Earnings Call: Q1 2021

Jul 30, 2020

Quarterly report

Ladies and gentlemen, good day and welcome to the Indian Energy Exchange Limited Q1 FY 'twenty one Results Conference Call hosted by Axis Capital 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. Abhishek Puri from Axis Capital Limited. Thank you and over to you sir. Yes. Thank you, Faiza. Good afternoon, ladies and gentlemen. On behalf of Axis Capital, I'm pleased to welcome you on for Indian Energy Exchange Q1 FY 2021 earnings conference call. We have with us the top management team represented by Rajiv Srivastava, Managing Director and Chief Executive Officer Mr. Vineeth Hadalka, the Chief Financial Officer and the entire management team of REX. We will begin with an opening remark from Mr. Rajiv Srivastava followed by an interactive Q and A session. Right. Thanks so much. Okay. Good afternoon, everyone. And I audible. Okay. Good afternoon, everyone, and I extend a very warm welcome to all of you for our Q1 fiscal 2021 earnings call. Present with me today on the call is the entire leadership team of IEX, Vineeth Halkha, the CFO Rajesh Mejweta, our Strategy and Regulatory Leader Director on the company Rohit Balaz, our BizDev Country Leader Sameer Prakash, our CHRO Kinbreen Chatterjee, our Chief Risk Officer Amit Kumar, our Market Operations and New Products Introduction Leader Gautam Sung, our CTO Deepak Mehta, our Business Leader for Indian Gas Exchange Shruti Patya, leader for Marcom and Aparna Garg, she is the Investor Relations Leader. Just as a quick one, I just I hope everyone, you and your teams and your families continue to be safe and healthy. We clearly are living in unprecedented times right now. The Q1 of the fiscal this fiscal has been pretty tough for the industry and economy and for all of us in many ways. On our part, we continue to support from a business perspective, we continue to support the distribution utilities, industries, critical healthcare facilities, communication infrastructure of the country, millions and millions of employees who are working from home today, consumers at large, just by facilitating an uninterrupted 24seven power supply. I also want to let you know on June 27, during the last quarter, we celebrated our 12th anniversary. And the complete uninstended support, belief and partnership with our members, our clients, stakeholders, employees over these years has played a key role in building REX as well as building a very vibrant power market in the country. I express my gratitude to everyone for partnering with us in this journey and I really look forward to an even closer collaboration going forward. In line with our vision to architect the next generation solutions for sustainable energy economy ensuring a competitive, transparent, reliable access, We are committed to leveraging technology and innovation and lead the energy sector transformation towards energy as a service, which we see has a real paradigm shift in its true sense. I would also like to thank all our members, clients, employees and their entire ecosystem for a real very solid quarter gone by. And I must tell you, it has been a real busy period for us. We launched many new we launched a few new products and markets and we also launched our new company, Indian Gas Exchange. During the quarter, just because of the nature of the times we are living in, we had to revamp our customer engagement and business development currently completely to be our virtual in its virtual form. During the quarter, we took several significant initiatives to reach out to our customers to actively through webinars, through events, through e meetings. It was almost like a communication overdrive for us during the quarter. And then on top of that, we made significant investments in technology and process innovations, leading to a better user experience for our participants. So all in all, a very fulfilling quarter and I'll talk more about it as we go forward. But let me give you an economic and industry update as well. The overall economic and industry update played out in a very different way for different industries. The quarter began with a serious slump. In the 1st month of the quarter, the IIP contracted, which is April, the IIP contracted by almost 58%. Manufacturing and Services sector continued to struggle during the period in April May and gradually opening up as the economy opened up in the latter part of the quarter in the month of June. So there was a significant improvement in manufacturing and services PMI in June at 47.2 for the manufacturing PMI and 33.7 for the services PMI, both still in the contraction zone, but much better than the way the quarter started in the month of April for both Services and PMI and Manavaxi PMI. On electricity front, all India consumption of energy fell by 16% during the quarter in the Q1, starting June with the easing of lockdown restrictions in most parts of the country and also the fact that summers peak in the month of June across the country, the peak demand did return to 90% of pre COVID levels. But all in all, over the quarter, the electricity demand fell by 16% over the previous year. I will also give you a statistics on installed capacity. India's total installed capacity of power is 3 71 gigawatts as of June 30, 2020. In line with India's commitment to Paris Agreement to really increase the share of green energy in the overall energy mix. The renewable capacity grew faster. It grew by 10 percentage points during the period and reached 88 gigawatts on during the period. Thermal generation was a drastic drop from last year. It was it dropped by 23% in the same period versus last year. The regulatory developments during the quarter, they included amendments to the CRC, intersea transmission charges and losses, which are likely to be implemented by September 2020, as well as the REC regulations on floor and forbearance prices implemented on 1st Slide 2020. We believe both these regulation regulatory developments will possibly benefit the exchange market trading on the power markets. Specifically, the amendments to transmission charges, charge regulations will place transactions which are done on the exchange at par with intrastate transactions and will incentivize distribution companies to further optimize their power purchase through exchange just because the cost will go down to that extent and increase the viability for the sellers. To create a market framework that is robust, efficient, transparent, on 18 July 2020, the CRC issued draft power market regulations for 2020. And we are optimistic that these developments will over time lead to enlarging the role of markets in the Indian Power segment. On the policy front, just to give you an update, the Power Ministry also amended the methodology of coal allocation under the Shakti scheme, which allows generators to participate in the coal linkage