Investors buy IEX after steep fall in past 2 sessions as UBS sees 58% upside in stock

UBS suggests that implementing market coupling in inter-regional transmission or green energy can help improve the management of transmission capabilities.

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After falling 18 percent in the past two sessions straight, shares of Indian Energy Exchange (IEX) rose percent on June 12 with investors buying the stock. UBS has a ‘buy’ rating on shares of IEX with a target price of Rs 200, implying an upside of 58 percent from today’s high.

At 09:41 am, IEX was quoting at Rs 124.35, up 1.43 percent.

Even as market coupling along with Market Based Economic Despatch (MBED) indicates potential rise in power exchange volumes by 12-15 times, the execution could pose to be a challenge due to complicated settlement procedures.

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UBS suggests that implementing market coupling in inter-regional transmission or green energy can help improve the management of transmission capabilities.

With simple market coupling, there will be no change to existing structure, and this will in turn impact power exchanges operations, the brokerage firm said. However, it added that UBS remains cognizant of the risk and will continue to track this closely.

Read more | Market coupling casts a shadow on IEX. What should investors do?

Last week, Antique Stock Broking downgraded its rating on shares of IEX to ‘sell’ with a target price of Rs 105.

The possibility of a coupling operator can net the power flow within each zone, posing a new challenge for dominant exchanges like IEX, Antique Stock Broking had said. Additionally, incentives by competitor exchanges--like HPX and PXIL, can eat into volume growth, it had added. These factors drove the brokerage firm to cut rating on the power exchange stock.

Naveen Singh, Head - Policy Advocacy & Vice President - Business Development at Hindustan Power Exchange (HPX), had told CNBC-TV18 in an interaction that IEX will lose its monopoly with the implementation of market coupling.

Read more | IEX investors have reason to worry even without market coupling

Currently, India operates three power exchanges, namely IEX, HPX, and Power Exchange India Ltd (PXIL). HPX is a power exchange in the Indian electricity market, promoted by PTC India, BSE and ICICI Bank.

He added that market coupling is crucial for other exchanges to increase their market share.

Even IEX has expressed apprehension over the need for consultation on market coupling in spot power trading.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.