Ladies and gentlemen, good day and welcome to the Indian Energy Exchange Q2 FY 2022 investor conference call hosted by Axis Capital Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Jiten Rushi from Axis Capital. Thank you, and over to you, sir. Thank you, Lizanne. Good afternoon, ladies and gentlemen. On behalf of Axis Capital, I'm pleased to welcome you all for the Indian Energy Exchange Q2 FY 2022 earnings conference call. We have with us the management team of IEX, which is represented by Mr. Satyanarayan Goel, Chairman and Managing Director, Mr. Vineet Harlalka, Chief Financial Officer, Mr. Rohit Bajaj, Head Business Development, and Ms. Aparna, Lead Investor Relations. We will begin with the opening remarks from the management followed by an interactive Q&A session. Over to you, sir. Thank you. Good afternoon, friends. I am Satyanarayan Goel from IEX. I welcome you all to the quarter two FY 2022 earnings call. Present with me today are Mr. Vineet Harlalka, our CFO and Company Secretary, Mr. Rohit Bajaj, Head Business Development, Mr. Amit Kumar, Head Market Operation, Mr. Sangh Gautam, CTO, Mr. Samir Prakash, Ms. Shruti Bhatia, Head Market Communication, Mr. Inder Gill, looking after new initiatives, and Mr. Jogendra Behera, who's heading the regulatory affairs system division. We seem to have almost overcome the COVID-19 pandemic. There has been a significant uptick in the pace of vaccination. Yesterday, we achieved a landmark figure of 100 billion vaccinations in the country. I think it is 100 crore. The economy, industry, and retail activities are resuming fast. There has been a clear resurgence in economic activities, leading to rapid increase in the demand for power. Recently, the exchange power market has been seeing constraints on supply side. We all are reading about the media articles regarding high prices and limitation on the sell-side liquidity on the exchange. It is important to understand the fundamentals behind all these news articles. In H1 this year, there was 14% increase in the power generation in the country with respect to last year. Monsoon affected the domestic coal production and supply. There is increase in the price of imported coal. The prevailing price of $120 per ton for 4,200 BTUs coal is almost five times more than what it was one year back, $25 per ton. At $125 per ton, that variable cost will be almost about INR 9- INR 10. In case of LNG also, there has been very high price increase, almost 10 x. The LNG prices are almost about $30 per MMBtu, and about a year back, it was just about $3 per MMBtu. With $30 per MMBtu, the variable cost will be more than INR 25. With generation on imported coal and LNG has reduced significantly, and as a result of that, there is more pressure on the domestic coal. This phenomenon is not only in India. Countries across the globe also have been experiencing similar situations, leading to an unparalleled increase in the price of energy and power, as well as rise in price of other commodities. Government of India has already undertaken several initiatives to ease the situation, including an increase in domestic production of coal, increased coal supply to the power plants, blending of 10% imported coal with domestic coal, and restarting some of the imported-based power plants. More recently, with these initiatives by the government and the widespread rains which reduced the electricity demand in the country, the prices on the exchange have started to come down, and today it is almost about 1/3 of what it was a week back. The exchange market continues to work uninterrupted, facilitating the distribution utilities and industries in addressing the increased power demand in the most flexible, competitive, transparent, and efficient manner. I will now talk about recent developments of IEX. On 17th October 2021, IEX received CERC approval to commence the Green Day-Ahead contract as a part of the Integrated Day-Ahead Market. Under the Integrated Day-Ahead Market, the exchange will allow the market participants to submit bids together with conventional bids as we were doing in the DAM market. Thereafter, the clearance will take place in a sequential manner. Renewable energy bids will be cleared first in accordance with the must-run status of the renewable, followed by conventional segments. IEX will also allow its market participants an option to transfer the unselected bids from the renewable to the conventional segment. Furthering our customer-centric initiatives, we have launched value-added services, VAS, for the renewable energy generators. The renewable energy generators who are keen to avail the services such as generation forecasting, qualified coordinating agency services, and analytics solutions, et cetera, can reach out to the best-in-class service providers empaneled by the IEX at a very competitive price. We have already onboarded Climate Connect as our first empaneled service provider. We look forward to welcoming other service providers who are keen to associate with us in this journey. Let me now share with you an overall economic and industry update. After reaching a manufacturing PMI of 48.1 in June 2021, India's manufacturing activities expanded for the third straight month in September to 53.7, highlighting a strong expansion in overall business conditions. On the services side, we witnessed an increase in activities leading to expansion of services PMI to 55.2 in September 2021 as compared to 41.2 in June 2021. On power sector front, the rise in economic activities led to an increase in overall power demand. The All India Electricity Consumption increased 10% year-on-year from 334 BU in quarter two of FY 2021 to 366 BU in quarter two of FY 2022. In this quarter, highest ever peak demand of 205 GW was registered in the month of July. It was July or that? July. July, yeah. The industrial states such as Gujarat, Maharashtra, Andhra Pradesh, and Tamil Nadu were the key contributors of this growth. As of September 2021, the installed power capacity at 389 GW saw 4.2% year-on-year growth. The renewable energy capacity reached 101.5 GW from an earlier figure of 89.2 GW end of FY 2020, seeing about 13.8% year-on-year growth. The fastest growth in renewable capacity underlines the energy shift that has been underway and an increased impetus on building a decarbonized and sustainable energy economy. On the policy and regulatory front, the 10-year long pending jurisdictional conflict related to power market between CERC and SEBI has been finally resolved by the Honorable Supreme Court, paving way for introduction of the much awaited long-duration contracts on power exchanges and electricity derivatives in the commodity exchanges. CERC has issued draft Deviation Settlement Mechanism, and under this, now the DSM charges also will be linked on the block-wise price discovered on the exchange. This will further expand and deepen the Real-Time Market. MBED is expected to go live through exchanges from first April 2022 with intrastate generation capacity as per the press release issued by Ministry of Power. The Ministry of Power issued the draft rules for promoting renewable energy through open access, allowing consumers with contracted demand load of 100 kW and