Earnings Call: Q3 2020

Feb 3, 2020

Quarterly report

Ladies and gentlemen, good day, and welcome to the Indian Energy Exchange Q3 FY 'twenty Earnings Conference Call hosted by Axis Capital Limited. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Mr. Abhishek Puri from AXIS Capital. Thank you, and over to you. Yes. Thank you, Stephen. Good afternoon, ladies and gentlemen. On behalf of Access Capital, I am pleased to welcome you all for the Indian Energy Exchange Q3 9 month FY 2020 earnings conference call. So today, we have with us the drop management team represented by Mr. Rajiv Srivastava, Managing Director and Chief Executive Officer Mr. Vineeth Haldalka, the Chief Financial Officer of the company. The call will be initiated with a brief management overview and discussion of the earnings performance, followed by an interactive Q and A session. So overview, Rajiv. All right. Thanks so much. And good afternoon, everyone. Let me welcome you to the earnings call for Q3 2020. I've got with me right now Rajesh Mejita, who leads our strategy function, manager director of the company Vineeth Alarka, who is our CFO we got Rohit Bajaj who leads our business efforts, we got Shruti who leads our MACOM and Investor Relations, we got Aparna who leads the Investor Relations and Sangh Gautam, who is our CTO. Let me do this. Let me just take you through a brief economic industry update of financial performance and then open it up for interaction for everyone. I'm going to begin by just reinforcing the fundamental unique proposition of Indian Energy Exchange, which is to bring 24 cross 7 electricity to India, to every consumer across the length and breadth of the country in a most competitive, transparent, flexible, reliable, user friendly manner. And iX continues to be committed to the pursuit of transforming India's energy landscape by bringing in competition, by bringing availability, improving in availability and accessibility and efficiency just by leveraging technology and markets across at the 2 key dimensions. And I'm happy to share that I have stayed on course in this pursuit in Q3 fiscal 2020. The average market clearing price discovered in Q3 2020 at INR2.83 was 34% below the prices in the same period last year. And that's a huge, huge, huge reduction in the market cutting price, making the market increasingly competitive as attractive for buyers. Our clients are buyers, whether these are in the distribution companies or these are open access consumers all across all kinds of buyers. We will also give you a brief update on the sector per se. And it is our belief that the energy sector is up for significant transformation. It is estimated that the per capita consumption of electricity will increase from a current of 1181 units to almost 16, 20 units in the next 5 years. Now this is a huge 40% growth over the next 5 years. And to support this, the government has made an investment commitment of L11.75 crores to the power sector. And this is where the overall vision to boost the infrastructure expense by 100 lakh crores by 2025. Now this investment will go to increase the power sector installed capacity from a current of 3 20 odd gigawatts to 6 20 gigawatts automatic side just to make sure that the demand increase is supported. Then there have been in the budget that got announced yesterday, there have been some nice good provisions for the power sector. And one very critical one is the distribution reforms, which mentioned that they want to replace conventional energy meters by prepaid spot meters over the next 3 years. Now that's a very significant measure because this allows consumers to really choose the provider that they wish to go with. And third, it brings in transparency, it brings in efficiency, operational discipline and fiscal discipline as well. So this is a very important efficiency measure for the etcetera as a whole. But also in the budget, there have been also other announcements around our commitment to green energy, our commitment to shifting energy mix to make it more sustainable. And we'll talk about those as well as we go forward. But there's also been further amendments in the national tariff policy through the constitution of a high level group of ministers led by the Home Minister, which should ultimately pave the way towards rationalization of power tariffs and bring benefit to the industry as a whole. By rationalizing the power tariffs, the economy and consumers and customers and C and I, everybody will get benefited broadly. At just to the broad economic and industry level, India's economic growth in Q3 'twenty was and you guys are well aware, well across this, was subdued. The GDP for FY 'twenty is expected to be in the range of 5 percentage points. ISP continued to shrink in October and fell to negative 4%, and it did rebound in November to a +.1.8 y o y. The core sector was negative in October but recovered to a 1.3% -ish points in December after remaining negative in last 4 previous months prior to December. Now there's been a high emphasis on the arrival of the economy with initiation of reforms and stimulate measures like how do you rationalize the taxation, corporate taxation structure and other policy measures in various sectors over time, hopefully, all of this will see acceleration to the growth of the country, both GDP and the core sectors growing faster. Quarter 3 for the fiscal 2020 was a bit of mixed developments on the electricity front. The energy demand for the sector as a whole across the quarter declined 6.2 points. Now this was most severe in the initial one, which is October. October was a decline of 13 percentage points, which is very unprecedented in the legacy sector. It was the highest decline in 12 years. It recovered a bit in November. November registered a 4 point decline and December was even better, just a negative 0.4% decline. So I think over the course of the quarter, we saw the electricity consumption going up and becoming better. But one good thing happened in the month of December. The peak energy electricity demand went up by 4.8 percentage points. Now this is significant and in part contributed to a 50 points of growth in electricity trade volumes on the exchange in the month of December alone. And just so you know, that momentum has sustained in the month of January as well. So we'll see a recovery in the consumption of partners across the country and across sectors in the