auction even if they sell power on the Bayhead market on the power exchanges as well as on the deep platform. Now this scheme should really boost sell side on the exchange because the independent power producers will get coal this coal will be auctioned, so it will be as competitive as you can get. And so they will get coal to generate and they can then come and sell and move the sell side liquidity on the exchange from the merchant capacity. And they will be eligible to participate in the coal auction and thereby leading to the full supply chain. And they will keep a check on the prices in the spot market just because the liquidity will increase and they'll be allowed to produce more power. So much for the regulatory and the policy. Let me just give you a financial and business performance update as well. Our revenue for the quarter has been up 15.6% on a standalone basis year on year. This is primarily on account of increase in the overall volumes traded on the exchange. On a standalone basis, our Q1 profit after tax was INR42.88 crores, which is up 8.3 percentage points as compared to INR39.5 million in Q1 2019. Now I just want to caution you, there are 2 non recurring items over here. We did make a contribution towards COVID Care, a INR 5 crore contribution towards COVID Care, And we had also INR 2.6 crore of tax liability, which had to be which was differential from last year. Now because of which, if you take these into account, without these 2 non recurring elements, our profit after tax would have been INR 47.89 crores, which would be a growth of 18% y o y and 6% Q on Q. So couple this with the revenue growth of 15% 6% and non recurring itemized profit growth of 18% y o y or 6% Q on Q, these are really strong numbers at any moment and more so during these times. So the company continues to be very strongly placed with a robust business model and absolutely zero debt. Just to give you a sense of electricity volumes, our volumes increased from 12,900,000,000 units in Q1 FY 2020 to 14,900,000,000 units in Q1 FY 2021. This was a 14.5% growth in volumes. And there is an increase in economic activity which started towards the end of the quarter. Our open access volumes did jump up in the month of June and witnessed a 30% month on month increase, which means from May to June, there was a 30% increase in our open access volumes. Including REC, if I would include REC as well, which didn't do as much just because of the new regulation on the flow pricing and floor business pricing, the total volumes grew 9.8%. Please inform you that on July 10th this month, just as early this month, the Ministry of Power also released an office memorandum, which indicates a resolution of the decade old jurisdictional conflict between CRC and Semi, a deal led by the government, in order to facilitate in Russian of yet another new product in the market, the long duration of our contracts, which will include forwards and derivatives. It's a really welcome step, much needed, much awaited, very positive step, which has been in the works for a long time and it will facilitate power markets to leapfrog the next level of growth. The longer duration delivery based forward contracts and derivative contracts will potentially alter the way power is procured in our because you get to hedge over the long period of time. The order will pave way for introduction of these contracts, delivery based contracts on the power exchanges under jurisdiction of CRC. The derivative powers would be under the jurisdiction of SEBI. And we at IEX we'll be able to design long duration contracts, move forward with the approval process in CRC. The contract from us is already done, so we'll move forward with the approval process. And we hope to launch long vision contracts pretty soon, surely in Q3 of this year. We should be another step towards the commitment of development of the power markets and achieving our business aspirations. Let me just give you a sense of Q1 initiatives. And there's not a few, like I said, it's been a really busy quarter. A few very significant Q1 initiatives for the year, the company committed to invest at a technology level for the year, the company committed to invest INR 15 crores in technology and tech innovation and process innovations. And this should lead to a better user experience, ease of trade for our partners and all our stakeholders. We are launching new functionalities for all our participants, a faster time to market for our new products and a better engine overall for the trading engine. So that's on the Tech Tech front. On the business front, like I mentioned, we conducted more than 30 events with our participants as part of our customer outreach efforts. As regards to new market segments, we introduced the real time electricity market recently, which has received, I think, an absolutely excellent and fabulous response from our customers. It did a volume of 515,000,000 units in the 1st month, which is in the month of June itself. The market was launched on 1st June. And in the 30 days, we did more than 500,000,000 units of trade, which is absolutely excellent. And it comprised 10% of total volumes taken on IEX. Additionally, the Indian Gas Exchange, which is India's first automated natural gas trading platform, it commenced operations on 15th June, 2020. Quite a few of you would have attended our virtual launch event where the Honorable Minister of Petroleum and Natural Gas and Minister of Steel, Shri Dhanveer, inaugurated the IGX and the first trade was executed in his presence on the same day. Now IGX has traded 9,600 MMBG of gas within the first 15 days of launch. And also very positive development, I think early part of July, the regulator PNGRB, which is the gas regulator, had issued draft gas exchange regulations, invited comments from all exchange from all stakeholders. And IGX is in the process of compiling it. We will share it with the regulator soon. So it will give a huge amount of structure to the whole gas jetting market. Let me also give you a sense of way forward because like I said, these are unprecedented times. COVID-nineteen has clearly unfolded a multitude of challenges and in our opinion has huge number of opportunities for our sector. Like I mentioned earlier to you, I think it is pretty much the most opportune time you can think of to really rethink the electricity sector design. Rethink the complete value chain, rethink the financial models which are operating in the electricity sector, the regulatory framework, all of these towards building a more efficient and sustainable energy economy. At IEX, we really stand at the forefront to deliver the solutions necessary to enable the transformation of the sector. Good thing really is that the transformation will be technology led and enabled by technology. And if you think of it, that is really who we are at the core of what