above as eligible for green energy open access. All these initiatives will lead to further deepening of power market in the country. The Indian Gas Exchange has been seeing an uptick in volumes as well as participation. During this quarter, Indian Gas Exchange traded almost about 10 lakh MMBtu of gas. Cumulative so far, IGX has traded more than 15 lakh MMBtu of gas. Good thing is we are seeing business on gas exchange increasing every month. In the second quarter of FY 2022, we did highest volume of almost about 8 lakh MMBtu. As part of our customer-centric initiatives, in the IGX, we launched the Day-Ahead contract also very recently. Ministry of Petroleum and Natural Gas, by its office memorandum dated 19th August 2021, has provided an additional mechanism to domestic gas producers who have been granted pricing and marketing freedom to trade on gas exchanges. Accordingly, the domestic gas producers may sell quantity of gas up to 500 MMSCM or 10% of their annual production, whichever is higher, to the gas exchanges. I'm sure this notification will provide availability of cheaper gas on the exchange platform and will further deepen this gas market on the IGX platform. On a standalone basis, revenue for the quarter increased by 52.6% from INR 79.4 crores in quarter two of FY 2021 to INR 121 crore in quarter two of FY 2022. Profit after tax grew by 67.3% on year-over-year basis with a margin of 64.5%. The board of directors have considered issuing two bonus shares for each equity share. During the quarter, electricity volumes on the exchange grew by 58% on year-over-year basis, with 25.9 BU volume traded versus 16.5 BU in quarter two of FY 2021. During the first half of FY 2022, IEX traded a volume of 47.2 BU, which is almost about 6.7% of the total generation in the country, implying a robust growth of 50.6% on year-over-year basis. The growth in volume was driven by substantial increase in electricity consumption, as well as the trends by the distribution utilities to meet their short-term supply requirements in a competitive and flexible manner through the IEX. The Real-Time Market continued to be one of the fastest growing market segments on the exchange, witnessing a growth of 125% on year-over-year basis. During this quarter, 5.3 billion units of volume was traded in the RTM market. RTM contributed almost 20% of the overall volume, which we traded on the exchange platform. The consistent growth of Real-Time Market is an indication of growing reliance of the distribution utilities and industries to achieve power supply balancing in the Real-Time Market in the most efficient manner. The Green Term-Ahead Market is also now almost one year old. We started this on 21st of August, and so far we have cumulatively achieved a volume of 3.5 BU in this market. In the second quarter of FY 2022, the cumulative trade was 1.7 BU. This market has seen a considerable increase in the participant base and more and more number of utilities and C&I consumers are participating in this market to meet their energy demand and also the RP obligations. We are gearing toward the launch of ESCerts and Integrated Day-Ahead Market. What I understand now, that these two markets will start from 26th of October this month. Honorable Minister is going to launch the ESCerts market today, and the GTAM market will be launched on Monday, and trading will start from 26th October. We are also now gearing up for launching the long duration contract. We have already filed our petition with CERC. CERC hearings was held on 21st of October, I think the last hearing is going to happen on 28th October, thereafter order is expected in the month of November. Later this year, we may also see introduction of exchange-based ancillary markets. In the backdrop of several initiatives I have touched upon today, combined with several policy and regulatory enablers, the power markets will have a much greater role to play. Besides, there is a huge opportunity on the gas front, coupled with diversification initiatives which we are assessing. We are very bullish on the growth prospects of the company. With India's power consumption expected to grow at 8%-9% during FY 2022, we expect a significant growth for the exchange market. We are continuously innovating, strengthening, and advancing our technology initiatives. We believe that energy markets have a pivotal role to play in transforming India's energy economy, and we are committed to play a proactive role in facilitating the much needed efficiency, competitiveness, and sustainability in the energy ecosystem. Thank you, everyone. Now we can start the question and answer session. Thank you. Ladies and gentlemen, we will now begin with the question and answer session. The first question is from the line of Mohit Kumar from DAM Capital. Please go ahead. Yeah. Good afternoon, sir, and congratulations on a very, very excellent quarter. Sir, two questions. The first is a Market-Based Economic Dispatch which the government wants to implement from 1st April 2022. The related question is whether it is feasible given the timeline to adhere to 1st April 2022. Secondly, how does it changes business for us? Do you think this long-term volume will increase at the expense of short-term volume? The second question is, where are we in the process of launching long duration contract, and what kind of products you are likely to begin with? Thank you. Yeah. First on MBED, Government of India has already issued a press release, which indicates that the MBED should be implemented from 1st of April. It also indicates that before this, CERC will align the regulations and mock drill will be carried out to ensure that the system runs smoothly. CERC will first have to align the regulations, and that is the important thing to be done. As far as we are concerned, we are ready to launch it. We have done all necessary developments, and we are working with CERC also to start this as soon as possible. On long duration contracts, we have already filed our petition with CERC. Now, after resolution of this dispute, I'm sure CERC will take up the petition for approval, and once the petition is approved, then we will launch these contracts also. These contracts are basically for fortnightly, monthly, quarterly, and yearly contracts for duration less than one year. Thank you. Thanks for question. The line for the current participant has dropped off. We'll move on to the next question. This is the line of Devansh Nigotia from SIMPL. Please go ahead. Yeah. Sir, thanks for the opportunity. Sir, regarding that, if you can help us understand what do you believe are the challenges in terms of implementation? Prima facie, it looks like a lot of changes have to be made right from the generator to DISCOM and even for PFC and REC to actually fund the DISCOM for this whole process. What is our overall view in terms of the bottlenecks which are currently there? Yeah, as I have always said that implementation of MBED is as complicated as implementation of GST. There are a lot of things to be done. Once government directions are in place, I am sure everybody will act fast on this to ensure implementation by 1st of April. I would not like to comment anything beyond that. Okay. In case of