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Indian Energy Exchange Ltd.

BSE: 540750 Sector: Financials
NSE: IEX ISIN Code: INE022Q01012
BSE 00:00 | 14 Aug 1619.65 -24.35






NSE 00:00 | 14 Aug 1619.35 -21.90






OPEN 1630.30
52-Week high 1679.95
52-Week low 1405.00
P/E 34.55
Mkt Cap.(Rs cr) 4,912
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 1630.30
CLOSE 1644.00
52-Week high 1679.95
52-Week low 1405.00
P/E 34.55
Mkt Cap.(Rs cr) 4,912
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Indian Energy Exchange Ltd. (IEX) - Director Report

Company director report

Dear Shareholders

The Board of Directors is pleased to present the Eleventh Annual Report on the businessand operations of your Company along with the audited financial statements and theAuditors Report for the financial year ended March 31 2017. The highlights of thefinancial results for the year under review are given below:


The Company s financial and operational performance for the year ended March 31 2017is summarized below:

(Amount in million)

Particulars 2016-17 2015-16
Operating Income 2039.13 1750.28
Other Income 335.63 251.12
Total Income 2374.76 2001.40
Less: Total Expenditure 642.18 535.17
Profit before tax 1732.58 1466.23
Less: Provision for Tax 599.42 464.91
Profit after tax 1133.16 1001.32
Add: Brought forward P&L balance from prev. year 1056.95 1041.20
Profit available for Appropriation 2190.11 2042.52
Less: Proposed Dividend on Preference Shares (CCPS) - 30.33
Less: Interim Dividend on Preference Shares (CCPS) 15.16 14.97
Less: Dividend Distribution Tax on Preference Shares 3.09 9.22
Profit available for Appropriation 2171.86 1988.00
Less: Proposed Dividend on Equity Shares - 576.24
Less: Interim Dividend on Equity Shares 288.12 197.33
Less: Dividend Distribution Tax on Equity Shares 58.65 157.48
Less: Transfer to General Reserve Nil Nil
Less: Adjustment due to revision in depreciation rates Nil Nil
Balance carried forward to Balance Sheet 1825.09 1056.95

Your Company has sustained and maintained its leadership position in the power Exchangeindustry in India during the year.



The Indian power sector is undergoing a slow and steady turn around with the governmentplacing greater thrust on aspects such as: renewable energy generation especially solarenergy; distribution reforms through UDAY to enhance operational efficiency and restorefinancial viability of the distribution companies; electricity supply on 24x7 basis;development of transmission infrastructure and last but not the least increasedavailability of domestic coal to thermal power plants leading to reduced reliance onimported coal. As per statistics from the Central Electricity Authority (CEA) during thelast five years installed capacity has increased at CAGR of 13% from 199 GW to 327 GWwhile the peak demand met has increased only at 4.1% and energy availability has grown at7%. Our present installed capacity could have possibly generated more than 1700 BUs whileactual generation this fiscal according to CEA was only 1160 BUs. These statistics implythat we are now having surplus power scenario.

From short-term power market perspective as per CERC MMC Reports FY 2017 witnessed atotal trade of 110 BUs till February 2017 constituting about 10.4% of total generation.The power exchanges continued to be at the bright spot witnessing annual growth of about20 % year on year basis. Overall in this fiscal as of February 17 the share of powerexchanges in total generation increased to 3.5% from 3.1 % in the previous fiscal (as ofFebruary 16) while the share of long-term and medium term market remained same at around89.6%.

Graph on Share of Power Market in fiscal 2016-17 (till Feb'17)

With fast paced increase in generation capacity and low pace of growth on demand sidethe energy deficit reduced from 2.1% to 0.7% and peak deficit from 3.2% to 1.6%. Withample availability of generation the exchange platform saw good liquidity on the sellside and low Market Clearing Price (MCP) of Rs 2.41 per unit about 12% lower than Rs 2.73per unit in the previous fiscal. The low and competitive price discovery resulted inincreased cleared volume on your Company s platform from 34286 MUs in fiscal 16 to 40528MUs to this fiscal an increase of about 18%.

To facilitate coal based thermal power generators the government placed considerableemphasis on increasing domestic coal production. With persistent efforts the domestic coalproduction increased by almost 92 MT over the last three years taking the coal productionto 554 MT in this fiscal. This helped the thermal power generators to generate at lowervariable cost. Your Company saw 36% increase in sell bids from 56514 MUs in fiscal 16 to77141 in fiscal 17. With greater liquidity on the sell side at your Company s platformthe market clearing price this fiscal was 12% lower at Rs 2.41 per unit from Rs 2.73 perunit in the previous fiscal.

One Nation One Grid and One Price remained to be a key priority of the Government andthus significant emphasis was placed on augmentation and reinforcement of transmission toaddress the transmission congestion in import of power to southern region as well asnorthern region. With the commissioning of 800 KV Pole 1 of HVDC Champa-Kurukshetra WR-NRbipole inter-connector several independent power producers in Chhattisgarh are enabled totransfer power from Raigarh Champa in Chhattisgarh to demand centers of Northern regionviz. Haryana Punjab UP Rajasthan and adjoining areas. Similarly the Southern Regionsaw more than 85% increase in ability to import power from the rest of the country withaddition of 9000 MW of transmission capacity in last one year owing to commissioning ofKudgi Kohlapur Chikodi Kohlapur Angul Srikakulam and Wardha - Nizamabad transmissionlines. In addition there were many other intra-regional lines which were commissionedduring the fiscal which resulted in reduction in transmission congestion. In thisbackdrop the volume lost by your Company due to transmission congestion reduced by about32% to 1527 MUs compared to 2253 MUs lost in fiscal 2016. Further single price discoveryin the day-ahead market on your Company s platform on 23 different days in this thisfiscal was another remarkable development towards realizing One Nation One Grid and OnePrice. Due to increased availability of transmission system import of power to SouthernRegion increased resulting in lower clearing price and increased Open Access volume instates like Karnataka Andhra Pradesh and Telangana.

