Earnings Call: Q2 2021

Oct 21, 2020

Quarterly report

Ladies and gentlemen, good day, and welcome to the Indian Energy Exchange Q2 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 would now like to hand the conference over to Mr. Abhishek Puri from Axis Capital Limited. Thank you, and over to you, sir. Thank you, Janice. Good afternoon, ladies and gentlemen. On behalf of Axis Capital, I am pleased to welcome you all for the Indian Energy Exchange Q2 FY 2021 earnings conference call. So we have with us the management team of IEX, which is represented by Mr. Satyanarayan Goen, the Non Executive Chairman of Board, Interim Managing Director and Chief Executive Officer Mr. Vineeth Sannadlalka, 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. So over to you, sir. I welcome you all to the quarter 2 fiscal year 2021 earnings call of IEX. I hope all of you, your teams and families continue to stay safe and healthy. While we are still coping with this COVID pandemic, efforts are being made across the country to revive the economic engine and cautiously moving towards the business as usual. As a critical part of the energy and power sector ecosystem, the exchange continues to be committed to facilitate the distribution utilities and industrial consumers in procuring 20 fourseven power in the most competitive, transparent and efficient manner. The quarter 2 of the fiscal year 2021 has been significant one for the IX. During the quarter, we witnessed the launch of yet another new market segment, which is Green Turned Market. We continued momentum on our customer outreach efforts to disseminate awareness and build capacity through various webinars as well as 1 to 1 digital engagements. We upgraded the technology platform to support the green markets. We further strengthened our subsidiary IDX through Equity Infusion as well as file applications for approval with the PNGRB, the gas regulator. With these and many more initiatives, we could achieve and sustain a positive momentum in terms of our business and financial performance even during these unprecedented times. We acknowledge and thank our members, clients, employees and all our energy ecosystem partners for their continued support. Now I'll talk about economic and industry update. Over the Q2 of fiscal 2021 saw significant relaxation in the lockdown restrictions across the country. We saw a sharp recovery in industrial activities in the month of August September 2020. This is evident from the fact that mid client manufacturing PMI for the month of September 2020 rose to 56.8% from 46% in July 2020. Notably, September witnessed the highest manufacturing PMI numbers in the last 8 years, which is an encouraging sign for the economy. With an increase in economic and commercial activities, power demand also returned to pre COVID levels. In September 2020, India witnessed 4.6% year on year increase in the national energy pension. However, due to slump in the months of July August, overall national energy consumption declined by 0.5% in quarter 2 on year to year basis. India's total installed power capacity has reached 3 33 gigawatt as on September 30, 2020, an increase of 3% on year to year basis, In line with the national vision to increase the share of renewable energy and its effort to fulfill its commitment under the Paris Agreement 2016, the renewable energy new capacity has registered at a rate of 8% growth. As on 30 September 20, India's installed renewable capacity has now increased to 89 gigawatts and constitutes about 24% of the total installed capacity. On the regulatory front, during the quarter, Utrechtabir's Electricity Regulatory Commission issued craft ready tower dispatch and power purchase optimized from WSM 2020 aimed at improving the efficiency in generation and power procurement industry. The Regal Islam rightly recognizes the exchange rate soft and power market as a possible revenue for power purchased by distribution companies and for efficient and cost effective optimization while meeting the state's overall demand supply situation. Inlet such regulations are also are already invoked in the states of Delhi and Maharashtra and serve as the precedence for other states in pursuing an efficient merit on respect for procurement of electricity. As regards the gas industry, in India we issued final gas exchange regulations on September 28, 2020, which is a significant development for the gas market in India. It will mobilize the market and should hopefully accelerate the pace of gas daily. Financial and business performance. On a stand alone basis, the quarter witnessed 4.9% year on year growth in revenue from operations on account of an increase in volume. However, due to decline in treasury income, overall revenue increase was increased in quarter 2 by 0.8%. Profit before tax increased by 1.5% on year on year basis from INR 60.65 crores to INR 61.56 crores. This is profit before tax. FACT at INR46.7 crores was down by 4.4% as compared to INR48.86 crores in quarter 2 of FY20. Last year, that was more because of one time tax benefit of INR3.7 crores. The electricity volumes on the exchange witnessed an increase of 13.2 percent year on year increase in quarter 2 and stood at 16 point 486000000 units as compared to 14,560,000,000 units in quarter 2 of FY 2020. The REC trading could not take place during the quarter, owing to stay out of form under ASCL and hence the total volumes including REC showed 3.8% year on year growth in quarter 2 of FY20 21. The day ahead market on the exchange continues to see robust volume on the sell side with sell side volume of 2.2 times of the credit volume, the market business average clearing price of 2.53 per minute, a very competitive price. And last year during the same quarter, it was INR3.15 rupees per unit and a decrease of almost about 20% in the clearing price. And this enabled the distribution companies and industrial consumers to take significant cost advantages by purchasing power supply exchange. Attractive prices also led to 40% year on year increase in the open access volumes from the exchange platform. The retail time electricity market, which was launched on June 2000 on 1st June also continues to witness robust volumes and traded 2,350,000,000 units of volume in quarter 2. On a cumulative basis, market crossed a milestone of 3,000,000,000 units on 6th October this month. Quarter 2 initiatives, we are pleased to inform you that in line with our efforts to commence trade in the long duration delivery based contracts, we have filed a petition with CRC for its approval. Simultaneously, the exchange is working towards ramping up its market operations, business, communications and technology infrastructure to support commencement of trading in the new market segments. During the quarter, we launched a new market segment, Green Thermite Market on August 21st, and market witnessed an encouraging response from the participants with cumulative credit volume of 75,000,000 units. On every day, we trade almost about 1,000 megawatts during the peak hours. On the 1st day of the launch of Vipan, we were participation of only about 6 participants and today we are seeing participation of almost about 40 participants on daily basis. And average volume is about 8% NU per day. IJAX continues to strengthen iJAX platform. IX platform through various capacity building initiatives and investments. We have also filed applications with ENGRB for the authorization and being a regulated entity would bring in more credibility in the e platform and have been greater penetration of the gas market. We continue to undertake various policy and regulatory advocacy, market development as well as customer outreach initiatives with an aim to build the pickup of policy trade momentum. While COVID-nineteen has adversely impacted the energy and power sector, a favorable policy and regulatory framework could unleash