Indian Energy Exchange Limited (IEX) Earnings Call Transcript & Summary

Ladies and gentlemen, good day and welcome to the Indian Energy Exchange Limited Q1 FY '21 Results 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. Abhishek Puri from Axis Capital Limited. Thank you. And over to you, sir.

Thank you, Vasant. Good afternoon, ladies and gentlemen. On behalf of Axis Capital, I'm pleased to welcome you all for the Indian Energy Exchange Q1 FY '21 Earnings Conference Call. We have with us the top management team represented by Mr. Rajiv Srivastava, Managing Director and Chief Executive Officer; Mr. Vineet Harlalka, the Chief Financial Officer; and the entire management team of IEX. We will begin with an opening remark from Mr. Rajiv Srivastava, followed by an interactive Q&A session. So over to you, Rajiv.

All right. Thanks, Abhishek, and I hope I'm audible.

Yes, you are audible.

All right. Thanks so much. Okay. Good afternoon, everyone, and I extend a very warm welcome to all of you for our Q1 fiscal 2021 earnings call. Present with me today on the call is the entire leadership team of IEX: Vineet Harlalka, the CFO; Rajesh Mediratta, our Strategy and Regulatory leader -- Director of the company; Rohit Bajaj, our business country leader; Samit Prakash, our CHRO; Indranil Chaterjee, our Chief Risk Officer; Amit Kumar, our Market Operations and New Products Introduction leader; Gautam, Sangh, our CTO; Deepak Mehta, our business leader for Indian Gas Exchange; Shruti Bhatia, leader from our comm; and Aparna Garg, she is the Investor Relations leader. Just as a quick one, I just -- I hope everyone, you and your teams and your families, continue to be safe and healthy. We clearly are living in unprecedented times right now. The first quarter of the fiscal -- this fiscal has been pretty tough for the industry and economy and for all of us in many ways. On our part, we continue to support the -- from a business perspective, we continue to support the distribution utilities, industries, critical health care facilities, communication infrastructure of the country, millions and millions of employees who are working from home today, consumers at large just by facilitating an uninterrupted 24/7 power supply. I also want to let you know, on June 27, during the last quarter, we celebrated our 12th anniversary. And the complete unstinted support, belief and partnership with our members, our clients, stakeholders, employees over the years has played a key role in building IEX as well as building a very vibrant power market in the country. I express my attitude to everyone for partnering with us in this journey, and I really look forward to an even closer collaboration going forward. In line with our vision to architect the next-generation solutions for a sustainable energy economy, ensuring a competitive, transparent, reliable access, we are committed to leveraging technology and innovation and lead the energy sector transformation towards Energy as a Service, which we see as a real paradigm shift in its true sense. I would also like to thank all our members, clients, employees, the entire energy ecosystem for a really very solid quarter gone by. And I must tell you, it has been a very busy period for us. We launched many new -- we launched a few new products and markets, and we also launched our new company, Indian Gas Exchange. During the quarter, just because of the nature of the times we are living in, we had to revamp our customer engagement and business development in order to completely to be a virtual -- in its virtual form. During the quarter, we took several significant initiatives to reach out to our customers proactively through webinars, through events, through e-meetings. It was almost like a communication overdrive for us during the quarter. And then on top of that, we made significant investments in technology and process innovations, leading to a better user experience for our participants. So all in all, a very fulfilling quarter, and I'll talk more about it as we go forward. But let me give you an economic and industry update as well. The overall economic and industry update played out in a very different way for different industries. But the quarter began with a serious slump. In the first month of the quarter, the IIP contracted, which is April. The IIP contracted by almost 58%. Manufacturing and services sector continued to struggle during the period in April and May and gradually opening up as the economy opened up in the latter part of the quarter in the month of June. So there was a significant improvement in manufacturing and services PMI in June, at 47.2% for the manufacturing PMI and 33.7% for the services PMI, both still in the contraction zone but much better than the way the quarter started in the month of April for both services and -- PMI and manufacturing PMI. On electricity front, all India consumption of energy fell by 16% during the quarter. In the first quarter, starting