Here's Why IEX Shares Are Facing Pressure In Trade Today

Shares of Indian Energy Exchange (IEX) Ltd. is facing immense pressure in trade on Friday following media reports of the Central Electricity Regulatory Commission (CERC) considering revisions in transaction fees.

The stock is trading at Rs 136, accounting for a fall of around 2%. In early trade, shares of IEX had reached an intraday low of Rs 133, compared to Wednesday's closing price of Rs 139.13.

As part of the reported revision in trading fee, CERC is considering lowering the total transaction fee from Rs 4 per kilowatt hour to Rs 3 per kilowatt hour.

CERC is also reportedly lowering the uniform fee from Rs 2 per kilowatt hour to Rs 1.5 per kilowatt hour. This change implies a reduction of up to 25% from the current fee structure.

For long-duration contracts, fees could be lowered to Rs 1.25 per kilowatt hour, although the talks are still at a preliminary stage and no final decision has been taken yet.

Such a reduction in transaction fees will impact IEX's core revenue as the company earns largely from per-unit transaction fees.

A reduction in total fees from Rs 4 to Rs 3/kWh and a uniform fee from Rs 2 to Rs 1.5/kWh implies that, on the same traded volume and mix, IEX’s transaction revenue per unit could fall by roughly 20–25%

IEX is a high-margin, asset-light platform, which means most fee reduction flows almost directly to the bottom line.

Therefore, operating leverage means a 20–25% cut in core fee yield could translate into a similar or slightly higher percentage decline in Ebitda and PAT from the affected segments.

In the long run, higher traded volumes - as lower costs usually lead to more transactions - could mitigate some of the short-term risks.

IEX currently trades at a relative strength index of 29, which suggests the stock is in an oversold territory.