Earnings Call: Q3 2021

Jan 22, 2021

Quarterly report

Ladies and gentlemen, good day, and welcome to the Indian Energy Exchange Q3 FY 'twenty one Earnings 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. Silas Gishore from Axis Capital Limited. Thank you and over to you sir. [SPEAKER SRINIVASAN VENKATAKRISHNAN:] Thank you, Mallika. Good afternoon, ladies and gentlemen. On behalf of Axis Capital, I am pleased to welcome you all for the Indian Energy Exchange Q3 FY 2021 earnings conference call. We have with us the management team of IEX, which is represented by Mr. Satin Narayan Goyal, Chairman of Board, Interim Managing Director and Chief Executive Officer Mr. Vineeth Hallalkha, Chief Financial Officer and the entire management team. We will begin with the opening remarks from Mr. Goyal followed by an interactive Q and A session. Over to you, sir. Thank you. Good afternoon, everyone. Wishing you all a very happy, healthy and prosperous New Year. I welcome you to the quarter 3 fiscal year 2021 earnings call. Present with me today are my colleagues Mr. Vinit Harlalka, Mr. Rajesh Madhiratha, Mr. Rohit Bajal, Mr. Kimranil Chatterjee, Mr. Ramit Kumar, Mr. Sangh Gautam, Mr. Sameer Prakash, Mr. Deepak Mehta, Ms. Suthi Bhatia and Ms. Aparna Garg, I hope all of you, your teams and families continue to stay The past year undoubtedly had been a tough year for all of us. The collective resilience with the mankind has shown to grow beyond the Adversities and focus on new opportunities for growth and development is truly remarkable. The year 2021 has begun. On a very encouraging note, the industry and economy continue to sustain growth forever. The news Our vaccine rollout is also a positive development and supports fast track move towards normalization. As India watched its growth to recovery, the exchange continues to make significant contributions towards transforming the energy ecosystem. To support India's growth and a sustainable energy ecosystem, ix remains committed to providing uninterrupted access to its platform to facilitate the distribution utilities and industries in procuring uninterrupted 20 fourseven power in the most competitive, flexible, transparent manner. Moreover, as a technology led energy marketplace, we are constantly striving to leverage existing technology to its fullest potential and provide New and customer centric solutions to our market participants. The Q3 of the fiscal year 2021 has been the most significant one for the exchange since its inception in the year 2008. Continuing the spirit of launching a new contract or a product every quarter, in this fiscal year and in quarter 3, we We introduced 2 new contracts in the green market, daily and weekly contracts. Additionally, during the quarter, We signed a licensing agreement with MCX. Under this agreement, MCX will launch Lectureative derivatives in the market using iX5 as a clearing. After Approval from that, this will be lost only after approval from the government and the regulators. Even more importantly, our subsidiary IGX, Indian Gas Exchange, secured the financials from PNGRB as the 1st gas exchange in India, which will bring in further credibility to the platform, enabling greater participation in the gas market. We continued our customer outreach efforts through various workshops and webinars, especially to build awareness and capacity around electricity markets, Green market as well as the gas markets. We continue to enhance our technology platform to support new contracts Under Green Market, we are now gearing up towards building capability for our forthcoming new Market segments like long duration delivery contracts, these efforts coupled with invaluable support from our members, clients, partners and employees have helped us to sustain a positive momentum as well as deliver remarkable business growth. In quarter 3 this fiscal year, we could accomplish the highest quarterly volume ever. So I express my gratitude to our stakeholders as well as all our and the ecosystem partners for their continued support. I will now share with you the overall economic and industry highlights for the quarter. The industrial activities and electricity consumption continued to rebound in the Q3 of the fiscal year 2021, led by the revival of the consumer sentiments as well as the demand. In October 2020, the manufacturing PMI rose to 58.9, the highest ever in the last 8 years, while in November December, the PMI sustained momentum at 56.3% and 56.4%, respectively. With increase in industrial activities, the national energy consumption increased 7% on a year on year basis during this quarter. As on 31 December 2020, the installed power capacity in India was at 3.75 gigawatt and with a growth of 1.8%. The renewable capacity grew faster at 6% on year to year basis. The cumulative renewable capacity is now at 91 gigawatts. The steady growth in renewable is testament to India's sustained efforts towards decarbonizing the economy and increasing the share of green energy in the country's energy mix. On the policy and regulatory developments during the quarter, the Ministry of Power introduced a draft proposal on December 4, 2022, Enabling the distribution utilities to exit from the power purchase agreements after completion of the term of the PPA. This initiative will enable more buying by the utilities and sale of power by the generators on the Exchange platform. On December 22nd December 2020, the Ministry of Power Notified Electricity rules as part of the major reforms in the power sector. This was a significant step that aimed at strengthening, streamlining and enhancing the Quality of electricity supply and services being provided to consumers across the country. The rules will also ensure consumers' right to around the clock electricity supply. Amidst these developments, the role of power exchangers market will become more critical as it will allow distributors utilities to fulfill their power supply obligation and address demand supply variations in a seamless and cost effective way. On the gas market side, as mentioned earlier, PNGRB authorized IVX as the 1st delivery based gas exchange in India. Additionally, the PNDI will notify the regulators regulations for unified tariff structure for over a dozen pipelines that form the National Grid Let's now gas grid today. The simplified 2 zone tariff structure will lead to a reduction in transportation charges for distant users of the natural gas, thereby making it more conducive for development of market in the country. PNGRB also notified Final regulations regarding access code of CJD and TETI's post exclusivity, period, wherein 20 of the pipeline network will be available for Open Access. Further, PNGRB also notified the Imbalance Management Services Regulations during the quarter. These developments together will help increase competitiveness in the market and increase redemption of natural gas in the country. We have been working with 2 large strategic players in the gas sector for equity participation in gas exchange. Today, I'm happy to announce that Adani Total Gas Limited and Torrent Gas Private Limited have acquired 5% each in Indian Gas Exchange. We are also working for strategic divestment with a few more prominent partners. Let me now discuss about the financials and the business performance. On a stand alone basis, the revenue for the quarter grew by 37.9 percent on year to year basis over INR 69.39 crores in quarter 3 of FY 2020 to INR 95.68 crores in quarter 3 of FY 2020. Further, the PATR 60.08 crores increased by 42% year on year basis with respect to quarter 3 of FY 2020 and the price margin was at 62.8%. The company has announced an interim dividend of INR 2.5 per share. Moving to the significant uptick in electricity demand, Q3 of FY 2021 registered highest ever volume on the exchange platform. Even despite the subdued market conditions, the company remained Debt Free and showcases robust performance led by strong business and governance model. The electricity volumes in quarter 3 of FY 2021 