June, with the easing of lockdown restrictions in most parts of the country and also the fact that summers peak in the month of June across the country, the peak demand did return to 90% of pre-COVID levels. But all in all, over the quarter, the electricity demand fell by 16% over the previous year. I will also give you statistics on installed capacity. India's total installed capacity of power is 371 gigawatts as of June 30, 2020. In line with India's commitment to Paris Agreement to really increase the share of green energy in the overall energy mix, the renewable capacity grew faster. It grew by 10 percentage points in the period and reached 88 gigawatts on -- during the period. Thermal generation was a drastic drop from last year. It was -- it dropped by 23% in the same period versus same period last year. The regulatory development during the quarter, they included amendments to the CERC interstate transmission charges and losses, which are likely to be implemented by September 2020, as well as the REC regulations on floor and forbearance prices implemented on 1st July 2020. We believe both these regulation -- regulatory developments will possibly benefit the exchange market, trading on the power markets. Specifically, the amendments to transmission charges, charge regulations will place transactions which are done on the exchange at par with intrastate transactions and will incentivize distribution companies to further optimize their power purchase through exchange just because the costs will go down to that extent and increase the viability for the sellers. To create a market framework that is robust, efficient and transparent, on 18 July 2020, the CERC issued draft power market regulations for 2020. And we are optimistic that these developments will over time lead to enlarging, growing markets in the Indian power segment. On the policy front, just to give you an update, the power ministry also amended the methodology of coal allocation under the SHAKTI scheme, which allows generators to participate in the coal linkage auction even if they sell power on the day-ahead market on the power exchanges as well as on the DEEP platform. Now this scheme should really boost sell side on the exchange because the independent power producers will get coal, and this coal will be auctioned and be as competitive as you can get. And so they will get coal to generate, and they can then come and sell and -- go to sell-side liquidity on the exchange from the [ merchant ] capacity. And they will be eligible to participate in the coal auction and, thereby, leading to the full supply chain. And they will keep a check on the prices in the spot market just because the liquidity will increase and they'll be allowed to produce more power. So much for the regulatory and the policy, let me just give you a financial and business performance update as well. Our revenue for the quarter has been up 15.6% on a stand-alone basis year-on-year. This is primarily on account of increase in the overall volumes traded on the exchange. On a stand-alone basis, our Q1 profit after tax was INR 42.88 crores, which is up 8.3 percentage points as compared to INR 39.59 crores in Q1 '19. Now I just want to caution you: there are 2 nonrecurring items over here. We did make a contribution towards COVID CARES, a INR 5 crore contribution towards COVID CARES. And we had also a INR 2.6 crore tax liability, which had to be -- which was a differential from last year. Now because of which, if you take these into account, without these 2 nonrecurring elements, our profit after tax would have been INR 47.89 crore, which would be a growth of 18% Y-o-Y and 6% Q-on-Q. So couple this with the revenue growth of 15.6% and nonrecurring itemized profit growth of 18% Y-o-Y or 6% Q-on-Q, these are really strong numbers at any moment and more so during these times. So the company continues to be very strongly placed with a robust business model and absolutely zero debt. Just to give you a sense of electricity volumes. Our volumes increased from 12.9 billion units in Q1 FY '20 to 14.9 billion units in Q1 FY '21. This was a 14.5% growth in volumes. And with an increase in economic activity, which started towards the end of the quarter, our open access volumes did jump up in the month of June. And they witnessed a 30% month-on-month increase, which means from May to June, there was a 30% increase in our open access volumes. Including REC -- if I would include REC as well, which didn't do as much just because of the new regulation on the floor pricing and forbearance pricing, the total volumes grew 9.8%. I'm pleased to inform you that on July 10 of this month, just as earlier this month, the Ministry of Power also released an office memorandum which indicates a resolution of the decade-old jurisdictional conflict between CERC and SEBI, ably led by the government in order to facilitate introduction of yet another new product in the market: the long-duration