month of January. Just from an installed capacity perspective, during the quarter, the total installed capacity increased 6 percentage points to reach 3 69 gigawatts. Now in line with and you guys are familiar with the fact that India has a huge commitment to the Paris Climate Control Agreement to ensure we are progressively shifting towards a much more cleaner, greener energy. And so in line with commitment to that agreement, our renewable energy capacity increased 16 percentage points and it went up from 74 to 80 3 kilos within the year. And so I think we are moving in the right direction as our commitment towards the most sustainable ecosystem. During the quarter, Ministry of Power also finalized the methodology of allocation of coal for the sale of power in the short term market in power exchange. The proposed methodology will enable core linkages to power plants not having PPAs. So guys don't the industry or the generation units that don't have a PPA will now be able to get coal under this methodology and lead to further available increase in generation, which leads to then availability of more liquidity on the exchange and therefore leads to a hard stabilization or a decline in the prices. I think all of it in a way has been extremely positive. Let me just move and give you a sense of financial and business performance. And on a standalone basis, our revenue for the quarter, you've seen the way the electricity was such a huge drop. On a Sandoz business, we saw that our profit after tax was almost flat at INR42.3 crores year on year with a revenue drop of 9.8 percentage points. The TAC margin was up at 61%. The EBITDA was at 83%, the PAC margin was up at 61% and the PAC margin went up from 56% at the same time last year, reflecting a very, very strong discipline in the way we are managing our operating expenses known fully as the sales industry. Now starting Q3, you would also know that we have started to consolidate our results of our wholly owned subsidiary, the Indian Gas Exchange. And the overall consolidated revenue for the quarter was down 9.7 percentage points to INR 69.4 crores in Q3. And our EBITDA decreased to 56.7 crores and this margin, EBITDA margin stays within the consolidated balance sheet. The EBITDA margin stays at 8% to 2 percentage points and that is at 41.7%, which is a 2.2 percentage points drop because of the consolidation, but the PAC margin stays at 60 points versus statistics of last year. Let me focus on the business performance. Similar to the trends in the overall power demand in the industry in the country, business performance during the quarter also is across those 3 months. And the first two months, like I said, were extremely down from our overall consumption pattern. And we also saw a reduction in the electricity purchase accretive on the machine in the month of October. And it went down hugely to a negative 42% in the month of October loan. But when the demand started to recover in the month of November, we saw a 6 points growth in November. And December, like I said, was a 53 points growth in December. So that's so much from a day end market business perspective. The company continued to report robust term ahead market performance. The volumes increased 48 percentage once during the quarter, led by an increase in daily contracts initiated by some states. Southern states were more active than the others in the TAM business. Now R and C volumes continue to be impacted because of lack of inventory on the sell side. And we did 11.28 annuals in Q3 versus 1197 annual in Q3. So this is just a small decline. But overall decline in prices by 31% procurement of power by commercial and industrial consumers, that has increased significantly. And we've seen that in the open access consumers, that part of the business has seen a very strong growth of 64%. Now that's significant and that plays to the fundamental value proposition of the exchange that lower the prices, it finds far more number of buyers across the country in the commercial indexes segment. And also I just wanted to take a moment to update you that some of our new product launches are on the annual. We continue to progress and get close launching cross border, long duration contracts, wait time products. And then what we've done is we've strengthened our sort of sales coverage around for these products in anticipation of these products. And our sales team continue to reach out to customers across the country, very, very positive sentiment from multiple market participants and stakeholders about the new product launches and the new schemes that we're trying to come up with. Let me also give you a bit of a way forward. And you would understand that we comparatively discovered prices on our platform. They continue to be attractive to both distribution utilities as well as open access consumers. Now that is the single biggest gain that has happened over the last couple of quarters that the prices continue to be stable and extremely, extremely attractive to all kinds of consumers. With prices remaining low during the fiscal year because of ample liquidity on the sell side and increased electricity demand, volumes on IH should continue to increase just the way we've seen a rebound, like I said, in the month of December January 2020. Also, our proactive efforts and collaborative work with our stakeholders and alliance partners, marketing, capacity building initiatives, hopefully, will lead to our volume growth. We continue to very strongly pursue tech based innovations. So we have made a very, very strong commitment to revamping the technology and making sure that whatever we do has got a very, very strong foundational technology backbone to it so that we can make sure that our user experience to our consumers, customers, discounts and open ads to consumers continues to be really the best in class through robust practices and processes. Now that in a nutshell is all that I wanted to communicate. Given your story on the way you see the industry moving, some of the government initiatives that are happening right now and the way in which the power sector has been transforming and the way our volumes have moved and our business performance has been moving. So let me stop here and open it up for any questions that are there on your mind and we'll be happy to take them. Thank you very much. We will now begin the question and answer session. 