In June 2016 the CERC notified extension of operation of 24x7 round-the-clock Intradayand Contingency Contracts (Extended Market Session) on the Power Exchanges. The extendedmarket sessions greatly enabled the Discoms to schedule power closer to real time basisand replace unscheduled interchanges with scheduled drawal thereby reducing their realtime deviations. Your Company saw considerable improvement in Term-Ahead Market (TAM) withvolume growing from 330 MUs in fiscal 16 to 744 MUs in this fiscal an increase by 125%.

UjwalDiscom Assurance Yojna (UDAY) to bring about improvement in operational andfinancial efficiency of state distribution companies remained a key priority of thegovernment. With persistent efforts over the last three years almost 27 States and UTsare now part of UDAY framework. According to the MOP States such as: Gujarat KarnatakaMaharashtra Himachal Pradesh Uttarakhand Punjab and Haryana are the top sevenperforming states in quarterly performance ranking carried out in December 16. Further 16state governments have already issued bonds over INR 2 trillion AT&C loss of 18States is now at 23% almost 25 of 27 states have carried out tariff revision and the gapbetween average revenue requirement and average cost of supply of 18 states has beenbrought to less than 50 paise per unit which was earlier more than Rs 1 per unit.Implementation of UDAY has indeed resulted into better financial and operational ofDiscoms and has also led to increase in power procurement by them thereby boosting demandfor power. The Discoms are now opting to procure and supply power instead of opting forload shedding.

The Ministry of Power also maintained persistent focus on regular appraisal of thestate distribution companies to create competition among them as well as ensure highdegree of transparency and objectivity. MOP launched several web and mobile basedplatforms such as: VIDYUT PRAVAHA and DEEP to highlight real time energy price anddemand-supply situation at the state and national level; TARANG/E-TRANS to monitortransmission network development and bidding of the new projects; UDAY GARV UJALA MITRAto track progress on distribution reforms in states village electrification outageinformation new electricity connections filing of grievances and last not but not theleast SHAKTI for harnessing and allocating coal transparently in the Country. Many ofthese platforms are greatly benefitting the stakeholders to make smart decisions in termsof demand-supply and prices leading to increase in power procurement through your Companys platform at very competitive rates.

The Central Electricity Regulatory Commission (CERC) which regulates and governs yourcompany notified several new initiatives such as: draft regulations for cross-bordertrade in electricity and draft regulations for transmission planning and access; staffpaper on national open access registry (NOAR) and electricity storage systems (ESS);regulations and procedures for trading in energy saving certificates (ESCerts); extensionto extended market on the power exchanges; revision in the floor and forbearance of RECand procedure for scheduling and forecasting REC regulations. Besides these initiativesthe Central Commission also notified amendments in several of its key existing regulationssuch as: Deviation Settlement Regulations 2015 Open Access Regulations in Inter-stateTransmission 2008 IEGC Regulations 2010 REC Regulations 2010 and Connectivity andLTA/MTOA Regulations Sharing of inter-state charges and losses regulations. Since yourcompany is affected by all these regulatory initiatives in one form or the other westrived through the year to monitor these regulatory developments and advocated for aregulatory framework that enables market development.

A synopsis of key regulatory developments at the state level is as below:

The Electricity Regulatory Commissions (ERCs) of States such as: Gujarat MaharashtraRajasthan Madhya Pradesh Uttarakhand Punjab Haryana Uttar Pradesh Himachal PradeshBihar Karnataka Kerala Andhra Pradesh Telangana Assam Meghalaya Mizoram ManipurArunachal Pradesh and UTs of Daman and Diu Dadra and Nagar Haveli (DnH) issued tarifforders in fiscal 2016-17.

The SERCs in Rajasthan made amendments to their open access regulations which arefavorable to open access transactions; SERC in West Bengal had issued draft new openaccess regulations. The ERC in Maharashtra notified various practice directions to enableopen access in the State of Maharashtra that remain restricted on account of NOC relatedrestrictions by MSEDCL despite the enabling regulations by the State Commissions.

Many States such as: Rajasthan Punjab Himachal Pradesh Maharashtra and DnH leviedAdditional Surcharge (AS) on the open access transactions adversely impacting theviability of open access transactions through power exchange.

The SERCs in Karnataka Gujarat and Andhra Pradesh notified their respectiveregulations for scheduling and forecasting renewable energy while the ERC in West Bengalnotified draft regulations for balancing and settling renewable energy.

Electricity Market

Overall 39783 MUs were traded In DAM in fiscal 2016-17 in comparison to 33956 MUslast fiscal indicating a growth of 17%. The average daily volume was 109 MUs nearly 17%up from 93 MUs in the previous fiscal. Key highlights of the Day-Ahead Market are asbelow:

One Nation- One Grid- One Price was realized on 23 different days in DAMcompared to 6 such instances in FY 16. This implies that the transmission congestion hasdecreased across the country.

