Nuvama Institutional Equities Downgrades Indian Energy Exchange (IEX) to 'Reduce' Citing Market Coupling Risks

Nuvama Institutional Equities has initiated coverage on Indian Energy Exchange (IEX) with a 'Reduce' rating and set a target price of ₹131 per share, indicating a potential downside from its previous closing price. The primary concern highlighted by Nuvama analysts is the structural threat posed by the impending implementation of market coupling, which is expected to impact IEX's growth prospects in fiscal years 2027-28.

Despite this outlook, IEX reported robust financial results for the second quarter of FY26. Net profit rose by 13.9% year-on-year to ₹123.3 crore, compared to ₹108.3 crore in the same period last year. Revenue from operations saw a 10.5% increase year-on-year, reaching ₹153.9 crore, while Earnings Before Interest, Taxes, Depreciation, and Amortisation (Ebitda) grew by 11.4% year-on-year. Overall trading volumes increased by 8% year-on-year. This growth was driven by a significant 39% jump in Real-Time Market (RTM) volumes, which compensated for a 30% decline in Renewable Energy Certificates (REC).

Analysts cautioned that while IEX currently benefits from RTM growth amidst subdued power demand, future power deficits could lead to higher spot prices, potentially reducing spot trading volumes. The market coupling initiative, seen as a key threat, could affect IEX's market share. The next hearing by the Appellate Tribunal for Electricity (APTEL) on November 28, 2025, regarding IEX's challenge against the Central Electricity Regulatory Commission's (CERC) coupling order is anticipated to bring more clarity.

Impact: This news has a significant impact on IEX's stock performance and the broader energy trading sector in India. The downgrade and the looming market coupling threat introduce considerable uncertainty, potentially affecting investor sentiment and future valuation of IEX. The company's ability to navigate these regulatory changes and technological challenges will be critical. Rating: 7/10

Definitions: Year-on-Year (Y-o-Y): A comparison of financial data over a period with the same period in the previous year. Ebitda: Earnings Before Interest, Taxes, Depreciation, and Amortisation. A measure of a company's operating performance. Renewable Energy Certificates (REC): Tradable certificates that represent proof of the generation of renewable energy. Real-Time Market (RTM): A market segment where electricity is traded for delivery within the same day. Domestic/Term Ahead Market (DAM/TAM): Market segments for electricity trading for delivery on future dates. Market Coupling: A process to integrate different segments of the power market to achieve uniform pricing and improve market efficiency. Appellate Tribunal for Electricity (APTEL): A tribunal established to hear appeals against orders of the Central Electricity Regulatory Commission (CERC) and state commissions. Central Electricity Regulatory Commission (CERC): The statutory body responsible for regulating the electricity sector in India. MBED: Market Based Economic Dispatch, a system for efficient dispatch of electricity generation. IGX: Indian Gas Exchange, a platform for trading natural gas. ICX: Indian Commodity Exchange, a platform for trading commodities.