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. So my first question I have is regarding the launch of new products. The I believe that we are supposed to launch 3 products. 1 is RTM, second is cross border and third is long term duration. Is it possible for you to share the launch, the time when you're supposed to launch the 3 new products? Yes. I can give you a more definitive answer for 1 of the 3. And that one is RTM, the real time market product should begin trading from 1st April onwards. The radiology body, which is CRC, along with POSSOCO will go in for testing of or trial run of that calendar month of Feb March and so to be ready for launch on 1st April. So I think that's an absolutely definitive one. The other 2, you're familiar with the case that is not on the long vision contract. That hearing, final hearing of that case is on 2nd March and we hope to get a clearance by then so that we can start trading immediately after that, get into the business immediately after that. And the third one is gross motor. We are almost we are in my opinion, my personal opinion, we are in the final year, last leg of that to get the regulations out and so that even should see the light of the day very, very soon. If you recall in my last call, I mentioned that by end of Q1 or Q kind of Q1, the sale is Q4 fiscal Q4. We should be in a position to see through all of these, and that's where it stands right now. So a clarification on long term duration contracts. You had mentioned in one of the calls that the we were supposed to withdraw petition and that means the chapter would have been closed. But now you're saying the case is still ongoing? That's a misnomer. The petition withdrawal is going to happen on the petition withdrawal because it has to be withdrawn from the Supreme Court. So technically, it's a legal filing of the case, and that has to be withdrawn on 2nd March. That hearing has now been fixed for 2nd March. Understood, sir. And secondly, on gas, is it has something happened on the gas trading side? Is there something which you can throw some light? Yes. Look, I can't share with you the last launch date. That's still under wraps. No, I'm just seeing a broader environment is something incremental which happened during the quarter? Yes, yes. Look, so you would have seen that we have consolidated the gas functioning into our gas financials into our balance sheet for the quarter. So obviously, we've made some expenses. We've made some investments. These are investments, early in our business and technology and people and office space and some of the administrative things like setting up the company and all that. So we are bringing ourselves up to launch GAP as soon as you can. Last question, sir, how do you see the REC volume panning out in FY 'twenty one, given the fact that the inventory is quite weak? Let me go ahead. You want to take that? Yes. So inventory, rightly said, it's not there and hence volume is also down this time. In fact, every quarter we are seeing lower numbers. But good news here is we are expecting some new issuance in the months to come. Some of the distribution companies, some of the state utilities, they have some surpluses that can get issued. That is one thing. And it is down in volume terms, but our revenue in revenue terms, it is not so much down because our realization has increased the incentives which we used to give earlier that we have withdrawn. So yes, it will continue to be under pressure as far as volume compression, but we are expecting a little bit improvement in the volume in the coming few months. And then my question, borrower question is that are we do we expect a decline in volume in FY 'twenty, one over FY 'twenty? Or do you see we can witness or do you think it will be flat y o y? So going forward, in FY 'twenty, it can be little better because with more renewable capacity with the state distribution companies, the issuance will increase. So one is the projects which are registered under REC mechanism, they are getting their eligible entities, they are getting this REC. And the other OceanMed state unit who are meeting their IPO and going surplus, they are also excited to get this out. So on the second front, we are expecting more issuance and we hope that inventories should improve going forward in FY 'twenty one. Okay. Understood. Thank you. Thank you. The next question is from the line of Ankush Agrawal from Stylian Asset. Please go ahead. Thank you for taking my question, sir. Just two questions. Firstly, once the real time market starts, how do you think the current pull out of winter day market that would like increase value to the real time market? If so, like how it would be different from the real time market? And secondly, in case of if I see we have more than 99% of market share in case of a bear market. But if I see the termite market, our share compared to PXEL is around 60%. So why is there such a difference in ComEd market share and trade market share? No. Yes. So your first question is, is the real time our real time market is different from intraday or some chip or what will happen to the volume? So intraday is today done about 3 hours in advance. So when you have you should have minimum 3 hours window, then only if you buy it now, after 3 hours delivery will start. The real time is going to be more closer to the real time, this will happen just 1 hour in advance and trading will be done for every 3 lakhs between such 2 time block. And another big difference here is, our real time market will operate on the principle of collective connections, which is double negative growth options. Now this is exactly same as what we are doing for our daily market. Intraday, it is more of a matching. It's a matching concept where you can place your best bid and then the matching is done on the multiple lines. So, this house is going to be different. Now the second question is in the TAM side, our share is about 65% today. It is little excess of 65% today. Just as higher as it is in the face of bad market, Here it is more of a 1 to 1 transactions, 1 to 2 transactions. So they are also active there and both the participants are trying their best. We are maintaining the action here as well, but it is not as high as in case of the end market. So I think the proposal here is that the way the day head market works, that really plays to the efficiency of the whole trading platform, right? Because when it's the exchange, the