Highest ever volume traded in DAM:147.19 MUs on 31st March2017

Total volume transacted in the short term market by DAM: 33% as per CERCMMC reports from April 16 till February 17 • Sell bids:Bids worth 77141 MUswere received 36% up from 56514 MUs in FY 16.

Buy bids:Bids worth 47699 MUs were received almost 11% more than 43101MUs in fiscal 16.

Market Clearing Price (MCP):The market remained buyer friendly throughoutthe year with subdued prices. The average MCP was Rs. 2.41/unit in FY 17 about 12% lowerthan Rs. 2.73/unit in previous fiscal.

Final Cleared volume:Final cleared volume was 39783 MUs 17% up from theprevious fiscal.

Participation Trend: Total registered participants increased to 4297 inthis fiscal from 3819 in the previous fiscal a rise of more than 12%. Open Accessconsumer base also increased to 3822 up by about 12% from 3424 in last fiscal. On adaily average basis 1161 participants traded in the DAM as compared to 1035participants in last fiscal. The highest participation ever was observed on 9th August2016 when 1380 participants traded in DAM.

Congestion: In fiscal 2017 the congestionin the Inter-State transmissioncorridor reduced considerably compared to fiscal 2016 and consequently the Area ClearingPrices (ACP) converged. Overall 1527 MUs could not be traded in FY 17 due to congestionwhile in the last fiscal 2253 MUs were lost.

Curtailment of cleared volume at IEX due to transmission congestion

Particulars Market Clearing Volume (MU) Cleared volume (MU) Curtailed Volume (MU) Curtailment (%)
FY 2013-14 34230 28923 5307 15%
FY 2014-15 31227 28124 3103 10%
FY 2015-16 36210 33956 2254 6%
FY 2016-17 41310 39783 1527 3.7%

Source: CERC Market Monitoring Reports

Term-Ahead Market (TAM):

A total of 744 MUs were scheduled through TAM 125 % up from 330 MUs in the previousfiscal. The highest volume traded so far in this segment was achieved in November 2016when close to 201 MUs were traded.

REC Market:

Your Company saw a total trade of 4.62 million RECs in fiscal 17 an increase of 47%over trade in fiscal 2016 when 3.14 million RECs were traded. The total inventory in theREC registry at opening of fiscal 17 was 16.6 million an increase of 36% over openinginventory of 12.2 Million in fiscal 2016. The cumulative REC trade on both the powerexchanges was 6.5 million RECs in fiscal 17 and 5.0 million RECs in fiscal 16. Since theinventory was far larger than the traded quantum the situation indicated surplus RECs inthe market due to lack of Renewable Purchase Compliance (RPO) by the obligated entities.Going forward your Company expects better RPO compliance by the obligated entities andthus more dynamism in the REC Market.

Other Significant Developments

1. Compliance Review of CERC Audit on Functioning of IEX

In reference to observations and recommendations made by CERC in its Audit Report datedMarch 2016 on "Review of Functioning of IEX" in March 2017 your Companyappointed M/S Deloitte as an independent consultant to do a Compliance Review in order tocheck and verify whether the Company has successfully implemented all the compliancemeasures and has adopted corrective actions as observed in the CERC Audit Report. Therewere almost fifty two (52) key observations and recommendations reported in CERC AuditReportrelating to : governance and regulatory market development and price discoveryfinancial risks (liquidity and settlement) and technology which were assessed foroperational efficacy. You will be pleased to know that M/S Deloitte in their ComplianceAudit Report have confirmed that your Company is fully compliant with all CERCrecommendations and does not have any exception against any of the 52 key observationsmade by CERC.Further on

24 May 2017 your Company submitted the Deloitte Compliance Audit Report duly approvedby the Audit Committee and the Board of Directors to CERC.

2. SIAC Arbitration in the Technology Matter:

Your Company had been in arbitration with M/S PFS in respect of implementation of thePerpetual License Technology Agreement dated August 2015 which was signed between yourcompany and M/S FTIL in respect of the transfer of technology. The arbitration was beingpursued under framework of Singapore International Arbitration Center (SIAC). The finalarbitral award dated 29 March 2017 as notified by SIAC is in favor of your Company. Thearbitration was carried out by the Sole Arbitrator who in his award has held that thePerpetual License Agreement is valid and that your Company did not need any affirmativeconsent from M/S PFS for entering into such an agreement. SIAC award confirmed that theAgreement is a transaction in the normal course of business and for use of technology fromPromoter. In backdrop of these developments on 16 May 2017 your Company initiatedappropriate measures to implement the Perpetual License Technology Agreement. Your Companyhas acquired the Source Code of the technology its modifications as well as thetechnology team comprising of twenty-two (22) personnel from M/S Financial TechnologiesLimited.

3. ISO Certification

In August 2016 your Company received three ISO Certifications - ISO 9001:2008 forquality management ISO 27001:2013 for Information security management and ISO 14001:2004for environment management.

4. Corporate Social Responsibility (CSR)

Our CSR initiatives are aimed towards addressing challenges such as environmentalsustainability economic empowerment and social development. Over the last two years wehave aided beneficiaries spread across states in India including Uttar PradeshDelhi-NCR Bihar Chhattisgarh Tamil Nadu Karnataka and Maharashtra. Our CSR activitiesinclude promoting decentralized renewable energy skill development for the youth mid-daymeals and holistic development for young school children support to mentally disabled byskilling them school bus support for rural schools healthcare for elderly andcommunities among others. These activities are carried out in partnership with crediblenon-governmental organizations. Besides these activities we have also signed a memorandumof understanding with the Indian

Institute of Technology Kanpur to set up the Energy Analytical Lab (the"EAL") in the institution. The EAL aims to promote research in power sectorefficiency improvement and development of markets and provide support to scholars pursuingdoctoral and post-doctoral fellowships in energy and power markets.

