Earnings Call: Q2 2022

Oct 22, 2021

Ladies and gentlemen, good day, and welcome to the Indian Energy Exchange Q2 FY 'twenty two Investor Conference Call hosted by Axis Capital Limited. As a reminder, all participant lines will be in the listen only mode And there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Mr. Jitendra She from AXA Securities. Thank you, and over to you, sir. Thank you, Lujan. Good afternoon, ladies and gentlemen. On behalf of Axis Capital, I'm pleased to welcome you all for the India Indian Energy Exchange Q2 FY 2022 earnings conference call. You have discussed the management team of IEX, which is represented by Mr. Sethi Narayan Goyal, Chairman and Managing Director Mr. Vinit Harvalkha, Chief Financial Officer Sarojit Bajaj, Head Business Development and Ms. Aparna Nagar, Lead Investor Relations. Now we will begin the opening begin with the opening remarks from the management followed by an interactive Q and A session. Over to you, sir. Thank you. Good afternoon, friends. I am Satyanarayan Goyal from IX. I welcome you all to the Q2 FY 'twenty two earnings call. Present with me Today, I have Mr. Vinit Halkha, our CFO and Company Secretary Mr. Rohit Bajaj, Head Business Development Mr. Amit Kumar, Head Market Operations Mr. Sangh Gautam, CTO Mr. Sameer Prakash with HADHA Mr. Kati Mhatia, Head Market Communication Mr. Indranil, Looking after new initiatives and Mr. Jaginder Verha, who is heading the regulatory affairs system. We seem to have almost overcome the COVID-nineteen pandemic. There has been a significant uptick in the face of its inevitable. Yesterday, we achieved a landmark figure of 100,000,000,000 merchandise in the country. The economy, industry and retail activities are moving fast. There has been a fair resurgence in economic activities leading to rapid increase in the demand for power. Recently, the exchange power market has been seeing constraints on supply side and we all are reading about the NPD articles regarding high prices and limitation on the self and liquidity on that scale. It is important to understand the fundamentals behind all these news articles. In H1 this year, there was 14% increase in the power generation in the country with respect to last year. Monsoon affected the domestic coal production and supply. There is increase in the price of Imported coal, the prevailing price of INR 120 per tonne for 4,200 Mitsubishi Coal is almost 5 times more than what it was 1 year at $25 per tonne. And at 125 covers per tonne, that variable cost will be almost about INR 9 to INR 10. In case of LNG also, there has been very, very high price increase almost 10 times. Now the LNG prices are almost about $30 per MMBtu and about a year back it was just about $3 per MMBtu. With $30 per MMBtu, the variable cost will be more than RMB25. So with imported I mean, the investments on imported coal and LNG has reduced significantly. And as a result of that, there is more pressure on the domestic pool. And this, Fazim and I is not only in India, countries across the globe also have been experiencing similar situations leading to an unparalleled increase in the price of energy and power as well as rise in price of other commodities. Government of India has already undertaken several initiatives to meet the situation, including an increase in domestic production of coal, Increased coal supply to the power plants, blending of 10% imported coal with domestic coal and restarting some of the imported waste of power plants. More recently, with these initiatives by the government and the widespread rains which reduced electricity demand in the country, The prices on the exchange have started to come down. And today, it is almost about 1 third of what it was at Big Pak. The exchange market continues to work uninterrupted, facilitating the distribution initiatives and industries in addressing the Increase power demand in the most flexible, competitive, transparent and efficient manner. I will now talk about recent developments of IX. On 17 October 2021, Ajax received GSP approval to commence a screened day head contract as a part of the integrated day ahead market. Under the integrated day ahead market, the exchange will allow the market participants to submit which together with conventional, which as we were doing in the Daim market. And thereafter, the clearance will take place in a sequential manner. Renewable energy bids will be cleared first in accordance with the investment status of the renewables followed by conventional segments. IX will also allow its market participants to Market participants an option to transfer the unflected bids from the renewable to the conventional segment. Ordering our customer centric initiatives, we have launched value added services for the renewable energy generators. The renewable energy generators were keen to avail the services such as generation forecasting, qualified call rating agency services and analytics solutions etcetera can reach out to the best in class service providers and benefits IES at a very competitive price. We have already onboarded Climate Connect as our health and financial service provider. We look forward to welcoming other service providers who are keen to associate with us in this journey. Let me now share with you an overall economic and industry update. After reaching a manufacturing PMI of 48.1 In June 2021, India's manufacturing activities expanded for the 3rd straight month in September to 53.7, highlighting a strong expansion in overall business conditions. Even on the services side, we witnessed an increase in activities leading to expansion of services to RMB55.2 in September 2021 as compared to RMB41.2 in June 2021. On power sector front, the rise in economic activities led to an increase in overall power demand. The all India electricity convention increased 10% year on year from 334 btu in quarter 2 of FY 'twenty one to 366 btu in quarter 2 of FY 'twenty two. In this quarter, highest ever peak demand of 205 gigawatt was registered in the month of July. The industrial states such as Gujarat, Maharashtra, Andhra Pradesh and Tamil Nadu were the key contributors of this growth. As of September 2021, the installed power capacity at 389 Gigawatt saw 4.2% year on year growth. The renewable energy capacity reached 101.5 gigawatts from an earlier figure of 89.2 gigawatts in the fiscal year 2020, seeing about 13.8% year on year growth. The fastest growth in renewable capacity underlines the NNCC that has been underway and an increased impetus on building a decarbonized and sustainable energy economy. On the policy and regulatory front, The 10 year long pending jurisdictional conflict related to power market between CRC and CB has been finally resolved by the honorable Supreme Court, There is therefore introduction of the much awaited long duration contracts on power exchangers and derivatives AARP has issued draft revision settlement mechanism. And under this, now the DSM charges are to be linked with the on the block wide price discount on the exchange. This will