Shares of IEX (Indian Energy Exchange) have been facing a downward trend, experiencing a 21 percent decline in the past month and a 30 percent drop over the past year. In line with this, Antique Stock Broking recently set a target price of Rs 105 for the stock. Basant Maheshwari, a well-known market expert and the creator of the YouTube channel 'bmtheequitydesk' with 171,000 followers, has shared his perspective on IEX shares and its business model.
Maheshwari believes that stories meant to console oneself about a business facing ongoing challenges often lead to lengthy recovery periods for the associated stocks. He opines that the IEX stock is likely to underperform significantly in the future. However, he emphasizes that his comments are not intended as investment advice and advises investors to consult their financial advisors before making any decisions.
According to Maheshwari, minority investors should evaluate whether the business model and prospects of a company remain unchanged. If the answer is negative, he suggests moving on from such investments. In the case of IEX, there are concerns about the impact of competitor exchanges such as HPX and PXIL offering incentives that could erode its volume growth.
Antique Stock broking also raised concerns, highlighting that potential regulatory measures may stabilize market share among exchanges. Moreover, the spot prices of electricity remain higher than bilateral prices, making it challenging for IEX to replicate the past era of substantial volume growth. Consequently, the analysts at Antique do not see significant structural volume growth drivers for the company.
The difference in exchange rates of electricity plays a crucial role in the market dynamics. When spot rates are lower than bilateral rates, exchanges like IEX attract more volume, as seen in the cases of Dadri-I with Delhi DISCOMs or Barh with Bihar DISCOM. Conversely, if spot rates are higher, DISCOMs have more incentive to pursue bilateral contracts. In fact, even the Central Electricity Regulatory Commission's (CERC) May 2023 approach paper supports extending the bilateral contracts for older power plants.
Maheshwari points out that when a company becomes a dominant player in critical sectors such as power, government intervention is inevitable. Historically, market reactions have anticipated such actions. Therefore, unless there is a significant change in government policy, he expects the IEX stock to be impacted negatively.
It is essential for investors to consider these perspectives and conduct thorough research before making any investment decisions related to IEX or any other stock. The market can be unpredictable, and seeking guidance from financial advisors can help navigate the complexities of investment choices.