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

Ladies and gentlemen, good day, and welcome to the Q4 FY '21 Earnings Conference Call of India Energy Exchange, 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, Ritika. Good afternoon, ladies and gentlemen. On behalf of Axis Capital, I'm pleased to welcome you all for the Indian Energy Exchange Q4 FY '21 Earnings Conference Call. We have with us the management team of IEX, which is represented by Mr. Vineet Harlalka, Chief Financial Officer; Mr. Rohit Bajaj, Head Business Development; and Ms. Aparna Garg, Lead Investor Relations. We will begin with the opening remarks from Mr. Bajaj followed by an interactive Q&A session. Over to you, Rohit.

Thank you, Sumit. Sumit, am I audible? Clearly?

Yes.

Thanks. So good afternoon, dear friends. I welcome you all to the Q4 and fiscal year 2021 earnings call. Present with me today are my colleagues Vineet Harlalka, Mr. Rajesh Mediratta, Amit Kumar, Sangh Gautam, Samir Prakash, Deepak Mehta, Indranil Chatterjee, Shruti Bhatia and Ms. Aparna Garg. Our Chairman and Managing Director, Mr. S.N. Goel, is unable to join us today. He had been keeping little unwell and is now recovering. Amidst the surge in COVID pandemic, I sincerely hope you -- you all, your colleagues, your families have been keeping safe and being cautious. The second wave has affected us in so many ways. Our wishes for everyone wellbeing, good health and speedy recovery. It has been almost 2 years since we have been confronting the COVID-19 pandemic. Its harsh realities have impacted many of us besides marking dent on the economy industry as well as life as such. The second wave of the pandemic posed some risk and might offset some of the economic gains made in the last few quarters. For fiscal year 2021 has had its own share of ups and downs as we face the hardships caused by the pandemic, the macroeconomic growth indicator dipped to a unforeseen levels. The energy and power sector has not been an exception. The first 2 quarters were difficult. However, the last 2 quarters, have seen good growth momentum led by resilience on the economic and industrial activities front. In fact, in both Q3 and Q4, IEX achieved the highest quarterly volume ever [indiscernible] platform. During the fiscal year 2021, we made significant contribution towards supporting the economic and industrial revival through our robust business continuity plan. It ensured round-the-clock access to our trading platform and facilitated the distribution utilities with uninterrupted access to most competitively priced electricity in the most flexible, transparent and reliable manner, thereby helping them improve financial savings as well as improve their financial liquidity. Besides the launch of new market segments, the real-time market as well as green market, this added much needed vibrancy and dynamism to the market, providing great choices changes in terms of product offering to the market participants. As our nation prepares to revise the economic growth, we are confident of playing a key role in establishing an efficient energy order and supporting India's transition to building a sustainable energy economy. Technology and innovation are the key cornerstones of our vision to build energy markets. As a technology-led marketplace, we strive to integrate innovative technologies at both the trading and the enterprise IT levels to provide an intuitive, seamless, customer-centric and best-in-class solutions to the market participants. Fiscal year 2021 has been an exceptional year for us in our journey of the last 12-plus years. We can say that the year was characterized by digital transformation, comprising several initiatives welcomed on technology and customer centricity. Our key role in the energy ecosystem, robust digital and technology infrastructure, growing and diverse market segments and seamless market operation and services have helped us deliver success in these challenging times. During the year, we strengthened an advanced technology, expanded IEX's product portfolio with the commencement of new market segment, such as green market and real-time markets and also diversified our play within the energy sector with entry into gas trading through India's first authorized gas exchange, which is IGX, Indian Gas Exchange. The Indian Gas Exchange has subsequently onboarded several eminent strategic partners, such as NSE, ONGC, Gail, Adani Total -- Adani Total Gas and Torrent gas as key stakeholders. Our sectoral partners have a strong play in both upstream and downstream segments of the gas sector, while NSE, a global market leader with rich legacy expertise and experience in conducting operations at a large scale should help IGX play a key role in developing India as a market-based gas economy. With the market participants, warming up to the idea of competitive price gap and several key policy and regulatory initiatives, we expect trade to grow at a faster pace in the coming. Additionally, during the year, IEX also signed a licensing agreement with multi-commodity exchange of India, MCX. Under the MCX, can launch electricity derivatives in the country using IEX price as a reference price. Of course, this is subject to approval from government and the regulators. Throughout the year, we engaged with customers through the outreach and capacity building efforts through series of workshops and webinars focused on electricity market, green market as well as the gas markets. To build momentum in the gas market, we introduced an open auction format and also several market-friendly features, which has been received very well by the market participants. In Feb, 2021, the CEA laid down the much awaited procedure for approval and facilitation of cross-border trade of electricity, and we are pleased to inform that on 17 April 2021, we pioneered commencement of the cross-border electricity trade on exchange. In the mid- to long-term, our endeavor is to build a vibrant and integrated South Asian regional power market. Nepal is the first country to have participated in the day-ahead market on exchange and Nepal has since been trading almost on daily basis. The trading volumes are likely to increase going forward. We also continue our proactive efforts to bring other grid connected South Asian countries, such as Bangladesh and Bhutan. Simultaneously, we have also been doing the groundwork to advance our technology platform to support the lineup of upcoming new segments that include long-duration delivery contracts and the integrated Green day-ahead product. Our efforts around these fund and invaluable support from our members, clients, partners and employees has helped us navigate safely through the challenging times during the last month. Continued encouragement and support from all our stakeholders has been key to delivering a great success, and we continue to be optimistic about our future growth trajectory. I will now share with you overall economic and industry update and how it played out for our business. The industrial and economic activities and thereby electricity consumption reduced over 23% during the initial month of fiscal year 2021, primarily due to nationwide lockdowns in the subsequent months with the relaxation in the restriction, manufacturing PMI that had dipped to the historic level of minus 57.3 in April 2020, rebounded to plus 58.9, the highest over the last 8 years. The industrial activity decelerated a bit in Q4 compared to Q3 FY '21. However, it remained above 50. This has been a good sign so far and indicates the resilience and recovery of Indian economy. With the recovery in the economic activities, electricity demand and consumption improved, the electricity consumption has dropped by 23% in FY '20 and remained negative for first 2 quarters. The phenomenal rebound was seen in Q3 FY '21. In Q4 FY '21, electricity consumption increased by 8.9% Y-o-Y. The national peak demand also met highest level of 189 gigawatt in the fiscal year 2021. As of March 2021, the installed power capacity at 382 gigawatts saw 3.3% Y-o-Y growth. The renewable energy capacity saw 9% YoY growth, with cumulative renewable capacity now at 94 gigawatt from an earlier 87 gigawatts in the fiscal year 2020. This considerable growth in green power reiterates the fast-paced energy shift that has been underway and an increased impetus on building a sustainable and decarbonized energy economy. During the fiscal year 2021, IEX witnessed increased participation from the market participants given its robust value proposition of most competitive price besides the flexibility, transparency and no counterparty risk in the power procurement. This was also reflected in the increase in share of exchanges in the short-term power market, which has increased from 40% in the fiscal year 2020 to 54% in the fiscal year 2021. This is a significant jump of 14% in just 1 year. Most importantly, power exchanges now contribute about 6% of the electricity consumed in the country. This was 4.4% in the last fiscal 2020. Therefore, the exchange market has seen accelerated pace of growth in the last fiscal year. On the policy and regulatory front, the government introduced many futuristic initiatives, support the revival