IONEXCHANGNSEQ1 FY23August 11, 2022

ION Exchange (India) Limited

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165turns

14analyst exchanges

1executives

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Management on call

Sonpal. Anuj Sonpal

Thank you. Good afternoon, everyone and a warm welcome to you

Key numbers — 40 extracted

INR 3824 million

rst quarter of the current year on a consolidated basis. The operating income for the quarter was INR 3824 million, an increase of around 22% year-on-year. Operating EBITDA reported was INR 329 million, a decre

22%

lidated basis. The operating income for the quarter was INR 3824 million, an increase of around 22% year-on-year. Operating EBITDA reported was INR 329 million, a decrease of around 8% year-on-year

INR 329 million

ter was INR 3824 million, an increase of around 22% year-on-year. Operating EBITDA reported was INR 329 million, a decrease of around 8% year-on-year and EBITDA margin stood at around 8.6%. Net Profit After Ta

e of around 22% year-on-year. Operating EBITDA reported was INR 329 million, a decrease of around 8% year-on-year and EBITDA margin stood at around 8.6%. Net Profit After Tax reported was INR 274

8.6%

ted was INR 329 million, a decrease of around 8% year-on-year and EBITDA margin stood at around 8.6%. Net Profit After Tax reported was INR 274 million, an increase of 18% year-on-year while PAT mar

INR 274 million

around 8% year-on-year and EBITDA margin stood at around 8.6%. Net Profit After Tax reported was INR 274 million, an increase of 18% year-on-year while PAT margin percentage was 7.17%, a decrease of 22 basis po

18%

margin stood at around 8.6%. Net Profit After Tax reported was INR 274 million, an increase of 18% year-on-year while PAT margin percentage was 7.17%, a decrease of 22 basis points on a year-on-

7.17%

x reported was INR 274 million, an increase of 18% year-on-year while PAT margin percentage was 7.17%, a decrease of 22 basis points on a year-on- year basis. Let me now take you through the quarterly

22 basis point

274 million, an increase of 18% year-on-year while PAT margin percentage was 7.17%, a decrease of 22 basis points on a year-on- year basis. Let me now take you through the quarterly segmental performance on a

INR 2024 million

performance on a consolidated basis. In the engineering division, the revenue for the quarter was INR 2024 million compared to INR 1767 million during the same period last year, an increase of 15%, EBIT for thi

INR 1767 million

basis. In the engineering division, the revenue for the quarter was INR 2024 million compared to INR 1767 million during the same period last year, an increase of 15%, EBIT for this segment was INR 81 million co

15%

as INR 2024 million compared to INR 1767 million during the same period last year, an increase of 15%, EBIT for this segment was INR 81 million compared to INR 92 million on a year- on-year basis. T

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Guidance — 20 items

Vasant Naik

opening

“We expect the segment to sustain its growth momentum.”

Kiran Sebastian

“And there is a high chance that we will be getting the approval and then right away we can start the construction.”

Aankur Patni

“As of now, our expectation is there will be no further delay.”

Aankur Patni

“Wwe do not expect to have any credit risk in this job.”

Aankur Patni

“We are not getting paid directly from the Sri Lankan Government and this project is funded by Exim Bank.”

Chetan Bohra

“Sir wanted to understand what will be the execution for UP during this quarter and what are the margins made on those.”

Aankur Patni

“The margins for engineering segment as we discussed earlier, they have been impacted for primarily two or three reasons, one being that we have strengthened the infrastructure on the back of increased order backlog and expect increased pace of execution in the coming quarters.”

Aankur Patni

“In the coming quarters, we expect to see a significant improvement on the engineering revenue for FY23 as a whole..”

Chetan Bohra

“Patni what he gave the answer to the next question that due to the strengthening of the infrastructure for the UP to gear up for the execution front, so the cost was front loaded and going forward, we will be seeing a healthy execution and accordingly the expenses will not be increasing in line with that and we would be seeing the operating leverage benefit.”

Chetan Bohra

“So, how should we see the remaining part of the year in terms of the revenue growth and the Greenfield plant has been postponed to the next year.”

Risks & concerns — 10 flagged

While there was reduced volatility in the raw material costs, the sharp appreciation of the dollar kept the input costs under pressure.

