Indian Energy Exchange (IEX)

My Investment Hypothesis for the company
A Natural Monopoly and pioneer in the field: Around 95 percent of all the trades carried out in the country are carried out on IEX platforms, making them a natural monopoly in the field. They are the pioneers in establishing the electricity exchange in the country which provides them a great advantage over other exchanges. As the first mover in the field, they have the “Facebook advantage” basically the most number of buyers and sellers are on the platform, which provides the company a long-term moat that cannot be replaced easily. Not only energy exchange they just pioneered a gas exchange(IGX) which has over 95 percent trades of gas on exchange in just a year since inception, in the long term company will keep owning a 25 percent stake in this exchange which will be a cash cow for the company. In the past 2 quarter investors’ presentation company have communicated about the plans to establish a coal exchange as well.

India’s Per Capita Electricity is projected to rise 3x: India has the lowest per capita consumption of electricity in the developed and developing nations, which is bound to rise, some estimates put it to 3x by the year 2050, combine that with the government push to trade most of the electricity over exchanges, is going to be a great growth driver for the company. The amount of electricity traded in comparison to the European exchanges is very low(80 percent vs 8 percent), and this is bound to increase. 3x per capita production increase of electricity and 10x trading volume increase. The current trade volume is bound to increase in the next 5–10 years, and IEX will the leader even if the natural monopoly is somehow taken away but there is a high percentage chance that IEX will continue to be the leader, according to numbers provided in the very best case the current volume will 30x and I would say there is the good percentage chance of it being 15x which is still a huge number. Another way to put the total current market size of trades is around 400 cr, 30x of which is 12000cr, in the best case, IEX will earn 10000cr of these trades and in the worst case, they will make 5000cr per year, for years to come, it is astonishing to me how much money the company will make.