exchange survives from discovery on a multilateral basis and then discovery is on a multilateral basis, whereas demand survives on 1 to 1. So the whole element, aspect of exchange fundamentals really plays out the technology aspect, the way in which transactions come, the way the liquidity is available on the exchange And the way the prices are optimized, that works in the day in the market. And that's the reason why you'll find that world over, the TAM market is really the market is really everything is kind of aligned to. The dam, the reason is important is to us, it is a higher price market and hence they will be obviously out of share from the dam perspective. Otherwise, machine fundamentals play out in the TAM market in the year. Yes. So is it okay to assume that once the long term contracts are in place, so the market share would be similar to that like of TAM and not DAM? Tough one to answer because it will you'll have to figure out what discovery mechanisms or how will you continue to discover prices, what kind of sales outage you will build. I can only tell you one thing. We are extremely, extremely, extremely conscious of that and making sure that our engine continues to improve and get more optimized. Our sales outreach continues to become stronger all the time. And so that's what we want to play. So I think we would love to believe that we will continue to deliver a convenient All right. All right. I'll get back in the queue for further questions. Thank you. Thank you. The next question is from the line of Ravi Naredi from Naredi Investments. Please go ahead. Sir, is there income down too much? Any specific reason in this quarter? This is Nishilokan. If you look into the YTV business for the 9 months, the treasury income might improve significantly. The 2 critical factors that impacted this quarter, one was that if you recall the previous year, the first two quarters were not good for the treasury. And these two quarters for the Q1 and Q2 were quite good. And secondly, because of some interest and concerns, there was some hardening of the yield happening in December. So these were some uncertain impact was there, but not very significant if you look on the YT number. Okay. And sir, how was the business in January 2020? On the treasury side? On the overall No, no. This With electricity is betting right. It has been very nice. Like I said, I think electricity trading in the month of January is almost a 45%, close to 50%, 50 plus percentage points growth year on year. 50% of growth. And sir, how many exchanges allow electricity paid in India other than us? Look, you can set up as many as you want, but right now, there are just 2. Okay. And MCS also planning to come, is it? I mean, I have no idea. Maybe you guys might be very informed, are they? Okay. Okay. Thank you. Thank you. The next question is from the line of Abhishek Puri from Axis Capital Limited. Please go ahead. Yes. Thank you. Just wanted to confirm one small data point on the grid code regulations which came in after the intraday norms are approved by CRC. When I'm looking at one of the provisions, it says that the allocation of transmission corridor between the power exchanges for real time transactions will be in the ratio of their shares in the dam market. Would that mean that you will get the lion's share even in the intraday market? B. Balaji:] Yes. For real time market, this is the provision, and we look at a line share for the transition capacity. So we can expect the market shares to remain similar to DAN in intraday as well, right? Exactly. Yes. The ASEAN because the model of price discovery is also same, so liquidity will play important role in RTM market. And second is just capacity, transmission capacity allocation is in favor of those who are already having higher share in the those market. Right. Okay. My second question is on competition. So I think PXIL has launched similar platforms. I still don't see any volumes going to them at this point in time. So any comments on that side? Look, Abhishek, I think one thing is good that they have launched this. And you've heard me talk about our views on competition in every single call over the last three quarters since I've been here that we really need more competition in our space because more competition allows companies to work to develop the market, which is always going to be healthy for all of us. So I really want KPILE to ramp up and whoever else wants to should ramp up and get there. So that's one thing. The other thing which the and to your point whether they're getting more volumes or not, I think that really depends upon a couple of other things. 1, on the fundamental design of the whole engine and the mechanism of trading is helpful, the user experience that customers get out of us versus anybody else, the manner in which our teams are engaged with the customers across the country, the familiarity, the way in which we trade. And we do an end to end settlement. So there are goodness to our old end to end sort of mechanism right now, which is helping. And I really wish and the fact that PSL is launching it, it tells us one very, very good thing that they see the market from a very buoyant perspective, just as we really believe it is over the course of next couple of years. So in that one market, more people coming in, it's an absolutely great thing to happen. But like I said, you have to play to the fundamentals of this change. Thank you. The next question is from the line of Gipen Mehta from Alexia Equities. Please go ahead. Yes, sir. So I just want to understand what exactly has gone wrong in this quarter because on one hand, if you said electricity consumption is down by 6%, but then we are down 9% in terms of volume. And then in your press release, you have said that there are certain states which have got double digit growth. Then, Sampari, you have said that the industrial customers have got a 64% increase. So what exactly went wrong for us to have such a small performance on the volume side? Look, I think, first of all, I won't if you've been tracking us and you were tracking the electricity market per se, there is bound to be a very close sort of a relationship and almost disproportionate relationship between drop and recovery, both sides. When the electricity market hasn't recovered in the month of December and it's down about 0.4 points year on year, but the electricity peak demand goes up 4.8%, you see the exchange performing 51 points better. But when the electricity market is down 12 points in the month of October, that was a significant drop year on year because electricity in October 2018 was an all time high for electricity consumption. That month was a very, very high month. And this year in October, and you would have heard us say over the last call as well that in the month of October, a couple of things happened. 