at 20,170,000,000 units when compared to 12,470,000,000 units in Q3 of FY 2020. It witnessed 61.8 percent growth. Due to the delays in regulation of impending Metadata regarding the REC, the trade in REC basket did not take place even during quarter 3. Consequently, Total volume including REC registered 48.2 percent year on year growth. Despite 43% growth in the end market, The price on the exchange remained subdued and saw a decline of 2% on year to year basis. The average market clearing price in the day ahead market during the quarter was 2.8 per unit. The real time market registered an all time high monthly volume of 1129 MUs in December since its commencement on June 1, 2020. On a cumulative basis, in quarter 3, the RTM market traded 2,837 NUs. The green market cumulatively traded 473 MUs during the quarter. As mentioned earlier, technology and innovation are the key importance to us as a technology led energy marketplace aspiring to shaped the future of the India's energies. India's energy, we are continuously investing in technology. This has helped us to position IX platform as a highly customer centric and scalable, proactively meeting the dynamics Dynamically Wearing Needs of West Market Participants. We are now gearing up to launch the web based trading platform, which will offer user centric, easy to use interface and self-service online capabilities to provide ease of faith and best in class customer experience. We are constantly innovating and also ramping up our technology infrastructures, enabling IEX to lead their way to the next chapter of India and India Revolution. While the last Few quarters have been turbulent for the economy as well as energy sector. The opportunity to build a competitive and efficient ecosystem with Enabling policy framework is now. The government has already initiated several reforms and likely to sustain the firm momentum in the coming months. At ix, we believe that energy markets are key to transform the sector in the best in the post COVID-nineteen era. This new market based energy order will be driven by efficiency, competitiveness, flexibility and sustainability, And we are working towards it in a proactive and collaborative manner. Thank you all. I and my colleagues would be available now I will be pleased to answer your questions. Thank you. Thank you very much. We will now begin the question and answer session. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Mohit Kumar from DAM Capital. Please go ahead. Good afternoon, sir, And congratulations on the excellent quarter. I have two questions. The first is on REC market. Given that the REC market, nothing has got traded in the last 9 last 5 to 6 months. The question is what is the inventory right now? And do you expect the steering to start sometime in this year? Or do you think it will get rolled over to next year? Given all the information, what is available right now? That's the first question. Secondly, sir, on the gas exchanges, you just announced that you have divested 5% stake. I'm assuming that this is a secondary sale and this is Is it done on par basis? Can you just comment on that? And how much you intend to divest going forward? Is there any Is there any strategic plan to know how much you want to hold over next couple of years? Yes. As far as REC market is concerned, every year almost about 80, 90 lakhs kind of Transactions happen in the REC market. So this year, this is hardly about RMB 10 lakhs. So rest of the IACs which are there available on the sell side, I'm sure will be available in future in addition to the yearly RACs issued. So on sell side, there should be good quantum available. And RPO obligation, that will be that continues. So I'm sure distribution companies and industries who are obligated entities, This RPO obligation of this year will have to be fulfilled in the subsequent period. Regarding whether the REC market will start in this financial year, Very difficult to say because what I understand is the rehearing of the case will happen in NAPTEL, only thereafter the order will be issued. So whether the order will happen this year or not, difficult to say. On the gas exchange? Yes. On the gas exchange, we are looking for strategic partners. So for strategic partners, the sale is at par only. So we are not divesting. We are only Looking for strategic partners and we have identified a couple of strategic partners and we are only talking to them and whoever is interested in Coming to join the ISX platform, yes, as equity investor. We will only sell the equity to those study departments. Understood. And last question, sir, what was the Open Access volume in this quarter And a 9 month? 3% increase. Percentage down, if you can provide us? The increase in the Open Access volume is 14% And the number term, 44% of the total demand and volumes wise. This is for quarter or 9 months? Quarter. 24% of the total volume, right, in the quarter? To volume and 14% increase on a year to year basis in the open source. This only includes DM market, it has nothing to do with RPM market, am I right? So very little in our DM market. Majority of the Open Access is to credit through their end market only, but we have some part is there in our team as well. So even in the total volume that we have done, which is about 20,000,000,000 units in Q3, almost 24% is through Open Access, remaining is all distribution company wide. 76% is distribution company wide. Understood, sir. Thank you, sir. Best of luck. Thank you. Thank you. The next Question is from the line of Sujit Jain from ASK Investment Managers. Please go ahead. Good morning, Jain team. Congratulations, stellar numbers. A few queries. On RAC, I want to probe more if the RPA obligation for this year FY 2021, Is there a chance of relaxing that because if that happens, because of COVID situation, exceptional situation? Then the demand that could have come once the trading starts actually will not come And the new set of obligations in FY 2022 will kick in. EASA trading should have happened this year. Any update on that? I also want to understand the software that we have is our own software with purchase rate from the vendor. So it becomes our property. So whatever new segments, etcetera, come such as GTAM, etcetera, they also become RIP. Is there a scope of monetization? For example, the vendor who sold us this software and this platform, he is one of the largest And at the same time, gas exchange also, we understand that The team will be in house since you've purchased a software and correct us if that is not the right understanding. Equity sorry, the electricity derivatives that you talk about signing up with NKS, would you be providing an index to them? If yes, what is the progress in terms of forming that index and how good is that a possibility? And one last question is that You had spoken that if solar generators start leaving some capacity outside the PPAs, that becomes an opportunity. On the same lines, I just wanted to look at a broader perspective as to what is the business development initiative A regulated entity like IEX and Exchange can do, to what extent we can take this Business Development Efforts. Thank you. Pash, you will have I will answer 1 by 1. Let me first respond to your first question, and you will have to then remind me about the subsequent questions. REC, So far, no regulator has waived off the RPO requirement. They have only allowed distribution companies to full service in the subsequent years. So I don't think this requirement will be waived off. Only thing is the carryover will be allowed. As far as industries are concerned, states before giving NOC are insisting for the RPO. Since our RECA market is not happening, they are resolving them an OC. But the moment RECA market starts, the industries will have to Comply with the RPO application of the last year also. Can you tell me your second question? The EASA trading, which has not happened and Should have happened this year. ESR trading should have happened this year. We are interacting