further expand and deepen the real time market. Ambit is expected to go live through exchanges from 1st April 2022 with interest rate generation capacity as per the press release issued by Ministry of Power. The Ministry of Power issued the draft rules for promoting renewable energy through open access, driving consumers with All these initiatives will lead to further deepening of power market in the country. The Indian gas exchange has been seeing an uptick in volumes as well as participation. During the quarter, Indian gas exchange stated almost about 10 lakh MMBT of gas. And cumulative so far, IGX has traded more than 15 lakhs of cash. Good thing is we are seeing business on gas exchange increasing every month. And in the Q2 of FY 2022, we did highest volume of almost about 8 lakh MMBtu. As part of our customer centric initiatives, in the IGX, we lost the Dayhead contract also very recently. Ministry of Petroleum and Natural Gas, YJ's office non random dated 19th August 2021, has provided an additional mechanism to domestic gas producers who have been grounded pricing and marketing freedom to trade on gas exchanges. Whichever is higher to the gas exchangers. And I'm sure this notification will provide availability of cheaper gas on the exchange platform and further replenished gas market on the IGES platform. On a stand alone basis, Revenue for the quarter increased by 52.6 percent from INR79.4 crores in quarter 2 of FY 2021 to INR121 crores in quarter 2 of FY22. Profit after tax grew by 67.3% on year to year basis with a margin of 64.5%. The Board of Directors has considered issuing 2 bonus shares for each equity share. During the quarter, electricity volumes on the exchange grew by 58% on year to year basis with BRL25.9 billion traded versus BRL16.5 billion in quarter 2 of our FY 2021. During the first half of FY twenty twenty two, I exited a volume of 47.2 btu, which is almost about 6.7% of the total generation in the country, implying a robust growth of 50.6% on year to year basis. The growth in volume was driven by substantial increase in electricity consumption as well as difference by the distribution utilities to meet their short term supply requirements in a competitive and flexible manner through the IEX. The real time market continues to be one of the fastest growing market segments on the exchange, witnessing a growth of 125% on year to year basis. And during this quarter, 5,300,000,000 units of volume was traded in the RTM market. RTM contributed almost 20% of the overall volume, which we take out on the exchange platform. The consistent growth of real time market is an indication of growing reliance on reliance of the distribution facilities and industries to achieve power supply balancing in the real time market in the most efficient manner. The green Thailand market is also now almost 1 year old. We started this on 20 1st of August. And so far we have cumulatively achieved a volume of 3,500,000,000 in this market. And in the Q2 of FY 2022, the cumulative trade was 1.7 btu. This market has seen a considerable increase in the participants. There and more and more number of utilities and C and I consumers are participating in this market to meet the R and D demand and also the RPA applications. We are gearing forward. We are gearing towards the launch of eCert and integrated AI market. And What I understand now that these two markets will start from 26th October this month. Amrapal minister is going to launch the CSAT market today and the JETAF market will be launched on Monday and trading with us from 26th October. And we are also now gearing up for launching the long duration contract. We have already filed our petition with CRC. IC hearings were held on 21st October, and I think the last hearing is going to happen on 28th October and thereafter order is expected in the month of November. Later this year, you may also see introduction of exchange based ancillary markets in the backdrop of several initiatives I have touched upon today, combined with several policy and regulatory envelopes, the power markets will have a much greater role to play. Besides, There is a huge opportunity on the cash front coupled with diversification initiatives which we are assessing. We are very bullish on the growth prospects of the company. With India's power consumption expected to grow at 8% to 9% during FY 2022, We expect a significant growth for the exchange market. We are continuously innovating, strengthening and advancing our technology initiatives. We believe that energy markets have pivotal role to play in transforming India's energy economy, and we are committed to play a proactive role in facilitating the much needed efficiency, competitiveness and sustainability in the industry ecosystem. Thank you, everyone. And now we can start the question in the session. Thank you. Ladies and gentlemen, we will now begin with a question and answer session. Ladies and gentlemen, we will wait for a moment while the question is coming. The first question is from the line of Mohit Kumar from Dam Capital. Please go ahead. Yes. Good afternoon, sir, Congratulations on a very, very excellent quarter. I have two questions. The first is a market based economic dispatch Is the government wants to implement from 1st April 2022? The related question is, it is Given the time line to adhere to 1st April 2022? And secondly, how does it change the business for us? Do you think this long term volume would increase at the expense of short term volume? And the second question is, Where are we in the process of launching long duration contract? And what kind of products you are likely to to begin with. Thank you. Yes. First on Ambit, Government of India has already issued a press release and which indicates that the ambit should be implemented from 1st April. It also indicates that before this, ERC will align, the regulations and mock drill will be carried out to ensure that the system runs smoothly. So, CRP will first have to Aligned the regulations and that is the important thing to be done. As far as we are concerned, we are ready to launch it. We have done all necessary developments and we are working with GFT also to start this as soon as possible. On long duration contracts, we have already filed our petition with CRC. Now after resolution of this dispute, I'm sure CRC will take up the petition for approval. And once the petition is approved, then we will launch these contracts also. These contracts are basically for fortnightly, monthly, quarterly and yearly contracts for less than 1 year. Thank you. Thank you. The line for the current participant has dropped off. We'll move on to the next question. That is from the line of Devansh Mangotia from SIMPL. Please go ahead. Yes. Sir, thanks for the opportunity. Sir, regarding the event, if you can help us understand what do you believe You know the challenge is in terms of implementation because simultaneously looks like a lot of changes actually made Right from the generator to DISCOM and even for PFC and REC to actually