1, and across those 2 big types of customers that we got, we got in agricultural and we got commercial and industrial customers. The industrial activity in October was really down. You've seen the IFP numbers for month of October being extremely, extremely low. And the core sector per se, whether it is coal or fertilizers or refinery or electricity or steel, everybody was down in the month of October significantly. The other thing that happened in so the industrial activity was one part of the whole story. The other thing that happened in October was that we had a very serious change in the weather pattern. Climate activity in the month of October or monsoon activity in the month of October was very high and this year was a delayed withdrawal of the monsoon. So when we have a delayed withdrawal of the monsoon, then the agricultural consumers do not buy enough electricity. They generate and hydro is very active there. And so both are 2 most potential sectors segments, C and I as well as the agricultural customers had a much reduced dependence and much reduced requirement of electricity. Now you're seeing the recovery bounce back much faster in the month of December January. And that is also because hydro is no longer an option right now because it's gone down. And then the industrial activity happens to be coming back on track. The IIT is positive in December or it's positive in January now. And some of the core sectors are becoming much positive. And that's the reason you are seeing the electricity demand go up across specifically in the month of January, the electricity has gone up by 2.5 percentage points. So there are factors, some factors which are in the larger alignment with the economy, GDP and IRT, and some factors which are in the domain of the climate control or climate change that is happening. Now the way we're trying to buffer ourselves is on 2 fronts here. One is clearly, there's a meta strategy question if somebody has you might have a question as to what are the exchange doing. One thing we're doing is we are planning ourselves out to more customers and more consumers to make sure that whenever there is a demand and we are there to fulfill that demand. That's something that is important. And the fact that there is liquidity on the exchange allows for the prices to be lower. The government has announced 2 other things. 1, all plants that are beyond the emission control norms will have to shut will have to be phased out and shut down. So that will require more electricity provided through some resources and that demand gets filtered through the exchange. And the second thing that has also happened is the bringing of coal to merchant power plants, which are not linked to PPAs. Now that utility also comes to the exchange. So when the liquidity comes on the exchange, you will find that the price on the exchange will continue to be lower. And that attracts that appeals to the open access consumers across the country. So one activity is very clearly go across to as many distribution companies and as many open access consumers who are sales efforts and convert those customers for buying on the issue. That's one thing. The second thing which is our effort again is making sure that the new products that we are launching, some of them you heard earlier, cross border or real night market or long duration contract, those ones should get launched. But also we are tweaking new products and we are engaging with our distribution customers and to our open axle customers to customize products from their requirement perspective. And those are the products that if you go to our website, you will find that we've launched a couple of products very recently. So we are expanding our portfolio. Expansion of portfolio allows us to serve the same customers in a deeper way and allows us to find new customers. So those are the 2 things that we're doing. So it's the longest thing. It's a very inventory per se is subject to a huge shift in vagaries. And that's what had happened over the course of the last quarter. That's the reason I said Q3 fiscal Q3 of Canada Q4 was a tale of 3 different months for us. Okay. And one quick question, I think you already answered. The other expenses have come up for what reason? I did not get it. Quarter over quarter, R827 to R473. It came down significantly because of the 2 questions. First of all, there are a lot of expenses we've earned during the last year for the depreciation of the debt exchange and we're looking to have an annualized payment, right, the calibration, 10 year calibration. So not a one time expenditure was there. And as Rajiv has said, because of the low volume, we had also been control on our expenses. That was also one factor we reduced on the cost side. Okay. Thank you. Yes. And last Thursday, we signed with last year, which we haven't repeated now because those are one time accelerates. Okay. All the best and thank you very much. Thank you. Next question is from the line of Shri Kartik from Investec. Please go ahead. Hi, sir. A few questions from my end. One is, what is the current proportion of open access on your buy side? What is the market share of open access within that? And what is the limiting factor that you see for this to actually continuously increase? Okay. The open access right now is 38% in our overall mix, okay? It has gone out. If you see last year, it was 22%. It has gone up to about 38% right now. And the open asset is the one which has grown significantly. It grew 64 percentage points in Q3 versus the same period last year. So I think that's our open asset is a good story. The reason why our belief is, and here it is, here's a question that or here's a proposition that I think we've been taking very strongly to the government is open access allows customers across industries which are more than 1 megawatt of installed capacity to buy cheaper power from the exchange. Now that's a great thing because it allows their input costs to reduce. But