power contracts, which will include forwards and derivatives. It's a really welcome step, a much, much needed, much awaited, a very positive step which has been in the works for a long time, and it will facilitate power markets to leapfrog the next level of growth. The longer-duration, delivery-based forward contracts and derivative contracts will potentially alter the way power is procured in our country because you get a hedge over a long period time. The order will pave way for introduction of these contracts, delivery-based contracts, on the power exchanges under the jurisdiction of CERC. The derivatives and forwards would be under the jurisdiction of SEBI. And we at IEX will be able to design long-duration contracts, move forward with the approval process in CERC. The contract from us is already done. So we'll move on with the approval process. And we hope to launch long-duration contracts pretty soon, surely in Q3 of this year. This should be another step towards our commitment of development of the power markets and achieving our business aspirations. Let me just give you a sense of Q1 initiatives. And there's been few. Like I said, it's been a really busy quarter. A few very significant Q1 initiatives for the year, the company committed to invest -- at a technology level for the year, the company committed to invest INR 15 crores in technology and -- tech innovation and process innovations. And this should lead to a better user experience, ease of trade for our partners and all our stakeholders. We are launching new functionalities for all our participants, a faster time to market for our new products and a better engine overall for the trading engine. So that's on the tech front. On the business front, like I mentioned, we conducted more than 30 events with our participants as part of the customer outreach efforts. As regards to new market segments, we introduced the real-time electricity market recently, which has received, I think, an absolutely excellent and fabulous response from our customers. It did a volume of 515 million units in the first month. That is just in the month of June itself. The market was launched on 1st of June, and in 30 days, we did more than 0.5 billion units of trade, which is absolutely explained, and it comprised 10% of total volumes traded on IEX. Additionally, the Indian Gas Exchange, which is India's first automated natural gas trading platform, it commenced operations on 15th of June 2020. Quite a few of you would have attended have attended our virtual launch event when the Honorable Minister of Petroleum and Natural Gas and Minister of Steel Shri Dharmendra Pradhan inaugurated the IGX. And the first trade was executed in his presence on the same day. Now IGX has traded 9,600 MMBtu gas within the first 15 days of launch. And also a very positive development, I think early part of July, the regulator PNGRB, which is the gas regulator, issued draft gas exchange regulations, inviting comments from all exchange -- from all stakeholders. And IGX is in the process of compiling this feedback and will share it with the regulators soon. So it will give a huge amount of structure to the whole gas trading market. Let me also give you a sense of way forward because, like I said, these are unprecedented times. COVID-19 has clearly unfolded a multitude of challenges and, in our opinion, as -- a huge number of opportunities for the power sector. Like I mentioned earlier to you, I think it is pretty much the most opportune time you can think of to really rethink the electricity sector design, to rethink the complete value chain, rethink the financial models which are operating in the electricity sector, the regulatory framework, all of these towards building a more efficient and sustainable energy economy. At IEX, we really stand at the forefront to deliver the solutions necessary to enable the transformation of the sector. The good thing really is that the transformation will be technology led and enabled by technology, and if you think of it, that is really who we are at the core of what we do as a business. We are focused towards a very high increase in engagement with the regulatory ministry to lead the market transformation and the initiatives which are working -- in the works right now. And we're working with pretty much every stakeholder across the country to draw a new energy order to lead this transformation to the new normal, which will be, in our opinion, underpinned by efficiency, competitiveness, flexibility and a serious gain for every consumer across the country. Like I said, Energy as a Service and a true consumerization of the power sector is on the anvil right now, and we seem to be in a very good position to be thinking and leading that transformation. With this, let me just stop here and open it up for question and answers. I've got my whole team with me, so I'll make sure that your questions are given the right level of expertise to be answered.