long duration contracts, since you are saying that we are expecting the order in November. After the order has come, how prepared are you in terms of launching the product? We have worked on all technological developments for that. We are ready to launch these contracts. The day we get the approval, and based on the approval, if some minor changes are to be done, we will do that, and I think within 15 days we will be able to launch the contracts after CERC approval. Okay. In case of Day-Ahead Market, in last one and a half, two years, we have seen that prices on the exchange have been very high, they have been very low. The shift from bilateral to Day-Ahead Market seems to be consistent every quarter or on a monthly basis. Structurally, what has changed in last one and a half, two years over here? Because when we look at previous 8-10 years, that shift has not happened with this pace. What are the things that have really changed in last one and a half years? See, the shift is a gradual process. It was happening earlier also. If you see state of the bilateral transactions, they were slowly going down. In the last one and a half year, the shift has happened at a much faster rate now. One of the reason is that during the COVID-19 time, nobody was sure about what kind of demand will happen, what kind of demand increase will happen, so they did not get into any bilateral contracts. When the demand started increasing, they started participating on the exchange platform. Good thing is that there was a lot of liquidity in the exchange. They got power, they got power at competitive rate. That led to the confidence building. Now they are more comfortable in purchasing power through the exchange. I'll tell you couple of cases. Telangana, their demand increases from July up to March, and every year they used to buy power under the bilateral market. In some of the years, because of the heavy rain, the demand used to crash. They used to back down, take less power under the bilateral contract. There used to be contractual complications in that. Last year they did not buy anything under the bilateral market. They bought from the exchange platform, and that led to significant saving by them. Now they are comfortable. This year again, they are not getting into the bilateral contract. I think same is the case with many of the distribution companies. Mm. Okay. That is why the shift is accelerated now. Okay. In case of RTM. Sorry to interrupt, Mr. Nigotia. Yes. May I request that you return to your question queue? There are participants waiting for their turn. Right. Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in this conference, we request you to limit your questions to two per participant only. The next question is on the line of Rahul Modi from ICICI Securities. Please go ahead. Thank you, sir, for the opportunity. Sir, can you explain how will be the payment security mechanism for the long duration contracts, whether it will be LCs or how will it be on a revolving basis? No problem. Long duration contracts also, we will accept LCs also, we will ensure that the payment is made before the delivery. We get payments before the delivery of the power. On a daily basis. Yeah. On daily basis. And contract. Contract can be for a month or a quarter. The payment should happen on daily basis, because if we ask payment in advance for the full month, it is going to be too large amount. We will ensure payments on daily basis. If in case there are missed out payments, then you have the power to regulate. Who has the authority to regulate? We have the authority to regulate. It's a part of the contract. Okay. Sir, who is the counterparty in this? Are we part of the counterparty? Yes. Exchange is, in all cases, a counterparty to all the transactions. If in case there is a situation where party A is buying 100 MW and party B, due to some issue, is not able to sell that 100 MW and is selling 90 MW. That 10 MW, whose liability will it be? See, there is a mechanism for also payments. Party A is to sell 100 MW. They are selling 90 MW. They will have to pay DSM for 10 MW. Okay. If nothing comes on to us? No. We have designed the contract in such a manner that there is no operation on exchange. Okay. That's great. Sir, secondly, obviously with your experience in the power market, so what exactly in the last two months, what we've kind of seen was quite unprecedented in terms of pricing going high. We saw, obviously, government also changing stand. First they had encouraged people to move out of older contracts. Suddenly, seeing the prices at INR 20 and a disruption in the generation market, they advised that we should again come back to old PPAs and revisit. From an outsider standpoint, how do we look at it? Now that you rightfully mentioned that there was a big cost saving in the last two years when a state like Telangana purchased X amount of units through the short-term market to meet the long-term demands which are there for years to come and will be years to come. The suppliers are obviously limited in the system, and they know that if a particular demand is coming, then obviously there can be a big play in the market that can happen, okay, which may not reflect truly on the demand-supply dynamics, which happened in the last two months, where we saw prices going up to INR 20, where a lot of DISCOMs also played into the market and selling power on the exchange at more than INR 15. How do we balance that, sir, as a system? Is my question to you. Let us not go to the immediate reaction to the situation. This kind of price increase, this time it is quite high, mainly because of the very high increase in the imported coal price and very high increase in the LNG price. As a result of that, almost about 15,000 MW-20,000 MW of capacity is not available. There is lot of pressure on the domestic coal, and domestic coal ramp-up cannot happen at a rate of 10%-15%. Particularly during the monsoon season, we have open cast mines and these mines also get flooding, coal production also gets affected. This is not that this is happening for the first time. If you see 2018 also, in the month of October, there was price increase. After monsoon, in the month of September, October, when the weather is also hot and humid, agricultural load is there at peak, price increase happens. Right from the month of November, you will see every year the price starts going down. You will see now also the earliest purchase prices are down. In the last six, seven days, the price is hovering around INR 5, INR 6 around this number. In November, I am sure the prices will be down to less than INR 4 again. It does not mean that if the prices are increased for a month, then we will start getting into the long-term contracts. Sir, I take your point. My only question was that what has happened is that a lot of capacities have become redundant in the system, because if you are not buying capacities under contract, then you are not incentivized enough to run them. If you are not running them, then obviously there will be a supply crunch in the medium to long-term. If that is the case, then obviously the prices may sustainably be higher than what we've seen today. I think the kind of demand increase