what has happened is that if you're following the sector, what has happened is across states, a lot of states do impose conditional access charges and some other subsidies, cost subsidies on open access consumers for and that deter them from buying. That makes the whole value proposition uncompetitive. The reason consumers open access despite all of those charges, spiked in Q4 was because the prices are very stable and low. And as long as we continue to see such kind of prices on the machine, you'll find that the open access consumers will continue to find favor for the exchange. The good thing is a lot of our engagement with the Ministry and with the Minister of Power and the Regulatory Authorities suggest that we are focused on this problem. We are focused on making sure that industry becomes competitive. And one of the factors which leads to the industry becoming competitive is production of open access cost subsidies so that they become the power becomes cheaper, which is, again, in a way, going to be really, really helpful for the exchange. In a way, what you're suggesting is the conflict of interest from an SCB perspective to actually lose their most profitable customer is probably the limiting aspect even now. Yes. What you're saying is the way it is understood right now. But let me give you a proposition. What happens is, assuming Empower is about 20 points of input cost you need product manufacturer there, okay? It is more in cases of some industries like a metals industry, it is more. It is less in case of solar industries which are knowledge of service industries, right? But on an average, it's about in that range of 15 plus miles Airbus, right? Now assuming the power cost can be reduced by 30 percentage points or 20 percentage points at least, okay, What they pay versus what they pay today versus full removal of open access of mail, what they can pay. Now in this manner, about 4 percentage points of their the combination of input cost of power the consumption of power per se can add about 4 percentage points to the bottom line, if you do the math right, okay? Now that 4 percentage points really adds at least at a 25 percentage of corporate tax, it adds 1% is the bottom line to the corporate tax. And that's like a wonderful proposition. So if and that's how we are trying to oppose this topic that there are different ways. And I think the country has to step up to find very different solutions to the whole DISCOM business problem. And this is, to our opinion, is one of the more brilliant solutions that the industry can go to, that we can get. In this case, everybody cares there's not a single loser because one percentage point you add to the bottom line and you use that for corporate asset, which is equal to much more than the discount business that the industry is carrying today. And the balance sheet point that you gain on the 4 points there in the bottom line, the use of capacity expansion, use of job creation, every single problem that we are going through and trying to solve for today. So there are various ways in which we can solve for this. That's the reason I said, at one level, your question is a safe operation, but the solutions are unique and different. And I think all of us need to step up and find those unique solutions, make sure those unique solutions find favor with the power of the year. Sure, sir. And at this stage, this is yes, sorry to interrupt, sir, but for any follow-up request, would you rejoin the queue, please? All right. Thank you. The next question is from the line of Dhruv Munchal from HDFC. Please go ahead. Hi, sir. Thanks. The 38% for open access mentioned, is this for 3Q or for the 9 months? Q3. And can you share a similar number for Jan if you have? Have? For 9 months, it's? 30. Okay. And just to understand the longer duration And just to understand the longer duration contract which we will have, will the design be similar to the TAM contract? I mean not similar to the BHED and 1 to 1 matching kind of contract? Or it will be similar to Baid Design? Yes. So what happens is in little longer duration contract, you cannot have a matching. In fact, if you see our weekly contract that we have today, there also it is a closed open auction, which happens. So we are looking at it from every direction. In fact, we are thinking of RSQ basis contract also, which would be in similar lines to the tender that is there today. We are also working towards creating standardized contract, which would be similar to our weekly contract. So in none of the cases, it would be matching, it would be auction or it could be reverse auction or it could be open auction, both ways it will be done. Okay. Just two small quick questions. One is on the TAM market. We don't see any industrial consumers coming there on the TAM market in the weekly markets. Given the prices are so low and you freeze enough price for 10 days at least, the people are buying in the dead market, why don't they come in the TAM market? Is there some issue there? So normally if you see TAM market prices are higher than direct market. That's a given thing. So whether it is a weekly deposit, weekly trade or it is a daily trade, normally the prices are on the high side. 2nd is, we have seen some participation of open access consumer in the past. All those consumers who are availing 100% open access, which means that they do not have a fallback option of distribution companies, they are coming in participating in the time market. So if the consumer is awaiting partial open access, which means that whenever there is increase in demand, he is eligible to buy from distribution company, They are not participating here. Okay. So can you indicate how the prices are in the term market? I mean versus the DAN market, say DAN is around INR 3, what would be the TAM market? There would be some premium. So if you are going for weekly trade, people will take of the head market and then there would be some 10, 15 countries that's a premium over that in the weekly market. Similarly, in heavy also, again, they would command some premium of depending on the day of delivery, whether it's a weekday or weekend. Considering also sectors, normally there is something there, for like this market. Okay, got it. And just last question. Mr. Mojan? Sure. Sorry, can you talk? Thank you. The next question is from the line of Pawan Kumar from Ratanathria Capital. Please go ahead. So first of