IEX shares get another downgrade; Bernstein says bad news 'not over yet'

Shares of Indian Energy Exchange (IEX) Ltd. have been downgraded by brokerage firm Bernstein on Tuesday, July 29, as it believes that the regulatory order no market coupling is worse than their historical negative view on IEX's business model.

Bernstein has downgraded IEX to "underperform" from its earlier rating of "market-perform", and while the brokerage had already slashed its price target recently on the stock to ₹122, it has cut it further to ₹99, making it the first brokerage with a sub-₹100 price target for IEX. This implies a potential downside of 29% from current levels.

The brokerage highlighted its earlier thesis that the regulatory clarity might make the stock investible after a correction. However, it now believes that there might be more bad news in store for IEX.

Here are some of the odds highlighted by Bernstein:

There are very low odds of this order being reversed. While IEX has highlighted that it will challenge this order, but Bernstein believe that enough discussions have been held on this matter and while there could be some delays beyond the January 2026 deadline due to software issues, the eventual implementation is inevitable.

Bernstein also believes that a discussion paper on transaction charges is impending. Current charges are four paise (buying + selling), which is over 1% of the product value at present. Even when spot prices fell to ₹0 per kwh, exchanges continued to make their 4 paise per kwh.

IEX had argued in the past that if prices were cut the other two exchanges would "die", which Bernstein now says does not hold anymore after the new regulations.

With almost no barriers to entry, Bernstein believes that new players can enter the market. The networth needed to open an exchange is just ₹50 crore, which, according to Bernstein, makes it the ideal set-up for big power traders like Manikaran to enter the business.

Five analysts each now have a "buy" and "sell" recommendation on IEX, while three others have a "hold" rating.

Shares of IEX ended 4% lower on Monday at ₹138.79, having exited the F&O ban.