fund the DISCOM for this whole process. So what is our overall view in terms of the bottlenecks which are currently there? Yes. As I have already always said that implementation of MBD is as complicated as implementation of GST. So there are a lot of things to be done, but once government directions are in place, I'm sure everybody will take part on this to ensure implementation by cost effectiveness. And I would not like to comment anything beyond that. Okay. I mean in case of long duration contracts, Sacha is saying that we are expecting the order in November. So then after the orders come, how prepared are you in terms of launching the product? We have put them all technological developments for that. We are ready to launch these contracts. So the day we get the approval and based on the approval, if there is some minor changes that we can, we will do that and I think within 15 days we will be able to launch the contract after. Okay. And in case of barehead market, I I mean, we have in last 1.5 years, we have seen that prices on the exchange have been very high, they have been very low. But the shift from bilateral to day ahead market seems to be consistent every quarter or on a monthly basis. So Actually, what has changed in last one and a half, two years over here because when we look at previous 8 to 10 years, that shift has not really happened with this space. So what are the things that have really changed in last one and a half years? Shift is a gradual process. It was happening earlier, Ralf. So if you see share of the bilateral transaction, they were slowly going down. But in the last one half year, The shift has happened at a much faster rate now. And one of the reason is that during the COVID time, nobody was Sure about what kind of demand will happen, what kind of demand increase will happen. So they did not get into any bilateral contracts. And then when the demand started increasing, they started with participation on the exchange platform. And good thing is that there was a lot of liquid in the exchange, PowerX, it was PowerX competitive rate and that led to the confidence building and now we are more comfortable in sustaining PowerX through the exchange. I'll tell you a couple of cases. Telangana, the demand increases from July up to March, and every year they used to buy power under the volatile market. And In some of the years, because of the heavy rains, the demand used to crash, used to back down, Take less power under the bilateral contract. There used to be contractual complications in that. And last year, they did not buy anything under the bilateral The market evolved from the exchange platform and that led to significant savings by them. And now they are comfortable. Vijay, again, we are not getting into the bilateral contract. So I think same is the case with many of the distribution companies. That is why the shift is that's where it is now. Okay. And in case of RDM I would like to interrupt Mr. Nagodia. Ladies and gentlemen, in order to ensure that the management will be able to address questions from all participants in this conference, we request you to limit your questions to 2 for The next question is from the line of Rahul Modi from ICICI Securities. Please go ahead. Thank you, sir, for the opportunity. Sir, can you explain how will be You know the payment security mechanism for the long duration contracts, whether it will be LCs or how will it be on a revolving basis? For the non dilution contract also, we will accept LCs also, but then we will ensure that the payments are made before the delivery. We get payments before the delivery of the product. On a daily basis? Yes, yes, on daily basis. .:] Contract can be for a month for a quarter. Payment should happen on delivery, Yes. If we ask payment in advance for the full month, it is going to be too large amount. So we will ensure payments on the basis. And if in case there are missed out payments, then you have the power to regulate. Who has the authority to regulate? We have the authority to regulate. It's a part of the contract. Okay. And sir, who is the counterparty in this? Are we part of the counterparty? Yes, yes. XMG allowed us now access a counterparty to our transactions. Okay. So in case there is a situation where party A is buying 100 megawatts and party B Due to some issues not able to sell that 100 and selling 90, that 10, which liability will it be? There is a different mechanism for all the achievements. But the A is to sell 100 megawatts, they are selling 90 megawatts. They will have to Say 10, DSM for 10 megawatts. Okay. So nothing comes on to us? No, no. I mean we have designed the contact center seminar that exchange there is no obligation on exchange. That's correct. So secondly, sir, obviously with your experience in the power market, so what exactly in the last two months, what we've kind of seen was quite unprecedented in terms of pricing going high. We saw obviously governments also changing stand, but They have encouraged people to move out of older contracts, but then suddenly seeing the prices at 20 and A disruption in the generation market, they advised that we should again come back to old PPAs and revisit. So From an outsider standpoint, how do we look at it? Because now that you rightfully mentioned that there was a big cost saving in the last 2 years When a state like Telangana purchased X amount of units through the sub term market to meet the long term demand which are there for Years to come and will be years to come. The suppliers are obviously limited in the system and they know that if a particular demand is coming, Then obviously there can be a big play in the market that can happen, okay, which may not reflect to me on the demand supply dynamics, which happened in the last 2 months, where we saw prices going up to $20 where a lot of discounts also played into the market and selling power on the exchange at more than $15. How do we balance that as a system is my question to you. Let us not Those are immediate reaction to the situation. This kind of price increase this time, it is quite high mainly because of the very high increase in the imported coal price and very high increase in the LNG price. So as a result of that, almost about 15,000 to 20,000 megawatt of So there is lot of pressure on the domestic coal and domestic coal ramp up cannot happen at a rate of 10% to 15%. And particularly during the announcement season, we have open cast mines and the mines are also get flooding, so coal personnel also gets affected. And which is not which is happening for the first time. If you see 2018 also in the month of October, there was tightening 3. So after monsoon, in the month of September, October, when the climatic weather is also hot and humid, agricultural load is there at sea, Price increase happens. But then right from the month of November, you will see every year the price starts going down. And you will see now also the prices are early purchase prices are down. In the last 6, 7 days, the price is hovering around INR 5 to INR 