[Operator Instructions] The first question is from the line of Varun Goenka from Nippon Mutual Fund.

First of all, congratulations for 12 years and, I think, a very good growth now, then for a great quarter. And your RTM launch has been, until date, very successful, so my compliments for that. I have 2 broad questions. One around our stand on the derivative side. If you could help us understand, are we really looking to launch electricity derivatives when allowed? And having derivatives on the same platform or not having the advantages and disadvantages of that. We could have it in a separate company -- that [ regulatory overlay ], that's fine -- but within the IEX company. And my second question is regarding IGX or any such initiative. The equity ownership in the company as we understand now will not be 100% and has to be gradually brought down, if we could understand that part clearly, please.

Okay. Let me do the -- for your first question -- Varun, thanks so much for asking. Thanks for your compliments. Let me hand over -- for the first question on derivatives and how we envisage that product, let me hand it over to Rohit, who is our BD -- business head, to answer that question. And for the second question on IGX equity and how we see that progressing over the next foreseeable feature, I will have Rajesh Mediratta handle that. Rohit, over to you.

Yes. Thanks, Rajiv. Thanks, Varun. So the first one is about derivatives. And let me just quickly tell you a few things about that because we are clearly seeing need of derivative at this stage because the dependence of discoms on stock market is increasing. And then they are exploring all the options, and they are looking for product where they can hedge their spot market purchase. So is the case with industrial consumers who are looking for such things. Then as you are aware, the financial market would be there, which would be participating in such derivative market. So going forward, we do have plans. And as mentioned by Rajiv, the O.M. which has been issued by power market -- Ministry of Power, that clearly paves way for launch of derivatives and also forward markets. So we are working on both those things. The first part of it is forward market, where we are going to launch in our present IEX only because there is no issue as far as regulatory framework is concerned because that would be delivery-based contract and will fall under the purview of CERC. On the second part, which is purely financial product, we are exploring various options. You rightly said that we have to create a new company for that, and those things are under -- are being explored by us. Not yet finalized, but we are actively working on that front as well. So going forward, you will hear from us on that.

Any particular disadvantage in case we do not end up having derivatives?

See, in all the mature market, if you see, they play a very, very important role, right? So derivatives are something which gives price signal to the market, and it has got its own goal. When the dependence on spot will increase, so you need some financial product to support that because when you are transacting more and more volume in spot, you cannot keep your -- all your positions open, right? So there are industrial consumers. There are distribution companies. They look for one support price or reference price, I would say, for the year, and that will -- this purpose will be solved when we have derivative in place. So there are definitely advantages of derivatives. And in all the global market, the derivative volume is 10x or even more in certain cases of the spot delivery volume that we see. So it has got its own place. And as we will progress, as the volume will increase, it will have even more significant role to play in times to come.

Any bifurcation between forwards and futures, the size of the market, any assessment of that?

Yes. So forward pricing, we have already done and, in fact, in past, some of the -- such interaction we have shared. So there is an existing market in place. It has got -- which is about 20 billion unit in a year presently being done by some of the different OTC platforms, we being one of that platform. And then there are some more intrastate transactions going on, which are also forward in nature, which is not part of this 20 BU. So 20 BU is something which is a potential size that we are eyeing as of now.

Right, right. And about IGX.

Yes. Varun, I will just try to answer the second part of your query. We are now currently 100% owned by IEX, but we definitely are interested that the more strategic investors should join so that we can develop the market working along with them. So you may be aware that GAIL has issued an expression of interest, seeking exchanges to -- for them to invest 26% equity. And we have sent our proposal. We are waiting for their final outcome of that proposal. And also, we -- there are many big gas players who have shown interest in taking equity. And that -- so those proposals are already there with us. So we are talking to them, and we are doing some internal formalities, and some part of formalities have been done with the other players. So we will shortly -- maybe in a month or so, a month or 2, probably, we'll be able to share more details on who are the final investors on board on IGX.

So my question is, how do we retain maximum equity in this company given the size of the opportunity or given how attractive it is for us rather than remain a minority controller?

No, we would definitely like to remain majority holder. So 51% at least, we would like to hold. And balance only, we will seek for this investment. So we also don't want to be a minority shareholder as IEX because one is that IEX is a neutral platform. So I think that, that should not be a problem for anyone. But we would like to get to remain identified as a neutral player in the sector. So though we may have big players coming on board, but their stake will not be really high. So our interest is that we should remain neutral in the market. And only thing is that there are some few strategic investors on board, but that will help us create a better marketplace.