transformism in the sector. We feel time is opportune to establish a new market with energy order which is forward looking and consumer centric for India's economic growth. IX is committed to support this transformation and ensuring the labral MLD and power procurement in the most sustainable, efficient and flexible way. Thank you. I and my colleagues would be pleased to answer your questions now. Thank you very much. Ladies and gentlemen, we will now begin the question Before we start The first question is from the line of Mohit Kumar from IDFC Securities. Please go ahead. Yes. Good afternoon, sir, and congratulations on good set of numbers. Sir, two questions, sir. Firstly, so what is the expected time line of power market regulation? And does launch of TAM require only CRC approval? Or it requires the power market approval and Supreme Court judgment is the first question. Yes. Power market regulations, I mean, we were expecting them to be issued in the month of September. But then as you are aware, we got the Supreme Court order, 2 of the members are now on leave. So the quorum is not available in PRP. So only when member law is appointed and other members are allowed to cancel, I think then they will take up this PMR activity. So nothing can be said right now when the PMR will be issued. As far as loan duration contracts are concerned, we have filed our application with CRC for approval, but CRC will take up the approval only after the jurisdiction issue is settled by the Supreme Court. So we have filed this petition basically to save some time the procedural aspect of the time, otherwise CRT will give the approval only when the Supreme Court issue is settled. When is the Supreme Court approval to it, sir? Very difficult to say. I mean the application in the Supreme Court was filed by for the joint application of the parties who have filed the case, which is SEBI, CRC, Ministry of Power and it was done about a year back and during this COVID time unfortunately on the urban meters are being taken up. So this hearing is getting postponed and the hearing was back around 8th October. It has now been shifted to December 1st week. Okay. So my second question is on the cash. It was getting shifted from the last 7, 8 months. So we can't really say whether it will happen in the month of December or not. Understood, sir. Secondly, on the cash volumes, of course, last quarter was very muted. How do you think gas volumes are in the next few years? And do you think if all the enablers for creating a gas trading market are taking shape? And if you think that can we update on all the enabling regulations, which can materially lead to increased trading on the gas exchanges? When we started electricity exchange in 2,008, at that time all underclass were delayed placed for starting the electricity exchange. NPLs like we had a system operator which is an LDC, RLLDC and SLDCs. There was a resistance settlement mechanism which was in the form of UI. We had open access provisions by CRC, there was non distancing equity open access to all party spends. So there is no tax system on interest rate sale of electricity. So all these issues were settled and the trading of electricity became a reality from day 1 when we launched this IDX. In case of cash exchange, we knew that many of these envelopes are not in place, but then even to get this analyst in place, there is a lot of policy advocacy to be done. So we won't be the expense, so making these are happening, but then transaction in a big wave will happen when we will have some interest. First thing is our market gas exchange regulations. We launched the gas exchange on 15th June in the month of July, the draft regulations were issued and after the public hearing, the final regulations were issued on 28th September. So that is one end regular which is now in place. PNBRB again has issued draft regulations for the excess code and also to issue resolutions from that transmission gas pass pollution tariff and we are again coming out with a simplified cash pass pollution tariff number which is required for the exchanges. So that is another activity which is working for us. The gas is unfortunately not under GST, so different states have got different tax refunds on the gas and because of that it's very difficult to introduce tender contracts on the gas exchange. We are working with the government. What we understand is that government has already returned this issue with the JST Council. Hopefully that should also happen in the next couple of months. System operator, for that also, Yale is already working in this area. They have in one of the office all pipeline metering systems are I mean all those activities have been provided, all its information systems are available now with them. We are also going to do this data gathering from the other pipeline operators. And I think citizen operator also will be operational maybe in the next couple of months. So on all the Genesys work in progress, it may take another 5, 6 months and only thereafter we will see gas trading in a big way. Even if you look at the infrastructure part of it, gas LNG terminals, the regasification terminals, today we have practically only 2 regasification terminals with our personnel, which is by PetrolNet and Shell. PetrolNet terminal is overbooked, operating in more than 150 and capacity under the long term contracts. Shell terminal, they are also technically of 31 100% capacity. So if you want to develop the market, I think we need more terminals so that we expect capacity available for the traders who want to bring cargo and sell in the market. A lot of activities are happening on the diversification terminals. I understand what is happening on 5, 6 terminals and maybe 2, 3 terminals will be committed in the next 1 year. Pipeline will do lot of work in the eastern and southern part of the country is happening there. So we should see interconnected gas pipeline network in the country the way we have for the electricity and that will be the time when we will have real good volume on the gas exchange. So what we are doing at the moment is the investment in the gas exchange and creating all this in a plus and I am sure about one thing that opportunity in the gas exchange is much bigger than what we are doing in electricity. Where in case of electricity, 90% of the transactions are happening in the long term contract. The short term market is very small. In case of gas exchange, already the short term market is almost about 15%, 20% of the transactions are happening to the short term market gets spot contracts. And going forward most of the incremental quantity is going to happen under the spot contracts. So the opportunity for the gas exchange is much larger. Understood, sir. Thank you. Thanks. Thank you. Before we take the next question, a reminder to the participants again. Please limit your question to 2 participants. You may rejoin the question queue if you have a follow-up question. The next question is from the line of Nikhilopadhyay from Securities Investment Managers. Please go ahead. Yes. Hi, good afternoon. Am I audible? Yes. Yes. Hi, sir. Sir, my question is on the RTM market. So the earlier idea was that when we will launch the So the earlier idea was that when we will launch the RTM market, there will be a shift of the market from the DSM to the RTM. Just wanted to know, but what we have seen is that the RTM has cannibalized the fan market. So how are you seeing is there a shift which is happening from DSM to RTM? And how are you seeing the scale up in the TAM market? That is one. Secondly, on the long dated contracts, when we talk of volumes of 20,000,000,000 units and on the green TAM and all, do you see there could be similar cannibalizations which can happen from our existing volumes? Yes. RTM market initially we thought that the central part of the DSM will get fixed