Indian Energy Exchange Ltd

Dear Shareholders,

The Indian economy continues to be the fastest growing major economy in the world, backed by strong private consumption, higher capital expenditure, and a robust financial sector. With a GDP growth of 8.2% in FY'24, the country is well-positioned to become a $5 trillion economy by 2027-28 and surpass Germany and Japan to become the third largest economy in the world.

Such an economic expansion has visible footprints in the country's power sector. Electricity, being the core of all industrial and commercial activity, saw a consequent surge in demand in FY'24. Power consumption rose 7.7 percent on YoY basis to reach 1,622 billion units (BU) in FY '24. India's daily peak power demand reached 240 GW in September 2023, whi.ch was the highest-ever daily peak recorded in the country. Recently in May 2024, India met a record maximum power demand of 250 GW. It is projected that India would contribute approximately 25 percent of the total global energy demand growth over the next 15 years. As per the CEA, electricity consumption is expected to increase at a rate of over 6 percent per annum to reach 2,279 BU by 2030. This provides a large growth potential for the country's electricity sector.

India's present installed capacity is at 442 GW with renewable capacity of 191 GW, which is 43 percent of total capacity. Having added nearly 19 GW of RE capacity in FY'24, India had one of the fastest renewable energy (RE) capacity addition among major economies in this financial year. To meet India's growing electricity demand, the Government has already put in place capacity addition plans for both thermal and renewable power. Around 15GW of thermal capacity is expected to be commissioned in FY'25. About 50GW or more thermal capacity will be added in the next 4-5 years. Additionally, 140GW of green energy capacity is under tendering and implementation. Already the Ministry of

Power has planned to add 50GW of RE capacity every year to achieve 500GW RE capacity by 2030.

To enable renewable power integration with the grid, the Ministry of Power has finalised Viability Gap Funding mechanism to develop Battery Energy Storage Systems (BESS) in the country. To begin with, BESS capacity of 4,000 MWh will be developed on this proposed model. Under this model, BESS would be able to store surplus solar power during day-time and deliver electricity during hours of peak demand and also be able to stabilize the grid by providing ancillary services. One of the options considered for charging and discharging of the BESS is through Power Exchanges. Additionally, the Government is also pushing the Green Hydrogen Mission with 125 GW of green energy requirement for Green Hydrogen of 5 million tonnes per annum by 2030.

While global economies have been severely impacted due to supply disruptions caused by adverse geopolitical events over the last two years, the Indian economy has managed these intermittent crises well. Policy interventions by the Government of India have helped increase domestic fuel production and eased supply constraints. Contrary to last year, we are now witnessing a scenario where there is no fuel shortage. India's coal production increased 11.7% YoY to nearly touch 1,000 million tonnes in FY'24. The Ministry of

Coal's Shakti Policy has also allowed power plants, including private generators without PPAs, to sell power in all market segments of Power Exchanges. Premium on coal under Shakti B8 auction came down to around 20% by the end of FY'24 and coal inventory was at a comfortable 20 days. Overall, the fuel crisis witnessed last fiscal subsided in FY'24.

As India marches towards achieving its net zero target, there is bound to be a much larger role of Power Exchanges in the country's energy landscape. The draft National Electricity Policy (2023) aims to increase the share of exchanges to 25 percent by 2030, underlining their importance in the energy transition of the nation. Globally, Power Exchanges have played a crucial role in reducing the cost of renewable integration and providing efficient price signals for newer capacity addition. Power markets in India too are poised to serve as catalysts for accelerating this renewable generation capacity addition in the country.

POLICY AND REGULATORY ENABLERS THAT DEEPENED POWER MARKETS

During FY'24 there were some noteworthy policy and regulatory initiatives that continued to deepen India's power markets and accelerate energy transition towards sustainability and self-sufficiency. Some of these key initiatives were:

• The Ministry of Power notified the amended Late Payment Surcharge Rules which mandates generators having PPAs to offer surplus URS power for sale on the Power Exchange. These rules also provide for penalty in terms of reduced fixed charges to Gencos if they fail to offer URS power in the market. This has improved sell liquidity on the Exchange platform. Already we are witnessing around 50- 60 MU of URS power being offered on the Exchange on a daily basis.