which is happening in the country, all that capacities which is rendered today, I am sure that will be put to use. Market prices will give a signal for the new capacity every time. Sure, sir. Thank you very much. Thank you. The next question is on the line of Kunal Thanvi from Banyan Tree Advisors. Please go ahead. Hi, sir. Thanks for the opportunity and congratulations on the good set of numbers. Broadly, I had two things. First was again on the MBED, we understand Ministry of Power has come out with one draft, and also they have come out with a deadline of April 1, 2022. Wanted to understand in the draft, they have talked about possible reduction in the charges that an exchange will charge the DISCOM and the generators, because there is a comparison between the global markets wherein the power exchanges globally have a very lower charge compared to what we charge in India. Wanted to understand, like, in the global markets, is that there are some other charges apart from the transaction charges that they charge, which, if at all they despise for us, we can also charge? That is question number one. Question number two was on the long duration contracts. Of course, the expectation was being that large part of bilateral market could come on long duration contracts. Do we also feel that some part of long-term power demand can also come on the NBID? Any color on our fee arrangement with MCX this financial year? Fee arrangement on? With? Fee arrangement with MCX. MCX. Okay. As far as MBED is concerned, I think charges, et cetera, what you are referring was there in the discussion paper. This is under the domain of CERC. They will have to decide about the detailed procedure, and if issues, if any, regarding the transaction charge. As and when CERC takes up this matter, we will see. We'll discuss with them, and it will be as per the CERC order. Implementation of MBED, that also will be dependent on realigning of regulations by CERC. Lot of work is to be done in that area. As far as we are concerned, we are ready, and we are working with CERC to ensure that it is implemented from 1st of April, because as far as we are concerned, we see a lot of opportunities if MBED gets implemented from 1st of April. Long duration contracts, as I told you, we have already filed our petition with CERC. We are waiting approval from CERC. As and when we get the approval, we launch these long duration contracts. Initially, we are definitely looking for diverting bilateral transactions on the exchange platform. That shift may happen gradually, but definitely it is going to happen. With MCX is going to launch derivatives, electricity derivatives. For settlement of the derivatives, you need reference price. They intend to use our price. For using our price, we have agreement with them. Sure. That's why, can you throw some light on the fee arrangement that we would have with them? We already have agreement with them. They will be using our reference price, and we will be getting some revenue share out of the revenue which they get from electricity derivatives. Sure. Just one follow-up on the price thing. Globally, have you seen exchanges where they charge for other value-added services also, apart from the transaction charges? Is there any scope that we can also, going ahead, say, three, four, five years down the line, charge for the value-added services that we intend to give to the participants? There is no standard system of charging fees and annual fees and membership fees for different exchanges. Everybody charge depending on the conditions prevailing in their country. We also have started charging it based on the conditions which are prevailing in India. Sure, got it. Make any international benchmark with respect to these things, the charges. Sure, got it. Thanks. I'll get back in the queue. Thanks a lot, sir. Thank you. The next question is on the line of Swarnim Maheshwari from Edelweiss. Please go ahead. Hello, sir. Good afternoon, and congratulations for a very good set of numbers. for a very good set of numbers. Sir, just two questions. First, I just wanted to understand your thoughts over here. First is it possible to implement NBID without price coupling, as it kind of defeats the purpose of single pricing in NBID version, so we will have multiple pricing on few exchanges? It is possible to implement NBID without price coupling, and that is what Government release also says that. Even the discussion paper which was released by Government, that also said that phase one of the NBID will be implemented without price coupling. All right. Okay. Okay. Today, if you see, 99% of the transactions in collective market are happening on the exchange platform. Even without pricing, what is the problem? In case of MBED also the same phenomenon will take place. Sir, I think the whole point is when you actually go for MBED, you are going from 100 billion units- 400 billion units. I think your ROE will be about 4 x from here. We don't see any entity actually making those super normal profits with a highly regulated framework. That was the point, the reason to our practice, really. I think regulator is there. They will take care of all these things. Right. Yes, absolutely. Correct. Super normal profits or anything. Yeah. No, I understand, sir. Correct. Sir, just the second thing is. What is the profit which you are making? INR 200 crores profit. What is the profit which NSE is making? Do you think the exchanges should stop eroding the profit? Right? Right. Look at the value which we are providing. You should be more concerned about that. Right. Got it, sir. Sir, secondly, now we will be moving from the mechanism of trade scheduling to the exchange. This would incur some additional cost with respect to our brokerage. Now, of course, the overall saving cost that was envisaged on implementation of MBED is about 3%-4%. Should MBED get implemented on the exchanges, about 1.5%-2% might be actually eaten up by the brokerage. Do you think that there is a possibility that in future, the transaction fees might actually start coming down? Otherwise, this actually defeats the purpose of MBED again. Again, I told you, regulators will have to take a view on this. They will have to see what kind of values customers will be able to get by implementing MBED, what kind of savings will happen, what is the job which will have to be done by the exchanges, what kind of fees is to be given to them. I think we have a regulator, and they will look into all these things. Okay, sir. Got it. Thank you so much. Purpose of MBED is not only 5% or 10% reduction in the cost. Purpose of MBED is also to schedule the power in the most optimum manner, utilization of resources in a most efficient manner, and also going forward, integration of renewable with the conventional power in efficient manner. Objective function is quite large. Let us not limit that to 5% cost savings. Sir, the discussion paper actually said that. That, of course, one of the objectives is to achieve those cost savings, but you did mention the other point, and I have well taken that point, that you need to schedule the power efficiently, then you have renewable also coming into picture. I completely concur with you. Correct. Right. Right, sir. Got it. Thank you so much. I will get back in touch. Thank you. Okay. Thank you. Thank you. The next question is on the line of from uncertain JK Capital Management. Please go ahead. Hi. Am I audible? Yeah. Please. Yeah, sure. My question is on one of the slides, I think it's slide number 32 or something. 