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Indian Energy Exchange Ltd
Earnings Call Analysis
Q2-2025 Analysis
Indian Energy Exchange Ltd
The Indian economy continues to showcase significant growth, with a GDP increase of 6.7% year-over-year in Q1 FY '25, positioning India as the fastest-growing major economy globally. This economic momentum is reflected in the revised GDP growth forecast from the World Bank, which has been upgraded to 7% from an earlier estimate of 6.6%. The power sector's performance has been notable, with total electricity demand in Q2 rising slightly by 0.5% year-on-year, stabilized by a favorable monsoon that exceeded long-term averages.
Despite the national electricity demand showing only minimal growth, IEX reported a remarkable 23% rise in electricity volumes. This impressive growth is attributed to various factors, including enhanced fuel availability, lower costs, and improved liquidity. The commitment of India's government to increasing energy capacity—28 gigawatts of thermal capacity in construction and plans for 40-50 gigawatts of renewable capacity each year until 2030—suggests a robust demand trajectory for IEX's offerings.
Looking forward, IEX's management is optimistic about the future demand for electricity. They project a compounded growth in demand of approximately 7% over the next several years, fueled by economic expansion. This growth translates to an anticipated increase of around 130 billion units over time, indicating a solid market opportunity for IEX. Even as October's numbers were slightly lower due to seasonal temperature changes, the annual outlook remains positive.
IEX's pricing strategies remain consistent, with transaction fees unmodified since 2011 despite a significant increase in clearing prices from around INR 2.50 to INR 5. This pricing strategy indicates a value-driven approach aimed at maintaining competitiveness in the market. The stability in transaction fees, as IEX continues to facilitate energy trading efficiently, supports its market position as a preferred platform in the Indian power sector.
The management addressed ongoing regulatory discussions regarding transaction fees and their potential impacts on future pricing models. As of now, no immediate changes are anticipated, but the regulatory environment remains closely monitored for developments that could affect future business strategies. Additionally, IEX is actively working on new product offerings to enhance market share within the energy sector, including ongoing pilot studies to explore synergies within the Renewables Certificate and Real-Time Market segments.
In summary, IEX stands at a pivotal juncture with promising indicators of growth supported by strong economic performance, expanded energy capacity initiatives, and strategic market maneuvers. The leadership's commitment to adapting to regulatory frameworks while focusing on sustainable energy trading practices positions IEX favorably within the evolving landscape of India's energy market. Investors can anticipate a continued upward trajectory, underpinned by both macroeconomic factors and proactive company strategies.
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Ladies and gentlemen, good day, and welcome to the Indian Energy Exchange Q2 FY '25 with this conference call hosted by Axis Capital Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sumit Kishore from Axis Capital Limited. Thank you, and over to you, sir.
Thank you, Nehal. Good afternoon, ladies and gentlemen. On behalf of Axis Capital, I'm pleased to welcome you all for the IEX Q2 FY '25 Earnings Conference Call. We have with us the management team of IEX, which is presented by Mr. Satyanarayan Goel, the Chairman and Managing Director; Mr. Rohit Bajaj, Joint Managing Director; Mr. Vineet Harlalka, Chief Financial Officer; and Mr. [ Panna ], Head Investor Relations and Corporate Communications. We will begin with the opening remarks from Mr. Rohit Bajaj, followed by an interactive Q&A session. Over to you, sir.
Good afternoon, everyone. I welcome you all to the IEX earnings call for Q2 FY '25. With me today on this call are Mr. Satyanarayan Goel, CMD IEX; Mr. Vineet Harlalka, our CFO and Company Secretary; Mr. Amit Kumar, Head of Market Operations, New Product Initiatives and Exchange technologies; Ms. Aparna Garg, Head of Investor Relations and Communications; and Mr. [ Abitani ].
Friends, multi-government 3.0 recently concluded underpays, maintaining its thrust on infrastructure development, innovation push and economic growth. The Indian economy continues to be the world's fastest major economy with yet another reported quarter of robust GDP growth. The economy grew 6.7% Y-o-Y in Q1 FY '25, allowing the RPI to retain its strategic forecast for FY [ '25 ], 7.2%. In the wake of Q1 GDP growth, the World Bank has also revised its GDP growth projections upwards for FY '25 to 7% from 6.6% projected earlier.
On the power sector front, electricity demand growth during the second quarter slowed on the back of better-than-expected monsoon. Monsoon was 8% higher than long-term annual average. Power demand at 435 billion units in Q2 was largely flat at plus 0.5% Y-o-Y with a peak demand of 227 gigawatts. However, in the first 6 months of FY '25, power demand was higher by 5.6% over the [ PSC ].