5. Planning to come out with the IPO

Your Company is in the process of undertaking an Initial Public Offering (IPO) of6065009 Equity shares of the Company of face value Rs. 10 each through an Offer For Saleof Equity shares by certain selling shareholders in terms of the provisions of theCompanies Act 2013 and Securities and Exchange Board of India (Issue of Capital andDisclosure Requirements) Regulations 2009 as amended ("SEBI ICDRRegulations").

Future Outlook:

The aspiration of the Government to provide electricity on 24x7 basis Power for AllRural Electrification Make in India turn around in financial viability and operationalefficiency of distribution companies through UDAY increased coal availability for thermalpower plants fast paced renewable energy generation and aim to achieve 17% renewableenergy consumption-10.25% solar and 6.75% non-solar by 2019 increased focus on buildingtransmission infrastructure at inter-state and intra-state level export of electricity tothe South Asian neighboring countries through guidelines and regulations on cross-bordertrade in electricity regulations and procedures for trading in energy saving certificates(ESCerts) are among a few key measures initiated in this fiscal towards heralding thepower sector to the next level of growth.

At installed capacity of 327 GW peak demand of only 159 GW and energy demand notgrowing at a pace commensurate with growth in installed capacity our generation capacityhas been operating at sub-optimal levels leading to a surplus power position in thecountry. The increased availability of coal at reasonable cost resulted in higher sellvolume by merchant generators at your Company s platform. This scenario is likely tocontinue in next 4-5 years. Besides reduction in transmission congestion has providedadded comfort to Discoms that they will be able to purchase power through your Company splatform either through the day-ahead market or through the intra-day market to meet theirvarying power supply needs. With the Government aspiring to achieve renewable generationcapacity of 175 GW by 2022 your Company in December 2016 filed petition in CERC seekingregulatory consent to introduce solar and non-solar contracts in the Green-DAM which willbe a separate platform of collective nature to facilitate trade in green energy (greenattribute plus electricity) in order to help the obligated entities offset their solar andnon-solar RPOs. Besides your Company has already received regulatory consent from CERC tostart trading in ESCerts. In anticipation of increase in energy demand by distributioncompanies and open access consumers which in turn will translate into greater liquidity inthe exchange traded contracts cross border trade in electricity through term-aheadcontracts on power exchanges commencement of green-day ahead contracts on your Company splatform trading in ESCerts greater liquidity in extended power market improvement inavailability of transmission corridor and fewer instances of congestion curtailment andconsequent market splitting your Company expects the power market to grow further andreach new heights in fiscal 2017-18. Maintaining market leadership and power marketdevelopment will continue to be your Company s key focus in an endeavor to spur growth andprogress.


a) Interim Dividend

During the year under review after considering the free reserve and cash surplus ofthe Company your Directors had declared and paid an interim dividend of Rs. 10/- perEquity Shares of Rs. 10/- each (i.e. 100% of nominal value) which totaled to Rs. 346.78million (inclusive of Dividend Distribution Tax of Rs. 58.65 million).

Further as the holder of Compulsory Convertible Preference Shares (CCPS) werealso entitled to a dividend at a rate equal to the dividend paid on the Equity Shares tillthe conversion date of CCPS an interim dividend of Rs. 10 per CCPS of Rs. 10/- each (i.e.100% of nominal value) was also paid to the CCPS holders of the Company which entailed anoutflow of Rs. 18.25 million (inclusive of Dividend Distribution Tax of Rs. 3.09 million).

b) Final Dividend

Your Directors have further recommended for consideration of the Members at the ensuingAnnual General Meeting a normal final dividend of Rs. 10 per equity share of Rs. 10/-each (i.e 100%) and a special dividend of Rs. 25 per equity share of Rs. 10/- each (i.e250%) thus aggregating to a total final dividend of Rs. 35/- per equity share of Rs. 10/-each (i.e 350%) for the financial year ended March 31 2017 totaling to Rs. 1226.49*million (inclusive of Dividend Distribution Tax of Rs.207.45 million).

As stated above the CCPS holders are also entitled to a dividend at a rate equal tothe dividend paid on the Equity Shares till the conversion date of CCPS. Accordinglydividend on CCPS at the rate of Rs. 35/- per CCPS of Rs. 10/- each (i.e 350% of nominalvalue) as recommended by the Board of Directors of the Company if approved at the ensuingAGM would be paid which will entail an outflow of Rs. 51.10* million(inclusive of Dividend Distribution Tax of Rs. 8.64 million)

(* Proposed final dividend payable on 29115480 equity shares and1213144 CCPS considering post March 312017 on May 30 2017; 303287 CCPS wereconverted into 303287 equity shares of Rs. 10/- each).

The Final & Special dividend if approved at the ensuing AGM will be paid tomembers whose names appear in the Register of Members as on record date and in respect ofshares held in dematerialized form it will be paid to members whose names are furnishedby the National Securities Depository Limited (NSDL) as beneficial owners as onthat date subject to the applicable statutory provisions.

The total dividend for the FY ended March 31 2017 on Equity Shares and CCPS (includingfinal and interim) aggregated to Rs. 45/- per share respectively. The total appropriationon account of Interim and Final (including Special dividend) if approved would beRs.1364.79 million and corporate tax on dividend thereon would be Rs 277.84 million forthe year.