with BEE. There are certain issues because there are a couple of new, I mean, industry sectors which have been So in fixing the benchmark for them for deciding the performance norms, I think there are some discussions going on. We are still hopeful that maybe in the month of February or March, Maybe 2, 3 sessions should happen, but then again difficult to say because this approval from the ministry is given, It will be very difficult to say. Software monetization opportunity? Yes. See, software, what we bought, it is our property and any Development work on that, which we are doing, it is IHX property, that is number 1. Number 2, we can monetize that, but the point is The software is our USB for the exchange. So we are getting a much larger value by using it in IX platform. Why should I give it to somebody else? Sorry to interrupt, Mr. Jainz, and I would request you to limit your questions to 2 per participant. And should you have a follow-up question? Yes, I'm already done. So you can just mention about the Electricity index and the last question about building the balance sheet. Yes. See, MCX, we have a signed agreement with MCX for introducing derivative as and when there is a law by the regulator, and IX price will be used as a clearing price. You don't have to come out with a separate index for that. No, no. That will be used by them for clearing for the purpose of settlement of the contracts. That will be physical settlement? Yes. If any contract results into a physical settlement, that will be settled on the IX platform. But if it is financial, etcetera, then the IX price will be the best price for that. And last question on that business development effort. How much an exchange can go out and do this activity under the regulations? The point is what we can do is to make our participants aware about what values we provide and second is understanding the problem, finding out solution for their problems and interacting with them. It is thereafter, it is a neutral platform. It is left to the participants. And if they find any value in this platform, they will use this platform. So our business development activity is mainly creating awareness about the platform and values what we provide. Thank you all the best. Thank you. Thank you. The next question is from the line of Devansh Ngoetya from Stifel. Please go ahead. Yes. Thanks for the opportunity and congratulations on a very good set of numbers. So just a couple of questions. So one is, If you can just throw some more light on what is causing the strong demand on dam and RTM. So unlike earlier where there were contention that weak power demand Is making this call choose lower prices on the exchange. But now even when the demand is strong, the volumes are exchanged or holding company are actually better than before. So if you can just throw some light on what are the factors which is causing that. 2nd is post RTM commencement, I mean, It was expected that DSM volume would shift. But when we look at the run rate of DSM volume, they are still there with pre RTM commencement. So what are the challenges when we are going to DISCOMS to convince them that you should prefer RTM over DSM? Why are they not switching their decisions in terms of how they should procure power? 3rd is, when we look at the TAM volumes, There has been some market share loss to PXIL. So even if I adjusted for the intraday loss that has gone to RTM, Even after that, there has been significant loss of market share. So why is that? And so that's it, Thomas. Yes. Strong demand, I think that's a good thing. Demand in the country is increasing. That shows that the economy is reviving. And Government of India also under the So I guess scheme did 100% rule expectation, the impact of all that is coming. So if you look at last quarter 3, the demand increase was 7%. And I'm sure going forward in this year, the demand is going to increase at a rate of 8% to 9%. If GDP has to grow at 8%, 9%, electricity demand also has to grow. So strong demand is a good thing for the market. In spite of the strong demand, the prices are competitive. And that is another good thing for the market. And that is mainly because today there is no shortage of coal. Predominantly, we have coal based genozil in the country. And earlier, we used to have coal shortage. This year, there was no coal shortage. Rate of coal in the e auction market was available at a premium of hardly 5%. Earlier, I have seen I mean, there were days when the premium used to be more than 100% also. Average premium for the full year was 30%, 40% higher than the notified price. So coal is available in 20 at a reasonable rate. So that led to competitive price discovery. And I'm sure today also the coal stock at the power plant plus the mine head is more than 100,000,000 tonne, which is almost 40% more than what it was there 1 year back. So the coal position is very, very comfortable. I'm sure going forward also this situation will continue. So that should give us, I mean, Committed price discovery for the market participants and good volume in the market. DSM and RTM, You said DAN or DSM? You said DSM, so DSM, when we look at the monthly volumes, Even after RTM commencement that has not changed, it basically signifies that earlier our contention was that RTM launch would help This comes to not have DHM volumes and avoid those penalties. But even after RTM commencing, That volume is still there. So if you can just throw some light, what are the challenges why that cannibalization is not happening? Number 1, The RTM market itself is very liquid now. There is a large participation of the participants, almost about 500 participants participate in this market. And volume, we are doing almost about 40MU per day kind of volumes every day. So that is one thing. 2nd is DSM is also reducing, not significantly. If you look at the trend in the last 2, 3 months, there has been some decline in the DSM. Whatever DSM was happening within the range of 150 megawatt, which is allowed when there is no panel rate, I think that will continue because that is happening at the market price only. But whatever DSM was happening with the penalty was involved, I think there the quantum is reducing. And our effort also is to do analysis of the distribution companies, DSM analysis. Tell them how what kind of penalties they have paid and was there a case for them to reduce that by Participating in the RTA market, we are also working with them. So I think it is a slow process, it will happen. TAM market, That market is a very, very small market. I think it is only about 4% of the total electricity market. And in that 4% market, there are only 3, 4 participants who are active. So if one participant is going to one exchange, that itself can Change the share of the 2 different exchanges. So I don't want to comment on this anything beyond that. Okay. So there has been significant slowdown in the GTAM run rate. So that has to do with the current relaxation in the green energy norm, If that's the right interpretation. So the run rate in is trending down, if you look at last 20 days in comparison to last quarter. So that would be the reason or is there something else which is causing the run rate to slow down? So in the green market, The sellers are mainly distribution companies, distribution companies of Telangana and Karnataka. Generators mostly have the long term contracts, and they don't have any free capacity for selling in the market. These distribution companies, their own demand is increasing now. So their self quantum in the green market is also going down. We are working with more distribution companies where the green power available with them is beyond the RPO application. If they can also We are also working with the generators. If you look at that green market clearing price, It is plus RUB3.50. It is around RUB4. It is much higher than the price which they get in the bidding room. So there is a good case for them to keep some capacity for cellophore in the market, maybe 30%, 40% or 20% kind of