6 rupees From this number. And in normal, I'm sure the prices will be down fully than 43,000,000. So It does not mean that if the prices have increased for a month, then we will start getting into long term contracts. Sir, I take your point. My only question was that What has happened is that a lot of capacities have become redundant in the system because if you're not buying capacity Under contract, then you are not incentivized enough to run them. If you're not running them, then obviously there will be a supply crunch in the medium to long term. And if that is the case, then obviously the prices may sustainably be higher than what we've seen today. I think the kind of demand increase which is happening in the country, all those all that capacity which is standard today, I'm sure that we will put figures. And market prices will give a signal for the new capacity agreement. Sure. Thank you, Vijay. Thank you. The next question is from the line of Kunal Tanvi from Banyan Tree Advisors. Please go ahead. Hi, sir. Thanks for the opportunity and congratulations on a good set of numbers. So, Rodney, I had 2 things. First was again on the Android. We understand, you know, Minister Power has come out with 1 draft And also they have come out with a deadline of 1st April of 2022. I wanted to understand, in the draft, did you talk about possibly Reduction in the charges that an exchange would charge for this form and the generic price because there is a comparison between the global market We know wherein the power exchange globally has a very lower charge compared to what we charge in India. Wanted to understand In the global market, is that in there some other charges apart from the transaction charges that we charge, which is at all data size, but for us, We can also charge, that is question number 1. Question number 2 was on the long duration contracts like, of course, the The situation has seen that the bilateral market, large part of bilateral market could come from long duration context. And do we also feel that some part of long term power demand can also come on the RBC? And also any color on the Owner arrangement, fee arrangement with MCX, it's the same here. Fee arrangement with MCX. P. Vijay Kumar:] Okay. As far as NVID is concerned, I think Charges, etcetera, what you are referring is was there in the discussion paper. But then this is under the domain of CRC. They will have to decide about the detailed procedure and issues, if I mean, regarding the balance in charge. So as and when CRC takes up this matter, we will see, we will discuss with them And it will be as per the CSCR. Implementation of unbilled that also will be dependent on Realigning of regulations by CRC. Lot of work is to be done in that area. And we are as far as we are concerned, we are ready. And we are working with CFT to ensure that it is implemented from 1st April because as far as we are concerned, we see a lot of opportunities It can be implemented from 1st October. Long duration contracts, As I told you, we have already filed our petition with CRC. We are waiting approval from CRC. As I mentioned, we get approval with non cash long duration contracts. Initially, I mean, we are definitely looking for diverting bilateral transactions on the exchange platform. So that shift may That's unbelievable, but definitely it is going to happen. With MCX, MCX is going to launch Derivatives, repetitive derivatives. And for settlement of the derivatives, you need entrance files. And they intend to use our pipe. So for using our pipe, we have agreement with that. Sure. So that's what like can we throw some light on the fee arrangement that we could add with them? We already have agreement with them. They will be using our reference price and we'll be getting some revenue share out of the revenue restricted from electricity derivatives. Sure. And just one follow-up on the pricing. So globally, like, have you seen extended related Charge for other value added services also apart from the transaction charges. And is there any scope that we can also, going ahead, say, 3, 4, 5 years There is no standard system Of charging fees and annual fees and membership fees for different exchanges. Everybody's charged depending on the conditions prevailing in the country. So and we also have started telling it based on the conditions which are telling me here. I don't think we Thank you. The next question is from the line of Swadnam Maheshwari from EDWise. Please go ahead. Yes. Anup, good afternoon. Congratulations for a very good set of number. So just two questions. First, I just wanted to understand your thoughts over here. So first is, is it possible to implement Envid without price coupling It's kind of the purpose of single pricing in ended, Garshal, so you will have multiple pricing on Q3. It is possible to implement and will not collect price of blame and that is what Government's release also says that even in the discussion paper which was released by government that also said that Phase 1 of the embed will be implemented Percent of the transactions in collecting market are happening on the exchange platform. So What is the problem? In case of MBG also, the same phenomenon will take place? Sir, I think the whole point is when you actually go for 100, you are going from 100 to 400,000,000,000. I think your ROEs will be like about 4x from here. And we don't See any entity actually using this is a normal profit. So with a highly regulated framework. So That was the point that even to our practice really. I think it is the regulator is there. They will take care of all these things. Yes. No, no, I understand, sir. Correct. Sir, the second thing is Sir, what is the profit which you are making? INR 202,000,000,000, what is the profit which NSE is making? Right. Got it, sir. Got it. Sir, checking in, now we will be moving from the mechanism of sales scheduling to the exchange And this would incur some additional cost with respect to our brokerage. Now of course, the overall Saving cost that was in the past on implementation of Envit is about 3% to 4%. But should Envit get implemented on these changes, About 1.5% to 2% might be actually eaten up by the brokerage. So, does it do you think that there is a possibility that in future that the transaction fees might actually start coming down? Otherwise, this actually defeats the purpose of that again. Again, I told you, regulator will have to take a view on this. They will have to see what kind of values customers will be able to get by implementing their bid, what kind of savings will happen, What is the job which will have to be done by the seniors? What kind of fees is to be given to them? I think we have a regulator Okay, sir. Got it. Thank you so much. The purpose of Enbit is not only 5% or 10% reduction in the cost. Parthasarathy, Ambit is also to distribute the power in the most optimum manner, utilization of resources in the most efficient manner and also going forward, integration of renewable with the conventional power and efficient manner. So Objective