we do as a business. We are focused towards a very high increase in engagement with the regulator, with the ministry to lead the market transformation and the initiatives which are working in the works right now and work with pretty much every stakeholder across the country to draw a new energy order to lead this transformation to the new novel, which will be in our opinion underpinned by efficiency, competitiveness, flexibility and a serious gain for every consumer across the country. Like I said, energy as a service and a true consumerization of the power sector is on the angle right now. And we seem to be in a very good position to be thinking and leading that transformation. With this, let me just stop here and open it up for question and answers. I've got my whole team with me, So I'll make sure that your questions are given the right level of expertise to be answered. Thank you very much. We will now begin the question and answer session. First question is from the line of Varun Goenka from Nippon Mutual Fund. Please go ahead. Yes. Good afternoon, Rajiv and team. First of all, congratulations for 12 years and I think a very good growth now. Then for a great quarter and your RTM launch has been, till date, very successful. So my compliments for that. I have 2 broad questions. 1 around our stance on the derivative side. If you could help us understand, are we really looking to launch electricity derivatives when allowed? And having derivatives on the same platform or not having the advantages and disadvantages of that. We could have it in a separate company if that's regulatory overlay, that's fine, but within the IGX company? And my second question is regarding IGX or any such initiative. The equity ownership in the company, as we understand now, will not be 100% and has to be gradually brought down, if we could understand that part clearly, please? Okay. Let me do that. For your first question, Bharat, thanks so much for asking. Thanks for your compliments. Let me hand over for the first question on derivatives and how we envisage that product. Let me hand it over to Rohit, who is our BD Business Head to answer that question. And for the second question on IGX equity and how we see that progressing over the next foreseeable future, I will have Rajesh Medit to handle that. Rohit, over to you. Yes. Thanks, Rajesh. Thanks, Varun. So the first one is about derivatives. And let me just quickly tell you a few things about that because we are clearly seeing need of derivative at this stage because the dependence of the SCOMs on stock market is increasing. And then they are exploring all the options and they are looking for product where they can hedge their spot market purchase. So is the case with industrial consumers who are looking for such things. Then as you are aware, the financial market would be there, which would be participating in such derivative market. So going forward, we do have plans. And as mentioned by Rajiv, the OEM which has been issued by our Ministry of Power that clearly gives way for launch of derivatives and also forward markets. So we are working on both the things. The first part of it is forward market where we are going to launch in the present iX only because there is no issue as far as regulatory framework is concerned because that would be delivery based on fact and will fall under the phobia of CRP. On the second part, which is purely financial product, we are exploring various options. You rightly said, we probably have to create a new company for that and those things are under are being explored by us. Not yet finalized, but we are actively working on that front as well. So going forward, you will hear from us on that. Any particular disadvantage in case we do not land up having derivatives? See, in all the mature market, if you see, they play very, very important role, right? So derivative is something which gives price signal to the market and it has got its own goal. When the dependence on smart will increase, so you need some financial products to support that because when you are translating more and more volume in spot, you cannot keep all your positions open, right? So there are industrial consumers, there are distribution companies, they look for one support price or reference price, I would say, for the year and that will this purpose will be served when we have derivative in place. So there are definitely advantages of derivatives and in all the global market, the derivative volume is 10x or even more in certain cases of the spot delivery volume that we see. So it has got its own place. And as we will progress, as the volume will increase, it will have even more significant role to play in times to come. Any bifurcation between forwards and futures of the size of the market, any assessment of that? Yes. So forward sizing, we have already done and in fact in the past some of the such interaction we have shared. So there is an existing market in place. It has got which is about 20,000,000,000 unit in a year, presently being done by some of the different O2C platform, deep being one of that platform. And then there are some more interest rate transactions going on, which are also forward in nature, which is not part of this 20 BU. So 20 BU is something which is the potential size that we are eyeing as of now. Right, right. And about IGX? Yes, Varun, I will just try to answer the second part of your query. We are now currently 100% owned by IA, but we definitely are interested that more strategic investors should join so that we can develop the market working along with them. So you may be aware that Gale had issued an expression of interest seeking exchanges to for them to invest 26% equity. And we have sent our proposal. We are waiting for their final outcome of that proposal. And also we there outcome of that proposal. And also we there are many big gas players who have shown interest in taking into this. And that those proposals are already there with us. So we are talking to them. We are doing some internal formalities and some part of formalities are being done with the other players. So we will shortly, maybe in a month or so or month or 2 probably we'll be able to share more details on who are the final investors on board on IGA. So my question is how do we retain maximum equity in this company given the size of the opportunity or given how attractive it is for us rather than remain a minority controller? No, we would definitely like to remain majority holder. So 51% at least we would like to hold. And balance only, we will seek for disinvestment. So we also don't want to be a minority shareholder as Aayik because one is that AYX is a neutral platform. So I think that should not be a problem for anyone. But we would like to get to remain identified as a neutral player in the sector. So though we may have big players coming on board, but