Market participants point out that concerns around market coupling have already weighed heavily on the stock over the past two-and-a-half years. According to Rupesh D. Sankhe from Elara Capital, the uncertainty surrounding the proposed regulation has led to sustained valuation derating despite strong operational performance.
“Yes, definitely. If you look at two-and-a-half years back when the market coupling draft was in the public domain, and even if you take a reference of the Power Market Regulation 2021, clearly from that time onwards we have seen multiple derating in IEX valuations. Earlier, it was trading at close to a 45–50 PE multiple; now it has corrected to a 27–28 PE multiple, mainly because of the market coupling impact,” Sankhe said.
He highlighted that fundamentals remain intact, with volume growth continuing to be robust. “Despite strong volumes that we have seen in the last two years—FY24 volume growth was close to 19%, and in the last nine months we have seen around 12% growth—there is not much impact on the fundamentals. The fundamentals are very strong. Only because of market coupling, derating has happened.”
Sankhe added that any favourable outcome from the Central Electricity Regulatory Commission (CERC) could trigger a sharp rerating in the stock. “Certainly, any favourable outcome, or if members of CERC decide to withdraw market coupling, will be hugely positive for IEX. In a business-as-usual scenario, it is trading at below 22 times PE. But if market coupling is considered—starting with DAM from January, which is close to 35% of overall volumes—there will be EPS downgrades. Anything favourable for IEX will lead to PE rerating for sure.”
On competition, IEX has argued that market coupling could hurt exchanges and weaken price discovery. Sankhe broadly agreed with this view, especially in the context of market development.
“When IEX started the short-term market in 2009, the short-term market was only 9–10% of total volumes. Internationally, it is close to 30–40%. To grow short-term volumes from 10% to 20%, we need more products and innovation so that discoms can benefit from better price discovery,” he explained.He warned that equalised volumes across exchanges under market coupling could dilute efficiency. “Currently, because of high liquidity on IEX, participants benefit from better price discovery. But if market coupling comes in, all three exchanges will get equal shares, and there will be no efficiency in price discovery—only volumes. That will be negative for a player like IEX and could lead to significant market share loss.”
Addressing allegations of monopoly and the legal arguments raised by IEX, Sankhe said the regulatory framework itself allows for such changes but acknowledged concerns over transparency and process.
“As per the Electricity Act 2003, there is a provision for CERC to introduce such market regulations, which they also did in 2021. There is nothing outside the Act. Stakeholder consultations were conducted. However, IEX’s argument is that despite SEBI findings of insider trading by key officials, the regulation was pushed through in a hurry, based on simulations and off-market data rather than real-time data,” he said.
He noted that the estimated benefits from simulations were limited. “If you look at data from December to March 2025, the benefit was hardly Rs 38 crore on a quarterly basis. So their argument that the benefits to buyers and sellers are not significant does carry some validity. At the same time, from a regulatory process perspective, I do not see major issues. But APTEL will have to consider these concerns.”
Looking ahead, Sankhe outlined the valuation downside scenario if market coupling is implemented. “For FY26, we are looking at EPS of around Rs 5.3. If market coupling comes into the picture—starting with DAM and then RTM, which together account for nearly 78% of IEX volumes—there will be market share loss and pricing pressure. Exchange fees could fall from four paisa to three paisa.”
“In that case, EPS could drop from Rs 5.4 to around Rs 3.5–4. With continued PE derating to 25–30 times, a fair value of around Rs 140 emerges under a market coupling scenario,” he added.
With the verdict expected soon, investors are bracing for heightened volatility, as the regulatory decision could determine whether IEX sees a meaningful rerating—or further downside—in the months ahead.