No amount was left unpaid or unclaimed dividend for earlier period therefore no amountwas transferred to Investor Education and Protection Fund.


No Amount has been transferred to any of the Reserve during the year.


During the year under review there is no change in the Authorized and Paid up ShareCapital of the Company as on March 31 2017 the paid-up share capital of your Companystood at Rs. 303286240/- comprising 28812193 equity shares of Rs.10 each fully paidand 1516431 Compulsory Convertible Preference Shares(CCPS) of Rs. 10 each fully paid.

However Pursuant to a resolution passed by the Board of Directors of your Company atits board meeting held on May 30 2017 your Company has converted 303287 CCPS of facevalue of Rs.10 each into 303287 Equity Shares of Rs.10 each in the ratio of 1:1 i.e. 1equity share of each CCPS held in the Company.

During the year your Company has neither issued any equity shares with differentialvoting rights nor any shares (including sweat equity shares) to any of its employees underany scheme.

The detailed break-up of the share capital is furnished in Note-3 to the Notes toAccounts of the Audited financials of the Company.


Company does not have any subsidiary joint venture or associate.


M/s Ravi Rajan & Co. Chartered Accountants are the Internal Auditors of yourCompany.

The Internal Auditors have conducted Audit as per Internal Audit Manual defined by theCompany and have reviewed the design and operating effectiveness of various processcovering the surveillance operational statutory compliances business developmentadministrative human resource financial & accounting aspects of your Company.

The Internal Auditors were satisfied with the management response on the observationand recommendations made by them during the course of their audit and have expressedsatisfaction with the internal systems controls and process followed by your Company.


The Shareholders of the Company at the eighth Annual General Meeting (AGM) held on June24 2014 had appointed M/s BSR & Associates LLP Chartered Accountants (FirmRegistration No. 116231W/W-100024) as the Statutory Auditors of the Company for one termof five consecutive years i.e. upto the conclusion of 13th AGM to be held inthe FY 2018-19 subject to ratification of their appointment by the members at every AGMof the Company.

Accordingly in terms of the first proviso to Section 139(1) of the Companies Act 2013and based upon the recommendation of Audit Committee and Board of Directors of theCompany the ratification of appointment of M/s BSR & Associates LLP CharteredAccountant Statutory Auditors is being sought from the Members of the Company at theensuing 11th AGM.

The Company has received a confirmation from Auditors to the effect that theirratification of appointment if made would be in accordance with the provisions ofSection 141 of the Companies Act 2013 and the Rules made thereunder.


M/s. BSR & Associates LLP Chartered Accountants (FRN: 116231W/W-100024) haveaudited the accounts of your Company for the FY 2016-17 and their report is annexedtogether with the explanatory notes therein which are self-explanatory and therefore donot call for any further explanation or comments from the Board under Section 134(3) ofthe Companies Act 2013. The Auditors Report does not contain any qualificationreservation or adverse remark


The Company maintains appropriate policies procedures and systems to ensure orderlyand efficient conduct of its business including adherence to Company s policiesmonitoring procedures to ensure that all assets are safeguarded against loss fromunauthorized use or disposition prevention and detection of frauds and errors accuracyand completeness of accounting records and the timely preparation of reliable financialinformation. The Internal control system is improved and modified on an ongoing basis tomeet the changes in business conditions accounting and statutory requirements.

The external and internal auditors review the effectiveness and efficiency of thesesystems and procedures on regular basis to ensure that all the assets of the Company areprotected against any loss and that the financial and operational information is accurateand complete in all respects. The Audits are conducted on an ongoing basis and significantdeviations if any are brought to the notice of the Audit Committee of the Board ofDirectors following which corrective action is recommended for implementation. All thesemeasures facilitate timely detection of any deviations /irregularities and early remedialsteps.


As per Section 134(5)(e) of the Companies Act 2013 the Directors have an overallresponsibility for ensuring that the Company has implemented robust system and frameworkof Internal Financial Controls. This provides the Directors with reasonable assuranceregarding the adequacy and operating effectiveness of controls with regards to reportingoperational and compliance risks. The Company has devised appropriate systems andframework including proper delegation of authority policies and procedures risk basedinternal audits risk management framework and whistle blower mechanism.

The Company had already developed and implemented a framework for ensuring internalcontrols over financial reporting. This framework includes entity level policies processand operating level standard operating procedures.

The entity level policies include anti-fraud policies (like code of conduct conflictof interest confidentiality and whistle blower policy) and other polices (likeorganization structure HR policy IT security policy and business continuity and disasterrecovery plan). The company has also prepared Standard Operating Procedures (SOP) for eachof its processes.

During the year the defined controls were tested and no observation on reportablematerial weakness in design and effectiveness was found.


Your Company have a "Whistle Blower and Anti-fraud Policy" defined as perprovisions of Section 177(9) of the Companies Act 2013 read with Rule 7 of the Companies(Meetings of Board and its Powers) Rules 2014.

Your Company believes in highest possible standards of ethical practices moral andlegal conduct of business operations and to maintain these standards the Companyencourages its Directors and employees to come forward and freely communicate theirconcerns about illegal or unethical practices/behavior actual or suspected fraud orviolation of company s code of conduct or ethic policy to the appropriate authority sothat timely and speedy investigations can be undertaken and corrective action could betaken if warranted.

This Policy has been framed with a view to provide a mechanism inter alia enablingstakeholders including Directors individual employees of the Company to freelycommunicate their concerns about illegal or unethical practices and to report genuineconcerns or grievance as also to report to the management concerns about unethicalbehavior actual or suspected fraud or violation of the Company s Code of Conduct orethics policy.