Capacities, I mean, maybe they can contract 70%, 80% to fulfill the requirement of the bankers for the purpose of debt obligation, Yes, the waiting obligation, but they can definitely keep 20%, 30% capacity for sale in the market. And I'm sure they can get good returns on that. So we have our Q and A participants. Thank you. Ladies and gentlemen, Please limit your questions to 2 per participant. Should you have a follow-up question, would request you to rejoin the queue. The next question is from the line of Lavena Codros from Jefferies. Please go ahead. Yes. Hi, sir. Congrats again on the Just two questions. One is, what is the annual fees included in the turnover for this quarter? And secondly, just to follow-up on the previous participants, I just wanted a sense on what is the statewide contribution in the volumes? I mean, is it like Gujarat and Maharashtra, 25%, 30%. I'm not sure of the numbers, but if you could give us some color on that. And is there any particular state where you think it might be more of a one off for 3Q or there's no such trend? Thank you. Yes. Annual fee this quarter is INR 4.2 crores. And in comparison to last quarter, it is almost flat, I believe. So because annual case, it is the these clients and the members, the numbers are not changing. So the active clients are same. So that is why there is no variation in that client base. And Eric, the participation of DISCOMS is almost all DISCOMS are participating. And quantum of power purchased by the discounts is dependent on the total load of the discounts. I mean state like Maharashtra, Andhra Pradesh, Telangana or Tamil Nadu where the demand is high, naturally the quantum of our purchase will be more. So On the access platform, we have seen active participation from Maharashtra, Andhra Pradesh, Punjab, Telangana, Gujarat, Rajasthan, Tamil Nadu, Delhi, Haryana, J and K. And top 10 DISCOMs contribute almost about 75% to 80% of the total buy. Great, sir. Thank you. Thank you. The next question is from the line of Ankush Agarwal from Stallion Asset Management. Please go ahead. Yes. Hi, everyone. Thank you for taking my question. So my first question on the stakes that we have done on the IGS. Given that The valuation that we have sold at it is around 70 crores, which is similar to what the kind of money that we have invested in Ivesant now. So What is the sense of selling it on the face value given that we have been building the business for last almost a year now? And similarly, like since Given that we have to divest the stake down to 25% over the next 5 years, so would it be a fair assumption that we will first Growth of business and then towards the end of the 5 years, we'll look to divest majority of the stake in order to unlock value or we would be looking to sell majority stake in the initial years? That was my first question. And secondly, on the contract that we have done, the agreement that we have done with NCX, so what kind of revenue stream that will accrue to IEX? Will it be a P. Vijay Kumar:] Yes. See, for any business, you need some strategic partners. So IGX stake sale by IGX is only for the strategic partners to build up this institution. This sale is not for anybody in the market. And we have identified 5, 6 strategic partners was large players in the gas market, and we are only going to sell it to them. And if you also take them on board, I think this is a sacrifice we are doing to give them and give the shares at par. Basically, it's just to have that cooperation in building the market. Right. So we would be looking to divest majority stake in near term or towards the end of the year? No, no, no. IX Steel will have a significant shareholding. And as long as we are allowed to retain that, we will do that. Maybe in the next 5 years, we'll bring it down to 25%. All right. And so on the M6 agreement? M6 agreement, as you know, they will be using our price for the purpose of settlement and maybe with time, we will be getting some Sorry? So this contract, this arrangement is like linked to MCH's transaction fee. It's not fixed fee. It's a variable. Okay. Very interesting. Got it. So just one clarification over here. So the spot exchange will still remain the long term long duration spot exchange will remain On the IEX, and there was a silent dilutive market on M6, right? Yes, yes. See, if you look at the decision which has been taken by Government of India, All delivery based contracts will be regulated by CRC And all financially settled contracts will be settled by will be regulatory by TIA, steady. True, true. My confusion was just based on because you That if MCX contract goes into delivery, that would be set around IEX. So I was just trying to clear clarification on that. If there is a contract which has been entered in the NCX platform and finally the party wants to take delivery of that power, So it is a part of the contract specification of that NCS contract. Delivery will happen through the IX platform. Got it. Got it. Okay. That will be all. Thank you. But in such contracts delivery is hardly 1% or 2%. Most of the contracts, 99% of the contracts are finally settled. Thank you. Thank you. The next question is from the line of Swarnam Maheshwari from EagleWise. Please go ahead. Yes. Hi. Thanks for the opportunity, sir, and congrats on the record quarter. I have 2 set of questions. Sir, first is if you really look at the bilateral traders market, they have been actually losing kind of market shares because they have actually seen about 20, 25% of volume decline. So if you can just explain the reason for that, is it really to do with The DISCOMS or the Open Access customer is really moving closer to the real time? Or is it more to do with the fact that the DISCOMS Because of the poor demand that they were really not scheduling the power with the traders, what is it exactly? So that's my first question. This conference will go only to a platform where they find Cost efficiency and flexibility. So they have seen in the past that exchange provide a competitive If you look at the price, this sort of business rate is always lower than the bilateral transactions. Also, there is a lot of flexibility on the XTS platform. You don't have to get into a contract, a fixed 1 sum contract for a particular division. And high power basically based on your belief. So That is why and there is enough liquidity. The participants are also comfortable now that there is enough scale available and no transmission condition. So because of these factors, the purchase price on the exchange is increasing. Okay. Sir, but the price on the exchanges when you compare it with the bilateral prices, they have been much lower The last 4 years also. So it's like not a new phenomenon. But why does that in this 1st 9 months that we have seen the bilateral markets actually losing that market share. Is there some trend shift that's happening? If you look at the share of the exchange with respect to bilateral market, the exchange share is increasing in all the years. It's a gradual increase. This year, there is a significant upside. And the upside was also because During the COVID time, they were not clearly aware or sure about what kind of demand pattern they will see. So they have not entered into any bilateral contract, and The monthly demand for the exchange. Well, sir, point well taken. But this demand decline for bilateral is happening in the last 3 months specifically. It was there in the 1st 6 months also. But if you just observe October, November, December also, Where I think the demand is actually firmly robust and it's actually holding up well. But despite that, we have seen that decline. So I mean just wanted to understand, is it something which is changing really in the bilateral market where the DISCOMs are really not We are willing to go with them and really trying to play near term closer to the real time market. In the 6 months when they actively participated on the exchange platform, they found that there is very high liquidity. They were able to get power, so