their stake will not be really high. So our interest is that we should remain neutral in the market. And only thing is that there are some few strategic investors on board that will help us to create a better marketplace. Okay. Sorry, just to clarify this. So does regulator allow you to keep majority equity or is it in dialogue so that you're able to bring it down to 15% all over the next few years? What is the thought around that? Come again? My question was the new regulations that may not allow you to own majority stake in the company. So are you in dialogue with the regulator towards that? Yes, definitely, definitely. We will be having operated our REX for 12 years. We understand that what should be the right mix for this investment on any delivery based markets. So we are in touch with the regulator. We will we are in the process of finalizing our comments on that draft regulation and we will be filing our comments. So we are still firming up our comments over that. And of course, there is a guideline available in the sense that we have a power market regulation, which allows you to hold 26% if you are a neutral player in the market. And if you are a member, then you have to you are not allowed to go beyond 5%. But we will again review it with respect to whatever we have done so far in 12 years. So with our experience, if there is some modification required that we are finalizing our comments and we are sharing with the regulator. Thank you so much. I'll come back in the queue. Thank you. Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, Please limit your questions to 2 per participant. Should you have a follow-up question, we would request you to rejoin the question queue. The next question is from the line of Mohit Kumar from IDFC Securities. Please go ahead. Yes. Good afternoon, sir. Congratulations on good set of numbers and completing your 12 years and launch of the RTM, successful launch of RTM market. So my first two questions primarily. The first is on price, the new power market regulation, there is a enabling provision of price coupling. Is there any thought around that? And secondly, on the transaction margin, do you need to take approval and what is the kind of dialogue you are having with regulators? And just have you got any clarity on those 2? Okay. All right. Thanks, Mohit. Let me answer both the questions. And let me also give you a bit of a sort of a broad thing on PMR because I think the PMR has just come out and you're all expected to be responding to the PMR shortly. Now I think in more ways than 1, the way you see the PMR is about and the reason I'm choosing to do it because something will form a part of the whole PMR regulation. The way it has been thought through is to create I think CRC is now in the process of creating along with the Ministry of Power, a very robust and a very sort of transparent and regulated power market. Now what should be regulated, what should not be regulated, how should the new product introductions work, what should the new markets and certain operational topics look like on current shipment, all of that. And the OTC platform, the governance structure, all of it is being discussed right now with a view to steel mining operations in preparation, in our opinion, for a real exponential growth. If you were to have an exponential growth today, I think the market could have challenges because certain operations such as need to be put in place to get growth. And PMR is a very significant step in the direction of trying to get all of that. The regulation draft which introduced such as introductions of new build types, without the approval of the regulator amendment to new business rules are all positive and they are all in the direction of trying to set up a very nicely streamlined market. To answer your question on market coupling, I think it's a provision which has been included in the Kmart 2020 and an enabling provision to support future growth of the power market. Exactly the same sort of logic. I think there is a discussion going on between the regulator and the ministry and a huge amount of other people involved, which is combatants, allies, states, all of them on what should the right and the most effective design of the power market look like, which is best suited to the country from a long term perspective. All the right ingredients, Arvind has a relation to it, what's the right technology for it, what's the right innovation of products to come across with, processes, all of that is required to be done. And we are very closely engaged and involved in a lot of these discussions and we are absolutely confident that the regulator and the ministry will come out with most right, most correct, syndicating framework even from a company perspective like I said. As the growth happens, there needs to be a certain amount of streamlining. The other point about the point you mentioned about transaction margin. Look, I think transaction margin is polygon related. As in October 2018, the CRC approved our transaction fee by way of order, okay. If you have to increase the margin or decrease the margin, you need to still go to CRC. So I think there's no change. They are just regularizing what the practice has been and what they've already said earlier by way of regulatory order in October 2018. So there's no change to the practice. Look at it this way, I think what the market is going to have now is a plethora of products, many, many, many new products. So far, we had only 2. We had DAM and DAM and then we've gotten RTM. And then now over the course of next couple of months, you would find that long duration contract the way the question was on Varun about derivatives and futures and delivery based contracts in the long division, then that will happen. Cross border parts will happen. The green market is in green PAN and green DAN will happen. They're all different in this fiscal year or in the near term. Now all these market segments move it have a very different deployment from an operational perspective, from a technology perspective, from a development perspective, just the intensity is very different. I mean some products stayed in a very short duration during a very short period of time, which is damp rate, mid-twelve for instance, but RTS grade, they are so many more penetrating. So the operational intensity of each of them, the technology requirement, the people requirements, everything is different. I think it is only fair for the regulatory model of Singular, which is fair which recognizes the fact that all of these are different and they need to be treated differently and we'll make sure that we are provisioning the payouts absolutely committed with the dividend. So I think we feel comfortable with the way in which the whole thing is moving. Like I said, we are very deeply engaged and involved with the ministry to make sure that we