of power sector, with an objective to revise the viability of the distribution segment. Especially from the perspective of DISCOMs, financial health, the power ministry came up with the Electricity Amendment Bill 2020, proposing amendments to the Electricity Act 2003 with an aim to unleash distribution reforms, such as de-licensing of distribution business and facilitating competition in the power distribution and supply. This was followed by FM's announcement in the Union Budget 2021-'22 to introduce revamped reforms-based result-linked power distribution sector scheme. This is set to be launched with an outlay of INR 3 lakh crores over 5 years. Further to encourage better efficiency through increased competition within the distribution segment, government will introduce electricity connections portability while giving consumers the power of choice. In December, The Ministry of Power also introduced a proposal, enabling the distribution utilities to exit the power purchase agreement after completion of the term of agreement. This initiative will accelerate utility procurement, besides increased sale of power by the generators on the exchange platform. Another key development from consumer perspective was notification of electricity rights of consumer rules 2020. This was a significant step that aimed at streamlining and enhancing the quality of electricity supply and services being provided to consumers across the country. More recently, the government has also issued a draft national electricity policy 2021, which underlines the most pertinent issues of power sector with key focus on areas, such as provision of clean and sustainable generation of electricity, development of adequate and efficient transmission system, revitalization of distribution utility, as well as the development of efficient power market through an increased role of markets, aiming at market to represent 25% share by FY '24. The Ministry of Power also issued a paper on development of integrated day-ahead market in power exchange with separate price formation for RE and conventional power. Some of the important regulatory initiatives to deepen the power market was CERC Power Market Regulation 2021, which allows introduction of electricity contracts beyond 11 days, notification of proceeds around cross-border electricity trade, Merit Order dispatch and power purchase optimization regulations by some state regulators. On the gas market front, PNGRB introduced the gas exchange regulation in September 2020. Another important step that would help the development of gas market was the simplification of the pipeline tariff structure by PNGRB. The 2-zone tariff structure, which led to a reduction in the transmission charges for distant user of natural gas, thereby making it more conducive for trade on gas market. PNGRB has also notified final regulation regarding access code of CGD entity post exclusivity period wherein 20% of the pipeline network will be available for open access. Another important development was PNGRB notifying the imbalance management service regulation. These developments together will help increase competitiveness in the market and increase the convention of natural gas in the country. On a stand-alone basis -- now I'll talk about financial and business performance. On a stand-alone basis, revenue for the quarter grew by 28.3% Y-o-Y from INR 79.4 crores in Q4 FY '20 to INR 101.8 crores in Q4 FY '21. This largely attributed to a 41% increase in transaction revenues. For the fiscal year 2021, this growth was 20.3% Y-o-Y, with revenue at INR 357.4 crores for the year. Q4 FY '20 saw the highest ever electricity volume growth of 62% Y-o-Y during the quarter. Also, fiscal 2021 saw the highest ever yearly volume of 73.9 billion units traded at exchange since 2008 since inception, resulting in a growth of 37.3% in electricity segment on year-on-year basis. The growth was driven by the competitive power prices, creating traction with the distribution utilities as well as digital consumer, growing consumption of electricity, availability of adequate domestic coal and that, too, at a competitive price along with the commencement of new and much awaited market segments, such as the real-time market and green market. The day-ahead markets saw an average market clearing price of INR 2.82 in the fiscal year 2021, which is about 6% lower than the previous year price. Low power prices and ample sell-side liquidity throughout the year helped the distribution utilities and industrial consumers to optimize their power procurement and maintain good financial liquidity amidst the COVID crisis. The real-time electricity market commenced trading on 1st June 2020 and has received an incredible response from all the market participants. Market crossed 1 BU mark for 4 consecutive months i.e. from December 2020 to March 2021. In fact, in March 2021, it saw the highest ever month volume of 1.4 billion units on a cumulative basis. In Q4 FY '21, the market traded 3,766 million units. Since its commencement, the market has traded 9468, 9.5 billion units. We introduced another important market segment this year, Green Term-Ahead market to support and accelerate India's transition to a sustainable energy economy. The market commenced trading on 21st August 2020 and has cumulatively traded 785 million units since commencement. In Q4, the market traded to [ 238 million ] units volume across both solar and non-solar segment. As per the APTEL order, the stay in REC trading has been continuing since June 2020. During the fiscal year, the REC market would only cumulatively trade 6.97 lakh certificates. This has been [ damper ] for the exchange market during the otherwise exceptional financial year. Talking about way forward, fiscal year 2021 was a year of splendid success and growth for us. The year started in a turbulent way. However, demand resilience and positive sentiments in the last 2 quarters assisted economic revival and recovery in a significant way. While we are now going through and experience a second and a much harsher pandemic wave, our experience to deal with challenges, undaunted spirits and collective efforts will ensure victory in this matter. The localized restrictions and lockdowns may impact economic growth to some extent. However, the industry and commercial ecosystem seems to be well prepared this time as compared to last year and consumption seems to be stable. Going to the current situation, while RBI expects that the GDP will grow at 10.5% in this system, the industry exports have started coming out with revised estimates ranging between 10% to 12%. Taking all this into account and looking at the growth momentum IEX achieved in fiscal year 2021, we would endeavor to maintain double-digit CAGR growth track that we have achieved over the last 5 years. Overall, we expect the demand to register a robust growth during the next year due to -- on account of economic [indiscernible]. Further conducive policy and regulatory regime besides increasing power demand and consumption, adequate availability of domestic coal and phasing out of old and inefficient plant will serve as a key growth levers for us. Additionally, the much awaited launch of 2 market segments, longer-duration delivery contracts up to 365 days, integrated green day-ahead market, commencement of derivative trading on commodity exchanges and focus on diversification will unleash growth for us. In fiscal 2021, we made considerable investments to strengthen and advance our technology. We will continue the momentum in this fiscal too. Our endeavor is to make IEX a best-in-the-class technology platform. In FY '22, we will see fruits of past investments and our continuing efforts and investments to our technology innovation and operation. Some new initiatives that our market participants will experience are: provisioning of data insight, API, adoption of advanced MILP algorithm and most importantly our web-based trading portal, which we have recently launched on April 28 will make the trading experience seamless and far more intuitive for our participants. Coming to the new product launches, we have already marked the beginning of this year with launch of cross-border electricity trade. We expect to create greater momentum, as we engage in the capacity building and create awareness among the stakeholders. After Nepal, we expect countries, such as Bhutan and Bangladesh to join soon. We are also working to introduce longer-duration delivery contracts up to 365 days in both electricity and green markets. Another market segment that we expect to launch is integrated team day-ahead market. Once functional, this will allow greater revenues for renewable power sellers and buyers to trade renewable power. We will continue to work in collaboration with the government, customers and other stakeholders to develop the energy markets. As we move forward, with confidence and certainty in this otherwise in uncertain year, we firmly believe that we -- that the energy markets play a key role in transforming the sector. IEX is committed to playing a proactive role in facilitating the much-needed efficiency, competitiveness and sustainability in the energy ecosystem. Thank you. Over to you, Sumit.