To meet India's growing energy demand, the Ministry of Power has maintained its focus on capacity addition and strengthening overall power infrastructure. Almost 28 gigawatt of thermal capacity is under construction, out of which 15 gigawatt is expected to get commissioned in this fiscal and the balance, 13 gigawatt, in the next 2 years. Further, 58 gigawatt of capacity is in various stages of planning, statutory clearances and bidding and this should come in the system over next 6 to 7 years. Capacity addition is being regularly monitored by the Ministry of Power. In addition, 40 to 50 gigawatt of renewable capacity is to be added every year until 2030.
The government also plans to add 39 gigawatt of pump storage project CSP by 2030, out of a total potential of 184 megawatt.
Recently in September, M&R issued guidelines for variety GAAP funding stream for offshore wind energy projects at 1 gigawatt across the states with an Tamil. It is proposed in the scheme that any -- powered from these projects can also be sold on the exchanges. This is expected to increase sell-side liquidity on the exchanges.
At the recently concluded Global Energy Investors meet in Gujarat, our -- Prime Minister also underscores India's strategic growth to expand its renewable capacity to 500 gigawatt by 2030. Energy developers -- pledged substantial commitment to capacity creation under their -- agreements. At the event, the government also highlighted plans to develop 17 cities as a model solar cities.
On the fuel side, this fiscal has not seen any shortage so far. Coal is available through the e-auction route at a very nominal premium of 10% to 20% with respect to the administered price and coal inventory today stands at about 14 days. Imported coal prices in Q2 have also been competitive at $52 per ton. Similarly, gas priced at $12 per MMBTU have remained largely stable in the first half of FY '25.
With favorable monsoon this year, high, high-teen wind generation and ample availability of fuel has led to higher liquidity on the exchange platform with some liquidity increasing by 41% over H1 FY '24. With these strengths in liquidity, volume growth is expected to continue going forward.
Let us now talk about important regulatory updates and policy initiatives that helped deepen our markets. Recently in the draft, the CRC has proposed various changes in thermal head market design, which will align -- products across exchanges and also help in improving liquidity. The deviation settlement mechanism, Regulation 2024, has made deviation management more stringent. This is likely to promote further discipline leading to better grid stability.
Under the proposed amendments, deviation charges are again linked to great -- with regards solar and wind generators. Deviation percentage allowed for levy has been narrowed to 10%. This is expected to further increase RTM volumes at exchanges.
With regards to both -- electricity market -- has allowed generating stations selling -- power through a dedicated transmission line -- facilitate sale of power within India in case of sustained non-scheduling of capacity or default notary issued by generator for debt delayed payment under their respective PPA. This has the potential to increase liquidity on the exchanges.
To meet high power demands, the MOP recently extended Section 11 directive to imported coal-based plants to operate up to 31st December 2024. These assets will be utilized to meet -- demand and support liquidity on the exchanges.
To -- challenges posed by seasonal variations in electricity demand, which led to sharp virgin power convection during crunch periods, the PRC recently issued an order to ensure adequacy of resources, identify generation, demand response capacity and generation flexibility requirements.
Under the amendment to -- in surcharge rules, the government has directed all generating stations, which have long-term PPAs to offer -- repositioned power on the existing platform. As a result, about 100 million units of -- power plant central generating stations is coming to the exchange platform, out of which 15 million to 20 million unit is getting cleared on daily business. So generating stations, which are within the states, will start to offer -- power on the exchange, which will further increase liquidity of exchanges.
Under provisions of Energy Conservation Act 2001, the Gujarat Electricity Regulatory Commission has introduced change in compliance norms for obligated [ entries ]. In the event, an obligated entity does not fulfill its renewals purchase obligation and also does not purchase the certificates, the commission had introduced payment of traditional penalty up to INR 3.72 per unit for a shortfall in the specified rental energy convention markets. This should [indiscernible] compliances and help maintain -- market.
These changes are expected to be positive for exchanges and are bound to improve sell-side liquidity and softer power prices. As prices continue to remain competitive, it is expected to present an opportunity for DISCOMS and commercial and industrial consumers to optimize their power procurement costs.