come up with the best regulation, which is really the financial environment of all the whole world because we are doing at a time when I can say there's a huge amount of transformation going on in the market and we can really lead this whole setting up of the new regulations as well as the new governance mechanisms. Okay. My second question is do you have any since your plant launched a weighted contract, I think we will be allowed to hold only 15% in case we launch this new company for the derivative contract, am I right? I missed the question. In case launch derivative contract in a new company under the SEBI regulation for launching the new for launching the future exchanges, I don't think that you can hold more than 15%, am I right? Look, I think Rohit answered that question about whether we're looking for a new company or we look for partnership and all that. There are different ways of addressing the derivatives market. And the long duration contracts, derivatives contracts will be under the guidance of Sevy. So you continue to work with that. And there are many other exchanges in the country with whom we can partner. So there will be different mechanisms, which we'll have to evolve and think through over the course of the next 2 or 3 weeks to make sure that we do the right thing from our derivative goods perspective. It doesn't need to be necessarily and we're not constrained in that perspective. We're not constrained from a holding company perspective or neither we are constrained from doing the right sort of a level of partnership to make sure we maximize that. So there are different routes to go to the market for the derivatives. And then whenever these are to be delivered, the delivery happens on IA. So there's a very, very good framework that we are evolving right now, which can make sure that we maximize delivery based contracts, we maximize the derivatives, we maximize the fusions and we maximize the delivery around all those products as well. So I think we've been a good way just wait for a couple of weeks for us to come back to you on that topic. My last question, sir, what is the timeline? Mr. Kumar, this is the operator. Sorry to interrupt you. May we request that you return to the question queue for follow-up questions as there are several participants waiting for their turn. Thank you. The next question is from the line of Sudhir Jain from ASK Investment Management. Please go ahead. Hi, Rajeev and team. So the electricity future will be will it be in an index form, A. B, will it be cash settled? When it happens, what your understanding would be? For the gas exchange, the PNGRB draft regulations, are they looking at capping of equity holdings 26%. MCX has tied up with Mjunction or a coal exchange, which is a spot exchange. So, spot exchange has been data where we have been front runner and they have in the space actually in futures derivatives transactions. In fact, they already have a natural gas futures contract trading there. What is our game plan if another energy segment like coal exchange opens up? And M6 has also spoken about taking quotes from you and launching electricity futures when it is ready from Sibis side. You are kind of dealing with the end users, we are dealing with the financial investors as well. So how do you ensure that electricity future remain in your test? Thanks. Okay. Let me give on the first question if you ask to Raul to answer on the derivatives and the risk to futures and what we're doing. But just to give you a sense on the coal and what new lines of diversification can REAs think of. And literally, look, our aspirations are to play in the energy basket of the country. And because we have played we were an allegedly only player till now, then we became mid of June, we started our gap machine, so we added 1 portfolio to our company. We started a new company, but we gas exchange to launch our gas. And there will be many such similar lines of business going forward. I cannot disclose with you on this call right now what those lines of business would be, but there could be many other lines of business like I said, Energy Management is something that's really widespread and we can take a look at more in substance from expanded output within the energy basket. With that, let me hand it over to Rohit. Rohit will Yes, Rajiv. So, Sudip, you are talking about futures. And as I said earlier also, we are going to play a very big role there because as you know, all these financial transactions, which are converted into delivery will come to our platform because we are the one who are doing or who are doing almost 100% of the spot transactions in the country. Coming to the your question about index side. So these are little earlier days. We are exploring all these options, how the settlement could be done. And yes, in all such cases, index plays very, very important role. And we are exploring whether it should be a day index, peak index. In fact, we have different categories in our spot market. We thought that we do have time of transactions. So we are exploring on those fronts. As I said, it is early days. I don't want to comment on it at this stage. But yes, in future, we will surely hear from us on these accounts. But those are the cash settled, right, electricity futures? Absolutely, yes. Those will be cash settled and then we will also have those will come to spot, those will convert it into delivery. Options we get there. How do you fend off the competition? Because they are ahead in terms of the derivatives game. We are a spot exchange broadly. They'll also launch electricity futures. We'll also launch. Yes. So as Rajiv said, we are exploring all the options. We are there is a limitation on holding also as you are aware. So there are some players who are doing very good in that particular segment. We are doing excellent in this segment. So there could be some partnerships in future. Again, I will repeat a little early to comment on that. We are still working on it. Yes. And about the gas exchange? Yes. So this is I'll just answer the gas part. So actually the cap proposed by ENGIE is 15%, not 26%. And we are making our final comments on that. So we as we have seen in case of electricity, 26% is good for anyone who is not member of the exchange. So that's I think a right thing to do for members, non members. But we also see that exchanges would be allowed beyond that even 26% because exchanges are very neutral entities. So this can be allowed more than 26% non member, but a neutral entity from the market. They can be allowed to 26% and maybe those who are participating on the exchange as a member, they can be allowed to maybe say 5% or maybe they are also promoters, then we can have a different level. So we are just analyzing different scenarios and we will be finalizing our comments and share with the regulator. Diluting at this stage, would