to the RTM market. But actually what has happened is our intraday PAN transactions, they have now reduced practically to 0N as the transactions have got shifted to the RTM market because that makes a lot of sense also. Now distribution companies can buy on a data time basis and at a competitive price. At the same time, industrial volume in the RCM markets are much more than what we used to do in the PEM market. So good part of the volume is also the additional volume for the exchange because of competitive price many of the states are replacing the high variable cost power by purchasing power in the real time market. We are working with the states. We are doing analysis of the power drawn by the states under the DSM, what kind of penalty they have paid, what kind of at what rate they have overturned that power and does it make sense for them to purchase power to replace that DSM power by the exchange power. We are doing all that kind of analysis and the impact of this case. And I am sure it will take some time, but even some shifts from the VFN to RTM should also happen. Okay. And secondly on this long term long dated contracts and the new products which we are launching where we believe the volumes of 20,000,000,000 units additional volumes come up. Do you see there is a risk of cannibalization of existing volumes there as well or how do you see it? In the long duration contracts, I don't think there is a risk of penetration of the TAM market because TAM market is on day to day basis, it is different in the demand and supply of the distribution company which they purchase from the market. Long duration contracts will be typically getting volume from the bilateral market. Today, bilateral market volumes are also about 40,000,000,000 units. So maybe part of those volumes will get to the lump sum Okay, thanks. Thanks a lot, sir. Thank you. The next question is from the line of Divansh Lykodia from Sisankari. Please go ahead. Thanks for the opportunity. Sir, my question was relating to long duration contracts, where earlier you highlighted that we would be looking for reverse auction pricing structure, which is basically similar to what is actually happening right now in the platform. So and I think there are no transaction charges on the platform as of now and we will be taking transactions standard 2 paisa per unit. So I mean what will be the value proposition that we'll be offering for which volumes on bilateral will shift on our exchange. So if you can just throw some light on that. See on the brief platform, it is only discovery of price which is happening. If that price is covered, then the deep platform will indicate was the sellers who are willing to sell power at this stage and it is up to the distribution companies and bring to agreement with those sellers and then future delivery, financial and physical settlement is happening between the DISCOM and the sellers directly. So this platform is only doing by the story after the rolling over. In case of our long duration contracts, there are going to be option mechanism, there is going to be another mechanism also. But under the auction mechanism also we will do 3 dependent financial supplement also. We will take Open Access and ensure they supply the power end of the contract and supply to the distribution company and payment to the generators on yearly basis. So that is the value add which we are going to provide. Okay. So responsibility of the payment and delivery of the module, which is the edge? There will be counterparty to all these contracts. Okay. And in case of REC, I mean, there was this news flow where the Aptel has actually concluded that REC trade can now continue. So if you can just reclarify on that and when can we see REC volumes back on the exchange, if you have any visibility? Axtel has not completed that. Axtel has concluded the hearing order details. We are expecting orders in which week so that REC trading can happen on 28th October. That is what we are expecting. Because market participants, they are all requested their actual debt for 3 months study have not happened. So they should issue the order before 28th so that the trading can happen on 20th October. So we are looking for that. Okay. And if you could just throw some light on the increase in employee cost by I think it has increased by 10%. So if you can just divide it between increase in number of employees and increments that we have given if any and other income. I mean it's normally we do a run rate of INR 11 crores and it's been INR 8.5. So if you can just elaborate on these two differences? I will discuss Mr. Vinit Rawal, one of JFRE. First of all, I would like to answer on the treasury income. Like you said, the treasury income during the September 2019 quarter, we had around 11 crores and in the June it was around 13 crores from the consolidated business. But if you look at the trend in the interest rate, the interest rate had fallen significantly. And in the June what happened because of the first step is when the interest rates were reduced to be to 20 by the RBA because of the COVID thing. So there is a lot of mark to market gain which we got in the Q1 which is nearly around 5 crores. And if you look into the overall our treasury side which is in the range of around 5.8 crores and if you compare the lower interest rate in comparison to the September 30, then that impact is around 5 crores. So because of the lower interest rate that is the impact. So as we have the exception quarter because of the mark to market gain what we have because of the lower interest rate. So this was the one factor I was going to take care of it as we passed. Now we look at the manpower cost. Manpower cost has increased 10%, but if you look into the launch, there is a lot of new contacts that launched, arguably the telecom market and others for which we need the manpower and the annual increment impacts are there. And we were in lower interest rates, so there was some add on provisions for the gratuity and that provision of their activity for there. These are the basic factors, but looking at the overall structure of the site, I think now we have reached the level where we have been to 16 on this call for at least for the earlier term. Okay. Okay. And what would be the average yield on the bonds right now or the or our cash yield? Average yield we are getting from the overall the September quarter this year we are around 5.6% of the average grossing. Okay. And if you can just elaborate more on Indian Gas Exchange where we were trying there was a debate around the percentage of ownership that we want to retain and we even made an application for that. So what is the current status where Gail was a prospective buyer with whom we could have sold some stake? So if you can just re clarify a bit on that. Yes. Gate was interested in between 26% equity and committed strategic investor in the company. But P&Z, the regulations provide that members can only have 5% equity in the company. So there is a largest seller in the country and they are also our members. So I think there will be a risk there's only 5% equity in the company. Okay. I will come back in the queue. Thanks a lot for answering all those questions. Yes. We are in discussion with them and we are also discussing with couple of strategic investors who are large players in the gas sector for investing in the company. This is basically to get more value for this initiative. Thank you. Otherwise, as on date, it is IH which is holding 100% in the coming. Thank you. The next question is from the line of Lavina Quadraj from Jefferies. Please go ahead. Yes. Hi, sir. Great set of results. Just two questions from my end. So one is October, what volumes I'm seeing on your website, it indicates very strong growth. So I just wanted to understand, are there any one offs or maybe just a low basis Thank you. So it is not one