all, on the volume, since we did a BGO of 9% this year. But on a normalized level, what are the kind of volume growth or what is the kind of momentum we are expecting going forward in the next year? And what has medium done? I think this year, this year, where we are you're right. I mean Q3 was a 9% drop on the volumes. And they have picked up in December. They've picked up in Jan. So hopefully, in the month in these couple of months, which we have left for the rest of the year, we'll continue to see a similar momentum as we are right now. The next year is and we are going to be calibrating our next year very soon. And let me explain to you why I say this because of the so many of the new contracts that we are trying to launch now, which can have a very significant impact on either side. So that's a new market that we are trying to create. We are in the process of assessing the sizing there and our capability to how much of capture that we can do. And that's the reason we are a little katy in trying to tell you right now about how much the next year can look like. So give us a couple of weeks, and we'll let you know what our next year plans look like. But those are the new products which are already ready. We are extremely enthused and encouraged by the fact that, that will open up new markets for us. How much is coming that is being calibrated? And we'll let you know. And this particular anti testing is because of the new products that you are going to be launching? That's right. I mean because we are sizing it up and we are sizing it up across the country in every DISCOM, it's a very complicated site. And so we are sizing up on business plan for next year, and we will get back to you shortly. Okay. And on last month volume and this month January volume pickup, is there I mean, what has changed since October, November and the 2 months? And how sustainable is it? [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] I think, look, there are like I said, a couple of things changed clearly. One linked to the climate, like I said, the hydro generation has gone down very clearly. 2nd, the fact that the liquidity on the exchange is better because coal allocation is better. The prices of coal have gone down, both domestic as well as imported. When the coal prices go down, which is the input price has gone down, the output electricity cost is lower. And whenever there is a cost that is lower, then the exchange is the 1st beneficiary because then people can see the discount price of the exchange being too low and all the open assets as well as DISCOM can come and buy. And DISCOMS can literally replace their more costly generation generating stations through the cheaper power in the exchange. And you're seeing all of this that play out. The other thing which has happened is also that there is a pickup in the distill activity in December January. In January, we've seen some of the core sectors come back, like I said, fertilizer, refineries, steel, coal, all these 4 core IAP sectors have come back to a reasonable level of activity in the month of January. So one of them, the climate which is helping us and the prices of coal and the liquidity, the prices being low on the exchange that allows people to buy more on the exchange and the demand going up. So both of those are actually helping us, yes. And then I think peak demand, so how does peak demand actually affect you? And what has actually generated this particular higher speed demand that we were talking about that has actually got healthy in December? Look, the peak demand is a demand at a particular point in time, which is when you aggregate across the country and that demand happens to be the highest demand, that's the peak demand. Now when a peak demand happens, then there is an imbalance between generation and demand. So there's an imbalance because what is being generated and in that particular location because look, they actually market around highly localized even though it is a national market, national grid, it runs highly localized. So assuming there's a demand which is a point in time in Tamil Nadu and the generation is not in Tamil Nadu, they got to buy from somewhere And exchange becomes a more logical state. So the more the misnights, the better you will find that the exchange fundamentals will play out and exchange gets the highest benefit of those demands. Reach on the queue, please. Okay. Thank you. How long you can come back to us later also. Don't worry, we can explain to you. No worries. Thank you. The next question is from the line of Aniket Mittal from Ooyal Oswald Securities Limited. Please go ahead. Yes. Thank you for the opportunity. So my question is actually with respect to the longer duration contract. So if you could help us understand some of the contract specifications in terms of what sort of upfront margin would you be looking for? And how would the payment cycle go? Have you nailed that down? Could you help us on that? Yes, Amit, of course. As far as payment cycle goes, we are going to create a product where we are going to give comfort to both buyer as well as sellers. So this is what Exchange is known for. So when we are doing long duration contracts through Exchange, we would be absorbing counterparty risk, which means that as a seller, you will get paid. So what we are doing in case of our weekly transactions, where settlement is done on daily basis, similar thing we are going to adopt for longer duration contracts there. We will have some DGs and LCs in place, which will take care of guarantees and then every day the power that is being traded will be settled on a daily basis. So this is what we are thinking. And to answer your second question about transaction margins, that again is still under consideration. We will be taking call in due course of time. Okay. And so my second question is, I believe you've got an approval for some new block bits, which is the minimum quantity in the profile one. If you could just throw some light on that and how does that help us within the time market? Yes. So what happens is, today we have a block meeting mechanism where either all is selected or none is selected. So it is complete selection or 100% rejection. So what we are saying is now with the new bit type at home, if you want to buy a 50 megawatt and you can place a minimum by quantity of 5 megawatt, which means if minimum 5 is getting connected, it will be clear. So