— Vasant Naik

Can you just give me some color around risk management around this particular exposure?

— Kiran Sebastian

Wwe do not expect to have any credit risk in this job.

— Aankur Patni

To that extent, credit risk is not something which is on the top of the mind.

— Aankur Patni

So those costs are not going to be a loss for us and the other risks attached to this are the credit risk, which, again, I explained that we do not have a direct exposure to the Sri Lankan Government and because of that credit risk is not there, we do not expect to have any loss on this.

— Aankur Patni

N,o this contract funding is through Exim Bank, that is why the credit risk is not there.

— Aankur Patni

And then we will go ahead with execution in consultation with the funding agencies and Sri Lankan government only when we feel that the recoverability is not going to be a challenge and execution can proceed at a desired pace.

— Aankur Patni

Sir my first query is now as expected after last two three years comparable of COVID situation and very difficult situation in commodity prices and volatility next two, three years seems to be reasonably hopefully better.

— Sunil Kothari

At the moment the there is a slight demand stress or pressure on the demand in the international markets.

— Aankur Patni

But in any case, the receivables if any are not from the Sri Lankan government, but it would be the money which would be coming from Exim and that is why there is no credit risk involved.

— Aankur Patni

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Q&A — 14 exchanges

Hi, thank you. Good afternoon. Sir my first question is on the engineering part and we have highlighted a point in our presentation that we invested some to strengthen our infrastructure for future orders. I mean, if you can just highlight where is it, what is it that we are strengthening and what is the outlook there?

Aankur Patni

Yes, Pratik. We have strengthened the design, planning and execution teams as far as the infrastructure for engineering is concerned. There has also been upgradation of facilities which has impacted the expenditure side. My question was more from the internally, what have you prepared for I mean, because we see very healthy growth in order book, the pipeline that we have, your outlook seems very positive for the near future. So wanted to understand what is it that we have done to spend on this, I understand I mean, you take a hit for a quarter or two on your margin, but what have you done to s

Thanks for the opportunity. My first question was on CAPEX just wanted to be clear about this. So we are still awaiting the environment clearance right. Now is my understanding correct?

Aankur Patni

That's right. Right and the person who is supposed to give the clearance finally I mean has been appointed that is the status. That's right. And there is a high chance that we will be getting the approval and then right away we can start the construction. Again correct. Yeah and parallelly is there any plans to augment the capacity inorganically in case we get delayed with this capacity expansion? As of now, our expectation is there will be no further delay. That is our understanding based on discussions. We are always on the lookout for opportunities inorganically, if we do get something whic

Sir wanted to understand what will be the execution for UP during this quarter and what are the margins made on those. The execution for UP for the quarters.

Aankur Patni

Can I request Vasant if you have approximate number which we can suggest to them. Vasant can you share some approximate numbers for the up contract estimated revenue the second quarter. And sir my next question was till the time we get the answer. The margins in engineering for the quarter has gone down to nearly about close to 6%. So how should we consider keeping ahead because for the full year we were guiding out anywhere between 10 to 11% margin. So, how should one see this quarter particularly. I understand we should not call it a quarterly performance, but would like to understand how th

I had one question regarding all these projects that we have. Do you have any cost escalation clause built in, for example, rise in input costs. Did you receive any compensation from project owners? That is the first question.

Aankur Patni

So what is your second one? Yeah. The second one is about Sri Lanka project. As I understand from the previous participants question that there is some more going on. So, I wanted to ask that. Have you put any loss on that or an expected loss considering that this may not move for the year or so concerning the economic and political situation in Sri Lanka? So are we expecting any loss or have we booked any so far in the financials? Let me answer the second one first. No, we do not expect any loss arising of it. As I explained, the overstay which is caused by the customer or because of the acti

Thank you sir. Thank you for the opportunity. Sir my question is what type of opportunity opportunities we are looking for this Green hydrogen , because water is the key ingredient for this. What type of opportunities, we are looking in this field and how it can be for us.