off. Even September, we had volume growth of 45%, Even in the month of May also, we had I think similar kind of volume growth. So yes, one is best effect also. In fact, in the month of October, the per day average volume itself is quite significant. RTM market is also giving almost about 25 NUs per day. Green termite market is another 7 to 10 rupees per day. So I think overall volumes are good in the month of October. And I am sure going forward also as the demand of electricity, the minimum of electricity keeps on increasing, the volume on that change should also be good significantly better than last year. And sir on the states, any color over there? Any states which are contributing the 3 shares? P. Vijay Kumar:] This is for the system of all states. I mean, large states definitely by rate then is more like states like Maharashtra or Tamil Nadu, Telangana, Punjab. But then buy is more or less spread over all the states except for the extended end. The second reason buy comparatively is not lower. Alright. Thank you, sir. Thank you. The next question is from the line of Ankushka Gathal from Stellan Asset Management. Please go ahead. Hello. Yes. Thank you for taking my question. Just two questions. Firstly, if you can guess like how much percentage of total shutdown market is currently addressable by the IEX? And by what time do you expect it expect like a level wherein IEX would be able to address the entire short term market? Like we are looking for new products in terms of long term context. So will that be able to give you product portfolio that will be able to address the entire 100% of the short term power market? If you can verify that, that would be the first. And secondly, in some of your presentations, I've seen a mention of you looking to market banking contracts as a new product. So just one clarity on here. Is the banking contracts volume, which is being currently undertaken by DISCOM, is it separate from the short term power market? Or is it over and above the short term power markets? Or it is included in the short term power market? That would be. Yes. And today, short term market is almost about 11% of the total generation, and IX share, exchange share out of that used to be almost about 35% to 40%. So I'm glad to share with you that this year in the 1st 6 months, our share has been 50% out of the software market. There is a significant increase in our shares. So that is one thing good that has happened. 2nd is when we introduce these long term contracts, see the short term market is consisting of exchange, bifurcation, DSM and the banking transactions. So when we introduce long term contracts, with that our reach will be from increase from 50% to maybe about 70%, 75% of addressable markets. And with the real time market, we are also trying to get some money from the BSM market. Banking transactions, it may not be possible for us to introduce a equivalent of the banking transaction, but then we are working with the states that they can sell power on the exchange platform and maybe bank that money and use that money to buy power when they need it. So this kind of financial products also we are working on that. I think with all these things whether we will be able to get the entire profit market or not, difficult to say, but then yes, addressable market size will increase to 11%, 12% in the next 2 years. Okay. So just one clarification on this. So long duration contract, you expect the total addressable power market for the short term power market will be 70%, 75% for IEX. And with some variation of financial contract, which would be similar to banking, you expect the total addressable market to be 100% for IAS short term? Yes, yes, yes. Out of that, how much we are able to get? Yes. How much IEX will be gathered, that would be a separate thing, but the digital market will be 100% The next question is from the line of Abhishek Puri from Axis Capital. Please go ahead. Thank you for the opportunity. Sir, on the REC market that you mentioned earlier, if it starts from now, would it mean that the demand which is not met for the last 3 months will be pent up demand and or is it already met elsewhere and we will not see the volumes coming in, the lost volumes I mean to say, the last 3 months volume. No, the demand is not met. There is no other product available to meet the demand. We have to meet the demand in YouTube for the last 2 years. But because of pandemic, many of the states are giving carry forward provision to I mean benefit to the distribution companies. Some of the state regulators are doing that. So whether the RUK volume will be similar to what we did last year, I think it will bend, we will have to wait and see in the next couple of months. But with the reduction in the R and T price, CRC has revised the previous price and the base price from INR1,000 and INR2,400, which is now down INR0 INR1,000. So the RST prices are expected to be significantly lower. And with that, we feel that purchase by industrial consumers and effective industries will be significant. Okay. And this is the exact case why Aptel case was there, right, because the REC owners had questioned the reduction in rate? Yes, you are right. Okay. So secondly, in terms of the DISCOM short term open access notification, what is the status now? When will CRC is it stuck because CRC has not started functioning? No, that transmission charge chain mechanism. You are talking about that? Yes, sir. That will be effective from 1st November. The order was issued by CRC much earlier. It is an LDC which is working on the calculation of childless. And what I understand, this will be effective from 1st of November. There is not going to be any change in that. It is all administrative back until now. Okay. The notification is already out on this? Okay. And my last question, sir, is on NTPC is participating and you are participating in RTM, but they don't participate in DAN. Any specific reason why you think they are not they have started in RTM but not in DAN? In case of LCC, entire power is allocated to the states. So states are right to bring the project. States are right to return the travel on the the underutilization power can be sold by them in the market. So that is the flexibility which they have in the real time market and that is why they are able to sell power in the real time market. On any regulation which is pending to get them to the dam market also? I think there were some the Fed status on Yes, yes, I mean we were through the fault here, we could see that all unrecognized power on their basis should be allowed to be sold in the brand market that has been developed in the brand market, but unfortunately that has not been so far accepted by the regulator and the government. Okay. Thanks a lot, sir. And all the way back. Thank you. The next question is from the line of Suraj Shavender from Patrice and Maury. Please go ahead. Hi, sir. Good afternoon. So my question is regarding the market coupling. Is there an update on that draft paper that has that had been issued like 2 to 3 months back? Yes. Market coupling was enabling provision, which was introduced in the draft market regulation. And there was a public hearing on that. I'm sure you are aware about what was the view of different participants. We also presented our case and what our discussions we had in the present test and subsequent to that. So we understand this is another provision and maybe this has come mainly because of bandwidth where in 2018 when Ambit's discussion paper was issued, market data come back despite paper. If you want to mandatory do all transactions through the exchange of the 100% of the power limit in the country, and I think you need one price to settle that. And that is why you need market coupling. So therefore, as a concept this concept was introduced and I think it was created in that discussion paper. I don't think