Energy Exchange Ipo: Worth Investing?

The Indian Energy Exchange (IEX) is the leading power exchange in India, offering an online platform for the trading of electricity, renewables, and certificates. The company has seen a recent appreciation in its stock price, but there are concerns about the potential impact of market coupling on its position as the market leader. With a high trailing PE, the company appears expensive, but there are regulatory developments that could aid its long-term growth. The IPO price band was set at ₹1645 to ₹1650 per share, with a minimum lot size of 9 shares. The IPO was subscribed 2.28 times and the shares got listed on the BSE and NSE on October 23, 2017. Considering the risks and rewards, investors who already own the stock may choose to hold onto it, while new participants might want to wait for clarity on how and when the Central Electricity Regulatory Commission (CERC) will implement market coupling.

The IPO's price band is set at ₹1645 to ₹1650 per share

A price band is a value-setting method in which a seller indicates an upper and lower cost limit, between which buyers are able to place bids. The price band's floor and cap provide guidance to the buyers. This type of auction pricing technique is often used with initial public offerings (IPOs).

The IPO price band is the range of the offer price within which investors can place their bids. The price band for the Indian Energy Exchange IPO was set at ₹1645 to ₹1650 per share. This means that investors could bid for shares of Indian Energy Exchange at any price between ₹1645 and ₹1650.

The lower price of the price range is called the Floor Price or Base Price, and the upper price of the price range is called the Cap Price or Ceiling Price. The cutoff price is the final price within the price range at which the shares are allocated to investors. The cutoff price is decided by the company in consultation with the book-running lead managers and is usually within the price band.

The price band is used during the price discovery stage of an IPO. When a company decides to issue shares in the primary market, it hires investment bankers to act as underwriters. The underwriter analyzes factors such as the company's growth forecast, industry, and economy to determine a range of prices that the security can trade for. The price band is critical to understanding how much investors are willing to pay for the shares.

Once the price band is formulated, the underwriter starts building its books, sending a draft prospectus with the price band to potential investors. The book is open for a predetermined period, during which investors can submit and revise their offers on the number of shares they are willing to purchase at a price within the band. After the book is closed, the underwriters evaluate the bids to "discover" the fair price of the IPO.

The minimum lot size for an application is 9 shares

The Indian Energy Exchange (IEX) IPO is a book-built issue with a price band of ₹1645 to ₹1650 per share. The minimum lot size for an application is 9 shares, with a minimum investment of ₹14,850 required by retail investors. Bids can be made for a minimum of 9 equity shares, with further bids being made in multiples of 9 shares.

The IPO opened on October 9, 2017, and closed on October 11, 2017, with the shares listed on the BSE and NSE on October 23, 2017. The issue was entirely an offer for sale of 0.61 crore shares.

The Indian Energy Exchange is a 'power exchange' offering trading in a range of electricity products in India. It is the largest exchange in the electricity products trading category and is an online trading platform accessible to registered participants.

The IPO is a book-built issue of ₹1,000.73 crores

The IPO of the Indian Energy Exchange is a book-built issue, which means that the price of the shares is determined based on investor demand. In this case, the IPO is expected to raise ₹997.7-1,000.7 crores, with a price band of ₹1,645-1,650 per share. The final price will be determined through a process called book-building, which we can break down into five steps:

• Appointing an underwriter: An investment bank is hired to act as an underwriter and help determine the issue's size and pricing range.
• Bidding by investors: High-net-worth individuals, fund managers, and other qualified investors are invited to bid on the number of shares they want and the amount they are willing to pay.
• Building the book: The underwriter aggregates the bids from all investors and analyzes the demand for the issue.
• Publicizing the information: The details of all the bids submitted are publicized for transparency, so the general public can make informed decisions.
• Final allocation: Shares are allotted to the investors whose applications are accepted. If some investors bid higher than the cut-off price, they are refunded the surplus money. Those who bid less than the cut-off price are asked to pay the difference.

Book-building is a widely used method for pricing IPOs as it is considered more efficient than fixed-rate issuing. It helps decide the prices of securities and assists in finding the intrinsic value of shares, allowing the issuing company to select quality investors.

The issue is entirely an offer for sale of 0.61 crore shares

An Offer for Sale (OFS) is a method for the owners or promoters of a company to sell their shares to the public and raise additional funds for the company. In the case of the Indian Energy Exchange IPO, the issue is an offer for sale of up to 60,65,009 equity shares by 11 shareholders, including Tata Power and Multiples Private Equity Fund. This means that the company is not issuing new shares, but rather, the existing shareholders are selling their shares to the public.

The OFS mechanism allows shareholders who own more than 10% of the share capital of a company to sell their shares and reduce their holdings in a transparent manner through a bidding platform. In the case of the Indian Energy Exchange IPO, the offer for sale constitutes up to 20% of the post-offer paid-up equity share capital.

The OFS process typically involves the following steps:

• Announcement: The seller announces the OFS and sets a minimum price (floor price) for the shares on the stock exchange.
• Bidding: Investors place bids for the shares at or above the minimum price during the bidding period.
• Allocation: The seller reviews the bids and decides how many shares each bidder receives based on their offers.
• Settlement: Successful bidders have the shares credited to their accounts, and the payment is deducted from their bank accounts.

It is important to note that if the bids are lower than the floor price, the OFS fails, and the shares remain with the seller. The Indian Energy Exchange IPO received bids for 1,00,25,330 shares against the offered 60,65,009 shares, indicating that the issue was oversubscribed.

The OFS mechanism offers several benefits, including a simplified and faster process for raising capital compared to other methods such as Follow-on Public Offerings (FPOs). It also provides an opportunity for retail investors to purchase shares directly from the company's owners at a potential discount on the floor price.

The IPO opens on October 9, 2017, and closes on October 11, 2017

The Indian Energy Exchange (IEX) initial public offering (IPO) opened on Monday, 9 October 2017, and closed two days later on 11 October 2017. The IPO price band was set at ₹1,645 to ₹1,650 per share, with a minimum lot size of 9 shares. The minimum investment required by retail investors was ₹14,850.

The IPO was a book-built issue of ₹1,000.73 crores, entirely an offer for sale of 0.61 crore shares. The shares were listed on the BSE and NSE on 23 October 2017.

The IPO was subscribed 2.28 times on the closing date, with a 2.61 times subscription in the retail category, 2.56 times in the QIB category, and 0.85 times in the NII category.

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