Ritika we can open for questions.

[Operator Instructions]

Rohit, while the question queue assembles, I have a question. What is your take on the resumption of trading in REC? Or when do you see that happening? And what is your take on the status of new product launches, particularly LDC and the timing of that in FY '22?

Yes. Participants, you're there? Yes, Sumit, to answer your first question, which is about resumption of REC trade, see, we were -- in fact, APTEL has given multiple dates in the month of April, where they wanted to [indiscernible] hearing on continuous basis because initially they came out with the 3 days in the month of April, and they wanted to do it on a fast-track basis, so that within a month or so time, the resumption can be -- the REC trading can be resumed. But now the recent development is on the last date of hearing which was 28 because of COVID situation again, the new date given by them is July 14, which is again 3 months away. So this is a little bit setback, I would say, because we were expecting it to start somewhere later in the Q1 itself, but now it will surely go to Q2. So resumption will not happen until Q2. But since REC is one segment where you have to fulfill your obligation on annual basis. And since last year, it was not -- trading didn't happen, so all the RPO has been carried forward to this particular year. And even we might start a little late, but as and when it will start, all the participants, both distribution companies, as well as consumers, they will try to fulfill their past -- entire past obligation, which is for FY '20, also -- sorry, FY '21 also and FY '22 also. So though it is being pushed a little because of this pandemic situation, but we are hopeful that by Q2 end, it must start. So similar is the case with ESCerts market, Energy Saving Certificates, because we were expecting it to start somewhere in Q3 FY '21, but for, again, on similar reasons because of pandemic, it also got pushed. So same for Energy Savings Certificates, we are expecting it to start trading somewhere in the Q2 FY '22. So that was your first part. Can you please repeat your second part of the question?

Yes. I asked about the status on the new product launches and when -- particularly LDC, when can we expect it to happen this year? And what volumes to expect in this market?

Okay. So LDC is another segment which we are very excited about. And here, we have already filed petition with CERC, where this we filed about 6 months back, a long time since we have filed it. But only thing which is blocking introduction of this new product is the settlement has happened between the 2 regulators, which is SEBI and CERC. But I think they have to withdraw case from Supreme Court, such a long case, which is pending there in the Supreme Court, they have to withdraw that. And once that is withdrawn, our petition will be taken up for hearing and then we will get that [indiscernible]. So our expectation is after the Supreme Court withdrawal, we expect 2 to 3 months for the purpose of launching this new contract, which is longer-duration contract. So suppose this happens somewhere in end of Q1 or early Q2, so by Q2 end or early Q3, we should be in a position to launch this particular product. So from our side, technology readiness is there, petition, we have already filed. So nothing is stopping us from this. The only thing is [indiscernible] which is taking a little more time. It is taking a little more time than our expectation, that's one. You also asked about volume. So here, on an annual basis, about 25 billion to 30 billion units are traded under this particular forward contract platform. Today, this -- most of these transactions are done through this platform. We expect -- if we go by the similar volume that we see potential is there in this particular segment. And depending on our launch in current fiscal, we would like to capture some of that value.