concern is quite large. Let us not limit back to 5% cost savings. Sir, the discussion paper actually said that That of course will not be objective is to achieve this cost savings. But you did mention the other point, Ana, as well as to confirm that's it, That's Thank you. The next question is from the line of H. J. K. Capital Management. Please go ahead. Hi. Am I audible? Yes, yes, please. Yes, sure. So my question is on your one of the slides, I think it's Slide 32 or something, 32, I think. We are talking about the total capacity likely to phase out by March 2027, which is 41 gigawatts. This gives you additional 100 BU opportunity for the exchange. Right now with 9,000 MU per month, your current Volumes are around 100 biyu per annum. So it is like this additional opportunity is doubling your market. But what is this market exactly? Are you referring to the investor presentation? Yes. In your investor presentation, Slide 32, phasing out of plants. Total capacity likely to phase out by March 2027 is 41 gigawatts, incremental 100 btu opportunity for the exchange. So your current volume is 100 btu per annum. And this you're saying is an additional 100 btu. So what is this exactly? Yes. Today, we have power plants having generating uniting, having capacities of 60 megawatt, 100 megawatt, 150, 200 megawatt, these units are inefficient units consuming more cost for generating 1 unit of electricity. And these units are also quite old. They are also not meeting the environmental standards in many of the cases. So Government of India has decided to phase out these whole units and the capacity is around 35 to 40 gigawatts. At 80% utilization level, these units should generate something about 300,000,000,000 units. But since these units are old, these units presently are generating about 100,000,000,000 to 150,000,000,000 units. So if these units are phased out, Then there is opportunity of they are today generating and supplying their power to distribution companies. If they have failed out, then that Power will come to the market. That demand should come to the market. So that is the opportunity size. Out of this, how much we will be able to get on the exchange platform? That We look forward to it. Thanks. Okay, understood. And one more question on the follow-up side. You have in Slide 33, you are talking about the second bullet where the government is going to deepen the power market by increasing the spot market 25% by the year 2023 2024. This 25% spot market, what exactly is this? Because right now, 87% is the PPE, Remaining 13%, you have bilateral, then you have the exchange and then you have the integration settlement mechanism. So this 35% is the Exchange, which is now like 6.5% which is your market share. What is what are they trying to do? Is it like Because some of the numbers I want to understand from a bird's eye view, which one to add and how the long term CPE is going down from 87% To what percentage? Something like that. This statement is from draft National Electricity Policy, which was issued by the Government of India recently. This draft policy says that the share of the spot market should be increased to 25% by the year 'twenty three, 'twenty four. We have not defined the spot market in that draft, but spot market invariably In that, they had market exchange translation, the short short duration translation, that is a spot market. And this is today 6%, 7%. So the intent of the government, what we see from this is to increase this 6%, 7% to 20 5% in the next 3, 4 years. But even going by the short term market, which is today 12%, Increasing that to 25% in the next 2, 3 years 3, 4 years, that also is a big multi class. No, yes, exactly. That's what I'm asking. I mean, the short term market is 12%, 13%, which going to 24% itself is a great deal. But in this graph, as per this graph, I'm not saying that this is an achievable target or an unachievable target. I'm not commenting on that. But as per this graph, 25% will be the top market spot market on top of which you have the bilateral and the deviation settlement mechanism etcetera, etcetera. And bilateral also, you will benefit hugely because of the long duration contract. So net net, if we assume the opportunity for the exchange Down the line, like 3, 4 years down the line, it is like nearly what 30% if you add everything, if you add all the components as per this proposal. That is what it should be. If you want to have high renewable capacity in the country, it is necessary that exchange transactions should increase So speaking of market, then only you will be able to address that variability in the renewable generation. If you look at countries, open countries where you have high renewable generation capacities, exchange transactions are almost about 50% of the total generation. So in India, So in India, our plan is to go with 4 50 gigawatt of renewable capacity in the country. I think we need to have market size of 30%, 40%. And I think This statement in the draft, Nationality policy is also keeping gassing in you. Okay. So, got it. Okay, understood. Okay. Thank you. Thanks. Thank you. Thank you. The next question is from the line of Aniket Mittal from SBI Mutual Fund. Please go ahead. Yes. Thank you for the opportunity. So the first question is actually on the derivative market. I mean, like you rightly said, there's a very Your emphasis on increasing the spot market in the country. But with that, there also needs some sort of a mechanism in place to Hedge the risk, but the stock market gains. And I think it's been about a year now Since we signed the licensing agreement with Centrix. Centrix also have gone and signed a technology agreement in the 3 years. So just to get an understanding from a feasibility perspective, when do you think can you actually launch a derivatives market in India? Yes. This electricity derivatives we lost by the commodity exchanges. And what we understand that MCX So has already signed contract approval with SEBI. But if you have seen that joint working group minutes Based on which this litigation has been resolved, one of the requirement of the news that there should be a joint working group consisting of representatives of SEBI, GRP, Ministry of Power and Ministry of Economic Affairs. These joint working groups should decide what kind of Contracts should be allowed in the tailwinds in market and what kind of gross profit contracts should be allowed by CRC. So that it should not have any adverse impact on the spot market of the country. So I think the joint working group meeting is Shortly after that, they will decide about that and then thereafter, say, we will give the approval. And then M6 will be able to start this very good contract. So I will not be able to say anything about that time line, but this is the process and this process has to happen. Sure. Just one question on the on how do you see, let's say, the short term market turning out In the next 1 year or so, because traditionally, like you said, we do your 3 years back in 2018 as well. And at that