IEX rebound: Value buying or smart exit route?

According to sources, some of these funds may have bought additional shares after the sharp decline to average down their cost base, aiming to improve eventual exit returns.

Indian Energy Exchange Ltd. surged more than 10% on Friday, recovering some ground after a record 30% plunge on Thursday triggered by regulatory approval for market coupling — a move that threatens to erode IEX’s dominance in electricity trading. Despite the bounce, the stock remains down over 40% from its July 15 high.

Market sources told Moneycontrol the rebound appears to be driven by averaging strategies by some large investors looking to eventually exit the stock, rather than fresh value buying. “Considering the kind of disruption to the business, the stock will see selling at every rise,” said a market veteran.

The Central Electricity Regulatory Commission has cleared the framework that will allow Grid-India to conduct price discovery for short-term power transactions across all exchanges. This effectively dismantles one of IEX’s core advantages — exclusive control over price setting in the Day-Ahead Market (DAM), a segment that has historically generated the bulk of its revenue and profits.

With market coupling expected to be implemented by January 2026, investors are growing increasingly cautious over the long-term implications for IEX’s business model.

The big investors in IEX

Mutual funds remain among the largest shareholders in IEX, collectively holding 27% as of the June quarter, marginally lower than 28% in the March quarter. Key investors include:

SBI Mutual Fund: 9.57%

Parag Parikh Mutual Fund: 5.06%

ICICI Prudential Mutual Fund: 4.73%

Mirae Asset Mutual Fund: 2.35%

According to sources, some of these funds may have bought additional shares after the sharp decline to average down their cost base, aiming to improve eventual exit returns.

Structural risk clouds long-term outlook

Analysts warn that IEX’s long-term fundamentals could be significantly altered once Grid-India takes over price discovery. The shift raises concerns around margin compression and volume loss in its flagship DAM business.

“The DAM, which makes up 50 percent of IEX’s volume — about 63 billion units out of 121 billion last year — is set to be affected from FY27,” said Elara Securities' Rupesh Sankhe. “If they lose 50 percent market share in DAM, that’s a nearly 25 percent revenue impact and up to 30 percent earnings impact.”

The damage may not stop there. “If margins drop from 4 paisa to 3 paisa per unit, revenue and profits will be hit further. Eventually, we could see a 40–50 percent decline in earnings,” Sankhe added. “A 30–35% fall in earnings and derating of the PE multiple implies the stock could correct 40–50 percent. Most likely, it will go down further because investors will wait to see how competitors respond.”

Analysts also believe the current 35–40x PE multiple — granted due to IEX’s monopoly-like status and strong profitability — is likely to compress as the market recalibrates for regulatory and competitive risks.