anything is going to happen in the near future and I really don't know whether we feel it as a part of the final regulations or not. The next question is from the line of Aniket Mittal from Motilag Oduba. Please go ahead. Yes. Thank you for the opportunity. So my first question is on the open assets front, If you could just let me know what sort of volumes of your total volumes is coming to open access for 2Q and 1H? And this is not on that. Typically, what's happened is over the past 1 year, we've seen an uptick in open access volumes. But whenever such a situation has happened, states have sort of increased the additional search outages, especially given that the power demand situation is particularly. So based on your assessment, how are sort of states also reacting to this? Are they increasing the surcharges for Open Access? Yes. Our Open Access volume has been significantly increasing Open Access volume during this last 6 months, almost increased almost about 40% in that. Mainly, it happened hello, can you hear? Yes, yes, I can hear you. Yes. Mainly this happened because of the low clearing price. Our clearing price during this time was about RUB2.50 against RUB2.50 in the last year. They are still not encouraging open access. The tariff barriers and non tariff barriers are clearly created. We are working with the states. We are working with the state regulators, but the access is in a very limited manner. Open So this is for 1 inch or total? I mean, just I understand. It's for the 23%, 24% number? Sorry? Sir, this 23%, 24% number, is this the number for 1 edge that you're giving? Yes. First half is 26%. Okay. And if you look at second quarter, it is about 36%. And my second question is probably just to harp a bit more on the DSM RTM dynamics over here. So obviously, DSM still continues to have a 2% market share of the overall volume. So just trying to understand from just a medium term perspective, what is required for IH to get that shift from DSM to RTM? Is it is it is there a low amount of participation that we're still seeing on RTM? Is that the reason why? Or is there a thinking now that the 1 hour time frame actually may not be sufficient? Maybe that 1 hour time needs to, over a period of time, come down for that shift to happen? We are working on that. If you look at the DSM price, the DSM price are linked to the bare price. So the DSM I mean, with the reduction in the clearing price in the day ahead market, the DSM rate also has reduced. So it becomes the final rate only in the event there is an overdraft beyond the specified limit. So we are doing these calculations for state by state, what is the quantum of overdrawn beyond the limit, what kind of rate analysis they have taken to those overdraws and whether there was the opportunity for them to optimize and how much they could have done that. I think these kind of analyses and investments we just paid over the period of time, we will only be able to get the volumes from the TSM to the real time market. So still you can see increased participation coming from the competition that could probably be discussed? The participation is not today. Almost every day, more than 400 participants participate in the real time market. Okay. And just one last question, if I may. If you could just provide an update on how GTAM is progressing? What sort of response are you seeing on that front, especially in terms of participants? And also with the REC in place, how does that dynamic work for you? When we started Nissan, on 21st August, the volume was 0.2MU. And this year, we are seeing almost about 9 to 10MU per day. So it's significant the participation has significantly increased almost every day, 40 participants participate in this market. We have seen generators selling power. And one thing is the distribution companies, the distribution companies like Amrapotesh, Karnataka, which have Telangana, which have larger renewable portfolio. Power availability is more than the RTO application of the state. So they spend that extra power on the exchange platform, the green power, and take advantage of that. So regarding wearing weight in the green market is almost about 70% 80% more than that rate clearing the commercial market. So they get that premium, lessening power in the green market. Earlier, states were backing down the green generators when their demand was low. Now they have a market to sell that power instead of backing down the generators. So this is a very big development and very positive for the renewable generators also and for the state also. The next question is from the line of Yashu Vartan Narulkar from BPFS Mutual Fund. Please go ahead. Yes. Thanks for the opportunity. So the first question which I had was on REC. So like I heard in the call that there was a like you weren't able to trade and the RTCs are always so low. So could you throw some light on this? That's my first question. And secondly, I just wanted to understand the difference between green termite market and the REC market. Like, what are the difference in which market like what addresses which market? So if you could just throw light on these two questions. Thank you. Yes. Green termite market, you are purchasing electricity and also the green attribute of electricity. So you are meeting your energy demand and at the same time you are also putting your out your projection. In the RST market, you are only buying the green attribute. For example, the industry which has got its own captive gender sum, There is a RPO obligation for that, applicable for that industry. So since they have already met the energy requirement from the captive generation, they will have to buy REC from the market to meet RFP obligation. But if they look at state which is wanting to purchase power and also have to combine RFP obligation, 2nd, it's also green power to meet both of them. Okay. And so about the REC certificates, like there is no volume. So what exactly happened about the prices were lowered by the regulator? No, the volume is not there because transactions are not happening because of the effective stay order. I'm sure this month the order should come and we should see transactions in the IEC market also from 28 of October, which is the last business year of the month. So we should see transactions in the REC market on 28th October. The next question is from the line of Suji Jain from ASK Investment. Please go ahead. Hi, Gunjan team. Sir, a few quick questions. Any update on CEO search? What were the admission and annual fees for Q2? NCS has tied up with injunction for coal exchange. Now in energy markets, IEX clearly has the lead and monopoly in spot transactions. So will it be too much to expect now that we've launched a gas exchange to also pick on something like a coal exchange or IEX is going to have an answer in that segment as well? And if you can quickly elaborate on the states that we just mentioned that that is Maharashtra, etcetera on the draft numeric dispatch. What exactly that it is and what impact it has on the power market? Thanks. Yes. I think Board is working on that. So I will not be able to tell you anything beyond that. But there is no uncertainties as far as the company is concerned. We have somebody who is looking after the company who was with the company for a long time. So don't worry about that. There will be no vaccine as far as the COVID is concerned. Amgencine and MCX, It is very difficult to say what kind of a whole exchange they are talking about because what I understand about the exchange is the exchange which is doing price discovery and also physical and financial settlement. Digital and financial settlement can be done for a commodity in which there is no issue regarding quality and quantity. If you look at electricity of the gas, these are measured by meters automatic online measurement of the quality and quantity. And it is the same