it not be so Sorry to interrupt you. This is the operator. May we request that you return to the question in queue for follow-up. This is just a corollary and then I get back in the queue. So diluting at this stage, would it not lead to a lesser realization for the dilution in the gas exchange? Thanks. No, one is that we are making our own comments that our suggestions would be not limited to 26% for the exchange rate. So that is 1. And if they do it, then they can allow some time for coming to 26%. So still there is a final regulation to come out. So we don't see this as a final thing. So let us give comments and see that what is final decision of the NGRP. Thank you. Thank you. Thank you. The next question is from the line of Barnish Sreekumar from Spark Capital. Please go ahead. Good afternoon, sir. So my first question is on these forward potential that you just spoke about, about the peak Mr. Shri Kumar, sorry to interrupt you. Please use the handset mode. Yes. Is it better now? Yes. Yes. So what I want to find out is the potential 20,000,000,000 units in the forwards delivery based market that you spoke about. Right now, is it being traded in the bilateral market, if I'm not wrong? Yes. So this would be traded in the trading licensees and also it will be part of the direct bilateral contract between the DISCOMS, it will be part of that? Yes. So, so far all these transactions as I mentioned is being done through e platform. And some of these trading licensees are participating on behalf of distribution companies and IPPs. So they are representing both buy as well as sell in most of the occasions. But going forward, when we are going to launch this, it would be done on our longer duration contract platform, which would be extension of the TAM of the present TAM market. The present TAM market is about weekly contract, here we would have monthly contract, quarterly contract and annual contract also. And you rightly said the 20 view is the transactions that are happening today in the bilateral contracts, forward contracts. So when it is an extension of the current TAM market, so these trades would be on a continuous basis, not on a closed double sided collective basis? So it would not be on the closed double sided collective basis because that is more to do with spot and stay ahead and our team thing, it would be either continuous or there could be open auction sort of arguments, which will be there. We are also exploring option of introducing reverse auction for forward contracts. So for sure, it would not be a closed double sided auction. It won't be that. Because why I'm asking is it is in the double sided closed auction where the price discovery is better because of their liquidity. So in this case, do you still think the price would still be attractive? Yes. So what happens is double sided closed auction is used where the liquidity is very high, the number of participants are very high, right. But in case of longer duration contract, there would be 2, 3 buyers and 10, 12, 15 sellers. So if you adopt similar thing in those contracts, there would be many occasions where there would not be any price discovery at all, right. So this particular thing will not work. But open auction is something where you have option of divisor price, you can see other party bids as well. Those are the more efficient way of price discovery in this particular thing and those are also real efficient way, right. Similarly, the present system that is being followed by D platform, it is about reverse auction. So we are also exploring those things. So there would be combination of all these things and we would be using all of them. Sure. My second question is on the real time market and its impact on the current TAM market. So if I see the buybacks in the month of June July in the TAM market, of course, it is year on year down. In the same period, we have seen good response in the real time market. So is the real time market in any way impacting the DAM market? Yes. So right, you're saying TAM, TAM, right? TAM, DRH. Okay. So as you are aware, RTM is one market where trading happens just 1 hour in advance and the other market, the nearest market that we had earlier was intraday market, where trading used to happen, where trading still happen 2.5 hour in advance. So there is a definitive immediate impact on our intraday market. Our intraday market volume has gone down, 80%, 90% of that volume has been cannibalized into real time market. That is a very clear thing which has happened. But that similar thing we have not observed in dam. In fact, dam, we are not ruling out any cannibalization. Some cannibalization is there, because when you are trying to buy 100%, sometimes you feel that last 5% may not be required. So you since now you have more vibrant market, more liquid market, so you are shifting some of your quantum in the real time market. So 5% to 10% here and there, that 2 by very few states is what we have observed so far. So little early days to comment on that, but intraday market cannibalization is very evident. It has come out very clearly in last 2 months. That is for sure happening. Sure. Thank you. Thank you. Thank you. The next question is from the line of Apoorva Bahadur from Jefferies. Please go ahead. Hi, sir. Thank you so much for the opportunity. So I wanted to understand on this derivative side, have you decided on any margin structure for these contracts? Or is it too early to say? It's I would say too early. So those things are not yet finalized. Okay. Fine. So there are couple of bookkeeping questions, if you could just help us with the annual fee which was earned during the quarter and also the breakup between TAM and TAM volumes for the quarter? You're talking about annual fee, the client fee or transaction amount that The client fee. So client fee, there is no differentiation between DRAM and TAM. So if you are registered as a client, you are free to participate in any market, including RTI. I wanted to know the amount of REx fee earned during the quarter, total amount? Naveed, you can get the number. Naveed, do you have the number? Hello? Sorry, I was on mute. During this quarter, we had around INR 4.35 crores to us. INR 2.35 crores? Yes. INR 4.6. 4.3. 