IEX business performance during Q2 FY '25 has been strong. We recorded a total trading volume of 36.7 billion units in this quarter with a growth of 38.2% on year-on-year basis. For the first half of FY '25, IEX traded volume of 67 billion units, a growth of 30% over the same period in FY '24. Consequent to reduction in REC prices, we revised our transaction fee on -- from INR 20 to INR 10 per certificate on either side of transaction with effect from 12th August 2024. In Q1, a total of 63 lakh certificates were traded, a jump up to 77% over the same quarter last fiscal.
RTM segment has seen strong growth this fiscal. For Q2 FY '25, IP volumes were higher by 31% Y-o-Y at nearly 11 billion units, showcasing its critical role in developing discounts and open exit consumer efficiently manage short-term electricity means. In September 2024, RTM reported the highest single day trade volume of 173 million unit.
RTM also achieved its highest ever monthly volume of nearly 3.5 billion units. A share of RTM in our overall product mix has also increased nearly 30% over the last 2 quarters from 27% at the end FY '24. RTM's ability To offer flexibility and immediate responsiveness in mix -- the opportunity to efficiently integrate renewables with the grid.
Similarly, for the quarter, [ green ] market volumes rose to 46% to nearly 2.6 billion units as compared with Q2 FY '25.
In terms of new products, we continue to await approval from CRC for our long duration contracts. We have already filed the petition with them for approval of 11-month contract on which maturing has happened and order -- Further, we have filed patients with CRC for approval of green RTM segment. Green RTM would provide approximately [indiscernible] to avail price premium of our conventional power and also biased to avail [indiscernible] of electricity. This segment shall also help reduction variation exposure to [indiscernible] providing [indiscernible] trade green power, just [indiscernible] area.
We are happy to inform that our only owned subsidiary with the [ National Copper Exchange ] has been accredited as India's first renewal energy certificate issuers. IEX is globally recognized digital certificate that serves as a transferable proof of generation of 1 megawatt hour of energy from renewable sources. Further, the Honorable Minister of Coal, [ Shri Jake Christian Redig ] earlier this week announced that India's first coal exchange would be set up soon and that the exchange would work under the supervision of whole controller organization. IEX has been working with stakeholders to explore this diversification about [indiscernible].
on another front, in August, the trough guideline for authorization and functioning of extended power responsibility, EPR trading and settlement platform for plastic packaging has been issued by the Central Pollution Control Board. This will help in the transparent and competitive price discovery for EPR certificates through an online platform. EPR certification ensures proper recycling, reuse, end-of-life disposal of these generated from electronic and plastic products. It is expected that this would be extended to other types of waste, such as rewaste, battery waste, tire waste -- waste, et cetera. We are working with stakeholders to evaluate business diversification opportunity in this segment.
Let us now summarize the financial performance of the company in this quarter. On a consolidated basis, revenue for the company grew [ 36.2% ] on year-on-year basis in Q2 FY '25, increasing to [ INR 167.8 ] crores from INR 133 crores in Q2 FY '24. Consolidated PAT increased by 25.2%, rising to INR 108.2 crores in quarter 2 of FY '25 compared with INR 66.5 crores in quarter 2 of FY '24.
IGX traded volume of 118 lakh -- Q2 FY '25 compared with 195 lakh -- in Q2 last fiscal. Profit after tax for IGX for Q2 FY '25 premium at INR 6.1 crores compared with INR 7.8 crores in Q2 FY '24. For the first half of FY '25, IGX reported a PAT of INR 13.6 crores, higher by 20.7% compared to the same period last fiscal.
Gas prices have remained stable over the last 2 quarters, and volumes are expected to pick up as we approach the winter marks.
Way forward -- order sector is undergoing rapid physical shift. A year ago, battery storage rates were almost about INR 1 lakh per megawatt per month. But rates in the recent center of -- came down to about INR 2.37 lakh per megawatt per month under the VGF stream. The competitive rates in -- make a promising case for market element. Prices on the exchange provide enough arbitrage to make BS commercially viable at the current prices. This will improve liquidity during nonsolar arms and will help in meeting PPA demand.
With the CA forecast of peak power demand of 58 gigawatt by 2032, power consumption growth will continue to drive exchange volume growth. On the liquidity side, MOPs initiative on renewables and thermal capacity addition will keep power procurement cost stable.
The regulatory environment and government initiatives to facilitate the path of energy transition shall continue to support market development. IEX shall also continue with the -- initiative within the sector to grow them to significant value.
As India marches towards achieving this next zero target, there is bound to be a growing rollout power exchanges in the country and in the landscape and IEX shall continue to be part of this day.
Thank you. And now we can have questions and answers.