Thank you, Rohit. I was on mute, so I could not state question but you covered very well.

The next question is from the line of Mohit Kumar from DAM Capital.

This is Mohit Kumar, DAM Capital. So just a few questions, sir. How far are we in terms of readiness for launching Green day-ahead market contracts? And secondly, where do you think RTM volumes can stabilize as a percentage of total electricity volumes, while we had a very, very good year FY '20 -- FY '21, but how far it can go up as a percentage of total electricity volumes in short to medium term?

So Mohit, I'll try to answer second question first, and then Rajesh sir can take up the first one. So your question is about RTM volume and what we have seen. Last year, RTM volume total, which was available only for 10 months, this particular product was available for 10 months did about 13%. Its contribution was 13% in our total electricity volume. But if we see Q4 particularly, Q4, which was very good, in fact, very exceptional for us in volume terms, the contribution of real-time market was close to 17%, 17.5%. So it is picking up really well. We are seeing increased participation coming from almost all the segments, which includes distribution utilities as well as open access consumers. So what is happening here is now some of the distribution utilities they are dividing their total requirement in 2 baskets. So one is the firm thing, which they are coming to day-ahead market, which is absolute essential which they want to do. And then there, there is some 10%, 20% some mismatches there where they have some doubts whether this sort of demand would be there or not, that part they are keeping for real-time market. So this is one reason and in fact, in the month of April, the same trend continued after we again witnessed more than 1 billion unit. And in fact, highest ever monthly volume was recorded in the month of April. So difficult to put number to it because we have seen consistent growth there. But I won't be surprised if this is -- this starts to do somewhere between 20% to 25% also in, let's say, a few quarters from now, then I won't be surprised. So if this is -- if I have answered your question.

Yes. For the first part, Mohit, G-DAM is like something which we have been pursuing long with CERC, where we had applied for G-DAM, but it was rejected in 2018. But now again, the Ministry is very keen to launch this G-DAM market. And already paper was issued and paper sets the target of deadline of June 30. The only thing is we don't expect CERC to clear our application by June 30. We have already filed our application last month, so we are waiting for approval of G-DAM from CERC. And post approval, we will be ready to launch this. So as soon as approval is granted by CERC, we are ready for launch with the G-DAM. So maybe quarter 2 of this year, we should expect this market to commence.

The next question is from the line of Gokul Maheshwari from Awriga Capital.

RTM market has done very well for us and the market share gains have come from largely the bilateral market and not from the DSM. So could you just comment on how the -- how can we really capture more share from the DSM market? And secondly, just on the second question is on the REC listing, just wanted to reconfirm that the customer segment will have to make up for the FY '21 volumes as well. So if you could just confirm that as well.

Yes. So for REC segment, yes, we have to make up for the FY '21 volume as well because this RPO calculation is done on annual basis in most of the cases. And in certain cases, carryforward is allowed, in some other cases, it is not allowed, but when there was no option available, you have to make up for that in the subsequent year. So most of that will get converted into FY '22. Now to answer your first part, which is about RTM. So there is no shifting which has happened from bilateral market to RTM, no, because these are 2 very different time frames. These market operates in very different time frame. When we talk about bilateral market, it is normally 1 month and beyond, right? So when those who are participating in real-time markets, they are doing it on the basis of -- they have balancing requirement, [ there's ] correction in forecasting where they have gone wrong on day-ahead basis, that correction they do in the RTM market. So no relation between the 2. But as far as DSM is concerned, a lot of shifting has happened. So if you see absolute number of DSM, you will not find major change there. But if we do some deep analysis of DSM number, we have seen that a lot of quantum has shifted from DSM to this. What happens in DSM is, when you are overdrawing [indiscernible] there are various slabs where -- suppose we are drawing more than 12%, then there is a 20% slab penalty, which is applicable, up to 12%, nothing is applicable. We have to clearly pay on the basis of DSM prices. And suppose we are going beyond 15%, then 40% is applicable and after that, 100% penalty is applicable. So what we have seen in most of the cases, there are certain states which were overdrawing their penalty portion, the quantum they were overdrawing and paying high penalty that has gone down. So that quantum has shifted to RTM market. I can quote some more examples. We have seen in many cases, where all of the sudden, there is a shift -- there is a tripping of one big state plant. So we have seen in case of many states, particularly [indiscernible] 2, 3 times all of a sudden, their one plant, which was running at 600-megawatt got tripped for some reason. And this state was participating in RTM in a very big way. So to makeup for the loss, which has happened on account of this plant going on [ par, ] they had no other option but to come to RTM. So has this market not been there, they would have been dependent on DSM market, they would have paid very high penalty by overdrawing from trade. So as per our analysis, a lot of shifting has happened. Only thing is absolute number has not gone down to the extent there is no penalty available, states are still drawing, and which is write also. There's no harm in that, as long as we are paying pure normal DSM prices, it is okay to overdraw [indiscernible].

Okay. And lastly, just on the dividend, your payout. I mean, the company is sitting on around INR 600 crores of cash, could you just comment on your dividend payout policy, especially given that investments are largely done with the IGX as well, and there are no major capital investments. So is there a firm dividend payout policy?

I would request Vineet to take up this, please.

I'd like to inform that we have a dividend policy. And as per the dividend policy, the company wants to endeavor that 50% of the profit should be distributed in the form of dividend. And keeping in that line, in January itself in this -- in last quarter, the company paid a dividend of 250%, INR 2.5 per share. And considering that because this time because of the COVID uncertainty, the dividend was not declared. But definitely, it was on the task. So when we go with our annual report to the shareholders [indiscernible], definitely you may see some dividends. Regarding the INR 600 crores [ line of funds, ] you will see the exchange business is a bit a different business. So there's a lot of companies [indiscernible] deposits on the funds. So those funds are [indiscernible]. If you look at the overall shareholders on that fund will not be [indiscernible] in comparison to the overall [indiscernible] they're also exploring some other opportunities because the way the platform market and the way [indiscernible] so we are definitely looking at it and the [indiscernible].