Okay. Sorry, just to clarify this, does the regulator allow you to keep majority equity? Or is it in dialogue so that you're able to bring it down to 15% over the next few years? What is the thought around that?

Come again. I...

My question was the new regulations that may not allow you to own majority stake in the company. So are you in dialogue with the regulator towards that?

Yes, definitely, definitely. We will be -- having operated our IEX for 12 years, we understand that -- what should be the right mix for investment on any delivery-based markets. So we are in touch with the regulator. We will -- we are in the process of finalizing our comments on that draft regulation, and we will be filing our comments. So we are still forming up our comments over that. And of course, there is a guideline available in the sense that we have a power market regulation which allows you to hold 26% if you are a neutral player in the market. And if you are a member, then you have to -- you are not allowed to go beyond 5%. But we will again review it with respect to whatever we have done so far in 12 years with our experience. If there is some modification required that -- we are analyzing our comments, and we are sharing with the regulator.

[Operator Instructions] The next question is from the line of Mohit Kumar from IDFC Securities.

Congratulations on good set of numbers and completing 12 years and launch of the RTM -- successful launch of RTM market. Sir, my first 2 questions, primarily. The first is on price. The new power market regulation, there's an enabling provision of price coupling. Sir, any thought around that? And secondly, on the transaction margin, do you need to take approval? And what is the kind of dialogue you are having with regulators? And is the -- have you got any clarity on those 2?

Okay. All right. Thanks, Mohit. Let me answer both the questions. And let me also give you a bit of a -- sort of a broad thing on PMR because I think the PMR has just come out, and we are all expected to be responding to the PMR shortly. Now I think in more ways than one, the way you see the PMR is about -- and the reason I'm choosing to do this is because coupling will form a part of the rule PMR regulation. The way it has been thought through is to create -- I think CERC is now in the process of creating, along with the Ministry of Power a very robust and a very sort of transparent and regulated power market. Now what should be regulated? What should not be regulated? How should the new product introductions work? What should the new markets and certain operational topics look like on current -- even all of that? And the OTC platform, the governing structure, all of it is being discussed right now with a view to steer running operations in preparation, in our opinion, for us very exponential growth. If you were to have an exponential growth today, I think the market could have challenges because certain [ operating structures ] need to be put in place to get growth. And PMR is a very significant step in the direction of trying to get all of that. The regulation draft, which [ will allow for introductions of new product enhancements ] without the approval of the regulator, amendment to these business rules are all [ hostile ], and they're all in the direction of [ clients ] instead of a very nicely streamlined market. To answer your question on market coupling, I think it's a provision which has been included in the draft of PMR 2020 as an enabling provision to support future growth of the power market. It's exactly the same sort of logic. I think there is a discussion going on between the regulator and the ministry and a huge amount of other people involved, which is consultants, [ analysts, states ], all that on what should the right and the most effective design of the power market look like, which is best suited to the country from a long-term perspective. All the right ingredients. I mean there has to be a vision to it. What's the right technology for it? What is the right innovation of products to come across? What processes? All of that is required to be done. And we are very, very closely engaged and involved in a lot of these discussions, and we are absolutely confident that the regulator and the ministry will come out with the most right, most correct enabling framework even from a coupling perspective. Like I said, as the growth happens, there needs to be support of streamlining. The other point about -- the point you mentioned about transaction margin. Look, I think transaction margin has always [ been, really ]. As in October 2018, this CERC approved our transaction fee by way of an order, okay? If you have to increase the margin or decrease the margin, you need to still go to CERC. So I think there's no change. They are just regularizing what the practice has been and what they've already said earlier by way of a regulatory order in October 2018. So there's no change in the practice. Look at it this way: I think what the market is going to have now is a plethora of products, many, many, many new products. So far, we had only 2. We had DAM and TAM. And then we've gotten RTM. And then now over the course of next couple of months, you will find that long-duration contract. The way the question was and what I'm about -- derivatives and futures and delivery-based contracts with a long duration, then that will happen. Cross-border products will happen. The green market, which is green TAM and green DAM, will happen. They're all new introductions this fiscal year or in the near term. Now all these market segments, Mohit, have a very different requirement from an operational perspective, from a technology perspective, from a management perspective. Just the intensity is very different. I mean some products trade in a very short duration, in a very, very short period of time, which is a DAM trade, for instance, but RTM trades throughout the day, there are certainly more things to do. So the operational intensity of each of them, the technology requirement, the people requirements, everything is different. And I think it is only fair for the regulator to evolve a framework, which is fair, which recognizes the fact that all of these investment has the need to be treated differently, and would make sure that we are provisioning the payouts absolutely commensurate [ with everything ]. So I think we feel comfortable with the way in which the whole thing is moving. Like I said, we are very deeply engaged and involved with the ministry to make sure that we come up with the best regulation, which is really the [ financial advice of all of the whole world ] because we are doing at a time where, like I said, there's a huge amount of transformation going on in the market, and we can really lead this whole setting up of the new regulation as well as a new governance mechanisms.