32, I think. You're talking about the total capacity likely to phase out by March 2027, which is 41 GW. This gives you additional 100 BU opportunity for the exchange. Right now, with 9,000 MU per month, your current volumes are around 100 BU per annum. It is like this additional opportunity is doubling your market. What is this market exactly? Are you referring to the investor presentation? In your investor presentation, slide number 32, phasing out of plants. Total capacity likely to phase out by March 2027 is 41 GW. Incremental 100 BU opportunity for the exchange. Your current volume is 100 BU per annum. Right. This you're saying is an additional 100 BU. What is this exactly? Yeah. Today we have power plants having generating unit having capacities of 60 MW, 100 MW, 150 MW, 200 MW. These units are inefficient units consuming more coal for generating one unit of electricity. These units are also quite old. They are also not meeting the environmental standards in many of the cases. Government of India has decided to phase out these old units, and the capacity is around 35 GW-40 GW. At 80% utilization level, these units should generate something above 300 billion units. Since these units are old, these units presently are generating about 100 billion units-150 billion units. If these units are phased out, then there is an opportunity Because they are today generating and supplying that power to distribution companies. If they are phased out, then that power will come to the market. That demand should come to the market. That is the opportunity size. Out of this, how much we will be able to get on the exchange platform? That we will work out with time. Okay. Understood. One more question on the follow side. You have in slide 33, you are talking about the second bullet, where the government is going to deepen the power markets by increasing the spot market to 25% by the year 2023-2024. This 25% spot market, what exactly is this? Right now 87% is the PPA. Remaining 13%, you have bilateral, then you have the exchange, and then you have the Deviation Settlement Mechanism. This 25% is the exchange, which is now like 6.5%-7%, which is your market share. What are they trying to do? Some of the numbers I want to understand from a bird's-eye view. Which one to add and how the long-term PPA is going down from 87% to what percentage? Something like that. This statement is from Draft National Electricity Policy, which was issued by the Government of India recently. This draft policy says that the share of the spot market should be increased to 25% by the year 2023-2024. They have not defined the spot market in that draft. Spot market invariably is the Day-Ahead Market, the exchange transaction, the short duration exchange transaction. That is the spot market. Which is today 6%-7%. The intent of the government, what we see from this is to increase this 6%-7% to 25% in the next three to four years. Even going by the short-term market, which is today 12%, increasing that to 25% in the next two, three, four years, that also is a big multiplier. Exactly. That's what I am asking. The short-term market is 12%-13%, which going to 25% itself is a great deal. As per this graph, I'm not saying that this is an achievable target or an unachievable target, I'm not commenting on that. As per this graph, 25% would be the spot market, the spot market on top of which you have the bilateral and the Deviation Settlement Mechanism, et cetera. Bilateral also, you will benefit hugely because of the long duration contract. Net-net, if we assume the opportunity for the exchange down the line, like three, four years down the line, it is nearly what? 30%, if you add everything, if you add all the components as per this proposal. That is what it should be. If you want to have high renewable capacity in the country, it is necessary that exchange transactions should increase. There should be deepening of market. Only you will be able to address the variability in the renewable generation. If you look at countries, European countries where you have high renewable generation capacities, exchange transactions are almost about 50% of the total generation. In India also, we want to go with 450 GW of renewable capacity in the country. I think we need to have market size of 30%-40%. I think this statement in the Draft National Electricity Policy is also keeping that in view. Okay. Got it. Okay. Understood. Okay. Thank you. Thanks. Yeah. Thank you. Thank you. The next question is from the line of Aniket Mittal from SBI Mutual Fund. Please go ahead. Yes, ma'am. Thank you for the opportunity. The first question is actually on the derivatives market. Like you rightly said, there's a very clear emphasis on increasing the spot market in the country. With that, there also needs to be some sort of a mechanism in place to hedge the risk that the spot market brings. I think it's been about a year now since we've signed the licensing agreement with MCX. MCX also has gone and signed a technology agreement, I think with uncertain. Just to get an understanding from a feasibility perspective, when do you think can we actually launch our derivatives market in India? This electricity derivatives will be launched by the commodity exchanges. What we understand that MCX has already signed contract approval with SEBI. If you have seen that joint working group minutes based on which this litigation has been resolved, one of the recommendation is that there should be a joint working group consisting of representative of SEBI, CERC, Ministry of Power, and Department of Economic Affairs. This joint working group should decide what kind of contracts should be allowed in the derivative market and what kind of derivative contract should be allowed by CERC. That it should not have any adverse impact on the stock market of the country. I think the joint working group meeting is expected shortly. After that, they will have to decide about that, and then thereafter, SEBI will give the approval, and then MCX will be able to start these derivative contracts. I will not be able to say anything about the timeline. This is the process, and this process has to happen. Sure. Just one question on how do you see, let's say the short-term market panning out in the next one year or so? Traditionally, like you said, we've been here about three years back in 2018 as well. At that point in time, that tended to spook off the DISCOMs a bit. We had back then some amount of private schemes coming up, and a lot of DISCOMs started rushing a bit to actually buy up certain contracts. You can't keep on buying at more than INR 5, more than INR 6 on a daily basis. I think over the past one year, we've gained around 1%, 1.5% share from bilateral. Do you think some of that can actually then go towards the bilateral in the coming months? So far, only one pilot project has happened, and that too for 2,000 MW. Okay. The