Indian Energy Exchange Ltd.'s three-day initial public offering opens on Monday, as investors look to sell shares in the country's largest power trading platform for physical delivery.
IEX, an electronic exchange that enables price discovery and risk management in power trading, had a market share of 98.5 percent in the year ended March.
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The Offer
The IPO is an offer for sale by shareholders, including private equity funds and Tata Power Ltd. Investors will sell nearly 60.7 lakh shares, or 20 percent, at Rs 1,645-1,650 apiece to raise up to Rs 1,000 crore. The company will not receive any funds.
Axis Capital, Kotak Investment Banking, IIFL and Karvy are the book running lead managers to the IPO.
Business
About 3.5 percent of the total electricity generated in India was traded through exchanges in the year ended March. Volume of power traded through the exchanges clocked a 28.3 percent compounded annual growth rate in seven years to March, according to IEX red herring prospectus.
IEX offers four different services:
- Day ahead market trading of 96 separate electricity contracts of 15-minute blocks each for the next day.
- Term ahead market covers a range of options of electricity for up to 11 days.
- Renewable energy certificates: solar and non solar.
- Energy savings certificates—issued on reducing consumption.
Financials
- The exchange's revenue rose at an annual rate of 14.5 percent in five years to March, while net profit and operational profit increased at 14.4 percent and 13.8 percent, respectively. Margins, however, contracted from 76.3 percent to 74.4 percent.
- Earnings per share as of March stood at Rs 37.78, implying price-to-earnings ratio of 43.7 times. At the upper band, the stock would trade at 39 times its one-year forward earnings, according to BloombergQuint's calculations.
- The company had a cash balance of nearly Rs 500 crore as of March.
IEX directly competes with unlisted Power Exchange of India Ltd., which has a 5.1 percent market share. So, no comparable numbers are available. Here's how it fares in comparison to the Bombay Stock Exchange and the Multi Commodity Exchange.
Brokerage View
KRChoksey
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- Online platform accessible throughout India.
- Conducive government policies and regulations.
Angel Broking
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- Low market penetration allows for significant growth potential.
- Company likely to sustain its position as a dominant market player.
Prabhudas Lilladher
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- Highly scalable and proven technology infrastructure.
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