gas which is flowing through the pipeline. In case of coal, I am sure you are aware what kind of coal we have and what kind of issues we have in the coal market. So whether it is going to be a coal exchange or it is going to be a reverse option mechanism, what we have on the big platform. So I'm not really aware what is their business model. Your third question is regarding annual fees. These fees for quarter 2 is INR4.46 crore. Anything else? Yes. And finally, the draft spirit order dispatch, which you UPL issued and Maharashtra and Delhi, they already have that in place. What exactly in terms of doing progress in the power market and what impact it has? Let me briefly explain you what a merit order dispatch is. Normally, states are expecting their power based on the long term contract with their contractor. So they try to meet the demand through the long term contracts and if there is a shortfall in demand, then they purchase power through the bilateral of the exchange. Now regulator in case of Marafa and Billy have said repeatedly that when you are cutting your merit order, you should also factor in the exchange clearing price. If exchange clearing price is lower than the variable cost of some of your plans under the long term contracts, you should back down the power from those coffee plants and such as government exchange. That is the true merit of our design. You are replacing high cost variable power. This cost is something which is a sunk cost you have to pay, but then at least you compare exchange clearing price with respect to the variable cost of different plants. And there are many plants in the country where the variable cost is much higher than the exchange clearing price. So if everybody starts doing mental risk backs, then in that case you will find that the objective of end it will be automatically met through this merit or dispatch process. Sure. And one quick question on embed. In embed, you will first look at sources where you have the cheapest cost of power, cheapest variable cost. You'll exhaust them, then to the next source, then to the next source. That is the way you will build the entire architecture at a particular point in time under an MCO. In that Pan India level, there will be savings, but you also have to honor the PPAs. So some of that saving will be passed on to the producers of power, But some of the savings will be retained at the national level. To that extent, if I have a PPA at a price that may not be the best price or remunerative price for the STP, but I'll still get that price under that PPA, right? Let me interrupt you. For discussion on Ambit, we need one full good hour for that and we need to spend time with you. Let me only tell you in brief that with Ambit, the intention is to dispatch entire power of the country to meet entire demand of the country based on the most efficient manner. So it is a 2 minute round of this cycle which happened in the pandemic. It is very simple to hear, but if you want to implement this process, there are many complete systems. So all those complete cases will have to be addressed. You have to pay the capacity balance, you have to pay for the energy balance on daily basis and there is going to be contract for defense. So all those things will have to happen. I think it is as complicated as GST what we are doing now. So very difficult to implement in the country. You also meet the concern of the state. So I think it will need time, not going to happen very soon. No, sir. Thanks. Thank you. The next question is from the line of Ankit Gupta from Alchemy Capital. Please go ahead. Hi, sir. First, as per your volumes given, our pricing per unit compares to be relatively lesser than last quarter or even last year? Is there pricing pressure or is the pricing different in some in RTM market or No, no, no. Sorry to interrupt, but your audio is picking up, sir. Yes, yes, okay. As far as the transaction fee is concerned, it is constant. It is same last year and this year. I don't think there is there is no change in that. There is no reduction or any incentive or discount in that. But our volume growth is 13%, but our revenue growth is only 5% and why it is so? Yes, yes, okay, okay. And second, sir, what are the guest programs which we did this quarter? Gas volumes, volumes in the IVX. IVX volumes are very low as I told you that we are working with the government and regulators to put a neglect in place. So although things are going to happen, we are not really today worried about the volume. I think for the next couple of months, we will have to work aggressively with the government to put this in place. And thereafter I am sure there is opportunity. Got it. Thank you, sir. Thank you. The next question is from the line of Pavan Kumar from Guggenateya Capital. Please go ahead. Sir, REC volumes contribute what portion of our entire revenues? Our revenue revenue, I mean our volume we can say. Okay. And regarding the other expenses part which fell down with 52%, is INR8.5 crores other expenses, is it a sustainable kind of run rate? Other expenses if you look into it, there are significant fall reduction if you see in the expenses in comparison to the Q1, but mainly it's because of the CSR expenses, there was a 5 core contribution in the plan case which the company made during the Q1. That is a major differentiation. And secondly, because of the COVID restriction, so a lot of the activities are on hold. So when the opening up happens, certain costs will definitely go up on this side, but not significantly. Okay. Any idea what would be the sustainable run rate that we can take on this particular? If you invest into the average, average the other expenses will be in the range of 5 to 6 crores. Okay. Fine. Thank you. The next question is from the line of Saloni Jindal from Everyday Capital. Please go ahead. Thanks for the opportunity, sir. So I want to know what market coupling we expect for the exchange in the future? Can you repeat the question, please? The market coupling was introduced, we are afraid for the company in the future. Market coupling introduced, yes. So the point is when will market coupling get introduced? If you are introducing market coupling with the AND gate, there is no threat. So that with the Ambit, today exchange volumes are 60,000,000,000. After Ambit, this will multiply by 25 times to 1400,000,000,000. The entire generation of the country will happen through the exchange. So I don't see any setting that or any challenging that. But in the existing market of 5%, there is no case for including market complaint. Tell me what advances one is going to drive by doing the market coupling in existing market. Existing market is a voluntary market and it is going to be mandatory market. In the mandatory market, you need single file discovery. In a voluntary market, you don't need a single file discovery. We still have NSE and DST. There is a price difference between the stock price between these two We still have NCX and NCBS. So these kind of variations will be there. I don't think regulators are thinking of coupling those markets. In those existing voluntary markets, I don't think there is any case for The next question is from the line of Utsav Athai Sira from Fijilik Debt Investor. Please go ahead. Hello, sir. Hello. That over the years we will see that, but then market price will increase for Exynos. Thank you. The next question is from the line of Kunal Gandhi from Banyan Tree Advisors. Please go ahead. Thanks for the opportunity, sir. Sorry, I joined late. My question would be repetitive, maybe repetitive. Wanted to understand and have a sense on what how should one read into the employee cost in this quarter? Like is it a one off increase or it is on the it is the most flexible than it Yes, there are 2 implements which are one offs, but otherwise also there was increasing employee cost because of the