that has really given them lot of confidence that they can depend on this market. Yes. I can add one more thing. See, now the times which are coming, there will be more I'll start taking because of renewables because renewables also are now seeing lower prices as we So that also will keep that uncertainty of market and their demand will always be there in the minds Distribution company. So the trend what you saw last year was actually going to stay there for the future because People will be happy to trade on more flexible manner on the exchange rather than having a bilateral contract. So this Then IC at least is more permanent. It's not only temporary for 3 months. It is going to stay there for Long time. That's very clear, Tunica. Thank you. My second question is actually with respect to the GTAM. Now first, to really show some volume growth, we need to have more merchant capacity than the renewal, which is right now not there. And there was a proposal from the government that the incremental capacities could be something like at 80%, 20%, wherein 80% could be on long term and 20% could be on mid chain. So what's really the progress over there? We are working with government. We are also working with IPPs. So these things will take time. I can only say that, yes, there is a positive development in that. Okay. That's a significant capacity in the open for open market also in the next 1 year. That's good to hear, sir. Right, sir. Thank you so much and wish you all the best. Thank you. Thank you. The next question is from the line of Varun Goenka from Nippon Mutual Fund. Please go ahead. Yes. Good afternoon, sir, and My compliments for the performance, I think you've been delivering for last 10 years. So really good. I have three questions. First, on our gas exchange, what would be your best estimate to how could the adoption play out over the next 3, 4 years, either regulation, Why? Because this is a center subject. If you could help us understand how fast the adoption of this exchange could be? And what are the impediments to this Accelerate? Yes. Gas exchange, we started in June. We knew it at that time also that A lot of policy advocacy has to be done because there are a lot of NPLs which have to be put in place. So we started this Change basically to interact with the government and regulator to create all those enablers. One of the enableries, the accession systems, Unfortunately, gas is still not under the GST and each state has their own taxation system and it is varying from 4% to 26% in different states. So on a gas exchange, you have to have standard contracts. And for standard contracts, you need a uniform taxation system. So GST has to be there. Ministry of Petroleum and Natural Gas has already forwarded this proposal to Ministry of Finance or to the GST Council for including gas under the GST. And I'm sure there was a media article also in the recent past that GST Council So it's considering this proposal. 2nd is the rationalization of the cash transportation tariff. We used to have June 1, Somebody sitting in June 4 has to pay very high charges. That also has been rationalized by the PNGRP very recently, I think about 2 months back only. So that is another good step in the second place. There are many pipeline operators today. And there is no system operator. Like in electricity, we have a Posoco, NLDC, RLDCs, they are all the system operator, independent agency doing the NLG accounting and everybody has confidence in them. So that system operator concept is that as of now not there in the gas sector. So for developing market, I think we need a system operator. And Good thing is that we were interacting with Ministry of Petroleum also and with the regulator. And now they have decided that there will be a System operator in the gas sector also, which will be known as gas or a transportation system operator. And they are probably going to create a separate company who will do all this allocation of the pipeline capacity to different participants And there is a need for the infrastructure also. See, today, we have 2 active LNG terminals, and these are running at 100% capacity. If somebody wants to import gas in the country and sell in the market, there is hardly any capacity available. So new LNG terminals are coming up now. At Mundra, there is a new LNG terminal that has been set up. There are some pipeline issues which are being augmented now. Then another Ratnaghi terminal That is also a recommendation is happening there. Kochi terminal, Ennhor, Hamra, I think lot of LNG terminals are getting commissioned now And lot of pipeline works are being pipeline commission is also happening. So I'm sure in the next 1 or 2 years, you will see lot of a strong infrastructure in place. So gas exchange will need some time to see significant volume increase. I think maybe next 1 year will be a year where we will be doing all this kind of policy advocacy with the government and the regulator to create all these enablers. And when these enablers are in place, I'm sure there is a very high potential for the gas market. I mean, if you look at the power sector, in the power sector, our participants are distribution companies who are regulated entities. But in case of gas sector, the gas consumers are mostly in the private sectors, and they are very price sensitive. So I'm sure opportunity in the gas exchange is going to be much larger than what we have in the past. That's very, very helpful, sir, the way you've explained it. Just two more questions here. 1, The long duration contracts we're hearing on that, if you could just update us as to where do we stand in terms of Starting the LDC? We have already filed our petition with CRC for approval of a contract. But there are 2 things. One is the CRC itself was not functional from December from August. And now Singapore was kind enough to Allow the functioning of CRC, so that petition will be taken up by CRC. The hearing was in December, so has the hearing been postponed? The petition is now listed for hearing in CRC in the month of February. So that is a complicated development. But this before I mean even after CRC approves our contract, there is a case pending in the Supreme Court and Parties who have filed the case, they have already filed an application in the Supreme Court that we have settled the jurisdiction by intervention of Government of India. And in fact, Government of India also has filed application in Supreme Court to dispose of that case. But again, unfortunately, in Supreme Court also because of the COVID, That case has not come up for hearing. And once that is disposed of by Supreme Court, then I think the issue also will get resolved about the jurisdiction of CRC and SAB. And we will be able to introduce this long duration contracts. Great. Thank you for clarifying, sir. Final point on open access, I wanted to clarify, there's a lot of states with policies not aligned for open access. Is there any changes or some of the states you might want to mention, is there any movement there to become more friendly towards OpenActing? Our job is basically to do policy advocacy, Thank you. It's a continuous process. We are doing it for the last 12 years. And we have seen yes changes taking place. So we are continuing to do Our part of the job and that it is left to the state government and the state regulators. In the last 3 months, any state that might have What I can only say is the states which have allowed open access are the states where industrial development is taking place. Sure. Sure. Is one of the requirement of industries for ease of doing business also that open access should be in place. I mean, state like UP where the Open Access was not there in place, they also have a lot of Open Access now. And I understand how many industries, Roy? UP, we have more than 30 now. There are more than 30 industries now who are buying parts for the exchange. So perfect. Thanks a lot. I'll get back in the queue. Thank you. The next question is from the line of Ashutosh from