[Operator Instructions] The first question is from the line of Mohit Kumar from ICICI Securities Limited.
Congratulations on a very good set of numbers. My first question is what is your market share in this quarter, vis-à-vis, other exchanges?
Our market share has been almost about 83% now.
Understood, sir. My second question, sir, on the transaction fees. When you take the revenues and revise the number of units, it seems like the -- fees for the quarter is 3% per unit. Are we giving discount?
In case of REC market, the rates have come down. REC rates are now almost about INR 120, INR 110. So we have reduced the parent from the IP. And this is the top of that.
Right. My last question for -- the third question is where is the long-term trading volume, I think we're looking to start the new product, actually more than 3 months. Where it is right now? When we expect it to launch after that?
CRC hearings are complete, already resolved. So we are betting for the CRC.
Understood, sir. And last question is how the -- India started the pilot study for market company? Where Is it right now?
We are yet to submit the report. .
Have you stated to -- still elevated?
We are really [indiscernible] we are in the process of developing the software. They were taking the -- to validate the software. But what has happened in the simulation, we are not aware about that.
[Operator Instructions] The next question is from the line of Sumit Kishore from Axis Capital Limited.
My first question is in relation -- on volume growth that you have seen in REC in Q2. I mean, during the quarter, from July to August, from August to September from...
[indiscernible].
Going forward.
I did not hear your question. Will you repeat it?
Now?
No, not.
Okay. I will go back in the queue in that case.
Now it is better. Please continue.
So I was asking that during the September quarter, the REC volumes kept coming off from July, which was a very good month, followed by a lower number in August and further decline in September. What was the dynamics here, although you see in each of these months were much higher than the prior period on a year-on-year basis? And what is the likely road map going forward now that REC prices have come off substantially?
Volumes were significantly higher in the month of July because the heart is one state where there was a lot of decision and a good amount of policies. And since they completed their RPO compliance in the month of July by buying significantly high number of -- So in August, September, they were not there, [ PVC ] was not there. And I think because of that, the numbers have reduced.
But I'm sure that trend with respect to last year, increasing trend, that will definitely continue because REC rates have come down, and there are many interested parties who are willing -- compliance and [indiscernible].
Very clear. The second question is that in a quarter where India's power demand growth was barely up 0.5%, IEX electricity volume growth was up 23%. So aside from the factors of better fuel availability, lower cost, better liquidity, were there any other factors or anything structural, which would imply that the momentum of growth would continue going forward as possibly power demand actually may pick up at the India level? Your thoughts there, please.
Yes, demand is definitely expected to increase. I mean India is a growing economy. Our PTP is [indiscernible] at a rate of [indiscernible] GDP is increasing. Power demand is also going to increase. And government also has taken many initiatives to increase the electricity addition because this is a more convenient method of -- energy. And I'm sure -- demand is -- demand productivity is going to increase an EBIT of almost about 7% for the next 7, 8 years.
And if that is the case then definitely a sales also will increase because 7% of increase that is virtually out of about 130 billion units increase. And I'm sure a good part of this incremental demand will come to the [indiscernible].
Sure. Volume growth? How is the month of October panning out so far in terms of electricity volume growth?
It is a growth, but October demand is slightly lower because of the temperature dip in the northern region and also range in the South [indiscernible]. But this is, I think, almost about 8% kind of a number.
The next question is from the line of [ Mara ] from [ Orange Spar ]. .
Am I audible?
Yes, yes.
Yes. So my first question is on the transaction fees. Now in April 2023, when the -- was approved for CRC, the document talked about the regulator asking the commission to come out with a different paper outlining global distracted on transaction fee and after that, if you take a call on the transaction fee if needed. So just wanted to get your sense on, one, where is this process?
And second, in your opinion, whether the transaction for all the electricity products will be changed in the future efficacy given now even we ourselves have received sales REC products where price has come down?
Yes. I mean April '23 order did not specify any time line for the -- So as of now -- I mean, nothing has happened and nothing is happening on that. But as far as -- is concerned, I think this issue has been deliberated multiple -- In 2018, also CFC order came. And there also, they had allowed 2 per summer connection fees. It was again allowed in the 2021 regulation and then again, in 2023 orders.
And then -- that in case of REC since the rate has reduced -- will reduce the -- SPs. But in case of electricity, our transaction fees is continuing as a -- other site right from 2011 when the electricity rates were almost about INR 2.5, INR 3. Today, electricity clearing price is almost in the range of INR 5. In spite of that, we have not increased the financial case.