Okay. Sir, my second question is, do you - I think the -- since you plan to launch derivative contract, I think we will be allowed to hold only 15% in the case we launched this new company for the derivative contracts. Am I right?

I missed the question, Mohit.

Sure. In case you launch derivative contract in a new company, under the SEBI regulation for launching the new -- for launching the commodity future exchanges, I don't think that you can hold more than 15%. Am I right?

Look, I think -- let me -- I think Rohit can answer that question about whether we're looking for a new company or we look for partnership and all that. There are different ways of addressing the derivatives market. And the long-duration contract -- derivatives contracts will be under the guidance of SEBI, so you continue to work with that. And there are many other exchanges in the country with whom we can partner. So there will be different mechanisms which we'll have to evolve and think through over the course of the next 2 or 3 weeks to make sure that we do the right thing from our derivative routes perspective. It doesn't need to be necessarily -- they're not constrained in that perspective. We're not constrained from a holding company perspective or neither we are constrained from doing right sort of a level of partnership to make sure we maximize that. So there are different routes to go to the market for the derivatives. And then whenever these are to be delivered, the delivery happens on IEX. So there's a very, very good framework that we are evolving right now which can make sure that we maximize the delivery-based contracts, we maximize the derivatives, we maximize the futures and we maximize the delivery around all those products as well. So I think we'll be in good [ graces ]. We'll wait for a couple of weeks for us to come back to you on that topic.

My last question, sir, what is the time line...

Mr. Kumar, this is the operator. Sorry to interrupt you. May we request that you return to the question queue for follow-up questions as there are several participants waiting for their turn? The next question is from the line of Sudhir Jain (sic) [ Sumit Jain ] from ASK Investment Managers.

So the electricity future will be -- will it be in an index form, a? B, will it be cash settled when it happens? What your understanding would be? For the gas exchange. The PNGRB draft regulations, are they looking at capping of equity holding at 26% MCX has tied up with mjunction for a coal exchange, which is a spot exchange. So spot exchanges has been the area where we have been a frontrunner, and they have second place. Actually, in futures transactions, derivatives transactions, in fact, they already have a natural gas futures contract trading there. What is our game plan if another energy segment like coal exchange opens up? And MCX has also spoken about taking post from you and launching electricity futures when it is ready from SEBI's side. You are kind of dealing with the end users. They are dealing with the financial investors as well. So how do you ensure that electricity futures remain in your turf?

Okay. Let me give on -- the first question that you ask to Rohit to answer on the derivatives and the electricity futures and what we're doing. But just to give you a sense on the coal and what new lines of diversification can -- IEX can cross. And literally, look, our aspirations are to play in the energy basket of the country. And we were just -- we were an electricity-only player for a while, then we became -- middle of June, we started a gas exchange, and we added [ one ] portfolio to our company. We started new companies [ that are in gas ] exchange to launch our gas. And there can be many such similar lines of business in going forward. I cannot disclose with you -- to you on this call right now what those lines of business would be, but there could be many other lines of business. Like I said, energy basket of the country is very robust and very widespread and we can develop that around -- nothing stops us from expanding our portfolio in the energy basket. With that, let me hand it over to Rohit. Rohit, you can answer the question on derivatives. And I think there is a question on gas related to the [ same thing subsidiary ], and I think you can take that.