demand is increasing every year at a rate of 7%-8% now. If economy has to grow at a rate of 9%-10%, power demand has to grow at a rate of 6%, 9%. If that has to happen, the demand is going to grow at a rate of 15,000 MW, 16,000 MW per year. I don't think a pilot of 2,000 MW would be really a big concern for us. I mean, it's a kind of foundation for the whole market. There is still a lot of opportunity for the exchange. Maybe just one last question. If I wanted a data point. If I look at your second quarter volumes, would you tell me who are the top three buyers on the exchange for this quarter? What is their cumulative contribution to your overall volumes? I can tell you, in fact, participation was great by most of the states. The states where the demand has increased, like Gujarat, Maharashtra, Punjab, Haryana, Rajasthan, Tamil Nadu, Andhra Pradesh, all these states were active buyers on the exchange platform. Okay. Depending on the demand, they were buying power. Sir, would it be possible to quantify that as in who are the top three buyers and their contribution to overall volume? Okay. I can tell you one thing, that these seven, eight states which I told you, significant demand increase has taken place in these states, and they were large buyers on exchange platform. Sure. Thank you. That's it from me. Thank you. The next question is on the line of Apoorva Bahadur from Investec. Please go ahead. Hi, sir. Thank you for the opportunity. Sir, wanted to understand, basically, I think you mentioned that you're seeing capacity addition which should be planning in the system. Given that almost 40-odd GW will be retiring and we are, I think, will be adding 30-odd GW in terms of new coal capacity. Two questions here. Firstly, where do you see this capacity addition happening? Mostly in renewables or in thermal assets? Secondly, in case we are currently seeing some sort of reducing capacity on a net basis, do you see the long-term price on exchanges going up sustainably? I understand work is already going on for construction and commissioning of about 40,000 MW capacity. Thirty-two. 32,000, which is in the state sector and in the central sector. Whatever capacity will be retired, almost same kind of capacity is under construction commissioning. There is not going to be any shortfall in the installed capacity. Further, in addition to this, we are also working on the renewable capacity addition. Energy side, I don't see any challenge. This 20,000 MW of merchant capacity also available. Their utilization is extremely low. We expect as the demand will grow, so utilization of this capacity will also grow. This is open capacity. We are free to sell it anywhere we are. Yeah. Okay. Got it, sir. Secondly, sir, sorry for harping on this again, basically on the MBED side of things. Essentially, as I understand, and please correct me if I'm wrong, but under the MBED, price discovery won't happen on the exchange. It will simply be a scheduling function. In such a scenario, and I know you said that regulator will take a call, but what could be a fair remediation for the exchange, which will basically just do the scheduling function or just lend its platform and technology for it? Because from a supplier point. In case of phase I of MBED, exchanges will do what they are doing today. The entire function of bid collection, price discovery, scheduling, financial contract settlement, and physical settlement will be done by the exchanges. Okay, the price discovery also happen on exchange. Yes For embed. Yes. Won't be based on the variable cost of the asset. Under phase I, yes. Post the phase I at an overall implementation level? Implementation of phase I, we will see what are the implications, what kind of benefits country is deriving out of that, and what should be done for phase II. Whether we should launch for phase II or not, I think the call on that will be taken after implementation of phase I. Okay. Got it, sir. Sir, in that case, say, for example, in case of phase one, probably NTPC will become some market maker, given that it will be driving the bulk of the capacity. What incentives is it there for NTPC to be on IEX? What I wanted to know, since NTPC will be the market maker, probably it can drive price discovery on any of the exchange. If you could just please elaborate on this and throw some light. Number one, if you have seen the paper, it is not NTPC alone. It is talking about interstate generating stations. When you say interstate generating stations, it is NTPC, NLC, DVC, NEEPCO, NHPC, SJVN, all these companies, plus the private sector companies also, which are interstate generating companies like Adani, Tata, uncertain, and then you have interstate generating stations in the private sector also. GMR, I mean, all these companies. Right. All these plants are interstate generating plants. Right. Same thing applies here, sir. I mean, NTPC would obviously have the highest capacity among these, or even if you say a two or three government companies. Any generator or distribution company will like to participate on an exchange platform which has demonstrated its capability to run this kind of product. I mean, nobody can take risk with an exchange or a platform which has not proven. I mean, in last 13 years at least, we have demonstrated that we are capable of running such a product. Fair enough. If you think you are comfortable in going with other exchange. Do you think so? Right. No, sir, I get your point. Thank you so much. I'll get back in touch with you. Thank you. The next question is from the line of Noel from Ashika Group. Please go ahead. Hello. Yes. Actually, most of my questions have been answered by now, but just one last question. This is regarding the very high volume that we have seen in August and September, and so far, we are also seeing higher volumes for the month of October. Would it be fair to assume that these higher volumes would persist in terms of market share gains going forward as well? Yeah, definitely. That is what we think so. Okay. We are aiming for. Okay. There will be some portion of it that would be seasonal in nature because of the various power shortages that were there. That would be, I think, a minor portion, or that would be 50-50. I mean, what would be the best way of looking at it? If you look at our quarterly volumes. In variably, quarter two is the highest volume. Quarter three and four are also reasonably good volumes. The rest is not very significant. Okay. Month-on-month, there is good variation, but every quarter you will find some very good months. All in all, if you see on annual basis, within quarters, variation is not very high. Okay. Yeah, that answers my question. Thank you very much. Thank you. Thanks. Thank you. The next question is from the line of Aman Mad recha from Augmenta Research Pvt Ltd. Please go ahead. Yes, sir. I had one question. Like currently, if you look at the balance sheet, we have around INR 1,000 crores of cash in investments. What are we planning to do with this? Are we planning to invest in some other revenues, or are we looking to increase the dividend payout? What is the stance on the cash balance on books? I'll request my colleague, Mr. Vineet Harlalka to respond to this