The next question is from the line of [indiscernible].

And congratulations on a very good set of numbers. Sir, just 1 brief clarification on LDC and derivatives contract. So in the interview today, we expressed that there was a positive development. But currently, you highlighted that the matter has been settled, but the case has not been withdrawn. So I'm just not able to understand what has really changed here from the past?

No, nothing changed in last quarter or last few months, I would say. See, what we are saying is the settlement has happened. Now both -- there is absolute clarity amongst the -- amongst both the regulators, which is SEBI and CERC in this particular case. They have drawn line what's [indiscernible] under this jurisdiction. Only thing is this settlement has to be vetted by the court because this is pending in Supreme Court for almost 10 years now. So this is very close to resolution now. Only thing is they have to file one joint application for withdrawal, which they have already filed. But the problem is for some reason because of COVID only very pressing matters are being taken up at Supreme Court level. So really -- in the past, we have seen many dates were given and for some reason, all those dates were -- the hearing didn't happen on that date. It is just one hearing away from Supreme Court where the final order will come and settlement done by the regulators and ministries will be acknowledged and will be appraised. So nothing changed. The only thing is we are waiting for Supreme Court to come out with the orders so that those can be opened and finally these contracts that we launched.

Okay. Okay. And in case of Green Term-Ahead market, I mean, there has been an increase in the momentum recently. So is it because that the summers are there, which keeps the liquidity from the side of the generator on the higher side? So is there some seasonal effect or something has changed structurally here?

Yes. So it's a combination of both the things. We have -- not many sellers today who are actively participating here. And some of the state utilities are also there. So some certain state utilities are actively participating and their own demand has gone down. So when their own demand has gone down a little, they have huge surplus quantum, which they want to sell. and they are bidding that at our platform. That is number one. And second important thing is when we launched this market in August, so [ August '20 ] is normally a time when your wind season is over. In India, we have -- wind generation starts to kick in somewhere in May and it peaks somewhere in June, July, August. And after that, it decreases again. So last time, we could not take advantage of wind season because by the time we launched this contract, not enough wind generation was there. This time, we are rightly placed. And initial 5, 6 months, this volume should be very high because solar, which is largely available throughout the year, wind is [indiscernible] which is available only mostly in the H1. So that is another reason why we are seeing some traction.

Okay. And amongst the generators who have not tied up with PPAs, what is the percentage of the generators we are able to tap on the exchange currently for trading of G-TAM? And what are the constraints for the generators who we are not able to tap and who are still not tied up with the PPA?

So for all the renewal plants, you will find that all the regular generators they have some sort of arrangement with -- either with the consumers or with the distribution company where they are supplying under certain terms and conditions. So most of these are under long-term PPA, which is up to 25 years, but there are many small generators. They have small quantum PPAs with the consumers with the C&I segment, particularly for 1 year also. So today, we have got -- we have seen participation of over 10 generators at our platform already, where we have participated and whatever surplus quantum they had, they have started. And in fact, there are 2, 3 opportunities for us. One opportunity is where they have tie up -- very short-term tie up. There are many where they have tie up of 1 to 3 years. So we are targeting those generators because here the realization is pretty good, and they can explore this option as well, that is one. Second is there is another set of generators where as per the PPA terms, they have to maintain certain utilization factors in a year. So sometimes what happens is now particularly because of newer technologies, because of some good year where your [ generation ] is little more, they exceed those [ COS ] numbers. So what we are trying to tell them is when they are going beyond, there may be a commitment, they can also compete this platform and start selling the surplus power and thereby, realizing the market prices that -- but large part of the transitions which are happening today, here, the sellers are distribution company. There are many distribution companies in the country today. Those were supply. There are states like the Natta, which has both solar as well as nonsolar. AP's surplus is both solar, nonsolar. Telangana's surplus is solar. Tamil Nadu's surplus is nonsolar, Gujrat has surplus in of the 2, similarly [indiscernible] is also surplus. So many distribution companies are there who are surplus and we are trying to take them on board so that the side liquidity can be maintained. And on the buy side, there is no dearth of demand because all sincerity trading is not happening. Most of these buyers, they are willing to buy a green energy is for the purpose of facing their RPU. And prices are also quite decent, very competitive price power is available.

And sir, in case of cross-border, the existing volumes that we highlighted was 18.07 billion units in FY '21. So what percentage would be up to 11 days and 11 days to 1 year and 1 year and above? So the 18 billion units that you mentioned, the opportunity sizes.

No, no, 18 billion unit It's never an opportunity size for CBET. We are talking about cross-border trade, right?

Yes, cross-border. Yes, yes.

Yes. So cross-border trade that we have started recently about a month back, where we have seen participation from just one entity, which is Nepal. And participation has been quite decent. Some days we have seen overall participation going up to 5% of our day head market, and it is ever increasing as far and they are meeting their requirement depending on their demand supply situation. All this quantum that we are talking about is in the spot market. Today, only their participation is allowed only in spot market. So whatever number that we are sharing and it is for sure not be it must be million unit or this is coming from spot market because that's the only place where this transaction has started. So nothing beyond 7 days, nothing up to 365 days. Those are separate contracts. Those are separate bilateral contracts which are going on, which has been going on for a long, long time. So today, what we are saying when CBET has started, it has started purely from the point of view of their participation at our exchange plan.

So we are the one to start the spot volumes, if that's the right understanding in cross-border trade as of now?

Absolutely.