Yes, Rajiv. So Sudeep (sic) [ Sumit ], you are talking about futures. And as I said earlier also, we are going to play a very big role there because, as you know, all these financial transactions which are converted into delivery will come to our platform because we are the one who are doing all of the -- who are doing almost 100% of the spot transactions in the country. Coming to the -- your question about index side. So these are a little earlier -- early days. We are exploring all these options. All the settlement could be done. And yes, in all such cases, index plays a very, very important role. And we are exploring whether it should be the a day index, peak index. In fact, we have different categories in our spot market. We do that -- we do have a time of transactions. So we are exploring on those front. As I said, a little early days. I don't want to comment on it at this stage. But yes, in future, you are -- you will surely hear from us on these accounts.

But those will be cash settled, right, electricity futures?

Absolutely. Yes, those will be cash settled. And then we will also have -- those will come to spot. Those are converted into delivery. Those options will be there..

How do you fend off the competition? Because they are ahead in terms of the derivatives game. We are spot exchange, broadly. They will also launch electricity futures. We will also launch.

Yes. So as Rajiv said, we are exploring all the options. We are -- there is a limitation on holding also, as you are aware. So there are some players who are doing very good in that particular segment. We are doing excellent in this segment. So there could be some partnerships in future. Again, I would repeat, a little early to comment on that. We are still working on it.

Yes. And about the gas exchange.

Yes. Sudhir, just answer the gas part. So you -- actually, the cap proposed by PNGRB is 15%, not 26%. And we are making our final comments on that. So we -- as we have seen, in case of electricity [ 26% is good for ] for anyone who is not a member of the exchange. And that's, I think, the right thing to do for members -- nonmembers. But we also feel that exchanges should be allowed beyond that even 26% because exchanges are very neutral entities. So these can be allowed more than 26%. Nonmember, but a neutral entity from the market, they can be allowed to 26%. And maybe those who are participating on the exchange as members, they can be allowed to maybe, say, 5%. Or maybe they are also to promoters, then we can have a different level. So we are just analyzing different scenarios, and we are -- we will be finalizing our comments and share with the regulator.

Diluting at this stage, would it not lead to...

Mr. Jain, sorry to interrupt you. This is the operator. May we request that you return to the question queue for follow-up questions.

This is just a corollary, and then I get back in the queue. So diluting at this stage, would it not lead to a lesser realization for the dilution in the gas exchange?

No. One is that we are making our own comments. So our position would be not limit to 26% for the exchanges. So that is one. And if they do it, then they can allow some time for coming to 26%. So still, there is a final regulation to come out, so we don't see this a final thing. So let us give comments and see that what is final decision for PNGRB.

The next question is from the line of [ Vani Srikumar from Spark Capital ].

So my first question is on the forward potential that you just spoke about...

[ Mr. Srikumar ], sorry to interrupt. Can you please use the handset mode?

Yes. Yes, is it better now?

Yes, sir.

Yes. So what I want to find out is the potential 20 billion units in the forwards delivery-based market that you spoke about. Right now, is it being traded in the bilateral market, if I'm not wrong?

Yes.

So this will be traded with the trading licensees, and also, it will be part of the direct bilateral contract between the discoms. It will be part of that.

Yes. So, so far, all these transactions, as I mentioned, is being done through DEEP platform, and some of these trading licensees are participating on behalf of distribution companies and [ IPPs ]. So they are representing both buy as well as sell in most of the occasions. But going forward, when we are going to launch this, it would be done on our longer-duration contract platform, which would be extension of the TAM -- of the present TAM market. The present TAM market is about weekly contract. Here, we would have monthly contract, quarterly contracts and annual contract also. And you rightly said that 20 BU is the transactions that are happening today in the bilateral contracts -- forward contracts.

So when it is an extension of the current TAM market, so these trades would be on a continuous basis, not on a closed, double-sided, collective basis?