question. Yeah. Thank you. We look at the company has a surplus of the cash flow, but it is mainly because of the carrying float and margin, and which is a kind of a liability, is more of a cash surplus. If you look at the shareholders' fund, it will be tune of around INR 450 crore only. We are exploring all of the diversification opportunity, and company has been paying a good amount of dividend in the past also. Considering that, the company will continue to reward the shareholders with a good dividend also. Company will retain the requisite amount of the cash as required for diversification and looking for the other growth opportunities. Okay. Sir, I also wanted to understand with MCX derivatives coming into picture, will there be any effect on the volumes on IEX, or it will be just that MCX will be taking reference prices from IEX? Can you repeat the question, please? Sir, I was asking, with MCX entering into derivatives contracts for electricity, can we expect the volumes on IEX to deteriorate because as we have seen, derivatives often become the larger market in each and every segment. Can we expect the volumes to deteriorate or the volumes would remain same only or would increase? Volumes will rather increase because the derivative contracts are financially settled contracts. If any delivery has to happen under those contracts, as per the contract, that delivery will happen on the IEX platform. That is number one. Number two, when there are derivatives, there are few market participants who are not participating on the exchange platform because of the price volatility. Those participants will have the option of hedging their position in the derivative market and taking delivery in the spot market. Invariably, what we have seen when you have derivative market, the deepening of the spot market happens. The volume in the spot market increases. Despite, Government was also concerned about introducing these derivatives in the market, and Government took the initiative of resolving this jurisdictional issue. In this derivatives market, the contracts will be settled, right? There will be delivery of electricity. They would not be just financially settled. Their delivery will happen on the IEX platform. Okay. Yeah. Sir. See, it cannot do delivery of power because delivery of power is regulated by CERC. It has to be done as per the CERC regulations. Okay. As per the contract, any delivery resulting out of the derivative contracts will happen on IEX platform. Like with the derivatives, can we expect more price fluctuations because given that there would be derivatives, so there would be price fluctuations on the platform, like massive volatility or price fluctuations? I'm not clear about your question. Sir, I'm asking, with derivatives in picture going forward, can we expect the price volatility in the DAM or TAM markets to increase? No. Price volatility, in fact, when you have derivatives, there is more stability in the price. Okay. Yeah. Sir, I just wanted to understand more on the IGX front. When can we expect IGX to materially start contributing to the revenues or profitability? Yeah, as I told you, IGX is doing volume increase. Every month the traded volume is increasing. Because of the high price of gas in the international market, unfortunately, the import of gas has reduced, so availability of gas in the market has reduced. That has impacted our projections. We were expecting in the fourth quarter of this year, we should achieve breakeven, but maybe it might get shifted by one or two quarters. Okay. Sir, can you just give me some data point, like what is the transaction charge on the IGX? I think transaction charges are INR 4 per MMBTU on each side. Okay. That will help me. Thank you. Thank you. Thank you. The next question is on the line of Deepesh Agarwal from UTI AMC. Please go ahead. Good afternoon, gentlemen. My first question is, when you look at renewables, most of the capacities get built up with 25 years PPA. Do you think the addressable market for exchanges for renewables would be restricted largely for the load balancing, or there would be more volumes coming up out there? In 2008, we started IEX, at that time, almost 100% of the power generation capacity was tied up to the PPA. Slowly we started having merchant capacity in the market also. The distribution companies, when they had surplus power, they started selling on the exchange platform. Similarly, in the renewable also, we have just started this GTAM market, and on 26th of October, we will be starting the GTAM market. I think when we start these products in the market, now the generators will have another option of selling the renewable power. What we have seen in the last one year in the GTAM market, price discovered on the exchange platform is much, much higher than the price which they are getting under competitive bidding route. I'm sure there are going to be generators who will set up merchant capacity. Volume in this market will again, slowly start increasing. I'm not expecting that the volume increase in the green market will happen immediately in the next one or two years. It might take time, yes. Understood. My second question is continuation with an earlier participant's question. Sir, on the price coupling, where are we in terms of regulation? Can you help us understand, is there a clarity from the regulator side whether this will be implemented, and if yes, by when? From the regulator side, there is no mention about price coupling anywhere. We have said in the regulations also that it will be considered as and when it's necessary. I don't think there is any discussion on this. Even in the phase one press release given by the Ministry of Power for implementation of phase one of MBED, there also they are not talking about price coupling. Okay. After implementation of phase I, they will see how effective this was. Should they go ahead with the phase II or not? I think these are issues which will be subsequently dealt with. Okay. Thank you. Thank you. We'll move on to the next question that is on the line of Ankush Agrawal from Surge Capital. Please go ahead. Yeah. Hi, sir. Just one quick question. Could you just highlight, what would be the reason for someone to trade on the exchange through a power trader like PTC and not directly? What are we doing to bridge this gap? Can you repeat the question, please? I couldn't hear you. Yeah. What according to you would be the reason why someone would trade on the power exchange, not directly, but through a broker like a PTC? Right. I'm still not clear. Yeah. PTC, they have 30%, 40% of the exchange volumes, right? A lot of DISCOMs and power generators use PTC to put their bids on the exchange, right? Yeah. Yeah. What, according to you, are the reasons why these companies are coming to exchange through PTC and not directly to the exchange? Number one, the share of PTC on power exchange out of the total transactions what we do is almost about 20%. It's not 30%, 40%, it is about 20%. Number two, there are couple of state distribution companies participating through PTC, some of the industrial consumers also are participating through PTC. PTC also has a long-term contract with some of the generators. They