IONEXCHANG - Ion Exchange (India) Ltd Share Price

In the earnings call on May 30, 2025, management provided an outlook for FY'26, indicating a cautious yet optimistic recovery in performance. The key message was that while the first quarter might show muted growth due to delayed order finalizations, they expect to improve their performance in the second half of the year. Management noted they are undergoing an SAP implementation, which has caused some disruptions but is anticipated to streamline operations moving forward.

For FY'25, Ion Exchange (India) reported an operating income of INR 27,371 million, a 17% year-on-year increase. However, the EBITDA stood at INR 2,939 million, a modest rise of 8%, with the EBITDA margin at 10.74%. The net profit for the year was INR 283 million, up 7% year-on-year. Management highlighted that the order book for the engineering division was INR 27.62 billion, focusing on selective bidding to ensure quality while managing profitability.

Management expects the chemical division's new Roha manufacturing facility to commence operations in Q2 FY'26, which should enhance production capacity and lead to increased revenue. The CAPEX for the Roha plant is approximately INR 400 crores with around 80% financed through debt, incurring interest rates just below 10%.

In terms of specific segments, the engineering division reported a revenue increase of 17% year-on-year, despite some contracts underperforming due to sluggish governmental funding. For the chemical division, while quarterly margins experienced pressure due to seasonal factors and rising input costs, management addressed the need for price adjustments to mitigate these impacts. Notably, management aims to maintain or improve profitability amidst these challenges and remains hopeful for various opportunities in both domestic and international markets, especially in emerging sectors such as semiconductors.

Question 1: The order inflow seemed to be muted for the quarter. How do we see the growth shaping up ahead and the full financial year?

Answer: We've experienced slower order intake, with competitive pricing preventing us from winning some large bids. Additionally, a few key projects have been pushed to the next financial year. However, these projects are still active, and we plan to continue selectively pursuing engineering projects to ensure they align with our business margins.

Question 2: Chemical margins were quite low for the quarter. Can you state the reasons for the same?

Answer: The decline in the fourth quarter chemical margins compared to the previous quarter is due to seasonal variations in product lines and some increases in input costs. We've initiated price adjustments for customers to mitigate these factors.

Question 3: What are your thoughts on the revenue and margin outlook for FY'26?

Answer: We anticipate similar trends for FY'26. While the first half has shown muted performance, we hope to improve in the latter half. A clearer outlook will be provided in the second quarter after the SAP implementation stabilizes.

Question 4: Is the SAP implementation impacting your order bookings?

Answer: There is some disruption associated with transitioning to the SAP system, leading to a temporary impact on timing. However, we don't expect significant long-term effects on revenue.

Question 5: What is the demand outlook for the engineering segment given recent delays?

Answer: We remain optimistic about future order wins despite recent delays. While we'll continue pursuing quality orders, the overall demand environment is robust, and we're committed to selective order acquisition.

Question 6: Can you update us on the ongoing court case?

Answer: We hope the upcoming court date in July will be a final resolution, but given the case complexity, it may extend beyond that time frame.

Question 7: Considering your recent conservative stance, should we expect better margin trajectory in engineering given the lower contribution of problematic orders?

Answer: Yes, we aim to focus on high-quality orders while phasing out less profitable ones. Improvements in our order backlog should contribute to improved margins moving forward.

Question 8: When will the consumer division become EBITDA profitable?

Answer: While we have invested substantially to bolster infrastructure and market strategy, we anticipate a stronger margin profile in the latter half of the year once volumes increase.

Question 9: We see evidence of increased competition in the consumer products sector. Can you confirm?

Answer: Yes, competition has intensified, particularly in institutional sales, but our core B2C and B2B segments show positive growth indicators, and we expect continued improvement overall.

Question 10: How is the progress on the UP Jal Jeevan project?

Answer: Progress has been slow due to funding challenges, impacting our engineering performance. We project this project may extend into the next financial year, depending on how quickly funding improves.

Question 11: What can you tell us about the Roha plant?

Answer: We are finalizing prior clearances and are in pre-commissioning. It's expected to start operations soon, enhancing our revenue potential significantly as it caters primarily to export markets.

Question 12: What are the contributions from the Mapril acquisition?

Answer: The integration of Mapril is progressing well, with strong traction in southern Europe. While we don't disclose specific numbers, early indicators suggest promising future growth.