• Notably, the most important regulatory developments of FY'24 were implementation of the Indian Electricity Grid Code (IEGC); the Sharing of Inter-State Transmission Charges Regulations (ISTS); and the GNA Regulations. Since the implementation of GNA Regulations in October 2023, regulatory anomalies between the bilateral and Day Ahead Market have been removed. Consequently, volumes in the Day Ahead Contingency (DAC) Market have declined, while those in the Day Ahead Market have increased. Volume in the DAC market in H2 FY'24 was 690 million units in comparison to nearly 4.2 billion units in HI FY'24, a decline of 84%.

• The Ministry of Power amended the Electricity Rules paving way for rationalizisation of wheeling charges and additional surcharge for Green Energy Open Access consumers.

• The CEA finalized a plan for thermal plants to bring their technical minimum operation up to 40%, compared to the current 55%. This will facilitate the integration of more renewable energy capacity and improve grid efficiency.

• The CEA also amended the procedures for cross border trade in electricity, allowing for trade through Real Time Markets operated by Power Exchanges. This has led to increased cross border volumes on the exchange. For FY'24, 4.0 BUs in Cross Border power was traded on exchange, an increase of 52% over last fiscal. A report on BIMSTEC Energy Outlook 2035 estimates cross border electricity trade potential in the region can increase up to 7 times, from 16BU in 2020 to 127 BU in 2035. This will increase CBET volumes at Exchanges.

• REC trading on Power Exchanges has been increased to twice a month. Further, different types of RECs are now fungible as one. Consequently, liquidity has increased in the REC market. Also because of the removal of REC base price, REC prices have come down, leading to increased REC sale volume. At 75 lakh certificates REC volume was higher by nearly 27% in FY'24 over FY'23. Since the new REC regulations, prices have continually become more competitive and were traded at a the lowest ever price of Rs 140 in the REC trading session held in June 2024 as against Rs 1,000 in April 2023. These changes should further incentivise obligated entities to buy RECs to meet their Renewable Purchase Obligations.

All these policy and regulatory measures improved sell side liquidity in the Day Ahead and Real Time Market on the exchange by 17% YoY and helped soften power prices. DAM prices declined to Rs 5.24/unit in FY'24 from Rs 5.94/ unit in FY'23, a decline of 12% YoY. As prices continue to remain competitive and follow a further downward trajectory, it is expected to present an opportunity for Discoms and Commercial & Industrial consumers to optimize their power procurement cost.

In May 2023, the expert group constituted by the Ministry of Power for 'Development of Electricity Market in India' charted out a road map for deepening the power market and in accelerating smooth integration of renewable energy into the grid.

The expert group took cues from countries such as UK, Germany etc. which were able to increase their renewable energy penetration to more than 30% by implementing market-based reforms such as Contract for Difference (CFD). The CFD model is preferred globally, as it ensures no hassles of signing rigid PPAs, ensures regular payments, and there is no curtailment of power. Looking at international experiences, the total capacity awarded through CfD auction in UK stands at 33.7 GW. Similarly, Germany added 15 GWs in capacity through CfD auctions till 2020 and their target is for the electricity grid to be 80% renewables based by 2030. The Government of India is also considering CFD model for accelerating capacity addition in India.

The report on 'Development of Electricity Market in India' also includes the proposal to introduce financial products for electricity to hedge against price volatility in spot markets which will lead to further deepening of power markets. The recognition of the inefficiency and inflexibility of long- term PPAs is expected to result in a stronger role of Power Exchanges and enable efficiency in electricity procurement.