4.3. Okay, okay. Got it. And the volume break up between DAM and TAM? Yes. So TAM is normally very less in fact. So if I add all TAM volume put together, it is little it is about 1,000,000,000 unit. So less than 5% of our total volume. Okay. For the current total includes RTM as well, it's for 1 month? No. So when I'm talking about TAM, it is only day contingency daily and weekly, so which is about exactly 900,000,000 units that we have done in Q1. Since the month of June, when we introduced real time market, we did 550,000,000 units in 1 month itself, which is the RTM volume and then that they had volume, which you are aware. So put together, RTM sorry, TAM volume is less than 5% of the total volume. Okay. Got it, sir. So just one more question. Madhu, sorry to interrupt you. We request that you return to the question queue for follow-up questions. Thank you. The next question is from the line of Mardi Savan from Mirai Asset. Please go ahead. Thank you for taking the question. Just a couple of clarifications. First of all, on the NBAD market, any updates thereafter? And I would like to link it with market coupling question also. You mentioned that you do not see a risk to market because of market on the existing volumes or for IEI. So is it that market coupling in NBAD will come together and that should result into overall market expansion, volume expansion in the market? I think directionally, if you ask us, that's probably is the route which is probably going to get adopted. And if NBD comes and market costing comes with NBD, then you can see that the volumes on exchange will be just skyrocketing. Because the second direction would be couple all the volumes and then get them to the exchange to make sure you are doing the most efficient discovery and most efficient dispatch. So that's the way it can be the most effective route. But like I said, I think what the ministry is doing and what we are also helping with is to make sure that we understand what is the best route for India, what is the best way in which you can make this happen, which country has done what kind of a mechanism and what have been the gains and the losses thereof. So the gives and gets, the updates, all of this is being done right now. And on the basis of which they would come out with the most efficient side of the mechanism. But whichever way you come out with the mechanism, you would find that the provision inherently supports a huge growth for this sort of a business model, which is the Exchange 7 business model. So coupling for just doing 4% of the trade, which is happening in pretty much all through us, coupling that has got little relevance because that is already coupled. All the things that is happening right now through the exchanges is in a way already coupled because all of it almost all of it happens exclusively to us. So that's not the reason for coupling. You would streamline the whole operations, you would launch new products, you would make the whole system far more robust. And then if Emile comes on top of that, then you get to a volume which is unprecedented. So I think that would be the way in which the Medici would want to take the go forward plan, which is what I mentioned to you that there is a lot of work going on in defining the controls of that. Got it. And the second question was on the short term market or the LDC market to be emphasized. So we are targeting currently 20 BU market, which is more currently addressed by the bilateral phase. So what is the kind of growth that you would have witnessed in the bilateral space over the last 5 years? And will we anticipate a significantly higher growth on the bilateral side or bilateral on the exchange at all because exchange was not doing bilateral. We weren't allowed to do bilateral. We didn't have a product. LDC is a product which will allow us to do bilateral now. I'm talking about the overall bilateral market over last 5 years, not on the exchanges. Yes. Maybe, Rohit, you might have to ask this. But I can only let you know, Bharti, one thing that with so many products which are coming in now, and like I mentioned in my opening comments that there is a product of DAN and TAM and long division contracts and then there is green market and there is RTM and there is gantry markets coming in. There's a huge range of product which is coming in. Now to take the past as a reference for these future growth of these markets, maybe a starting point, but may not be the real sort of it doesn't give you enough analytics there to get you that because over time, every buyer would want to play in the whole basket to figure out what is the most optimum, most optimized procurement program for themselves. Each one of them will do that. So that would be the way in which the whole buying patterns will evolve across the market with each this one, not only one, because right now we are also seeing the same thing happen. The moment TAM or RTM has been launched, you are seeing people making trade off choices between TAM, TAM and RTM, which is what is happening. And so they'll come to optimize model, procurement model. And same thing will happen with many, many more. Assuming and think of it as 3, 4 more products that they've launched, people will start to figure out what is the best procurement optimized, most optimized procurement. So that's a way it will happen, but let me let me go ahead and go to Rohit to answer the first part of the question. Yes, Rajiv. I'll just add just two points. So we all these markets are required, right? So there are for the delivery of energy in one particular 15 minute time block, the trading happens in various time frames. So there is a requirement of real time market to balance your buy and sell, pluses and shortages. This is the requirement of day ahead market to do forecasting on day head basis and then procure. Similarly, LDC is serving different purpose, which is more of a seasonal deficit. So we know that there is a different seasons and across these seasons because of the diversity that we have in the country, somewhere demand is high and they do not have 100% long term arrangement for that. So every such transition will have its own place and to your larger portion of how this market is evolving or how it has fared in last 5 years, so growth of longer duration contracts have been lower than exchange. So within the short term market, exchange is the one who has been growing at the fastest pace. After that, we had the short term bilateral contracts and third one is deviation, which is shrinking. So that way it is not growing that fast, but we foresee that in the times to come there would be requirement of longer duration contract and it will stay. The growth may be little less, but requirement will definitely be there. Hope I answered your question. Yes, that was helpful. Just one Ms. Sawant, this is the operator. May we request that you return to the question queue for follow-up questions? Okay. I just had one clarification on the IGX one. Can I just chip in? Please go ahead. Just wanted to check as per the current draft on the power on the gas regulation, no party is allowed to hold more than 15% right? Hello? Yes, yes, exactly. So current app says that you can't hold anyone no one can hold more than 50%, right? But when we said that we will be looking to hold more than a supporting stake, we are in discussions with the gas regulator to change as in on the holding front. Otherwise, if that's set up to the existing draft gets approved, then we cannot hold