Bernstein reiterated an ‘Underperform’ rating on IEX, saying regulatory risks, rather than operating performance, will be the decisive factor for the stock. The brokerage said three issues matter most for IEX: market coupling, transaction charges and trading volumes. While recent legal signals could provide near-term relief, Bernstein warned that structural risks to earnings remain.
“Market coupling – IEX presented a strong case in the last APTEL hearing, and we see reasonable odds of APTEL asking for a re-evaluation of the timing of market coupling – which could be a temporary positive,” Bernstein said. However, the brokerage cautioned that any delay in coupling could reopen a more damaging debate. “If coupling gets pushed out, we see high chances of a discussion paper on transaction charges proposing a reduction in basis benchmarks and industry ROE norms. This is the biggest reason for our underperform rating.”
On operating momentum, the brokerage struck a more constructive tone, saying volumes “should remain supportive with good coal availability and even some renewable plants being forced to sell on the exchange,” in its view.
IEX shares rally as tribunal questions framework
Despite Bernstein’s caution, IEX shares have rallied sharply this week. The stock closed 4.5% higher at Rs 154.75 on the BSE on Wednesday, January 7, extending gains to about 15% over the past two sessions.
On Tuesday, the shares rose 9.3% to close at Rs 146.80 after hitting an intraday high of Rs 153.35, as investor attention turned to developments in the market-coupling case before the Electricity Appellate Tribunal (APTEL).
During hearings on petitions challenging the market coupling framework proposed by the Central Electricity Regulatory Commission (CERC), APTEL raised pointed questions on how the rules were formulated. The tribunal remarked that the regulator should have acted independently while drafting the framework and flagged concerns over what it described as excessive theatrics during the process, emphasising that the regulator must remain above suspicion.
APTEL has fixed January 9 as the next date of hearing after counsel sought additional time. Reports also suggest the tribunal informed CERC that if it signals a potential withdrawal of the order, the case could be closed by Friday.
Volumes rise, prices ease
Separately, IEX reported steady operating performance for the December quarter. In its Q3 FY26 business update released on Monday, the exchange said electricity traded volumes, excluding TRAS, rose 11.9% year-on-year to 34.08 billion units.
During the quarter, improved supply from hydro and wind sources, along with steady coal-based generation, enhanced supply liquidity on the exchange platform, contributing to softer power prices across key segments.
The Market Clearing Price in the Day-Ahead Market averaged Rs 3.22 per unit in Q3 FY26, down 13.2% from the same quarter last year. The Real-Time Market Clearing Price averaged Rs 3.26 per unit, a decline of 11.6% year-on-year.
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For now, the market’s focus remains on the outcome of the market-coupling case. Bernstein’s assessment, however, reflects that even if near-term legal relief emerges, the broader regulatory debate, particularly around transaction charges and returns, continues to cast a long shadow over the investment case for Indian Energy Exchange.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)