Centrum. Please go ahead. Hello. Thank you for the opportunity. Sir, first of all, in the opening comments, you mentioned that Now some sort of regulations that have come in that now the DISCOMs can shift once their PPA is expired, they can shift for their demand to the exchange. Could you give some clarity on that? How do you see the conversion rate from PPA to exchange once this Once this TV has expired? No, no. I did not see regulations are in place now. I only understand that Government of India has come out with a discussion paper. It's expected that Sorry to interrupt, Mr. Ashutosh, but I would request you to mute your line while the management answers your question. Okay. Thank you. These TPA's have a kind of perpetual supply provisions. And some of the PPs have a defined time period. So now Bhavan is saying that Let the DISCOM have the option to exit after 25 years. So it is just a discussion paper, And I have issued inviting comments of the different sector participants and thereafter they will decide what is to be done. Okay, understood. Thank you. So my second question is more of a business related question. I would like to know that as I have understood that How does RTM market work? As I know that RTM in the RTM market, the delivery takes place within hours. So what I have understood is that All these discounts have to be informed prior to the RTC, NLDC and all the dispatch entered about their delivery that is going to happen the next day. So how does RTM delivery actually takes place? Let me tell you the time lines for the RTM market. Okay. Suppose you want to purchase power from 12 o'clock, then at 10:30 the market opens. At 10:30, you will have to submit your bid. There is a 15 minute window for submission of bid by buyer and seller from 10:30 to 10:45. Then 45, the market closes and then we do the price story and find out the transmission system requirement. We sent this detail to NLDC. NLDC will check availability of transmission line. And if the transmission All our conditions are there, then we will based on the details given by NLTC, we will rework the solution and find out the final result and send this result to NLTC for implementation. All these activities are done in the next 15 minutes. So by 11 the schedules are sent to RLDCs, SLDCs and NDCs for implementation, and power will be delivered at 12 So in case of real time market, we are doing 48 such activities. Every half an hour, the activity takes place. So this market, the time lines are very, very tight. And I'm happy to say that We have been able to implement this market very successfully and in a very reliable manner. Initially, there were a couple of instances where I mean, there were because of the Technical reasons, there were glitches in the system and couple of sessions were aborted. But now we are running with 100% liability. Okay, sir. Understood. Thank you. And so my last question would be on account of the long duration contract and the cross border trading. What is the progress in that contract? Could you just throw some light on that? Long person contract I just mentioned that we have filed P. Vijay Kumar:] And that case is in Supreme Court. It's yet to be disposed off. It can be done only thereafter. Cross border, again, We are doing the policy advocacy with the government and also with the neighboring countries. And I also understand that in the recent past, there were some activities on that. And we are expecting the cross border transactions through the exchange also to start in the near future, maybe in a month or 2. But Very difficult to say till government approved that. The procedure has to be approved. So once that is approved, then only this can start. Okay, sir. Thank you. Thank you very much. That will be all. Thank you. The next question is from the line of Noelle from Ashika Group. Please go ahead. Hello. Yes. Yes, sir. So I'm not sure if there is an answer, But I just wanted to first get clarification on two points. So regarding the DPM in China, which will be probably going to Essentially expiring or costing the 25 year mark over the next 2 years. Is there any kind of figure that you can give guidance on as to What exactly what is exactly the demand shift that could potentially happen? And my second question is regarding the future divestments. So if we are to see any kind of a divestment going forward, it would be at a similar valuation of 5% for say As far as PPA's are concerned, I think it is too premature to discuss in detail about that. Let government notify the rules, then only I think there is a point in discussing about that. Because any plant which is more than 25 years sold is a fully depreciated plant. So it depends where the plant is located. If the plant is located away from the mine head, then the variable cost is high and maybe distribution company will like to exit. But for the plants which are located at the Pit Head, they're not like to exit at all. So I think this will have to be seen on case to case basis and only after the rule of the game are notified. So for the time being, I will I mean, I think that we should Keep our discussion only after this stage. And second is I guess, yes. See, I told you IGX Techsales is only for strategic partners. And we have identified the strategic partners. We are only talking to them, and it will be given to them at the face value. Beyond that, we will not do any divestment at the moment as of now. Okay. Okay. Thank you. Yes, that is all. Thank you. Your question is answered. Yes, yes, yes. Please go ahead. Thank you. The next question is from the line of Amikith Mittal from Motilal Oswal. Please go ahead. Yes, thank you for the opportunity. So my first question was actually on the open access front. If you could just tell me which are the top three states That are buying on an open access perspective on the IEX. And secondly, if price is now crossing INR 3 in January, is there any impact that we're seeing on open access? And how do you see it evolving? The top three states for Open Access are Gujarat, Tamil Nadu and Telangana. And as you are aware, Open Access transactions are very price sensitive. Open access consumers have option to purchase power from distribution companies. They will purchase power from the exchange only if The landed cost to them is lower than the distribution company. So there is a breakeven rate for them because on that rate they have to pay cost of service charge, transmission charges, billing charges, etcetera, etcetera. So if the rate is lower than breakeven rate, they will buy from the exchange. And in many of the states, this breakeven rate is around 2.80, 2.90, 3.30, 3.40 from state to this recurrence rate is varying depending on the cost of research, etcetera. So if the price increase, definitely the prices volume get impacted. But when the price increase because distribution company buy increases. So as far as the clearing volume is concerned, I have seen that whenever price increase, the clearing volume also increases because of the strong buyback discounts. Sure. And so just on the buying perspective and from this concept, I think what's happened is this quarter, we've seen a very sharp buying from Aandrep relationship Primo Phase II actually seems to be on the pricing opportunities that could be available as well. So just to make a better sense, are there any Are there states that you feel are not making use of your platform from a price opportunity perspective and can possibly drive volumes Any states where you feel in the scope of them to increase volumes over here? In case of Andhra Pradesh, They have a couple of generating plants where the variable cost is higher than the excess cleaning price. So they optimally utilize this platform. They reduced the investment from those costly plants and purchased power from the exchange. And happy to say that I understand Andhra has saved more than INR 1,000 crores by replacing costly borrowed exchange powers. Similarly, state like Maharashtra, Gujarat, many of the states are doing these kind