launch of new products. So we have taken business and power. Typing going forward, it is going to remain a bit range. Hello? Yes. Sure. And the second question was on green dam. So when you look at the volumes, this would be classified under the TAM itself, right? If I were to look at the if I were to track the daily or the monthly volumes, so it would be classified in the overall TAM, right? Or they would be in terms of timing of the extent? B. Balaji:] Sanagal, yes, some of TAM has happened because of RTM. So PAM only has shifted to RPM. Green plug market is a market for the green power. And then you can compare it with REC, but in case of the green market is energy plus green equity. Okay, sir. Not a problem. Okay, thank you. Thank you. The next question is from the line of Varun Maheshwari from EDWY Securities. Please go ahead. Yes. Hi. Good evening. Thanks for the opportunity. So please have a question. Number 1, derivatives in the electricity can be introduced only after the issue is settled by the Supreme Court. Because today derivative is evaluated by whom that is an issue under that case. So once Supreme Court discloses of that case, in fact, SEBI, CRC, Ministry of Finance, Ministry of Power, they all decided these issues, units have been signed and they haven't filed with the Supreme Court that derivatives will be set, will be regulated by SEDI. And long duration delivery contracts will be regulated by CRC. So once that case is disposed by Supreme Court, then CEB will be able to introduce unencilled contracts for any electricity also. And these will be introduced on strictly regulated exchanges. But you know the advantage of that will be that in electricity if you see there is lot of volatility in the price. So user will be able to hedge his position in the delivery market and take delivery in the spot market. So a part of the bilateral contracts will then get it through the best sales platform. Right. So the reading was supposed to take place on 8th October, Okay. This is postponed to December now. Okay. Yes. Alright. So that actually means that we were looking to launch LDC by December end. So now that actually looks a bit possible? Yes, yes, you're right. Understood, understood. Just a second question, sir, this is actually on GTAN. Now sir, right now we are at about 1 gigawatt. Now what according to you would be the changes required for the GTAN market to go from 1 gigawatts to something like 15 gigawatts. Need to understand that there are new policies which that is actually getting discussed with respect to higher capacity or higher lifting capacity allocation, so something like 80 20 with respect to new capacity. But can the existing capacity, can you see a ramp up? Is it possible that from 1 gigawatt, which is 10,000,000 units per day? Can it go to something like 15 gigawatt over the next few years? So one is in the green termite market, our volumes, our transactions are 1 gigawatt in the peak hours. The transactions are mainly happening during the daytime. So average if you look on the latest, the volume is about 9, 10,000,000 units. Today, there is no generator which has got merchant capacity. The entire renewable capacity is by the fundamental long term contract. So the packet system is more by the distribution companies, the distribution companies who have got surplus power generation, enabled power generation beyond the RPA business, they are selling to our own exchange platform. But then if you look at the clearing price of the retail market, this price is about 2 rupees 40 paisa. It is a very lucrative price considering that price discovered under the bidding roof for the renewable generators, which is around 2 rupees 50 paisa. So I am sure looking at this price maybe in future couple of IPs will set up capacity under the merchant rule or they will keep 10%, 15% of their capacity for selling the market and try to take advantage of this market. So this is how the market will get developed and helping us from 1,000 megawatts today to maybe 10,000 or 15,000 megawatts will take some time. I mean mean we have created a market and I think we will now see what kind of value we can take out of this market and make investment for selling bar in this market. Yes. So in Japan, right now, we have more of our fire flows rather than cell shows, is it? Yes, yes, you are right. But on the cell site, we are seeing active participation of the state distribution number with the surplus cover. And today, Karnataka and Selangirang were participating, but in the near future, we are expecting even Amrapovic or Gujarat or Rajasthan or Maharashtra who have large renewable capacities in this market. Got it, sir. Thank you so much and wish you all very best. Thank you. Thank you. The next question is from the line of Ankushikarwal from Stellan Asset Management. Hello. So just one clarification on my earlier question. So the banking contract value, the volumes in the current short term power market annually would be somewhere around 30,000,000,000, dollars 35,000,000,000. Is that understanding correct? Banking transaction? Yes. Banking transactions, I believe, about US10 1,000,000,000 to US12 1,000,000,000 Okay. Only US10 1,000,000,000 to US12 1,000,000,000 yen. Yes. So that's how the volumes are in the bilateral contracts. Mr. Ankushakarwal, we are unable to hear you, sir. Ma'am, my question is done. Okay. Thank you so much. The next question is from the line of Manoj Kumar from IDSE Securities. Please go ahead. Hi, sir. Thank you for the opportunity. So my question is on the RTM market. You explained about how RTM is cannibalizing other segments. But if you could throw more light quantitatively on what has happened in this quarter and moving forward, what do you outlook on this? What is the outlook on this? See RTM is not on account of Tenembras is one of the markets, entire volume. What I told you is that firm ad market, good part of those volumes are shifting in the RK market. But if you look at the total volume what we have been in the RKM market, which is that is significantly more than what we did in the end market. So I think almost about 60% of the RCM mark volume is additional volume which we have got and quarter 2 RCM volume is we did about 2,350,000,000 units in the RTM market in 2nd quarter. So, I mean, I think marketing is definitely going to be Got it. So this was my quantitative light into like how much that is showing. We are working with the distribution companies to shift their real time momentum to the RTM market. How can they take advantage of the real time market to reduce their cost under the DSM. So we are working with them. Let's see what kind of success we get and how we are able to provide value to our distribution companies. Got it. Thank you so much. Thank you. The next question is from the line of Rohit Balakrishnan from Riti Capital. Please go ahead. Hello? Yes. Hello? Yes. Hi, sir. Sir, I just had two questions. One was, so while our share in the short term market has increased over the last few years, but as an overall market, short term market has been stagnant at about 10%. I mean, this has been the case since our listing in 2,008. So I just wanted you all to what is going to change that and what is going to increase? I know we are introducing market products in the long term market, etcetera, but just talking about short term, what do you think can take this 10% to probably 15%, 20% and more, which is also seen in the advanced market? So that was the first question. And probably I'll also miss my second question is, you mentioned earlier to some participants' question that this market coupling is not a risk, Ambit comes in. So if you can probably elaborate a bit more on that, that would be helpful. Yes. Soft top market is holding around 10%, 10%, 11% from the last, I think, profile, yes. But government is currently working in creating more liquid in the softer market. There are few things which are happening now. One is long term PPA's are not happening. So whatever is the incremental demand, either it is met by the existing long term contracts or it is going to come to the short term market. With that short term market volume with the increase in the demand will definitely go up. It's unfortunate that last year the increasing demand happened only by 1%, and this year the demand increases, in fact, there is a decline in the demand. And we may end the whole year albeit the level of the last year or maybe lower than that. So the incremental demand has really not happened in these 2 years. That is why the volume in the short term market has not increased. 