are selling their power also through the exchange platform. These participants have their own reasons for participating through PTC. In addition to this, we also have some of the other trader members also, like Tata Power Trading Company, Manikaran, et cetera, who are doing transactions on behalf of some of the clients. We have many distribution companies, who are directly doing transactions on exchange platform, who are our corporate members. Right. The reason for asking this question was, since PTC is handling 20% of the volumes and PTC is coming out with its own exchange, and if PTC has 20% of the volumes and they are the decision maker with respect to this 20% of the volume, isn't there a risk that someone will be, like PTC will try to shift this volume to some other exchange? I'll give you one example. Yeah. When you participate, when you purchase shares from Zerodha platform or on ICICI Direct platform, there is a option. Yeah That you will do purchase from BSE or NSE. Yeah. Who decides about that? You decide or that platform decides about it? That's a good analogy, but I'll give you my perspective. Traders are only doing these transactions on behalf of the client. Yes. For a generator, it is more important to sell that power. If that power is not sold, that opportunity is lost forever. Power is a perishable commodity. For a generator, it is important to sell the power. Similarly, for a distribution company or industrial consumer, it is important to get the power. If he has not been able to get the power, industry will have to reduce the production. Distribution companies will have to do the load shedding. Yes. These parties will like to do that trade on an exchange platform where they have that comfort that, yes, they will be able to sell or purchase the power. I think it is they who decide about it. Okay, it is? Purchase shares on a particular exchange based on the liquidity on that exchange. Okay. It's a common phenomenon. Right. What you're saying is the DISCOMs and the consumers, like the DISCOMs and power producers decide which exchange to place the order on, and it's not PTC who decides it. Yeah. Definitely. Right. Got it. Secondly Okay, that was all. Thank you. Thank you. Thank you. We move on to the next question. That is on the line of Jiten Rushi from Axis Capital. Please go ahead. Yeah. Thank you for taking the question. I've got a few bookkeeping questions. First question is on the, what was the share of open access volume in the quarter? This is above 15% to less than 20%. Sorry, 20%. Okay. Less than 20%. Sir, two more questions on the other expenses. We have seen a sequential decline in other expenses and also on the employee costs, which went up sequentially. What was the reason for decrease in the other expense and increase in employee costs, and what can be the trend going forward? Cost optimization during COVID time. That is one reason. As far as the cost reduction is concerned, I'll request my colleague, Mr. Vineet Harlalka, to respond in detail about it. Please. During the quarter, the other expenses are mainly because of the CSR expenses. In the quarter one, there was a rising cost of additional CSR expenses the company incurred which was not there. Otherwise, all the other costs are more or less same. That was the only major significant difference in the quarter one and quarter two. If you compare to the September quarter of the previous year, yes, because of the COVID, were there and all the work from home. That's why even factors were limited, expenses were there. On the manpower cost, the increase was mainly because if you can recall, during the quarter one con call also we clarified. There was some reversal from the variable to portions, amount was there during that quarter. Some genuine difference was there. That was one-time impact also. It was on that number. If you look at the overall number, we are in this time around. These are the numbers which are going to continue going forward. Right. Okay, sir. Thanks a lot, sir. Thank you. Thank you. Thank you. We'll move on to the next question. That is on the line of Gokul Maheshwari from Awriga Capital. Please go ahead. Yeah, thank you for the opportunity. Sir, in your opening comments, you had mentioned about some changes in the DSM regulations in terms of price benchmarking. Can you help us in terms of understanding in detail how this regulation will help the RTM gain share from DSM over time? Thank you. Present DSM mechanism is that there is an average price of the day which is taken. That average price of the day is linked with the frequency. Since frequency is almost constant, hovering between 49.95 to 50.05. The DSM price is also very close to the average clearing price of the day. Average clearing price is the average price of the day. During evening hours, the price is higher, during morning hours, the price is higher, during the daytime, the price is lower. What we have seen during the morning evening hours. Hello? Yeah, sorry. Yes, sir. Please go ahead. What we have seen that when the demand is more, the market clearing price is high, DSM price is lower, and there is a tendency to overdraw. That is why now CERC is linking the DSM price to the block wise price discovered on the exchange platform. In the evening hours, even the price discovered from 7:00 P.M. to 7:15 P.M. block, if the price is INR 8, then the DSM price also is going to be more than INR 8. There is going to be a multiplier on this price. In the draft, they have indicated 110% of the discovered price. Many of the participants have commented that this price should be higher than this because then only it will act as a deterrent. That is how the DSM price is going to be linked with each block, and it is going to be higher than the market clearing price, forcing distribution companies to plan and purchase in the RTM market. Great. Is this around the corner, in the sense this implementation is going to happen soon? Huh? Is this implementation expected to happen soon, this change in regulation? This is a draft discussion paper they have issued. They have invited comments. I think comments are also submitted by all the parties. That date is over. CERC may take up this issue in the month of November. Two weeks. Thereafter, the order should come. Hopefully, by end of this year or in the month of January, this will get implemented. Great. Great, sir. Thank you so much. Thank you. Ladies and gentlemen, that is the last question. I now hand the conference over to Mr. Jiten Rushi for his closing comments. Yeah. Thank you everyone for participating in the call. We thank the management for giving us this opportunity. I would now hand over to the management for their closing remarks. Thank you. Thank you very much for participating in this earnings call. I must say that energy markets have a key role to play in building India as a sustainable energy economy. With the opportunities that lie ahead of us, we are very excited about the prospects of the company, and we had great interaction today, and I look forward to similar interaction in the next quarter also. Thank you. Thank you. Ladies and gentlemen, on behalf of Axis Capital Limited, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.