point in time, that tend to spook off the discounts a bit. So we had but then some amount of pilot schemes coming up And a lot of this call started rushing a bit to actually tie up in a certain context because You can't keep on buying at more than INR 5, more than INR 6 on a daily basis. So I think over the past 1 year, we've gained around 1 point B. Balaton:] Do you think some of that can actually then go towards the bilateral in the coming months? See, So far, only one pilot project has happened and that's for 2,000 megawatt. Okay. And the demand is increasing every year at a rate of 7%, 8% now. If economy has to grow at a rate of 9% to 10%, our demand has to grow at a rate of 6,000, 9%. If that has to happen, the demand is going to go at a rate of 15,000, 16,000 megawatts per year. I don't think pilot of 2,000 megawatts would be really a big concern for us. I mean, this kind of transition But there is still lot of opportunity for NexGen. Okay. Maybe just one last question, if I wanted on data point. So if I look at your second quarter volumes, would you tell me who are the top 3 buyers on the exchange for this quarter? And what is the cumulative contribution to your overall volumes? I can tell you that participation was verified by most of the states. And the states where the demand has increased like Gujarat, Maharashtra, Punjab, Okay. No. Depending on the demand, you are buying part of. So can you would it be possible to quantify that as we were the top few buyers in their contribution to overall volumes? Okay. But I can tell you one thing that this State 7 states which I told you that demand increased significant demand increase has taken place in this space and they were lost by some exchange Thank you. The next question is from the line of Apurva Bahadur from Investec. Please go ahead. Hi, sir. Thank you for the opportunity. Sir, wanted to understand basically, I think you mentioned that you're seeing capacity addition We should be planning in the system given that almost 40 gigawatts will be retiring in the year. I think that's the item 30 odd gigawatts in terms of new coal capacity. So 2% share, firstly, Where do you see this capacity addition happening? So mostly in renewables or in thermal assets. And secondly, In case we are currently seeing sort of reducing capacity on a net basis, do you see the long term pricing on exchanges going up sustainably? I understand what is already going on for construction and commissioning of about 40,000 megawatt capacity, which is in the state sector and in the central sector. So Whatever capacity will be retired, almost same kind of capacity is under construction kind of thing. So there is not going to be any shortfall in the installed capacity. Farzahar, in addition to this, we are also working on the renewable capacity addition. So, on this side, I don't see any challenge. Okay. Got it, sir. And secondly, sir, on the sorry for harping on this again, basically on the embedded side of things. Now essentially, I understand and please correct me if I'm wrong, but under the MDED, Price discovery won't happen on the exchange. It's simply the scheduling function. So in such a scenario, And I know you said that regulatory will take a call, but what could be a fair sort of a remuneration for the exchange, which is basically the 2 d scheduling Functional, just sort of landed platform on technology for it. You got some supplier points. In the phase of Phase 1 of Envit exchanges will do what we are doing today. The entire function of bid collection, price discovery, Scheduling Financial Tanya settlement and physical settlement will be done by the Exhibos. Okay. So the price history has also happened on exchange rate for embedded and won't be based on the variable cost of this? That is Phase 1, yes. And post the Phase 1 as an overall implementation level? Implementation of Phase 1, they will see What are the implications? What kind of benefits the country is driving out of that? And what should be done for Phase 2? Whether this is lost for Phase 2 or not, I think the follow-up on that will be taken after implementation of Phase 1. Okay. Got it, sir. And then, sir, in that case, say, for example, in case of Phase 1, probably NTPC will sort of become some market maker, Given that it will be driving the bulk of the capacity, so what incentives is it there for NTKC to be on IEX. Because what I wanted to know since NTPC is the market maker, probably it can drive price discovery on any of the exchange. If you could just please elaborate on this and first, if you don't like. Number 1, if you have seen the paper, it is not anti PC alone. It is talking about Interest rate generating stations. So when you say interest rate generating stations, which is NTPC, NLC, The NIPCO, MSPC, SGVNL, all these companies plus the private sector companies also which are Interest rate generating companies like Adani, Tata, Tassan and then you have interest rate generating patients in the private sector also. So, GMR, I mean all these companies, all these plants are interested in anything plants. Right, Saba, same thing Parthas, right. I mean, NTC would obviously be Have the highest capacity among these or even if you say a 2 or 3 government company? Any generator or distribution company will like to participate on exchange platform which has demonstrated its capability to run this semiconductor. I mean nobody can take risk with an exchange or a platform which has not proven. I I mean in last 13 years at least we have demonstrated that, that we are capable of earning such a product. Fair enough. And if you think you are comfortable in doing the Revaschen? Do you think so, right? Right, right. No worries, I get your point. Thank you so much. I'll get back in touch. Thank you. The next question is from the line of Noelle from Ashika Group. Please go ahead. Hello. Yes, actually most of my questions have been answered by now, but just one last question. So this is regarding the very high volume that we have seen in August September. And so far, we are also seeing higher volumes for the month of October. So Would it be fair to assume that these higher volumes would persist in terms of market share gains going forward as well? Yes, definitely. That is what we think so. Okay, okay. But just while that There will be some portion of it that would be seasonal in nature because of the various power shortages that were there. So That would be, I think, a minor portion or that would be like fifty-fifty? I mean, what would be the rest of your time? If you look at our quarterly volumes, Invariably, quarter 2 is the highest volume. But in quarter 3 and 4 are also reasonably good volumes. It's not very significant. So, multiple months in this negotiation, but every quarter, you will find some very good months. Okay, okay. Yes, that answers my question. Thank you very much. Thank you. Thank you. The next question is from the line of Aman Madrisha from Augmenta Research Private Limited. Please go ahead. Yes, sir. So I had one question. Like currently, if you look