2nd is old plants are now getting phased out. Government has already decided that the old inefficient plants will be phased out because they are not complying with the environmental norms. So when those plants are phased out, these plants are supplying power under the long term contracts. That demand also will come to them. A part of that demand also will come to the market. So I think these 2 then cross border transactions which should happen any time. I mean CRC had issued regulations. The procedure is to be issued by the CEO. I think I understand that that is also under the financials. So if that happens, that also will bring some volume to the short term market. I mean these are the drivers for increasing volume in the short term market. This should take the stock to grow. Got it. 10% to 15% in the next 2, 3 years. Got it. Got it. And sir, on the other question on market coupling and you mentioned if Ambit comes in, that's not a big issue. If you can just maybe explain it in more detail. What I what I told you is that in the present market model, which is the voluntary market, market spends, there is no compulsion on them to purchase off in the market from the exchanges. It depends on the regulated money supply solution. They can contract that with a shortfall through the dilutive market also or through the exchange. And they can purchase power from any of their schemes. It is a voluntary market, and it is only 5% of the total benefits happening to this market. And IXC is already having 99% kind of market share in the data market and real time market. So the competitive prices are already happening. So I don't think we are going to get any additional value by seeing market suffering in the existing model. And there is no need for doing market suffering in the existing model. But if you are going to implement Ambit, in the and wait entire power of the country is going to get dispatched to the exchanges. If that happens, then you need a common clearing price. You're going to have 3 dividend prices of that 3 exchanges irrespective of the volume of those exchanges. So since you need a common clearing price, I think and market cap rates make some sense if you want to implement Ambev. And if Ambev is implemented then the entire volume which is 40,000,000,000 units in the country is Junderson taking place, the entire Junderson will come to the market. So there is no challenge. I mean we are doing today 60,000,000,000 units and even if we get 50% of the market share it will become 700,000,000,000 units. So that is what my point is. Got it. And so just one final thing on this REC, you said that probably at the end of this month, the trading should start. But given the price has been so low, so would you think I mean, it's now the generator, could they continue to like is there an alternative that we can because the price is not negative, what is is what my understanding is. So, want your view on and what will happen post even if after it comes out with an order? The point is, existing generators who are selling in the REC market, having a critical REC market, What option they have? There are no other options. They have to sell the green attribute only in the REC market. Earlier also when the REC volumes were higher, the sell volumes were higher, the clearing price used to be only 1 rupees, INR 100 for 1 RG certificate. So that time also they are selling it. And for new capacity, I mean under the bidding rules, these ICTs are selling renewable power at a rate of 50% illustrative of the price, there is value which we have in the either in the green demand market or in the RTC market. Got it. Fine, sir. This is very helpful. Thank you very much. Thank you for answering the questions. Thank you. The next question is from the line of Nikhil Upadhyay from Securities Investment Management. Please go ahead. Yes. Hi. Good afternoon, sir. Thanks for the opportunity again, and appreciate you explaining each of the points in detail. I just have one question, which is based on the explanation you gave between the REC and the Green Tam. Now, would it be possible that the people who are the generators who are selling on the REC, they can sell the generation and REC both at the Green Time market. So all of the REC volumes can shift to Green Time. Is it a possibility or would you say like the split could remain at 80 20? It depends. Today generators who have set up capacity under the REC market, they have contracted the state distribution companies for supply power to the discount at the average cost of power purchase of the distribution company. And the green attribute they will get RHC for the green attribute and sell that RHC. In the future, it is left to the IT team, whether they want to sell power in the renewable market, in the retail market or they still want to sell power to the distribution company and take ownership of the Green Energy Group. Looking at the market clearing price and the segment position of the distribution company, I am sure Genetas will be inclined to sell power in the green market as energy and as green attributes and thereby they will be getting better results and also the comp payment. So just one last point which I want to understand. So if we say a person is selling green REC on the REC platform and is selling power to the distribution company, the combined price which he is getting, would that be higher than what he is getting on the green term market as of now? It depends upon yes, sorry. It depends on what time the contract was signed. If the contract was signed 5 years back, at that time the rate for the renewable power itself was INR 5 per unit. But today, a state generator, a state distribution company will not sign a contract to purchase power Got it. So we like to secure green power, we can talk basic both energy and the green attribute. So I think capacity addition under the REC market is not expected in future. Capacity addition will come under the green market now. Okay. Thanks a lot, sir. Thanks for the deep explanation. Thanks a lot. Thank you. Two questions now. Sure, sir. That was the last question for today. You may give your closing remarks. Thank you very much for not expecting this uninstalled. And we have discussed, I have nothing more to say. I can only say one thing that last two quarters was difficult time for us For the whole country during this because of the COVID, there was compression of demand in the country. And on exchange also initially we were apprehending that the volumes will also decline, but because of the very competitive trading price, we could achieve a volume growth of almost about 13%. And we also ensured effective operation of the gas sector on the power exchange, ensuring safety of our employees by doing digital transformation of the operations and going forward also, I mean if you achieve 13% kind of growth under difficult times, unbelievable conditions, I think going forward then the economic activities are now improving and sure that our growth will be much better. That's all. Thank you. Thank you. On behalf of Axis Capital Limited, this concludes this conference. Thank you all for joining. You may now disconnect your lines.