Other market models that are being prominently used by many corporates is Virtual PPAs - a bilateral agreement signed between the power producer (RE generator) and industries/corporates at an agreed contract price. With this model, renewable generator can sell power on the exchanges in the competitive price segment, while the green attribute of that power is given to the industry with whom the Virtual PPA is signed. Difference between the PPA price and market price is borne by the PPA holders. This can promote innovation, flexibility, attract investment, and accelerate capacity addition in the renewable sector and would also help in meeting net zero targets set by corporates.

These initiatives will pave the way to achieve India's net zero targets by increasing the sustainability and viability of the country's power sector. International experience shows that in well developed power markets, Power Exchanges have played a key role in reducing the cost of RE integration. In India as well, such models are being considered and will help in RE capacity addition. IEX will remain at the forefront of this transition by constantly innovating to meet the evolving needs of all stakeholders.

It is important to mention that as a follow up to the letter shared in June 2023 by the Ministry of Power with the CERC with regards Market Coupling, the CERC released a Staff paper on Market Coupling in August 2023. Comments on the Staff paper from stakeholders were open till October 2023. Over 70% of respondents to the Staff paper were not in favour of market coupling. Subsequently, in an order of CERC dated 6th of February 2024, CERC has made one thing clear that based on simulation studies for 3 months of January, February, March data of '23, they found that there is practically no merit in coupling of plain vanilla DAM market or RTM market. In that order, one part of the issue has been addressed which is that there is no advantage of plain vanilla coupling. Basis the stakeholder comment, CERC is exploring if there is any advantage of coupling RTM market with the SCED i.e Security Constrained Economic Dispatch, which is operated by Grid India. CERC in its order dated 6th Feb 24 on shadow pilot study on market coupling, directed Grid India to develop software for shadow pilot within two months of the order and after that run simulation for next 4 months. The recent amendment in Late Payment Surcharge Rules 2022, mandate sale of unrequisitioned power (URS) on the Exchanges in DAM & RTM. The mandatory sell of URS power in DAM & RTM will lead to optimum utilization of capacity and any further optimization by coupling SCED and RTM may not lead to any significant value. Therefore, it is expected that the shadow pilot being implemented by Grid-India will not yield any significant gain. We don't see any merit in Market Coupling. We do believe that even if there is a small gain, there will be numerous complexities in its implementation, and hence Market Coupling will not be feasible.

TECHNOLOGY AND CUSTOMER CENTRICITY

By prioritizing customer centricity, our technology team ensures that IEX's platform closely aligns with the ever- changing needs of India's dynamic energy sector. We continue to leverage technology and innovation to launch market- friendly products and increase efficiency of operations. We have made continuous improvements to our software and hardware infrastructure to ensure high availability, reliability, and security of our technology platform. IEX has introduced API based bidding for all products across the Electricity and the Certificate segments to ease the bidding experience of our customers and reduce manual interventions. In FY'24 we also started offering an anytime, anywhere, intuitive experience to our customers through our web-based platform, ENERGX. The platform provides customers with digital registration, market data insights, easy financial reconciliation, effective user access management, and web-based bidding.

As part of our robust Business Continuity Planning (BCP), we have implemented solutions to enable us to have an automated and seamless switch of our entire exchange operations from our Data Center (DC) to Disaster Recovery (DR). We have implemented best-in-class cyber and data security solutions to ensure robust and secure operations through our platform. Our 24x7 Security Operating Center (SOC) ensures a risk free trading experience for our customers.

As India strides towards its net-zero journey, IEX aims to be at the forefront of adopting new technologies and innovations, to forge ahead with new opportunities presented by a sustainable energy future.

SOCIAL CONNECT

As a socially responsible corporate citizen committed to facilitate India's decarbonisation targets, your company has voluntarily become carbon-neutral for the second year running and continues to be India's only Power Exchange to do so. This initiative will also enable our members and clients to green up their value chain.

