IEX posts 75% jump in Q2 profit, offers bonus issue after four-fold surge in shares

Indian Energy Exchange Ltd (IEX) has been red-hot on the Indian bourses this year, and is likely to remain in demand even in coming months thanks to its strong financial performance.

The company reported a 75% surge in consolidated net profit for the second quarter through September to Rs 77.4 crore from Rs 44.34 crore a year earlier. Total revenue climbed 55% to Rs 122.3 crore from Rs 78.7 crore.

The company has been buoyed by rising energy prices as India’s economy begins to re-open and go full throttle, following two devastating waves of the deadly coronavirus pandemic.

IEX also announced a two-for-one bonus issue of shares, further boosting investor sentiment.

The strong quarterly performance and the bonus issue sent its stock soaring by the maximum daily of 10% in opening trade on Friday to Rs 832 apiece on the BSE. The shares subsequently eased off from the highs.

Still, shares of IEX have soared more than four-fold from Rs 181 apiece in November last year. In fact, the stock had touched a high of Rs 956 apiece three days ago in anticipation of the bonus issue.

Analysts say the bonus issue will infuse further liquidity into the stock. Some like Sonam Srivastava, founder of Wright Research, recommend that investors can buy IEX shares even at these levels. This is because IEX controls 95% of the energy exchange market in India and will continue to have a dominant position for the foreseeable future.

Some other analysts, however, feel that the valuations are stretched and that there could be a phase of consolidation going forward.

IEX Q2: Other highlights

1) Standalone net profit surged 69% to Rs 78 crore from Rs 46 crore in the corresponding period last year. 

2) Costs remained largely constant at Rs 17.97 crore as against Rs 17.8 crore in the year-ago quarter.

3) EBITDA in Q2 was Rs 106.97 crore, up 69.15% from Rs 63.24 crore a year earlier.

4) EPS increased to Rs 2.60 in July-September 2021 from Rs 1.49 in the same period last year.

5) Electricity volume traded on the IEX jumped 57.6% to 25.97 billion units.

IEX outlook

IEX said growth in electricity volume was driven by a substantial increase in power consumption as well as the preference by distribution utilities to meet their short-term requirements through its trading platform.

The Real-Time Market remained one of the fastest-growing electricity market segments on the exchange, achieving a growth of 125% with 5.3 billion units traded during the quarter, IEX said. The RTM contributed 20% to the overall volumes during the quarter, it added.

As things stand, IEX will likely continue to see good times ahead. The company is debt free and has investments of the order of Rs 700 crore, which it can bank upon in case it needs to, in future. 

After an apex court ruling, settling disputes between the Securities and Exchange Board of India and the Central Electricity Regulatory Commission, electricity can now be traded as forward contracts and derivatives on the exchanges, just like any other commodity. This directly benefits IEX as it can it can get into longer-duration delivery- based contracts on its platform, adding to its volume and increasing the range of its products. 

Moreover, the shift of buying pattern from long-term power purchase agreements to the short-term market is expected to increase its volume.