more than 15% to 10% every transaction if the existing draft data pool. You are very right. Actually, I told earlier also that we are very much in contact with the regulator. So we will make our final comment. Before that also, we will appraise our comment to them. So we are in touch with that. Okay. Thank you. The next question is from the line of Abhishek Puri from Axos Capital Limited. Please go ahead. Yes, thank you. So just quickly, Rajiv, dwelling on your previous comments on the size of the coupling thing, which is already existing in the market. How do you protect yourself now given that some of the feedback that we received, they did mention that price discovery has been even that liquidity is entirely with IEX in especially in the DAM and RTM market. So can the other players now enter if the uniform pricing mechanism comes in going forward? So that is question number 1. And secondly, on the transaction margins, again, the draft regulations speak about separating the 3 functions and which is price coupling operator, the exchanges and then clearing and settlement mechanism. So these three functions are being separated out. So can we still continue to defend the 2 pesa margin and the other functions will get higher like the European Exchange has? Just wanted to check your thoughts on the same. So, I think and let me take the second question first and then I'll come to the first one. On the separation of the clearing settlement and functions from the exchange function, we would think that look, first of all, it's a common practice. It's done that way across many exchanges in India as well as globally. And there the unbundling will be linked to facilitating this sort of a growth. And from an IDX perspective, we clearly see this as a very strong, great business opportunity. We run a most perfect clearing the settlement process right now. It works flawlessly. If we were to separate it out as a 100% own subsidy of IEX, you could easily do that. It's just the functional separation. And then what it does, Abhishek is and that's a great point. What it does is it allows you to do many other things with the clearing and settlement function, including the OTC for which there is a provision, which is coming in the PMR that allows you to explore pretty much other potential business opportunities to set up a clearing and settlement function for anybody else who is setting up an exchange. And there will be many such opportunities possible because the commodity paid business in India is at an early stage and it is only going to grow. So I think we see that as a tremendous opportunity for IEX to step up and capitalize on such a brilliant provision that the regulator is trying to think of and create. So we see that as like I said, an absolute deposit. On the market coupling front, now the reason I said that it is a coupled market right now is just because we are such an overwhelming market share. So the electricity market is currently 4%. We are pretty much all of it, give or take the percentage point in and there. So your objective of complaint in terms of getting a higher level of getting a uniformity of price doesn't make sense because you can't get more uniform than that or your element of getting the any more virtual maximization done. Again, it's all of it. So you're making a complete social welfare maximization that you can get in this. Going forward, if there were if the design and where we are trying to work on the design, the design allows a huge amount of volume to be flushed through the exchanges, which is what the overall design on the if you read the underlying current within the PMRs and the fact that over time there would be a top of them. But as well, if you get all that rev, then there is bound free of primitive increase, a primitive regulation in the volume that have to flow through this mechanism of trade through this business model. And in that sense, there will be more exchanges. There should be more exchanges. There should be more places because you are wanting more efficiency to come in into the whole system. Then you are wanting people to go around and do much more work at a business development level, sell more different kinds of products, even though innovation might be a compromise thing, but you sell more different kinds of products, you go and sell on the fundamental element of your user experience and all of that. So there's a ton of innovation which is possible in this whole thing and there will be a huge amount of growth like I said which is being in massage and in which case it is a tremendous benefit for all across, for everyone all across in the new model which is set up. But like I said, I think there's a huge amount of work to be done to drop those guys, drop the team and come up with the most right sort of a business model framework which will really deliver for a company like India. There are no models like that across the world right now where price cupping has been done. I'm willing to comment the different thing. Price company is a completely different thing. So I think there's no we have to make sure that we are able to get the best possible market. Thanks a lot and all the best. Yes. Thanks. Thanks so much. Thank you. Ladies and gentlemen, due to time constraint, we'll take that as a last question. I would now like to hand the conference over to the management for closing comments. Okay. Look, thanks so much. I think very engaging conference, very engaging set of questions. We send the excitement of a lot of people on the way on 3 things clearly on the way that the weather has been future in forward, some other will come up, little ambitions are coming in. The second thing is on the way the gas exchange is going to evolve, bonus capacity there. We have Caesar that and we know exactly what to do to make sure that we stay in command and control. And then the third piece is about the way in relation with Humana is coming up as a precursor to really huge amount of growth that we can foresee in the market now for this sort of a business model, which is really efficient business prospects, which allows so much more money to be retained by the discounts for themselves than spending money on costly and conventional and costly power. So I think across all of these and there were other other questions too on our company each other in, but I think all of them are very, very engaging questions later on call and I hope you got the answer we wanted to hear. And I hope if you have any further questions, please reach out to us. We'll make sure that we do every single thing answered and any questions taken care of and any query of yours interest very well. But thanks so much for joining us today and stay healthy, stay safe and have a good time. Thank you. On behalf of AXIS Capital Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines. Thank you. Thank you. Thank you.