at the balance sheet, you have around R1,000 crores of cash investment. So what are we planning to do with this? Are we planning to invest in some other revenues? Or are we Looking to increase the dividend payout, like what is stands on the cash balance on books? I'll request my colleague, Mr. Vijith Ravanta to respond to this question. Thank you. We look at the company as a surplus of the cash flow, But it is mainly because of the trading float and margin, which is a kind of a liability, it's more of a cash surplus. But if you look at the shareholders on it, it will be 2 months around 4.5, for RMB50 1,000,000 only. So we are exploring along the diversification opportunity and company has been paying a good amount of dividend in the past also. And considering that the company will continue to reward the shareholders of the dividend also and completing the requisite amount of the cash as required for diversification and looking for Okay. And sir, I also wanted to understand and if There is just comment in the picture. So will there be any effect on the volumes on IEX or it will be just that And it will be taking prices, different prices from IAS. So Can you repeat the question, please? So, can we expect the volumes on IH to deteriorate Because HDFC derivatives often becomes a larger market in each and every segment. So can we expect the volumes to deteriorate or the volumes should remain Volumes will further increase because the regulated contracts are financially settled contracts. And if delivery has to happen under those contracts, As for the contract, the delivery will happen on the IX platform. That is number 1. Number 2, When there are derivatives, there are few market participants who are not participating on the exchange platform because of the price volatility. Now those participants will have the option of helping their position in the derivative market and taking delivery in the spot market. So invariably, what we have seen when you have derivative market, the deepening of the spot market happens. The volume in the spot market increases. And despite government was also concerned about Introducing this derivates in the market and government took the initiative of resolving this jurisdictional issue. So in this derivatives market, the contracts will be settled, right? There will be delivery of So that delivery will happen on the IX platform. Okay. Yes. And, Steve, do not do delivery of power because delivery of power is regulated by CRC. It has to be done as per the CRC regulators. Okay. So as per the contract, any delivery resulting out of the derivative contracts will happen on YS platform. So like with the derivatives, can we expect more price fluctuations? Because given that there will be derivatives, so there will be price fluctuations on the platform, It matters volatility or price fluctuations? Not clear about your question. So, I think the derivatives in picture going forward, can we expect price volatility in the time of time markets Indeed. No, no, no. Price volatility, in fact, when you have derivatives, there is more stability in the price. Okay. And sir, I just wanted to understand more on the IGX from like when can we expect IGX2 materially start contributing to the revenue of profitability? Yes. As I told you, IGX is doing Volume increased every month, the volume credit volume is increasing. But because of the high price of gas in the international market, Unfortunately, the import of cash has reduced, so availability of cash in the market has reduced. So that has impacted our projections. We were expecting in the Q4 of this year, we should achieve breakeven, But maybe it might get shifted by 1 or 2 quarters. Okay. And sir, can you just give me some data from like what is the transaction charge on the IGA? I think transaction charges are INR4 per annum btu on each side. Okay. That will be helpful. Thank you. Thank you. The next question is from the line of Dipesh Agarwal from UTI EMC. Please go ahead. Yes. Good afternoon, gentlemen. My first question is, So when you look at renewables, most of the capacities get built up with 25 years PPA. So do you think the addressable market for Changes for renewables would be restricted largely for the load balancing or there would be more volumes coming up out there? In 2008, when we started IEX, at that time, Almost 100% of the power generation capacity was tied up to the PPA. But then slowly, we started having merchant capacity in the market also. And then the distribution companies, when they had surplus power, they started selling on the exchange rate form. Similarly, in the renewable also, we are just after this GTAM market. And on 26th October, we will be starting the GTAM market. So I think when we start this product in the market, now the generator should have another option of selling the renewable power. What we have seen in the last 1 year in the digital market, price discovered on the exchange platform is much, much higher than The price which they are getting under completed will improve. So I'm sure there are going to be generators who will set up merchant capacity. And volume in this market will again slowly start increasing, right? I'm not expecting that the Volume increase in the green market will happen immediately in the next 1 or 2 years, a segmentic time, but yes. Understood. And my second question is continuation with an earlier participant's question. Sir, on the price coupling, Where are we in terms of regulation? Can you help us understand, is there a clarity from the regulator side whether this will be implemented and if yes, buy when? For comparator side, there is no mention about price coupling anywhere. We have certain regulations also that is to be considered as and when necessary. So I don't think there is any discussed among this. And even in the Phase 1 press release given by the Ministry of Power for implementation of Phase 1 of NRIQ, There also there, Nobun, Nobun, sorry, couple of things. Okay. After implementation of Phase 1, then they will see How effective this was? Should we should we go ahead with the Phase 2 or not? I think these are issues which will be Subsequently, no. Okay. Thank you. Thank you. We'll move on to the next question that is from the line of Ankushar Garrawal from Search Capital. Please go ahead. Hi, sir. Just one quick question. So could you highlight like what would be the reason for someone to trade on the exchange So power trader like BTC and not directly and like what are we doing to bridge this gap? Can you repeat the question please? I can't say to you. Yes. So what according to you, you think that's even by someone who trade on the power exchange, not directly but through a broker like a PTC, right? I'm still not clear. Yes. So PTC, they have like 30%, 40% of the exchange points, right? So a lot of discounts and powers and data used previously to put their bids on the exchange, right? Yes. Yes. So what according to you are the reasons why these companies are coming through exchange for PTC and not directly to the excess? Number 