of things. It depends on the opportunity available with them. State like Shaktisgarh, Orissa, West Bengal, there the plants which they have the variable cost is very low because those plants are located at the Big Head. But the states where the which are the states which are away from the Minehead, maybe in those cases, there is opportunity to do optimization. And most of the states are doing it, depends on how much I mean, are they doing it 100% or 70% or 80%? That depends from time to time and depending on the market clearing price also and depending on the demand also. Okay, okay. Sure. So one question actually on the RTM front, the royalty Clarity, now we've obviously been seeing a good amount of sell bids coming on the RTL. But despite that, a very large quantity of the Sheper URS power is still going to SCAD. So, I just wanted to know as per maybe your interaction with the Ministry, is there a thought process of not Extending this HCD scheme beyond March 'twenty one because then that can help the RTM further, right? We have more cheaper URS power coming in. Yes. That is our policy advocacy. We are working with the government. Let's see what happens. Okay. As per your discussions, would the STV team still be extended by March 21? Or is there a case for that Because the RTM has been working pretty well, right? Yes, yes, yes. I mean, when RTM was not there, there was a case for SAP. But now with RTM and RTM having a good liquidity, there is no case for a steady because the first, I mean, objective function of the regulator is to promote the market. So you have a market now. So we are working with the regulatory environment. Let's see what happens. Sure. And so one last question, if I may. So just wanted to understand the DSM regulation. Now Earlier, there is a DSM regulation which was supposed to come in and imposed stricter penalties in terms of the sign change. I believe this is supposed to come in effect from December 1. Has that happened? Yes, yes. I think it has been implemented. But then these days, the frequency variation is not significant and Distribution companies also have become quite disciplined. And the penalty on account of non compliance with the sign change also was reduced significantly. Okay, understood. Thank you. That's it from me. Thank you. The next question is from the line of Lokesh Manik from Valium Capital. Please go ahead. Yes. Thank you for the opportunity, sir. My question is on the revenue side. So specifically to the transaction fees, if you can just throw some light on How do we charge that? Is it when the volumes are down, we can increase these transaction prices and Vice versa, so just some clarification on that. Our transit and fixed is constant from the last 8 years. Yes, charging 2,000,000,000 from buyer and 2,000,000 from seller. Okay. So the variation that we see Calculate on the top line on the volume side, it would be probably on the annual fees that we charge and other transaction. Is that That was annual case. Okay, okay. Understood. Thank you so much. That's it, Shamash. Thank you. The next question is from the line of Gokul Maheshwari from Aviga Capital. Please go ahead. Yes. Thank you for taking my questions. So just a couple of things. One is on the REC volumes, which are not there this year. You're saying will be the shortfall of this year will be have to be made up in FY 2022? Yes. That is my understanding because no regulator has waived up that requirement. They only rolled over that to the next year. And the Green TAM volume will not make up for REC, is that a substitute for REC volumes? No, sorry. It is not a substitute and there is no there is not that kind of a liquidity in the midterm end market. You know, REC was used by even industries who have the captive generation. So they don't need power, but they have to comply with RPO. So they buy REC to Comply with that. Okay. Great. So there are states who have enough energy available with them. They have to meet that obligation. Okay. And with respect to are there any is there any update on the regulations on market coupling? Market coupling? What was the first few months back and there was some discussion which was discussed in the CRC hearing. And in fact, during the hearing itself also, We were given to understand that market coupling is something with Embedded, yes, it has a case. And when will Embedded happen? That is something we'll have to work out. We'll have to see when is going to happen. Market coupling without Embedded has no case. Okay, great. Okay. And just lastly on the in your initial comments indicated that the volumes are sustainable. And you see I'm sorry, your demand trends still being quite strong. So going into Q4, as well also you are seeing markets And exchange volumes holding up the way they have done in Q3? So far, yes. Exchange volumes in the 21 days of January also we are doing good. And demand is also in quarter 3, the demand was 7% up. In January, it is already more than 8% up now. We are reaching new peak demand heights every day. Today yesterday, the demand was 187 gigawatt. Today, hold. So in fact, today morning. So the money is increased. Great, sir. Great. Thank you so much and all the best. Thank you. The next question is from the line of Tejas Mehta from Old Bridge Capital. Please go ahead. Yes. Hi, sir. So I just wanted to understand from your perspective, How do you rate the health of the discounts today after going through the entire stress of the COVID? What do you read? Because in a couple of other calls that I have attended, people are really worried about the health of the DISCOMS even after I know the 1 lakh crore of rollout that the federal government has given. What's your sense? I'm not competent to comment on that. Okay. All right. And sir, the other question was on On the market share gains that is possible for you from here on, so you're at 6.5% broadly market share and you have consistently been above 6 For the last few months now, how much of the market are you addressing today? And how much Share gain is possible from here onwards, if you can just go some light there. At the exchange, our job is to interact with the market participants, tell them what kind of value we provide, How can we solve the problems? How can we address the power requirement in a more sufficient manner? And rest is left to the participants. I think Volume increased market share is now outcome of the activities of the participants. Right. So but I can only say one thing. Because of this continuous policy advocacy and continuous interaction with the participants, because of that, every year, there is This is a continuous process, and I'm sure the increase will continue to happen in the future also. Okay. Okay. And just one more question. The last 3, 4 days, there has been a sudden surge in the power demand and the exchange also we are seeing the fragrance certainly should get up beyond INR 3.5. Any sense whether this is kind of a temporary or it could last for a couple of months? Do you have any Can you give some idea on that? Sir, there are shoe generating stations which are not operating Because their variable cost is high. Now if the market clearing price is high, maybe those stations will also start operating and selling power in the market. So, right. And this would make a case for Merchant Power also to make a comeback, right, which was almost Not generating for the last few months. It looks a strong piece for merchant power to come back. Yes, yes, yes. Not many generating merchant plants are already on board now. Okay. Yes, yes, yes. Okay. All right, great. Thanks so much. Thank you. The next question is from the line of Amay Kulkarni from Candor Investing. Please go ahead. Yes. Thank you for giving me the opportunity. Green termite marks, [SPEAKER SRINIVASAN VENKATAKRISHNAN:] But as of now, what I understand is that all power plants, renewable energy, commissioned before June 23 Don't have to pay any transmission charges and transmission losses. The power grid or the central transmission