So -- and even if you look, the trading activities, what is happening in the sector, this has allowed [indiscernible] per unit. Government of India company -- when we are buying power from the renewable generator and we will release distribution company, they are also allowed to encasing margin of [ 7% ]. If that is the case, I don't see any reason why this lessons will not be allowed or will be considered as high.
Yes, I think that is -- Second question is on market supply in February 2024 when the result of the UCL pilot study was given -- The document talked about doing further pilot study, especially focusing on whether coupling -- RCM market with CEB market is beneficial. Now my question is, in layman terms, why should coupling in RCC -- sorry, RTM and -- be considered, if you can concise rather than softening in the overall market?
See, CRC in the order, which was issued in the month of February, they have very clearly mentioned that they did simulation for 3 months. And based on that, that is not find any -- coupling. Only RTM market or -- the market on the exchanges. So the -- one of the suggestions which they achieved was to couple the RCM and the -- And just to explore it further, they have given the order to -- great India to do the simulates and see if there is a merit in that.
But let me tell you -- and RTM are 2 different kind of markets -- is basically among the generating stations who have long-term power battery agreements where the fixed cost is assured under the PPA. They sell power on that on the basis of the variable cost -- regulated variable cost.
In case of RTM market, the generator of multi generators and they have to resorted and variable cost to the market. And even the coal, which is given to the PPA generator is through the FSA rule at that administered price, whereas the Basel generator buy coal from the open route. So I think these 2 are 2 different sets of generators.
So vertically speaking, coupling between these 2 set of generators is something not desirable. But then some initial studies are going on. And what we -- I mean, we and also -- we also know about that -- what kind of benefits they're getting in the scale and how much the volume is getting -- in the scale, all these at a again the public domain. And if you couple that base to markets, significant benefit is not going to happen.
The incremental benefit is going to be very, very low. And I don't think for that kind of a small benefit will go CRC ahead with a mean implementing this kind of a decoupling is very, very -- I mean, a cumbersome activity, and it also involves combustion financial and physical settlement purpose. So I don't think it is what's taking off that trend, but then we are waiting for that study report and then GRP thereafter.
The next question is from the line of [ Chirag ] from Key North Capital. .
Am I audible? Would it be possible for you to give market share product-wise?
Yes. [indiscernible].
So in day head market and -- market, which are collective segment, our market share is 99.5%. In the -- market, let me just read it out just along. So in the -- market, our market share is about 40%. so which, overall, on a total basis, it makes it 82.7%, that it is 3% in electricity. In certificate, it is 60%. And overall market share in H1, first 6 months is 79%. Electricity is 83% and certificates is 60% and total is 79%.
Right. Sir, second, I wanted to understand one thing as earlier part also [indiscernible] pickup time. There was one simulation taking place related to RTM bandwidths -- made it through because we already have the volumes were used to come [indiscernible]. So even if there is a market coupling is sold, RTM came and this market company moves forward. Does that mean all the products will be coupled or it will be just 2 of these products?
I don't want to comment on that. Let's see decide about it first. And thereafter, we will talk about this. As of now, there are similar -- basically for our team and [indiscernible].
Third question, I just wanted to have a view. Is there any internal discussion in the management team going on related to change in dividend policy? As we don't require discuss amount of cash for bringing new products itself, has there been any talks related to slab-based dividend model taking place and changing from the current 65 percentage of the [indiscernible]?
As of now, there is no such thinking about it. We are giving 65%, 70% kind of profit in the form of dividend, and that's a good dividend payout. We are also working on other initiatives. As I told you in the past, gas exchange is doing well. We are also working on coal exchange, which is government applications talking about that. And there are e-trading -- going around. Carbon exchange is another opportunity. So I think for all these things, money will be required, so we are getting that money from [indiscernible].
Will it be possible for you to a broad ballpark [indiscernible] what kind of money would be required for [indiscernible]?
See, even in case of our experience also since we are counterparty into both the -- we have to make them to the sellers, even if we are not getting payment from a buyer. And there have been some incentives where there was once per 2 days delay moving the payment by the buyer. So we have to have enough fund with the company to take care of the [indiscernible].
So I think the present surplus is about INR 900 crores is the investors' money, which is all to the company. It is not very high. But then yes, in future, we can think about a special dividend if there need.
The next question is from the line of Viraj Mithani from Jupiter Financial.
Congrats sir, for the good set of numbers. My question is decoupling things the company goes to how are we going to be affected like because we have a leading exchange in the first or advancing to -- can you give some color on that? I know it's too early to comment, but if you can give.