The Policy provides for (a) adequate safeguards against victimization of persons whouse this Mechanism; and provides (b) direct access to the Chairperson of the AuditCommittee of the Board of Directors of the Company.

Details of the Whistle Blower and Anti-fraud Policy are made available on the Company swebsite at


Your Company had not invited or accepted any fixed deposits under Section 73 of theCompanies Act 2013 during the year and as such no amount on account of principal orinterest related thereto was outstanding as on the date of the Balance Sheet i.e. March31 2017.


Your Company has created a favorable work environment and is focused on innovation andcompetencies. Your Company is future-oriented and encourages growth and developmentthrough various training and orientation programme.

Your Company have in house Training Department with an aim to provide training andcreate awareness among Power Market Stakeholders Exchange Members/Clients and Employeesof the organization. Your Company has also entered into an alliance with IIT Kanpur andAdministrative Staff College of India Hyderabad for organizing quality Trainings servingall Power Market Stakeholders.

During the year under review alongside the National Level Residential Programs at IITKanpur & ASCI Hyderabad several refresher Trainings programme were also carried outby your Company for its Members and Clients.

The regular Training Sessions are also organized for the Employees towards updatingtheir knowledge & skills through internal and external faculty.

Further the Company has also formulated and implemented an IEX Employee Stock OptionScheme 2010 to motivate and instill a sense of ownership among its employees which wasapproved by a Special Resolution passed by the Shareholders in the Extraordinary GeneralMeeting held on March 26 2010. The Company had adopted the trust route for allottingequity shares and the Company has allotted 606572 equity shares of Rs. 10/- each to theIEX ESOP Trust during the year 2010 to manage the ESOP as per defined ESOP Scheme.

The ESOP 2010 was amended by the resolution passed by our Board at its meeting held onApril 18 2017 and the amended ESOP 2010 was approved by our Shareholders at their meetingheld on May 16 2017. The major amendments made to ESOP 2010 in order to ensure compliancewith the requirements of SEBI (Share Based Employee

Benefits) Regulations 2014 ("SEBI SBEB Regulations") and other applicablelaws include among others:

(a) it shall be the duty of the trustees of the IEX ESOP Trust to act in the interestof the employees who are beneficiaries of the IEX ESOP Trust and subject to provisions ofapplicable laws it shall not act in any manner or include any provision in the trust deedthat would be detrimental to the interests of the beneficiaries;

(b) the IEX ESOP Trust shall not become a mechanism for trading in shares and henceshall not sell the Equity Shares in secondary market except as permitted under the SEBISBEB Regulations;

(c) in case of termination of the services of any eligible employee due to resignationall options (i.e. vested and unvested) granted to the eligible employee shall lapse on thelast day of his employment with our Company; and

(d) in case the eligible employee retires from our Company all options (i.e. vestedand unvested) granted to the eligible employee shall vest and may be exercised by sucheligible employee within three months prior to the date of retirement but in no caseafter the date of retirement.

The disclosures pursuant to SEBI (Share Based Employee Benefits) Regulations 2014Section 62 of the Companies Act 2013 read with Companies (Share Capital and Debenture)Rules 2014 as at March 31 2017 in connection with the ESOP Scheme 2010 are set out in Annexure-Ato this Report


A. Changes in Directors

During the financial year 2016-17 there have been following changes in the position ofDirectors of the Company:

1. Mr. Rajiv Malhotra (DIN: 02383396) resigned from the directorship of the Company onMarch 29 2017.

2. Mr. Gopal Srinivasan (DIN: 00177699) was appointed as Non-executive AdditionalDirector of the Company w.e.f April 18 2017 by the Board of Directors of the Company. Mr.Gopal Srinivasan holds office as Additional Director until the ensuing AGM of the Companyand is eligible for re-appointment.

3. Mr. Puneet Yadu Dalmia (DIN: 00022633) resigned from the directorship of the Companyon May 18 2017.

4. Mr. Mahendra Singhi (DIN: 00243835) was appointed as Non-executive AdditionalDirector of the Company w.e.f May 30 2017 by the Board of Directors of the Company. Mr.Mahendra Singhi holds office as Additional Director until the ensuing AGM of the Companyand is eligible for re-appointment.

In accordance with the provisions of the Companies Act 2013 and the Articles ofAssociation of your Company Ms. Renuka Ramnath and Mr. Ajeet Kumar Agarwal Directorsretires by rotation at the ensuing Annual General Meeting and being eligible offerthemselves for re-appointment.

Necessary resolutions for the appointment and re-appointment of the aforesaid Directorshave been included in the Notice convening the ensuing AGM and details of the proposal forappointment and re-appointment are mentioned in the Explanatory Statement to the Notice.

B. Declaration by Independent Directors

Mr. Dinesh Kumar Mehrotra Prof. Kayyalathu Thomas Chacko and Mr. Vallabh RoopchandBhanshali are the Independent Directors on the Board of your Company. Based upon theconfirmation/ disclosures received from Independent Directors the Board is of the opinionthat they meet the criteria of independence as laid down under Section 149(6) of theCompanies Act 2013 & the Rules made thereunder and the CERC (Power Market)Regulations 2010.

C. Meetings of Board /Committees

The composition of the Board meetings of the Boardand its Committees held during theyear and the attendance of the Directors thereat is set out in Annexure-B to thisReport.