Let me add what Rohit said because if you see, when we started exchange, there was nothing up to a week volume or up to a day. So everything started the converting bilaterals into their and other markets. So this is what will happen, some part of the volume which is currently happening in bilateral, which is the month or 1 year convoy, that part will -- may ship to their market because people would like to -- all our laboring countries would like to target competitive with discovered price. And in bilateral, they are not comparable because the price is never -- they are not comfortable with the prices because whether it's competitive enough or not, always that appeal is there. So we hope that currently what is happening in bilateral. A part of that will sit there. So there's nothing which is currently happening on date or a net basis. But what is happening on a monthly or yearly that will ship to date.

The next question is from the line of Kunal Gandhi from Banyan Tree Advisors.

Congratulations on at numbers. So my question was again on the DSM market. So you were highly cited in the previous participation that we are seeing a shift in terms -- because what I remember that we launched our team as a product to make sure that there is a shift from DSM to the RTM. And you also highlighted that we are already seeing that shift. However, when you look at the absolute numbers, you don't see that at all, right? You're continuing to see DSM volumes to be there where it were, in fact, they are in your presentation, you would have highlighted that 1% off from last year, right, on a 9-month comparison basis. So then it doesn't tie up, whereas when you look at the bilateral market, there, you see a significant drop in the volumes. So how should one look at this? Because at the end of the day, looking at the overall limit lab, everything, it has to -- the DSM volumes need to go down as we are getting some share from there, right? How should one read into it?

See, as I explained earlier also, is within the DSM thing, you have multiple slabs. I won't go into the same detail again. But what I was trying to tell you was sometimes what happens is then all of a sudden, you have got huge imbalance available because this could happen because of some tripping, this could happen because of some renewable intermittancy, all of a sudden, wind generation playing up or down. So what the options were available to you was It was only great right. We can start to grow more or our second option available to distribution company was load shedding to support 600-megawatt supply gap so immediately you will shut down certain feeders to make up for that loss. So now what has happened with RTM being in place. First of all, that load shedding is not happening because now you have options available where you can execute come to the market and start buying. And second thing, which I said was where you were attracting, where your overdraw was attracting, huge penalty, right? So this quantum was not very high. This quantum was not a very high because when they used to watch that under penalty being imposed, we need to take certain -- some decisions of load shedding and other things at gearing. So what has happened is...

Rohit, probably his question is still not being answered. What he says is finally, the numbers should reflect the shift, but numbers are not reflecting the shift. But what I can add to the understanding is that with the increased renewals coming into system, probably if nothing -- no RTM or other options are not available, would not have been available. Probably that time the DSM should have increased. What has not increased is actually coming into the real-time market. And so that can be explained like this because as we are going into higher renewal regime, than intermittency and more deviations are likely to take this, which is not being reflected. It means that otherwise, which would have happened are actually coming to real-time market.

Absolutely. Sure. Sure. And also on the -- in one of the calls, last time on we had discussed this point about the price at which the penalties are being levered is not a block price and the day average price. Any hope that you can share like what will happen to the DSM market as there's a change in the regulation regarding the price that is benchmark for the DSM.

Yes. Yes. Yes. I think that there is no discussion today happening. But of course, it will be more rational that we are raising prices, the DSM prices with time growth-wise prices. But currently, discussion is not taking place. And we have also not raised this issue because we are also not very confident to what extent this will impact volume. But we will do our own analysis and then pursue with the CRC.

Just to add here, Rajesh sir, when this regulation came somewhere in 2017 or '18, that time they mentioned very clearly that in a year's time, so they are starting this on pilot basis and within a year's time, they will migrate from RTC average price to time block-wise price. So it was mentioned there in that entire particular regulation. But for some reason, they have not taken it up. And we have seen increased grid discipline after that. So today, sequence is not changing much, and you will most of that time file the narrow band of whatever that they have designed. So that way -- that's an excellent point because going forward, if that has to happen, then surely, we will see some more conversion from DSM market to RTM market.

And I think likely raised on DSM, we also have meet their...

Yes.

Sure, sure. And sorry, I also missed on the dividend policy part, you had mentioned that we have a policy, 50% profits has pay out, right? However, this year, that payout looks be lower than 50%. You did explain something with the Annual General Meeting notice, but I missed on that. Can you repeat that again, please?

Yes, yes, please.

You have rightly said that companies have a policy of paying at least 50% of profit as the dividend. And in line with that in the month of January, we paid the entering dividend of 50%, 5 year. So there was a cash outflow is almost INR 175 crores. And because of this month, because of the high-end -- this COVID situation. So we did not declare the final dividend looking at the overall position. Can we declared the AGM for now and that time 1% to be reconsidered and announce the dividend. Now I can't comment because that is a Board prerogative when we look into it.

[Operator Instructions] The next question is from the line of Swarnim Maheshwari from Edelweiss.

Yes, sir, 2 set of questions. First one on the day head market. Now I believe we will be launching the LDC market somewhere by December. Now if you see that -- but the demand has basically kind of softened a bit and it is likely to be there in the low teens for the next 2 or 3 months. And this has also impacted our -- the volumes for day head market. What you also see is that there is some sort of a revival in the short-term PPAs. So my question over here is that can the ban volumes be under some pressure from, say, Q1 to Q3 till the time we don't launch the NDC product? That's my first question.