I'm very sure coupling is not going to happen. So let us not worry about that. And in case coupling happens, we have with and means to ensure that we are able to return our market share. And we all is when I come to that, okay?
The next question is from the line of Devesh Agarwal from IIFL Securities.
Again on continuing on market coupling. If you could help us understand whether this year is power that has been coming into the -- market, in any way, does that kind of in down the benefit that could have possibly come out by coupling the SCD -- or does an impact?
Number one, as volume itself is very nice earlier about 30 million, 35 million units per day, whereas RTM market volume is about 100 million units. And after this government, new room of sale of our own exchange DISCOMS, we are seeing that in the ATM market on an average day, about 20 million units of this -- power, which being sold to the market itself. So that means that opportunity available for further optimize in the market is further reduced.
So today -- market is less than [ 28 million ] units per day. So I think -- the optimize an opportunity is definitely further reduced. And if all generators, they participate in the demand RTM market, the rowers sold, there is technically no optimization opportunity by supplying and RTM.
Understood, sir. And secondly, sir, if we see the numbers for the October, you said there is some growth. But if we see for our numbers in the month of October, we are seeing that there is a month-on-month decline. And the decline is largely in the RTM segment, where volumes have come down by [ 20 to 25 MUs ] on a daily basis. Any particular reason for this, sir?
Yes. Month-on-month, there is a decline. But if you look at year-on-year, there is a positive number. And month on month of September is slightly -- my months and if the demand is also there because of -- high country. Our demand also has reduced. And fortunately, availability of generating units is high. So that is why I think volume is a month-on-month basis reduced.
But we are -- our competitor is mainly on a year-on-year basis. You will see on every month, we even next year, November is going to be further order month and the demand may further go down. But if you compare with respect to last year, that's the basic company than what we do.
Understood, sir. And sir, I think you touched upon in your introductory remark, this CRC regulation, which came at the start of the month around 10 pricing. Could you just explain a bit better what does the draft paper talks about? And how would this impact the TAM market? And does this benefit or impact us in many ways, if this were to be implemented?
It is basically -- streamline the projections in the TAM market. Today, there are multiple products and exchanges have given the flexibility to introduce whatever products they feel like. And as a result of that, different exchanges have introduced different kinds of products. So there is no finalization on that. And that is why we put in this market is getting segmented across the different products.
So PRC has now decided to streamline this activity. And there will be standard product -- in the market. So as far as we can see what is there available for the sale and what they want to buy. And I think this is a very good initiative of the CRC, and it is good for the market.
But does it impact any of our segment volumes or not, not yet?
It doesn't impact the financial, will be lower beneficial of this.
Understood. And lastly, sir, you talked about diversification, and you spoke about EPR trading and coal exchange. So among this one, which one do you think has the largest potential in terms of becoming sizable?
And secondly, which is the one that you think will be started first, will come into operation soon?
So both questions are difficult to answer because both these initiatives are dependent on the government decision. Whole exchange -- I mean, I've been hearing about it from the last 1 year and onto Minister of Coal also has made separable that it is a part of the 100 days and the 100 days are over. The last [ 3 ] also, we've said that we are doing that with a core exchange. So I think on the update decision is taken by the government in this regard, then only we will be able to start about competent.
After that, we will have to approach the regulator, whoever is a partly identified for this -- and take approval and thereafter launch. I think it will be some time, and dependent on the government approvals. But once approval is there, after that, we will need maybe about 6 months to 8 months time to start.
Similar cases in the APR setting, APR setting draft regulations have been issued -- and we have achieved the public comments. We are in the process of finalizing the regulations on revisions are finalized, then the will appoint agency for the purpose of EPR trading. So -- and their multiple parts may apply, and then it depends when they collect. So we have good chances to get collected. But then there is the opportunity to let everybody.
The next question is from the line of [ Vishal Periwal ] from [ Antics Stockbroking ].
Sir, on this REC transaction fee that we have revised I mean just wanted to understand the rationale for it. When the volume for any product, when it's going strong, what was the reason of reducing the fee that we charge?
Now since the rate for the REC, those would substantially reduced. And so we felt that transaction fees should also reduce because rates earlier about INR 1,000, it came down to almost about INR 120.
Okay. So -- no, but we are not pursuing a similar thing for even like the power products that we have when you like the tariffs move to maybe INR 8, INR 9?