Your company remains steadfast in supporting inclusive and sustainable growth of the nation. IEX consciously aims to positively impact the community across sections, in various ways. During the year, we collaborated with the Sabhyata Foundation for promoting and protecting India's culture, art, and heritage. Your company has supported the foundation in its initiative of restoration, preservation, and promotion of national culture and heritage at the Red Fort Monument which is designated as a UNESCO World Heritage site.

IEX BUSINESS

In our 16th year of business, the IEX platform has registred over 7,900 participants, and has been able to introduce efficiency, transparency, and flexibility in trade, and payment security across the entire power sector value chain. These milestones have been possible only due to the unwavering faith and support of all our partners, employees, and stakeholders.

In FY'24, IEX achieved traded volumes of 110 billion units, a growth of 13.8% over FY'23. Electricity volumes at nearly 102 BUs crossed 100 BUs for the first time since inception and were higher by 12% YoY. A total of nearly 84 lakh Certificates including RECs and ESCERTs were traded for the fiscal, higher by nearly 37%.

In FY'24 we launched the Ancillary market, the High-Priced Term Ahead market, and are currently awaiting approval from the CERC on our petition to extend the term-ahead market contract from 90 days to 11 months.

The good news is that the overall short-term market in India is increasing. According to data from CERC, up till March 2024, the Short-Term market has grown to account for about 13% of the country's overall generation, up from 12% in FY'23. And within the short-term market, Exchanges share has increased to more than 50%. This is an encouraging trend and points towards the deepening of power markets. However, there is still a need to increase the share of Exchanges in the country. At 8% of overall generation, we are still a distant number compared with European countries which trade over 50% of generation through Power Exchanges.

For the full fiscal year 2024, on a consolidated basis, revenue increased by 16.1 percent on a YoY basis, from Rs 474.1Cr in FY'23 to Rs 550.8 Cr in FY'24. Consolidated PAT at Rs 350.8 Cr grew 14.7 percent on YoY basis as compared to Rs 305.9 Cr in FY'23.

In FY'24, IEX achieved traded : volumes of 110 billion units, a growth of 13.8% over FY'23.

For fiscal year 2024, the Board of the Directors of the Company announced total dividend of Rs 2.5/- equivalent to 250 percent of the face value of equity shares.

With the launch of new products, investment in technology and innovation, customer centric initiatives, and an increase in country's power consumption, your company expects to grow even more strongly as compared to previous years while continuing to accentuate the country's energy sector value chain.

INDIA'S PREMIER GAS EXCHANGE

Aligned with the Government's vision to double the share of natural gas in India's energy basket to 15 percent by 2030, the Indian Energy Exchange (IEX) launched the Indian Gas Exchange (IGX) in 2020. IGX is India's first national level gas exchange for physical delivery of natural gas. In the three years since inception, the exchange has traded a cumulative of 100 million MMBtU in volumes to command about 10 percent of the natural gas spot market share in the country.

Due to wide variations in price and demand and supply of gas in FY'24, IGX traded 41 million MMBtu of gas and registered a profit of Rs 23 crores. The IGX currently offers delivery- based trade at multiple delivery points across four regional gas hubs in India - Western Hub, Southern Hub, Eastern Hub, Central Hub.

There have been many positives for IGX in FY'24 such as DGH Empanelment which now enables domestic producers to auction their gas through IGX; allowing fertilizer manufactures to buy domestic gas through IGX on a pilot basis; and approval to launch small scale LNG contracts for trading. In FY'23, IGX had launched the Gas Index of India (GIXI), which was the first-ever nation-wide price index to reflect the benchmark natural gas price for India. In FY'24, IGX signed an MoU with GSPC to develop the Hydrogen Price Index in Gift City and with S&P Global Platts to launch Long Duration Contracts (LDC) with linkage to indices such as WIM, JKM, Brent etc.

IGX continues to work with the Ministry, Regulator, market participants and other stakeholders to realise the nation's dream of building a sustainable energy future through a vibrant gas market.

WAY FORWARD

As India marches towards achieving its net zero targets by 2070, there will be a much larger role of Power Exchanges in the country's energy landscape. With India's GDP projected to grow at a robust 7-8 percent per annum for the next few years, and the consequent electricity demand growth, the power sector remains poised for growth and innovation.