Yes, so the requirement -- that market is there to fulfill certain set of requirements for market participants. So these distribution companies, they analyze their supply, they analyze their cost of supply, availability on day head basis, on that basis wherever the deficit wherever they want to replace or optimize, they participate at our plant to participate in our day head platform and we that requirement. So I don't agree with us that since the softening of demand has happened, so our volume will be under pressure. I can -- as I can recall, last year, in the month of May, volume was down. overall demand was down 15% Y-o-Y. But that was the month where we registered 40% growth in our volume. So there are -- it's not purely related to demand. And in fact, this is the H1 also last year or Q3 also, their demand was -- has not picked up so and our volume was going great in particular that part. So what happens is there is a -- day head market is used for meeting deficit. So if you have shortages, you come to market. And second important thing is when the chief power is available in the day head market, many distribution companies today, they start to back down their own tradition and come to this market to optimize on their power cost. Similarly, if the prices are down, there is a ability in the market. We see a lot of C&I participation in CV and when the prices are down, they're breakeven -- their viability increases and they participate. So no reason for us to believe that going forward for, let's say, next quarter 1, 2, 3, we are expecting day head market to be under pressure. NDC is a different segment altogether. So we do have bilateral markets, which have been functional for so many years. In fact, it started much before exchange, and this has been doing decent volume year-on-year. As I said, there is about 25 billion, 13 billion unit potential, which is available, and we are in the process of launching this market to capture that. So it's not that we are expecting some shifts from here to there. Both the markets are independent markets, and this is as per the global standard. Globally also, you will find there is market available for different time frame. Market is available for annual buy, quarterly buy, monthly buy, day head buy, real time buy, all these markets are as per the standard design, which has been adopted by almost most of the countries globally.

Fair point. In my mind, this limited understanding was that we are unlikely to go back to 200 million units, that per day kind of volume that we saw in Q4 specifically. That was my limited point because the demand has softened and then there is a revival of short-term PPs also. So that was my limited point. And hence, in isolation on an absolute basis, the bank volumes will be strong, but maybe since we have a base effect also, I was talking more from that perspective. So that's it. Sir, the second question is on IGX actually. So we have actually almost sold the now closer to 45% stake, and there is actually more price discovery, and we appreciate the fact that this was on account of that percent of the competition clearly. I just wanted to understand the next 30% where we have to actually get to about 75%, and we have to bring it down. So in that mix, 30%, when is this expected to take place? And importantly, can we expect this 30% stake sale to be at premium to the face value?

Yes. You are very right. Actually, we have divested about 46%, 47%. And we don't intend to sell this further 30% in near future. So we still have to take a call that when we will be doing it and at what premium that will be done. So I can't say anything on that because the Board will take a call. But that overall, this investment is not going to happen beyond the 50% any time soon. So currently, what is there maybe, lets say, some small investment can happen to one of the strategic investor, which can happen maybe in a month or so. But beyond that, we are not looking for any further of this investment and premium, we will fit as we go along.

Yes sir, because the next 25%, you have got a long window of about 4, 5 years.

Yes, yes, yes. We have 4 years' time, so that we will decide when to do that.

Sorry, if you [indiscernible] state said what was done from the standard point of view. So it was not the intention of just giving the equity to someone to the financial of the investor. And so company has done it to cheapen the cores of the [indiscernible]. And going forward, we see as Mr. Mediratta has said, as one or two the key significant player which we are doing to take. There is no intention to divest the mandatory regulatory requirement is there to [indiscernible]. We should be giving the concern with investors to understand the structure.

The next question is from the line of Abhilasha Satale from Dalal & Broacha.

Sir, my first question is towards CRC's order, like CRC's approval for the new exchange. So this is like [indiscernible], which is -- which is an offing. So what is the update on that and where are we placed if anywhere that exchange is coming on stream. So this is my first question.

Yes. So very recently, there was order from CRC where registration has been approved by them. And now what we understand is they have to file business rules, and they also have to share their technology platforms with CRC and obtain approval. So that's the status. And as far as we are concerned, we have been maintaining all these, that we welcome competition. So what we feel is it is just a start. We are just doing -- as exchanges, we are doing only 6% to exchange our there for so long time. And we have to go a long way. Our focus should be on evolving right market designs. There is a lot, which is to be done. In fact, if you go by a national electricity policy draft fund, which has been released by government very recently, it talks about exchanges contributing 25% in that total consumption by FY '22. So if those are our targets and if you want to do -- if you want to go beyond that, if you want to out entire generations to exchange, and if you want to use exchanges for the purpose of renewable capacity addition, if you have plans for COB and all these things are being considered at various levels in the government by the regulators and everybody. So if those are things to which is to be done, we always believe that competition is required. It will eventually help the end consumers. They will have more competitive power, which would be available. As an exchange, we would be able to do some more innovation, create more customer-centric products and everybody will pan out of that competition.

Okay. Yes. And sir, after approval, like what is likely time line for the actual -- the launch of the exchange. Like what it is according to?

Difficult to say. It depends on individual company. But one thing is clear, what I mentioned 3 months' time has been given by CRC for the purpose of obtaining these approvals, they have to file. And beyond that, we are not aware of how much time they will take. But developing technology and since so many new products are there, it is a constant continual improvement basis we have to do some of the things as far as technology is concerned. So it is not so easy thing. We have to invest time we have to invest money to get all those things in place. Difficult...

There was a media story which said that they are expected by year-end. So that is what you can take it because it must be some statement from that car loads, which has been recorded in the media. So they are expecting to start operation by year-end.

Yes.

Yes, yes sure. And secondly, sir, my other question is on GTAM. So you mentioned about the GTAM volumes from where the volumes are coming when we are launching GTAM as you mentioned, most of the green energy is with PPAs, like the PPAs are already signed for whatever the power plants are coming. So from there, like what kind of opportunity we are seeing in that products GTAM? Like how much volume we are seeing over a longer period of time coming through green energy?