Yes, I agree with you. In case of electricity, when the rate increase from INR 2.5 to INR 5, our conversion fees will increase there, but we did not increase that. But this time, to pass on that and then get benefit to the distribution companies, we decided to reduce the [indiscernible] fees [indiscernible].
Okay. So maybe I can ask it another way. Is there the other figures they have done on maybe like changes in the fee that made probably the industry to follow it may be one cleared market? Or how [indiscernible]?
We wanted to be rational in charging our fees.
Okay. Sure, sir. And one last thing is on this -- the TAM product, the 3 months to 11 months. So I know I'm making it has been pending for quite some time. So anything that you're hearing, which is probably believing the whole process? And any color that you can provide [indiscernible]?
And we were expecting that it will happen within 1 month of the order when the order was resolved. But no significant time has passed, so I don't know what is the issue behind that. Maybe when they finalize this -- I mean they have also issued a draft product about the TAM market. So once we get the comment from this and maybe along with this, they will finalize that also.
The next question is from the line of [ Ruchi Takagi ] from iWealth Management.
Sir, my question was on the -- segment. What has wanted for most is the opportunity size in this segment in terms of volume?
Yes, opportunity is very high because the government of India has specified RPO compliance norms and there are many space, when distribution companies, many industries who are not meeting that. So -- and earlier, the inventory was not available now the inventory out there. Almost about [ INR 3.5 to INR 4 ] are for inventories available. rates also have come down. So it is the right time for these entities to meet their RP obligation.
So I'm sure its's a big opportunities, again, depends on the market participants and also the enforcement, which is done by the state regulators. So our state regulators are the -- present case who have -- who are monitoring these things and ensuring some plans.
The next question is from the line of Nikhil Abhyankar from UTI Mutual Fund.
Just one question. Sir, you mentioned that we have a credit to issue carbon certificates. So can you just brief us about that, what exactly is this about? Like all the carbon trades issued in India will be through us and do they have to trade only with us...
No, no, no. It is not government credit. It is [ 5 lakh ]. It is International leverage certificates. We have a REC market in India, which is a compliance market. There is another market, which is a voluntary market, which is operating, which are operated by one of the internal agency. And earlier, they had one agency, which was doing issuance of the REC. And now they have given the job to ICX, our subsidiary company.
Okay. And so when should we expect any operations on ICX [ one ]?
Activities have started, but the opportunity is very small.
[Operator Instructions] The next follow-up question is from the line of Chirag from Keynote Capitals.
Sir, actually, I wanted to build [indiscernible] on [indiscernible]. As the prices of -- gas come stable to INR 12 -- $12 -- what's the reaction on the volume [indiscernible]?
Secondly, which type of gas has been traded? Is it the domestic...
Gas -- international gas [indiscernible] traded more on [indiscernible]. See, we have particularly 3 kinds of gas in the Indian market, RLNG, APM gas and non-APM. Non-APM is get produced by Reliance, gas produced by gains, PMT, et cetera. So trading on -- platform is basically happening in other than APM gas, whether it is domestic or -- growth kind of as subsidies because for the domestic gas households -- procurement sales that the gas can be sold to the competing group or to the exchange. So a good part of that gas is also sold for the exchange.
And as far as the gas price is concerned, yes, prices are about $12, $13. But very recently, I sort report that there is going to be a significant increase in the LME capacity in the world. And in 2025 and '26, we are expecting the cash target to come down. It may come down to almost about -- and when that happens, I'm sure the debt financial in India is going to increase and particularly in the power sector. So we see good opportunity, big opportunity in the gas exchange.
The next question is from the line of [ Rushabh Shah ] from Birla BMS.
Am I audible? Hello?
Yes.
[indiscernible]
Yes, yes -- hear you.
Yes, yes. am i audible, sir?
Yes.
So sir, how would you attract new customers [indiscernible] more and more trading possible on our platform?
Can you repeat your question, please? And let's talk slightly louder.
I'm asking how [indiscernible] new customers [indiscernible] possible on our exchange?
Yes. Number one is that the customer side, one is seller and other is buyers. On sales side, we have almost all generating thermal generators who we have registered with us. On renewable side, also, most of the renewable capacities are [indiscernible] with us. On buy side, 100% of the distribution companies of the country are registered with us.
Investor consumers, we have more than 4,500 large industries that are listed with us. And we continue to work with industries, tell them what kind of benefits they can take. So every year, we find that there is a increasing number in that. So it's a continuous business -- activity on which we are working.
