Indian Energy Exchange (IEX) Ltd has seen a continuous decline in its stock, falling by 2% on Tuesday, marking the second consecutive day of losses. This followed a steep 6% drop on Monday, contributing to an overall decrease of more than 8% over two days. The decline is largely attributed to concerns about the potential implementation of market coupling, a regulatory change that threatens the company’s dominance in energy trading.
What is Market Coupling?
Market coupling is a proposed system that would aggregate buy and sell bids across all power exchanges to set a single, uniform electricity price. Currently, IEX, which holds an 84% share in the power trading market, sets its own prices independently. The fear among investors is that market coupling could diminish IEX’s pricing power and reduce its market share.
Investor anxiety was heightened after Power Secretary Pankaj Agarwal confirmed that the government is working on market coupling, although no timeline has been set. A CNBC-TV18 report also supported the notion that market coupling could be implemented eventually, further unsettling the market.
During its June quarter earnings call, IEX management minimized the potential benefits of market coupling, citing simulations that showed no clear advantage from the model. They also pointed out delays in developing the software needed for its implementation. However, Elara Securities predicted that if market coupling is introduced, IEX’s market share could fall from 84% to around 70% by the financial year 2027. This prospect of losing market dominance has contributed to the recent sell-off.
On Tuesday, IEX shares fell to an intraday low of Rs 192.23, bringing the stock’s total decline to over 12% in the past month. Regulatory uncertainties have heavily impacted investor sentiment, even though IEX has offered significant returns of nearly 50% to shareholders over the past year.
In addition to these concerns, IEX recently announced a 2:1 bonus share issue and a 10:1 stock split, but these moves have done little to mitigate the negative sentiment surrounding the stock amid fears of market coupling.
Disclaimer:
The information provided is for informational purposes only and should not be considered as financial or investment advice. Stock market investments are subject to market risks, and past performance does not guarantee future results. Investors are advised to conduct their own research or consult with a qualified financial advisor before making any investment decisions. The writer and publisher are not responsible for any losses or damages arising from the use of this information.
Leave a Reply