1, the share of PPC on power exchange out of the total transactions what we do is almost about 20%. It's not 38%, it's about 20%. Number 2, there are a couple of state distribution companies, through PTC. And some of the industrial customers also are participating through PTC. PTC also has long term contract with some of the generators. They are selling their power also, so that's in spectrum. So these participants have their own reason for In addition to this, we also have some of the other trader members also like Tata Power Trading Company, Manikaran, etcetera, who are doing transactions on behalf of some of the clients. And then we have many distribution companies and who are Directly doing transactions on exchange, for example, while I'll cooperate in Since PTC is coming out of the phone exchange And if PTC is $20,000,000 volumes and they are the decision makers expect this $20,000,000 volume. Within that, the risk that I'll give you one example. When you participate, when you purchase share from Zirola platform or on ICICI Direct platform, there is an option So you will see purchase from DST or NSE. Who decides about that? You decide or that platform decides about it? Traders are only doing these transactions on behalf of the clients. For a generator, it is more important to sell that If that power is not sold, that opportunity is lost forever. Power is a perishable commodity. So far it's generated, it's important to sell the power. Usually for a distribution company or industrial consumer, it is To get the power, if the power is he has not been able to get the power, industry will have to reduce the production and distribution companies will have to do the low ceiling. So these parties will like to do that trade on exchange trade sum where they have that comfort that yes, they will be able to sell or purchase the power. So I think it is they who decide about it. Okay. So it is They decide to purchase share on a particular exchange based on the liquidity On the exchange rate? It's a common phenomenon. So what you're saying is that this Conference of consumers, whether this content power position decide which kitchen to place the order on, and it's not PTC who decides it. Yes, yes, yes, yes, yes, yes, definitely, definitely. Right, right. Got it. And so secondly? Okay. That was all. Thank you. Thank you. Thank you. We'll move on to the next question that is from the line of Jitendra Rishi from Axis Capital. Please go ahead. Thank you for taking my question. So I've got few bookkeeping questions. So first question is on the what was the share of Open Access volume in the quarter? This is about 15% to about 40% Sorry, 20%. Okay. And sir, I have 2 more questions on the other expenses. So we have seen Sequential decline in other expenses and also on the employee costs, which went up sequentially. So what was the reason for decreasing the other expense And increase in NPL and what 10 meter 100 going forward? Cost of innovation during COVID-nineteen. That is one reason as far as the cost management is concerned. As it's just my colleague Mr. Vinit Halal has to respond anything about it. So this is the company's incur which was not there. Otherwise, all the other costs are more or less same. So that was the only major significant difference in the quarter 1 and quarter 2. And if you compare to the September quarter the previous year, yes, because of the COVID, the restrictions were there and all the work from home. So that's why the one factors are very limited if the figures were there. And on the manpower cost increases mainly because if you can recall during the quarter 1 comp, I have to be clarified. So there are some reversals on the relevant proportion, amount was there during Thank you. We'll move on to the next question that is from the line of Gokul Maheshwari from Auriga Capital. Please go ahead. Yes. Thank you for the opportunity. Sir, in your opening comments, you had mentioned about some changes in the DSM regulations In terms of price benchmarking, can you help us in terms of understanding in detail how this regulation will help The RTM gain share from DSM over time. Thank you. Yes. So the DSN mechanism is that there is an average price of the day which is taken and that average price of the day is linked with the frequency. And since frequency is almost constant hovering between 49.95 to 50.05. So the DSM price is also very close to the average clearing price of the day. But Average clearing price is the average price of the day. During evening hours, the price is higher. During morning hours, the price is higher. During the day time, the price is lower. Hello? Yes. Sorry. Yes, sir. Please go ahead. Yes. So what we have seen that when The demand is more. The market clearing price is high. DSM price is lower, and there is a tendency to withdraw. That is why now CRC is linking the DSM price to the block wide price discovered on the exchange platform. So in the evening hours, even the price discovered from 7 o'clock to 7:15 block, if the price is INR8, then the DSM price also is going to be more than INR8. There is going to be a multiplier on these clients. So in the graph, they have indicated 110% of the discount price, But many of the participants have commented that this price will be higher than this because then only it will act as a different. So that is how the DSM price is going to be linked with that each block and it is going to be Higher than the market clearing price forcing distribution companies to plan and purchase in the RPA market. And is this round the corner in the sense this implementation is going to happen soon? Pardon? Is this implementation expected to happen soon, This change in regulation? This is a draft discussion they have issued. They have invited comments. I think comments are also submitted by all the parties That date is over. So, CRT might pick up this issue in the month of November and then thereafter the Order should come. Hopefully by the end of this year or in the month of January, this should be implemented. Great, great sir. Thank you so much. Thank you. Ladies and gentlemen, that is the last question. I now hand the conference Over to Mr. Jitendra Roshi for his closing comments. Thank you everyone for participating in the call. We thank the management for giving us this opportunity. I would now hand over to the management for their closing remarks. Thank you. I would now hand over to the management for their closing remarks. Thank you. Thank you very much for participating in this earnings call. I must say that energy markets have a key role to play in building India as a sustainable energy economy. With the opportunities that lie ahead of us, We are very excited about the prospects of the company. And we had great interactions with today. And I look forward to similar interaction in the next quarter also. Thank you. Thank you. Ladies and gentlemen, on behalf of AXIS with Capital Limited that concludes this conference call. We thank you for joining us and you may now disconnect your lines. Thank you.