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Indian Energy Exchange plans to go public

According to reports, Indian Energy Exchange Ltd (IEX) is gearing up to go public, three people close to the development said on condition of anonymity. The listing is likely to provide an exit option to PTC India Ltd and Financial Technologies (India) Ltd, or FTIL.

Founded in 2008, IEX is an electricity bourse in the country. Since its inception, the exchange has launched several products such as renewable energy certificates, energy saving certificates and day-ahead market among others. An IEX official confirmed the development. “The timing and IPO (initial public offer) size, however, is yet to be decided,” he said. A committee has been formed to prepare for the energy exchange’s listing, another person aware of the development said. The exchange is in advanced talks to hire bankers to manage the share sale, according to two bankers.

“IEX had been looking to bring an equity partner on board for the last one year. Plans to take the exchange public could be due to the inability of finding a partner who could bring in funds,” one of them said. Both the bankers requested anonymity. Investment bankers estimate IEX to be valued at Rs.700 crore. Spokespersons at IEX were unavailable for comment. PTC India clarified to the BSE that it is unaware of any such development. FTIL has been looking to pare its stake in IEX against the backdrop of power sector regulator Central Electricity Regulatory Commission (CERC) asking the firm to bring its shareholding down to 25%.

In March, FTIL had announced sale of 5% stake in IEX for Rs.72.89 crore as part of efforts to comply with the regulatory norms. Post that transaction, its shareholding in the company would reduce to 28.49%. In April, FTIL founder Jignesh Shah stepped down from IEX’s board. On its plans to exit from IEX, FTIL, in a clarification note to the exchanges, said, “While the stake sale process in Multi Commodity Exchange of India Ltd is on, for other exchanges, FTIL is evaluating various options to exit, including IPO.”

Similarly, as per the CERC’s guidelines, PTC India has also been selling its stake to private equity firms. CERC does not allow an electricity trader to hold more than a 5% stake in an electricity exchange. In the past, IEX has sold its stake to PE firms such as Multiples Alternate Asset Management, Bessemer Venture Partners and Lightspeed Venture Partners. Shah stepped down after CERC proposed a new regulation that would have resulted in an effective censure of his appointment on the board of IEX. The regulation stated that if any person is found unfit to head an exchange by any regulatory agency, he or she will not be entitled to hold any position on the board of power exchanges. The exchange is doing well and should be able to list at a decent valuation, said Deepesh Garg, managing director, O3 Capital Global Advisory Pvt. Ltd, an investment bank.

Although FTIL is one of its investors, the IPO shall not be hampered as long as FTIL has no say in IEX’s management, which is the case after Shah stepped down from the exchange’s board, Garg said, adding that there are other high quality private equity firms that have invested in the exchange, so listing IEX will boost governance.

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