I'll share one example. See, when we started exchange in 2008. That time, there was no concept of merchant and retails. So except for one odd ITP, where they had no tie-up available, they were selling at exchange. Otherwise, the entire capacity in the country was tied up under long-term PPAs. Now if you see today, over the years, what has happened today, we have got 30 gigawatt of merchant capacity available in the country where there are no PATs. People are investing in projects where they want to create capacity, which is solely dependent on the market. They participate in bilateral market and spot market and try to maximize their rent. So this is what we have seen. And it has its own traded initially some of the IPP, they started beating just 15% power for market; remaining 85% is for long-term PPAs. And same thing is or will happen in renewal as well. So today, as I said, there are not many generators where they have tie-up, but there are many generators where their PPAs are continent. There are many generators who are following -- who are watching these prices. Those who are taking reference of these prices and then they are planning to create some capacity only for supply under merchant route within mid- to short-term. So what we do is especially create marketplace whatever is available in the market will come to the market and then market will start giving signals to all the people who are willing to make investments in the sector and take position and try to create capacity and sell. Rajesh sir, do you want to add something here?

No, no, no. You covered very well.

The next question is from the line of Varun Goenka from Nippon Management Fund.

Congratulations for a fantastic performance. We have been delivering for over 10 years now. So very credible. I think you've answered it in very good detail. You mentioned a few technology initiatives. If you could lay down some details as to what you have done in FY '21, what are the key initiatives and implementation for FY '22? How is it -- what is it solving at your end? And what is it solving at the customers. It could be really good to know.

Amit, can you please -- would you like to answer this?

Yes. Sure. Good afternoon, everyone. So regarding the technology initiatives that we have taken in the current -- in the last financial year. Some of the key ones, one is that we launched automated bidding option for the customers through the application programming interface. So with the launch of real-time market where the customers had to do bidding 48 times during the day, It was important to drive the growth and adoption of real-time market to provide customers with an option to integrate their systems directly with our systems through our API so that the whole bidding process can be automated. And that is something we'll launch like from day 1 of the launch of the realtor market. And some of our large members are already integrated to this automated API bidding solutions and almost close to 60%, 70% of the cleared volume in realtor market actually is for the bids that gets placed to the automated apply bidding model. So that is one of the options that we did. The second option was we purposely, from a product and technology perspective, we are innovating and identifying how we can make the whole process seamless and easy for customers to interact with the -- with the exchange platform. So with that objective, we also looked at the opportunity wherein we can provide customers with an option of auto forwarding their uncleared bits of day head market into term head market. So for example, as we know that once the day head market ends post-tax customers have an option of placing unclear bids into that day head contingency market. And the existing process was that if there is one clear bid then they have to then create the bid for placing in the day head contingency market and place the bid manually. So we built a solution which was an option of automating this whole carryforward of uncleared day head market bid into a day head contingency market. And if it doesn't get clear in a day head contingency it gets carried forward to day head market. So customer has the option to pick up that option as well. So those are one or two examples of solutions that we provided, which eases the bidding experience for the customers. Then in addition to that, we also introduced some of enhancements that enables easy view of the existing bid. So for that, we introduced a dynamic market watch in the functionality in the term-ahead market, which enabled customers. It's a very, very easy view of the active bids which are there in the market. So that based on that, for the consumers matching products, looking at the dynamic market wards, the plan to put in bids and we at the right prices to deal with the market. So that is another example of our customer-facing initiative that really helps the customer. In addition to that, we have built in lot of automation of some of the existing processes, which helps us provide much more faster outcome to the customers. One of the example, we have done automated institution with our trading banks, which now enables us to provide payment credit even 3 to 4 hours faster than what we used to do earlier. So which means that we are earlier on most of the time the grade used to happen in the second half, and now you're able to do that credit in the first half itself so that customers who want to utilize that money to invest in the funds or in that activity like there are a lot of afternoon points which have automate, they have the money right in the modeling for them to use it for the investment and other working capital needs. So these are some of the examples of automation that we have done and technology that we have used to enhance the customer experience. And so that is from a customer perspective, and then there are a lot of process automation that we have done within our internal company processes, which makes our company internal processes much more effective. We have done an SAP rollout, within the organization, which makes a lot of internet processes much more effective. There are a lot of business process automation that we have done, which makes the whole market operations processes through which we provide the registration and the scheduling in certain facilities to the customers, that becomes much more effective. And very recently, we have launched the web-based platform for our customers. So one of the key initiatives that we are also working on is to provide all our existing platform features through our web based platform to the customers and also going forward through a mobile-based platform. So we have, in the last week, April last or the best features platform to the customers. So that is something that we have done until now. Going forward, some of the key things that we are going to do is extension of the web based platform to provide bidding for all the products through the web based platform itself. And also into the introduction of mobile based platform, which will provide a lot of deep data insights and also going forward, provide the bidding option to the customers. So that is one important thing that we are in the current financial year going to work on providing. Second, I mentioned about the auto carryforward between day head and day head contingency. We are with the success of that to carryforward functionality, we are working on building auto carryforward integrated pipeline for all these different product segments. So that customers could have the option of using the auto carryforward functionality to carryforward just to give example, suppose a customer wants to have a bid placed in the existing winning term head market, if it doesn't get cleared, let's say, it's a sell bid, it should automatically move to the real-time market. So similarly, we have identified all the different auto carry, and we are building a pipeline, which provides option to the customers to utilize that feature to ease the whole bidding process. So these are some of the initiatives that we are working upon in this financial year. And in the subsequent quarterly earnings call, we'll keep you updated about what we have done and what more we plan to do for more transforming customer experience and technology product.

Ladies and gentlemen, due to time constraints that was the last question for today. I would now like to hand the conference over to the management for closing comments.

Yes, thanks. So thank you so much for attending this. We value your time. Today is a holiday for some of us and still we could have to do it. Thank you so much. We, again -- we expect you to stay safe, be cautious. This is just a passing phase. All of us can weather this surely then. And thanks to all the management team. Thank you from all of us here to all the participants. Thank you so much.

Thank you. Thank you. Thank you, everyone.

Thank you.

Thanks, everyone. Thanks.

On behalf of Axis Capital Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.