Towards the end of FY'24 Battery Energy Storage Systems (BESS) gained some traction as we witnessed a drastic fall in BESS discovered rates from nearly Rs 11/kWh to about ~3.66/ kWh for two cycle operations per day and these rates are expected to further decline by the end of this calendar year due to significant over capacity of BESS manufacturing. This would make BESS more viable and is likely to increase BESS participation for sale of power during peak hours in power markets. Additionally, Firm and Dispatchable RE (FDRE) and Round the Clock (RTC) tenders are also gaining traction and Exchanges would play a key role to support these innovations in meeting Discoms demand and RPO targets. These contracts will have surplus generation capacity and Exchanges can play an important role in providing sell option for these. Further, 5% of annual commitment in FDRE can be purchased for GDAM.

To further create a liquid Green Market at the exchange, we have constantly advocated the use of market-based options for RE capacity addition such as CfD, Virtual PPAs and merchant models. The Ministry of Power is exploring to set up 1,000 MW of RE capacity through the CfD model. Similarly, VPPA models have been successful among corporates in the US market, and in the case of India as well, we see interest among C&I players to use this model for accumulating green credits. Currently, more than 1 GW of RE capacity under VPPA and merchant model is participating at IEX and further, it is expected to increase to ~ 2.5 GW by end of FY'25.

Further, as a part of their Net Zero goals, Indian arms of large multinational companies have also begun to advocate 24x7 RE supply matching with the actual consumption. From a market perspective, we see a future for products which can solve the liquidity concerns in Green Markets, risk of deviation exposure for RE and meet the 24x7 RE targets of corporates. We are working towards developing the Green RTM product which will be an hour ahead market like the conventional RTM, subject to the approval of the CERC.

With the announcement of the Prime Minister's Surya-Ghar policy for promoting and installing Roof Top Solar (RTS), an emerging trend in India's energy transition is the potential for developing local energy markets such as P2P trading. Going forward, with large scale Roof top solar, there would be a need to transition from a subsidy-based mechanism (Net Metering) to a market-based mechanism (P2P Trading). While some States such as Uttar Pradesh, Karnataka and Delhi have taken a lead in framing guidelines and regulations, we expect other States to follow through in the next few years as roof top solar capacities rise. IEX, along with ISGF and Power Ledger, are evaluating opportunities to set up P2P energy market in states.

The REC market which commenced on exchanges in 2011 has been playing an important role in fulling the RPO requirements of Obligated consumers and is an important enabler to facilitate decarbonization in India. With an inventory of more than 30 million certificates and a sharp decline in prices to Rs 140 per certificate as compared to Rs 1,000 per certificate a year ago, there is a lot of opportunity for obligated entities to fulfil their RPO obligation and voluntary customers to meet their sustainability aspiration.

Additionally, the government's thrust on green hydrogen and green energy storage solutions, such as pumped storage, battery, hydrogen etc., will lead to innovation of new products and market segments. With India's NDC target of reducing emission intensity of its GDP by 45% (with respect to 2005 levels) and to become a Net Zero emitter by 2070, the journey ahead for power markets is full of opportunities.

Technology driven solutions leveraging futuristic technologies such as API based solutions and Robotic Process Automations, will automate market operation processes for greater efficiency. Your company will continue to assess and leverage new opportunities to deliver highest value to all stakeholders and to the country as a whole.

The power sector is undergoing rapid visible shift. We are witnessing many Regulatory and Government initiatives aimed at deepening the power markets to achieve the objectives of India's energy transition. Your company's strong governance structure, ethics and business fundamentals will continue to deliver the country's vision for economic and energy transition. As it has for over a decade, IEX will collaborate with all stakeholders, including policymakers, regulators, system operators, market participants, members, clients, and partners, to develop the country's energy market and foray into new growth opportunities that maximise stakeholder value.