Shares of Indian Energy Exchange (IEX) Ltd soared nearly 5% on Thursday amid analysts predicting more than 39% upside to the stock in a bull case scenario. The brokerages also predict around 34% downside in a bear phase scenario amid the country’s power regulator kicking off a debate on the need and timing of market coupling of exchanges.

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Painting a bullish picture, global brokerage UBS has assigned a ‘buy’ rating on IEX Ltd while upgrading the target price to ₹200 per share from ₹185 per share earlier. The new target price suggests a potential upside of 39.3% against 28% earlier.

UBS in a report mentioned that it has increased slightly the estimate by 3% with favourable market situations. “Supply side bids in the DAM (day ahead market) market are improving, and volume is picking up,” UBS stated. The higher volume is likely to sustain with meaningful moderation in international coal prices while the brokerage expects market shift reversal from bilateral transactions to exchanges.

UBS also listed the three four triggers that would drive the stock price in the next 12 months. It expects improving supply situation and softening merchant power prices would be a positive for the exchange. “Gross Network Access regulation from October 2023 supports DAM,” UBS said. Higher trading volume will also support the IEX stock as during Q3TD, the volume is up 15-17%, it said.

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The company’s plans to launch LDC with up to 1 year of products in the next couple of months would also be positive, it noted.

However, on the other hand, predicting the worst case scenario, Bernstein has projected a downside of nearly 34% for IEX in the next 12 months. Assigning an underperform rating, the brokerage set target price of ₹95 for the stock. The brokerage reasoned that the monopoly that IEX enjoys is unlikely to continue perpetually for an essential commodity.

Bernstein noted that it is watching if monopoly is broken via coupling or by reduction in transaction charges of exchanges. It explained that the commodity impacts common consumers with high transaction charges in a developing nation like India. The brokerage mentioned that central electricity regulator CERC has released a staff paper on market coupling a few months back to seek views of large discoms on need and timing of market coupling of exchanges.

While BJP-run states support coupling, opposition party-run states oppose it. Bernstein also mentioned there is a need to watch if coupling leads to MBED (Market Based Economic Dispatch). IEX shares were trading 2.51% higher at ₹147.15 apiece on BSE at 10.48 AM.

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(Edited by : Asmita Pant)