The IEX share price had a rollercoaster week. From plunging 30% intra-day in July 24 to jumping 10% the very next day on July 25, investors are curious about the direction the stock is set to take going forward. The big reason why the stock crashed was the CERC approval for market coupling of DAM. Analysts point out that while the sharp losses were more of a knee-jerk reaction, the buying the next day was perhaps triggered by the fact that there is no near-term fear of market share loss. However, they believe that the worst may not be over for the IEX share price.
Rupesh Sankhe of Elara Securities pointed out that the IEX share “valuation has corrected to 25x levels from 35x. So as you can see the derating has already happened. The current valuation is pegged at around 25x FY27 PE with EPS for FY27 estimated at Rs 7 per share. The EPS for FY27 may, however, slip to Rs 5 per share, depending on the extent of loss in market share after the implementation of the CERC directives in January 2026.”
IEX: Implementing market coupling to spell significant pressure
In a detailed report on the CERC decision, Elara Securities detailed that this decision to implement market coupling against the report submitted by Grid-India has come as a negative development, as this means IEX loses its business moat of being the best platform for price discovery. Additionally, the introduction of market coupling can meaningfully shift volume to competitive exchanges. Currently, IEX has a market share of nearly 85% in the spot market. Electricity volume had increased 19% YoY to 121.0 BU for FY25. Day-ahead market volume had increased 15% YoY to 61.3 BU in FY25. IEX currently enjoys a market share of 99.8% in the DAM and RTM segments.
IEX currently enjoys a market share of 99.8% in the DAM and RTM segments. DAM contributes 50% of total volume—close to 62 billion units out of 120 billion units. We could expect 10% in share price if the margins fall to 3 paise per unit from 4 paise. Based on recent correction, it is possible that the stock may find support at Rs 135-140/share levels. One must understand, there is no immediate market share loss, and we have seen a higher structural shift in short-term values due to better liquidity and pricing as compared to the bilateral market and a higher share of renewable energy. More new products are being launched with higher duration
Long-term implication of CERC approval on IEX share price
The coupling of the DAM will be implemented by January 2026. Under the first phase of these norms, under which different power exchanges will act as market coupling operators (MCO) on a round robin basis. Elara Securities highlighted how “market coupling has been a persistent overhang for IEX,” and with CERC’s recent approval for its implementation, they expect a sharp decline in the company’s market share, resulting in a loss of its dominant position in the DAM and RTM segments. “To retain volume amid rising competition, IEX may be compelled to lower trading margin, further weighing on earnings.”
The CERC staff will also initiate stakeholder consultation for DAM coupling and propose necessary regulatory amendments. Sankhe indicated that even if IEX is able to retain 50% of the market share (which is the best-case scenario), “there is 25% loss in its share after January 2026, the FY27 profit may fall 30%, and the EPS may potentially slip to Rs 5 levels.”
Nuvama recommends Reduce on IEX
Another important brokerage house, Nuvama has recommended Reduce on the IEX share price. They now have a target price of Rs 145 per share and caution investors to brace for impact as market coupling hits. They believe that “the CERC’s order approving ‘market coupling’ disrupts IEX’s monopoly in the DAM market by introducing uniform price discovery across exchanges . This levels the playing field, impacting IEX’s moat of price determination.”
They believe that with this “IEX’s share in DAM + RTM (which is currently 99% in FY25) shall dip to 70% and additionally, a ‘price war’-led trading margin cut, likely from 4p/kWh to 3.5p/kWh is expected by FY28.”