Okay. And sir, my next question is the open access volumes have only been contributed by a few states. So what necessary actions are you taking so that the volume increase and all states are participating in these volumes?
Yes. open volume is basically purchased by the industry and purchased by the industry is dependent on the state open access regulations, particularly the profile [indiscernible], and willing chargers.
And looking at the exchange leading price, which is about [ INR 4 -- INR 4.5 ], with this on top of it, if you add these charges, the viability in many of the states is not there because in those states that others are higher. But in -- stage, where the cost facilities of sales and in -- is lower, there is still in likely [indiscernible].
We regularly interact with the -- Commission. We submit our comments also [indiscernible] AR hearing and the -- our endeavor has been to ensure that we rationalize some of our subsidiaries ourselves so that open access is promoted. And that is to -- the movement of India so the basic pitfall.
Our next question is so if you remember [indiscernible] '22 were a market saw up 94%. In actual relate, we came down to INR 88.4. In FY '24, and now you are a consolidated like all the products we see an 83% [indiscernible], am I correct?
Yes, yes [indiscernible].
My last question is what [indiscernible] why are you in the market share? Is it because the competitors -- more competitors are coming into our market or whatever?
In 2022, these long duration contracts for delivery beyond 11 days were not there. But these products were introduced in June to July 2022. And thereafter in these products also significant volume foundation has started happening.
The -- market and RCM market, which are our -- I mean, the key market segments where our market share is particularly 100%, there is a volume increase in these 2 segments [indiscernible]. That some volume shift has happened from the trading companies through the long-duration contracts on that sales reform. And in those contracts, all 3 exchanges have reasonable market share. So market share has reduced because of that. But if you look at our volumes, our volumes are increasing. Our volumes increased in 2023, 2024 was also there and [ '24, '25 ] [indiscernible].
Okay. Okay. And sir, how is the market share distributed among the 3 exchanges in totality and in time market?
I told you in totality is 3% in equity, whereas it is in TAM, RTM and GTMs 100 of that, particularly 99.5%, you can say.
Okay. And what would be your top 3 priorities going ahead for the next 4 to 5 years?
Yes. One is electricity exchange, continue to introduce more products on this. And to business development activities, policy advocacy, so that we are able to deepen this market. Second is our gas exchange, there also, we are working to I'm sure that there is the volume will happen there because opportunity is much bigger there. Third is [indiscernible] diversification initiatives, core Exchange API trading, these are the new initiatives on which we are [indiscernible].
You said products. Any new products in tightening. What kind of taking are we going to those new products?
11 [indiscernible] contract is under approval. We have also filed citizens for green RCM market. So these are the 2 things.
The next question is from the line of Lokesh Manik from Vallum Capital.
My question is just a clarification. What is the volume we would be doing in long-duration contracts today, which are beyond the [indiscernible]?
The question is not clear.
Volume and long duration contracts, how much need we have done this quarter?
Just a minute. 5.2 billion units in this quarter, we have done -- sorry, 6 months' time.
Okay. 6 months is [ 5.2 ]. And do you have this clarification, we have 40% market share in this segment. Am I clear on line? .
Yes, you are right. You're right.
Okay. So 40% at [ 5.1 ], about 20 billion of the total industry. Trading would be 50 billion, 60 billion, the power trading market, long duration?
Long duration is about [ 13 billion ] units in all [indiscernible] taken to them. And if you look at that trading companies also, they do long duration [indiscernible]. Accounting for that also, it becomes [ 56 million ] units.
We have more products in the pipeline to capture more market share from there? Or do you think we are reasonably positioned to grow some [indiscernible]?
Yes. I mean, there contract is the next item because upstream, we have all kind of contract available. 11 contracts, we already apply to [indiscernible] for approval. With that, we will be able to offer the complete range of products.
Understood. So when is that expected to?
Difficult to say. It is under the [indiscernible] approval.
Okay. My second question was on the...
Yes, sir.
Yes, sir. So I'll come back in the queue for any further questions.
I think we can have another one more question. .
We have no further questions, sir.
Okay. Thank you. That's good. I have another meeting.
Thank you. Ladies and gentlemen, we'll take this as a last question. I would now like to hand over the conference to the management for closing comments.
Thank you -- I would like to thank each one of you for being part of today's call. We have had a good first half of this fiscal on the business front. We have [indiscernible] several efforts announced for the [indiscernible] to further develop the market. We remain committed to contribute to the development of a sustainable and efficient energy future for India. Thank you. Have a wonderful evening. And Happy Diwali to all of you.
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.