D. Nomination and Remuneration Policy

The Board of Directors of your Company had already constituted a "Nomination andRemuneration Committee in compliance with the provisions of Section 178 of the CompaniesAct 2013".

Further the Nomination and Remuneration Committee of your Company has formulated apolicy on Directors Appointment and Remuneration including criteria for determiningqualifications positive attributes independence of a director and other matter providedunder Sub-section (3) of Section 178 of the Companies Act 2013. The said Policy isappended as Annexure-C to this Report.

E. Statement on Annual Evaluation made by the Board of Directors

As per Clause (1) of Para VII to Schedule IV and other applicable provisions of theCompanies Act 2013 and performance evaluation policy the Nomination and RemunerationCommittee of the Board had carried out the evaluation of every Director s Performancebased on specified criteria.

Further the Board had carried out an Annual performance evaluation of its ownperformance the Independent Directors as well as the evaluation of the working of theCommittees.


Your Company being an exchange has adequate risk management systems and proceduresoperating within the organization. The Company has a Risk Management Committee whichreviews the risk management framework and process of the organization on half yearly basisas per Regulation 25(ii) of the CERC (Power Market) Regulations 2010.

In addition your Company has also devised and implemented a comprehensive RiskManagement Policy under which the Board has constituted an Enterprise Risk ManagementCommittee ( ERMC ) and ERMC reviews and analyze various internal and external risks anddefine risk mitigation steps to counter these risks.

In addition to above the Audit Committee of the Board has additional oversight in thearea of financial risks and controls. Major risk identified by the business and functionsare systematically addressed through mitigating actions on a continuous basis.


The Board of Directors of your Company has constituted a Corporate SocialResponsibility (CSR) Committee required as per Section 135 of the Companies Act 2013 readwith Companies (Corporate Social Responsibility Policy) Rules 2014-

The Board of Directors of the Company has approved Corporate Social ResponsibilityPolicy (CSR Policy) based upon the recommendation of the CSR Committee. Your Company hasundertaken various CSR activities during the year with an aim to address issues in theambit of environmental sustainability economic empowerment and social development byadopting an integrated holistic and need-based approach.

The main focus areas of the Company s CSR Policy are:

• Promote decentralized renewable energy by creating opportunities for access andawareness.

• Support socio-economic development of underprivileged communities throughimproved access to livelihoods sanitation water healthcare and education.

• Endeavour to integrate the cause of women empowerment while designing projects.

• Contribute to relief and rehabilitation measures in disaster-affected parts ofthe country.

The CSR policy of the Company is placed on the website of the Company viz atwww.iexindia.comand the Annual Report on CSR as required pursuant to Section 135 of theCompanies Act 2013 is appended as Annexure-D to this report.


Though the operations of your Company are not energy intensive your Company takesadequate measures to reduce energy consumption by using energy-efficient lightning inoffice computer systems and procuring energy-efficient equipment s. As an on-goingprocess your Company continuously evaluates new technologies and techniques to makeinfrastructure more energy efficient.


You company has taken multiple initiatives for Technology absorption in FY2016-17 asTechnology has been the key business driver and primary facilitator for maintaining themarket leadership in power exchange space and meeting business goals of your Company. YourCompany has embarked on a forward-looking and strategic program to setup a TechnologyCenter by transferring the current trading technology platform from M/s 63 MoonsTechnologies Limited (formerly Financial Technologies (India) Limited) as per thePerpetual Licenses Agreement to use own and modify necessary software for maintenance andfuture enhancements. Your company has transitioned this trading technology along with thecore technology expertise and in the process of internalizing technology capability inits new state-of-the-art Technology Center in Mumbai.

Technology being one of the strategic pillars it ensures your company s continuedmarket differentiator in power exchange space. Your Company s technological infrastructureis built on the state-of-the-art technology stack which provides fast secure costeffective resilient and highly available trading environment. Your Company continues tomake substantial investments in technology absorption and development for meeting thechanging needs of power market scenarios and for keeping pace with the rapid technologicaldevelopments and challenges. Your

Company s technology platform continues to be stable robust and flexible and supportsfaster processing along with increasing transaction volumes. Technology absorptioninitiatives of your Company will further mitigate any risk associated with the exchangeplatform by ensuring uninterrupted exchange operation and business continuity and equipyour Company to extend the platform for future business needs and challenges as well asinfuse new technology stack and new architecture concepts for enhancing performancescalability extensibility usability and cost optimization. You company is taking severalinitiatives in the technology space for furthering its market leadership throughdeveloping an exchange eco-system using digital transformation connectivity and dataanalytics.

Your Company hosts and operates all mission-critical power exchange applications andthe supporting infrastructure in a leading Data Center which is supported by highlyavailable environment robust network cyber security and other infrastructure. Yourcompany recognizes the challenge of Cyber security. While current SOC is robust yourCompany has been working on plans to go beyond SOC by building capability for handlingcyber intelligence for preventive security system enabling to take proactive actions. Theexchange provides multiple mode of connectivity solution to members including MPLS SSLInternet SSL VPN based on the specific needs for performance redundancy and informationsecurity. Your company has been also working on plans to reap benefits of cloud computingfor enhanced availability scalability cost optimization and technology sustenance.

Technology is widely used by all functions of your Company to ensure quality servicesto al all stakeholders namely internal as well as members. Keeping pace with the currenttrend your company has planned several initiatives to increase operational efficiency andproductivity of the internal teams by automating internal processes and system creatingknowledge capital and augmenting analytics for faster and quicker decision making.