utility does not allow the construction of transmission lines without a firm LTA side, right, and a firm PPA side. So Stage 2 connectivity is not given at all. So what is the road map for this green time ahead market merchant capacity developing Unless these regulations are changed, is there any proposal to change the transmission regulations? Or what is There is a change in the transmission planning of life. Now the transmission planning is more dependent on the Generation and demand, it is being done based on that, not based on the long term open access. So availability of transmission line for the merchant plants, I think that is to be an issue. And in fact, this is something which even government is also thinking about because government also wants to develop a market the renewable power. And that can only happen if there is a transmission capacity available to that. Okay. So what you are saying is that the transmission lines developed for green corridors and such stuff have enough capacity right now itself For the merchant capacity to be detached? Yes. Okay. And sir, just one more question. Could you just kind of you have already elaborated on the regulations required on the development of the gas market. Could you kind of give some tentative timeline of what you expect these regulations to come in place? For example, Will it take like 1 year, 1.5 year, 2 years for the system operator to be in place? Or can it happen in 6 months? Yes, Rohit, thank you very much. So I was adding to the earlier point. There was one amendment which came about 2 months back. Now this particular amendment, this particular provision allow all the renewable generators to create more capacity to apply for connectivity beyond their PPA capacity, which means that now any generator, they can keep aside some 15%, 20% volume as a merchant sale and create a plant and keep this capacity open for Mark, this is just I wanted to add. Okay. Thanks. Thanks. And as for the gas exchange, I think a lot of work has been done. Long work has been done. I think things should happen in the next But then again, these things will have to be done by the government. So can't give you any definite time lines, but Our estimate is that the next 6 to 8 months is an approach to be in place. That's quite fast. So that's quite fast. Thank you. Thank you for your participation. We have spent a lot of time on these things, not very fast. And these things are going on from last couple of years. Yes, I understand, but government works at its own pace. So even the energy timeline, the energy sector timelines, I think next 6 to 12 months, Even 12 months is quite fast for the government to act. See, Abhay, you can see that, see, we have been Looking for asset change regulation since last few years. The thing is we were waiting, but nothing was happening. But when we Actually started cash trading platform in June, and you could see that in 3 months' time, the regulations were put in place. And in 2 months' time, we could get the approval also. So because now there is an agency for market development and there is Institutions being created by government. We hope that the SLS will also be we will also work towards it as the gas sector participants are working So maybe we should be able to achieve faster than had we been not there. Okay, okay. Yes. We are also trying on the market side that today the domestic gas is not coming to the market. And we are working very hard to bring that gas also because to discover good price in the market, Not only imported RNG, but domestic gas should also contribute to the market. And for that also, we are very keenly With all the participants also and with the government also. Okay, sir. Yes. Thank you. Thank you. The next question is from the line of Manant Shah from Manibee. Please go ahead. Yes, my call questions are answered. Thank you. Thank you. The next question is from the line of Ravi Shrikanth from Muthuk Family Office. Please go ahead. Hi, sir. Good afternoon. I just had two questions, sir. One was on your sort of product basket that you currently have. So after you are sort of Done with the long term contracts and I think GDAM is also one thing that you were looking at earlier. So does that sort of complete your product bucket or are there any further So opportunities or contracts that you can look at? And the second question is on the gas exchange. So after this open access for the CGT companies, I mean, If you've spoken to some of the industrial sort of main clusters like Morbii, etcetera, I mean, have you shown any interest on taking gas from the exchange? Number 1, this new product from the gas and the electricity exchange. I think long duration contracts and GADAM, these are 2 important new products. And after launching the products, also we have to do a lot of marketing awareness with the participants to bring enough liquidity in these products. So this kind of products, I don't think we can launch every quarter a product like this because like RTM, RTM is a product which was launched after every Couple of years. So but then we continue to interact with the market participants, understand their need and try to find out Well, what else can be done? So this is a continuous learning for us also and developing things for the market participants. So I think as of now, it is long duration contracts on GTEM. And thereafter, depending on how market evolves, we will see What new product can be developed? The second part of the question was on CGT exclusivity when they are as We will be allowed to buy from the 3rd party. Now Modi is the hub where 3G exclusivity is not going to be over In near future because the CTV access to CTV customers will be there for Those activities where exclusivity period is going to be over. So mostly it will be IGL, MGL. So that part, we are anyway working that such customers, how we can bring them to For exchange that we are working closely with them. Only thing is still that final The exemption part is going to be further given by PNGRB. It is yet to happen. Only thing is the broad remissions are already there. So we are working closely with those clients who will get this access to the market. Okay. Got it. Thank you, sir. Thank you. The next question is from the line of Sumit Kishore. Please go ahead. Yes, just one question from my side. There was an expectation that Short term open access charges would be removed for discounts and that would help damp volumes. Is there any progress around that front? Because we thought it would be a catalyst for the There is a transmission sharing regulation which has come. As per the regulation, The Skibuton Companies are not required to pay any short term open access charges, and all short term transactions will be covered under the long term and medium term open access which they have taken. If there is any deviation with respect to that, then that will be charged under the Fast mister and division charge. So that is already in place. Okay. And has that resulted in any incremental Benefit for volumes in the short term market? In fact, that has the price of Santander has been implemented from 29th December. And yes, there is some shift happening, but I think it will need some time. Okay. So that was the last question. Mr. Goyal, would you have any closing comments? No, I think we have discussed enough. I can only assure that This next quarter also should be a good quarter because demand is increasing. And right in the month of January itself, Demand growth has I mean, in adjusted terms, it is 8%. And in terms of the peak demand, I think the demand has increased almost by about 9%, 10%. So with these kind of indications, I'm sure exchange volume also significantly higher than what we did last year. So we should have a good Thank you so much, sir. Thanks for allowing us the opportunity to hosted call at Axis Capital. Over to you, operator. Thank you, sir. On behalf of Axis Capital Limited, that concludes this conference. Thank you for joining us. And you may now disconnect your