2:1 Bonus Share, 10:1 Stock Split: PSU Stock IEX Continues Decline Amid Market Coupling Fears, F&O Ban - Goodreturns

Oct 17, 2024

The shares of Indian Energy Exchange (IEX) Ltd continued to decline on Tuesday, falling by 2%, marking the second consecutive day of losses for the energy trading platform. This slide follows a steep drop of over 6% on Monday, driven by renewed concerns about the potential implementation of market coupling - a regulatory change that has been a looming threat for the company. In total, IEX shares have now fallen by more than 8% over the past two days.

Market coupling is a proposed mechanism where buy and sell bids from all power exchanges are aggregated and matched to discover a uniform price for electricity. This would mean that only one price for electricity will be set across all exchanges at any given point in time, effectively centralizing the price discovery process. Currently, IEX, the largest energy exchange in India, benefits from its market dominance by setting prices independently on its platform.

The fear among investors is that market coupling could dilute IEX's pricing power and potentially reduce its market share. IEX currently enjoys an 84% market share in the power trading segment, but analysts fear this dominance could be at risk if market coupling comes into play.

The recent sell-off in IEX shares was triggered by comments from Power Secretary Pankaj Agarwal, who confirmed during a press briefing in New Delhi that the government is committed to moving forward with market coupling. Agarwal noted that work on the coupling mechanism is underway, although he did not provide a concrete timeline for its implementation.

A CNBC-TV18 report earlier fueled investor worries, confirming that the market coupling of power exchanges is "on the cards" and could happen eventually. While no definitive dates have been mentioned, the very prospect of market coupling has been enough to unsettle the stock.

During its June quarter earnings call, IEX's management downplayed the potential benefits of market coupling, stating that simulations indicated no clear advantages from the proposed model. They also highlighted that the software required to implement market coupling was still in development and facing delays.

Elara Securities, in a recent report, predicted that if the market coupling is implemented, IEX's market share could decline from its current 84% to around 70% by the financial year 2027. This potential erosion of market dominance has added to the bearish sentiment around the stock.

Following the renewed fears of market coupling, IEX shares fell to an intraday low of Rs 192.23 on Tuesday, down 2% from the previous close. The stock has now declined over 12% in the past month, as concerns about regulatory changes have weighed heavily on investor sentiment. Over the past year, the IEX stock has delivered returns of nearly 50% to its shareholders.