As your Company is a Power Exchange and not directly involved in any manufacturingactivity your Company is not directly involved in any Research and Developmentactivities.


The information required pursuant to Section 134(3)(m) of the Companies Act 2013 readwith Companies (Accounts) Rules 2014 on the foreign exchange earnings and outgo of theCompany during the FY 2016-17 is given below:

Foreign Exchange Earnings and Outgo

Particulars Amount
(In million)
A-Foreign Exchange Earnings Nil
Total Nil
B- Foreign Exchange Outgo
1. Expense 2.44
2. Dividend on Equity Shares 6.58
3. Dividend on Preference Shares (CCPS) 1.52
Total 10.54


Pursuant to Section 92(3) of the Companies Act 2013 read with Rule 12(1) of theCompanies (Management and Administration) Rules 2014 the extract of Annual Return isappended as Annexure-E to this Report.


Your Company has adopted a well-defined Nomination & Remuneration Policy for itsDirectors KMPs and other employees which forms part of this report as Annexure - C.

Your Company being an unlisted entity the information disclosure required pursuant toSection 197(12) of the Companies Act 2013 read with Rules 5(2) and 5(3) of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 in respect of employeesof the Company drawing remuneration in excess of the limits set out in the said rules isnot applicable on the Company


During the year under review your Company has not announced any scheme for buy back ofshares from its shareholders.


Pursuant to Section 134 of the Companies Act 2013 the Directors state that:

i) In the preparation of the Annual Accounts the applicable Accounting Standards havebeen followed along with proper explanation relating to material departure if any;

ii) Appropriate accounting policies have been selected and applied consistently andhave made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company as at March 31 2017 and of the profit ofthe Company for the year ended March 31 2017;

iii) Proper and sufficient care has been taken for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;

iv) The annual accounts have been prepared on a going concern basis;

v) Proper Internal Financial Controls were followed by the Company and such internalfinancial controls are adequate and were operating effectively;

Proper systems are devised to ensure compliance with the provisions of all applicablelaws and that such systems were adequate and operating effectively.


There was no related party transaction entered by the Company during the year in termsof Section 188 of the Companies Act 2013.


During the year under review there was no significant and/or material orders waspassed by the regulators or courts or tribunals impacting the going concern status andCompany s operations in future.


During the year under review your Company has not given any loans guarantees orprovided any security and has not made any investments in any body corporate as specifiedunder Section 186 of the Companies Act 2013.

All the Investments of your Company are in Bank FDs Tax Free Bonds and Debt &Arbitrage Mutual Fund schemes only the details of which are provided in Note-13 14and 16 to the Notes to Accounts.


The Company has put in place an Anti-Sexual Harassment mechanism in line with theSexual Harassment of Women at Workplace (Prevention Prohibition and Redressal) Act 2013.

An Internal Complaints Committee has been set up to redress complaints receivedregarding sexual harassment. All employees (permanent contractual temporary trainees)are covered under this policy.

During the year under review the Company has not received any complaint pertaining tosexual harassment and hence no compliant is outstanding as on March 31 2017.


The issued & fully paid-up equity shares of the Company are admitted with theNational Securities Depository Limited ( NSDL ) and Central Depository Services (India)Limited ( CDSL ). The International Securities Identification Number (ISIN) allotted tothe equity shares of the Company under the Depository System is INE022Q01012.

Members holding shares in physical form are requested to consider converting theirholding to dematerialized form to eliminate all risk associated with physical shares andfor ease in portfolio management. Members can contact M/s. Karvy Computershare PrivateLimited (Karvy) Registrar and Share Transfer Agent of the Company for assistance in thisregard. The contact detail for the benefit of shareholders is as follows:

Karvy Computershare Private Limited

Karvy Selenium Tower B

Plot 31-32 Gachibowli

Financial District

Nanakramguda Serilingampally

Hyderabad Telangana 500 032.

Ph: 040-67162222 Fax: 040-23001153

Toll Free no.: 1800-345-4001


The bifurcation of the category of shares in physical and electronic mode anddistributing of shareholding as on March 31 2017 is given below:

Category No. of Shareholders Total Shares % To Equity
NSDL 51 28565351 99.14
PHYSICAL 13 246842 0.86
Total 64 28812193 100 Category (Shares) No. of Holders No. of Shares
1 1-5000 23 49910
2 5001-10000 5 31180
3 10001-20000 7 109350
4 20001-30000 2 55000
5 30001-40000 - -
6 40001-50000 2 100000
7 50001-100000 1 60000
8 100001 & Above 24 28406753
TOTAL 64 28812193


No material changes and commitments were reported which could affect the financialposition of the company in between the year end and the date of directors report.


Your Directors would like to place on record their sincere gratitude to the Ministry ofPower Central Electricity Regulatory Commission (CERC) Members State ElectricityRegulatory Commissions (SERCs) Members and Staff Central Electricity Authority (CEA)National Load Dispatch Centre (NLDC) Regional Load Dispatch Centers (RLDCs) State LoadDispatch Centers (SLDCs) State Electricity Regulatory Commissions (SERCs) Power GridCorporation Ltd. (PGCL) Financial Institutions Shareholders Bankers Registrar andTransfer Agent (RTA) Members of the Exchange and Business Associates and for theircontinued support.

Your Directors also wish to place on record their appreciation for the contributionmade by the employees of the organization at all levels.

For and on behalf of the Board of Directors
Indian Energy Exchange Limited
Place: New Delhi Mr. Dinesh Kumar Mehrotra
Dated: June 12 2017 Chairman
DIN: 00142711