this is what this first thing is all about. And second is considering the requirement of RE market and also conventional market where they want to bid for complete profile, which means that let's take example of solar, right from 9 to 5, every hour generation would be different. So you can create one block where the quantity in every tiny block would be different and then this would be considered as one block. So this, as per the fact, it is not there. And now the approval has come, we are going to introduce in the standard time. We haven't reduced this yet. This is going to help us increasing the cleared volume. So some certain quantity gets rejected today, that rejection quantity will come down. Okay. Thank you. The next question is from the line of Dhruv Mochel from HDFC. Please go ahead. Yes, sir. Thank you. Sir, a small quick one. The tax rate is 21% in this quarter. The normal it should be 25% or this will be the rate norm? It will be the overall, it should be 25% because we fall under 22% category. But because of our treasury income, so the whole asset comes lower. Okay. So the treasury includes mark to market on which you're not probably have to pay tax and that is why the current quarter's tax is low? No. Because the mark to market also we need to create a deferred tax liability accordingly. But because of the some longer term products where we can get the tax benefits of the lower rate, so that's why the lower taxes come down. Okay. So normally it will be back to it will be 25 around? It will be in between 22 to 25. Okay. Got it. Thanks. Thank you. The next question is from the line of Mohit Kumar from IDH Securities. Please go ahead. Yes, one clarification. This RTM market, all the regulation is applicable from 1st April 2020, am I right? Yes. So the second question is that the power exchange, India Limited, which are launching platform, is it working right now? Or you're just in pilot mode till the time because this kind of function till the final regulation comes in place. Am I right? Our exchange is working right now. So what they have launched No, no, no, no. Talking about RTM market. No, no. They have not launched RTM market. They have launched they had market. So new platform they have created, which they launched around 10, 12 days back. So that's the placement of earlier platform only. Okay, okay, okay. Understood. It's not the RPA market, right? We can't launch RPA right now. I'll first you do. Sure. Okay, understood. Thank you. Thank you. The next question is from the line of Shri Kartik from Investec. Please go ahead. Hi, sir. Thanks again. I had my second question with regards to the deep versus iEX price parity. That seems to be narrowing over the last few quarters. And you, in fact, presented some data with regards to how there is some gap and why it's beneficial for executing the contracts on IEX. Apart from the usual counterparty benefit that we get, is there any other reason why participant would use IEX over these? The counterparty benefit is a huge benefit. So if you are following these markets, you will find that the price varies with the straight discount. Some discount in Southern region when they are going for bidding, price discovered is INR 5.20 perfor some other discount, same generators are supplying, willing to supplying INR 3.60 perfor. So that's the difference is there because of the they are not confident that they would be able to recover money from extra cost. Of the past time, these payments is getting delayed for over a year also in certain cases. So we feel that the value that we are bringing to the table, there are going to be many takers. In fact, we already have discussions with most of these distribution companies. We have shared our contracts with them, and people are waiting keenly for that. Hello? Yes. Have I answered your question? So essentially, your view is the counterparty risk is the primary reason why people use I Yes, it's one of the major regions. Yes, major regions. Okay, sir. And purely from an infrastructure perspective, that is the integration of the grids and the connectivity, Is everything in place in the country currently for a wider open access utilization? Yes. So if you are clean, with the more transmission line coming in, we have got in fact huge network today, more than 80 gigawatts of inter regional capacity is there. And congestion is virtually 0. So 99.5% of the time, we have 1 nation, 1 grid, 1 price, which means that wherever there is a customer, this power can be generated somewhere else and can be transported to that particular base. So this infrastructure was not there 3, 4 years back, but last 2, 3 years we have seen that we are very comfortable as far as the transmission infrastructure is concerned, and it is helping in taking the market forward. Thanks, sir. Thank you. Ladies and gentlemen, due to time constraint, we take the last question from the line of Govan Sabu from Indian For the Q3 or for the 9 months? Q3 and Q2 would be good. Okay. Q3, our total transaction fee from the on the segment volume, the total transaction fee was RMB 55 point INR 38 crores in the Q3. Okay. Annual fees were INR 4.3 crores. The total operating revenue was INR 59.68 crores. Okay. And the same number for Q2. Q2. Yes. For the Q2, the total electricity revenue Sorry, 64.89 crores, right? 62.89 crores. 62.89 was the transaction fee. RMB255 was the annual fee. And the total operating revenue was RMB67.4 crores. Okay. Thank you, sir. Thank you. Thank you. I now hand the conference over to the management for closing comments. All right, hey look, thanks everyone. Thanks so much for If there is anything that you all want to know more online, so whatever we discussed or anything else that you want to know about our company, more than happy to connect please connect with Aparna and she will make sure you get the responses that you need. But otherwise, we stay the course. Like I said earlier, we stay the course on a forward path. The market continues to be extremely supportive right now. And we see a very, very solid way forward, a good recovery in the month of December, January, but continues to be. And all our efforts in terms of market expansion, new products and new customer acquisitions is something that is going to be helpful to us over the course of next couple of years. Thank you. Ladies and gentlemen, on behalf of AXIS Capital Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.