Aankur Patni

This is an interesting opportunity for us and we are keenly working with all major players in India who are evaluating large scale infrastructure setup for green hydrogen. We would certainly be a part of almost all of these projects. You are right in saying that water is an important part of this entire process and we hope to be able to contribute to this particular industry in a big way. The next question is how hydrolife progressing? What is the progress electric to hydrolife. The market acceptance of the product is very goodand the revenue potential is very high. In coming times we should s

Thank you for the opportunity. Sir what would be the contribution from private sector in our current order book?

Aankur Patni

Let me see If I have that number handy. They would contribute roughly around 40% to 50%. Am I right Vasant on that? Yeah, I think I around 40-45 will be a right figure. Okay, chemicals, Greenfield CAPEX, what is the total CAPEX plan and how much we have spent till date. The total CAPEX on that is expected to be in excess of 200 crores. At the moment, the execution of this new plant has not started as we highlighted a little bit earlier on the call, we are waiting for the environmental clearance to be formally signed. Only after that we will start working in earnest. You mentioned correctly. Ok

Sir what would be your gross profit margin for you chemical business and can you expect the chemical business increase in terms of sharing going 2/3 years down the line?

Aankur Patni

You are saying chemical business to increase in terms of share in the overall revenue? Yes sir. Let me answer and then we will ask Vasant to give you the chemical segment EBIT margins that we reported. But in terms of percentage share of chemicals in our overall revenue, we certainly expect the chemical segment volumes to improve substantially over a period of next 2-3 years, but likewise, we also expect the engineering volumes to climb as we have been talking about the overall order book and the pace of execution of it. These orders should be improving in the coming quarters and in the years

Namaskar sir. Thank you for this opportunity. Sir I joined a bit late. So pardon me for any repetition. Sir firstly on the consumer products division, so how is this segment going to contribute going ahead and are we able to make the key changes or are the COVID factors now behind us where in that has affected the profitability and of this segment earlier.

Aankur Patni

COVID has certainly impacted the consumer segment substantially, I do believe that the current working environment has helped us to put the COVID factors significantly behind us. The segment as a whole is doing very well. On revenue terms, you would have seen that compared to the first quarter of the previous year, we have grown by more than 100% and the outlook going forward is also very strong. We will continue to maintain the growth momentum. Individual products which we have launched in recent times are also doing very well. The market acceptance is very good and I expect these new product

Thank you for taking the question. I appreciate it. Just very quick question on the chemical you said it was 70 to 75% utilization. I just wanted to know what is the last three to four year volume growth in our chemical business? Like if you have a CAGR or anything that you can give in volumes.

Aankur Patni

Let me check. Vasant do you have readily available number to give as far as volume growth CAGR over the last four years is concerned. Last four years, I am sorry Ankur. I will not be having. I can try to give you a ballpark but I maybe off by a few percentage points. So I will not hazard guess at the moment. You can get back through Valorem and we will be able to provide you that answer. Okay. So you believe like year-over-year, would it be at least last year to this year or do you believe there is a volume growth expected or this is all due to price realization. Certainly over the last three

Yeah, thanks for opportunity. Thank you sir. Very really hearty congratulation for such a good order book. After long we are having sizable order book, sizable deck for further inquiries. Sir my first query is now as expected after last two three years comparable of COVID situation and very difficult situation in commodity prices and volatility next two, three years seems to be reasonably hopefully better. So and you rightly only started investing in reasoning capability, execution capability. So, which are the major focus area which allow you to say generate substantially higher execution. en

Aankur Patni

I think the opportunities to grow on the engineering segment exists both domestically and internationally. We are now looking at an inquiry bank of more than 8000 crores. A significant portion of that is international. We are hopeful that we will be able to convert a good portion of this inquiry bank and hence the need to expand our overall infrastructure not just to execute the current order book, which we discussed was in the range of around 3000 crores, but also to prepare ourselves for the incoming order flow from the inquiries which are under discussion. So, we should be looking at a sign

Thanks for that question Mr. Reddy. We have a culture at Ion exchange which is pro employees and as a testament to that, a large number of our senior management team has been with the company for more than 25-30 years. We continue to adhere to the policy of being extremely pro employee and value the contributions made by our experienced team both in terms of their managerial and technical capabilities. Having said that, the induction of young blood into the entire team is also necessary, which happens at various levels. Both at middle management, junior management levels, and sometimes at rela

Management

Sir just want to confirm about the CAPEX for the application. So, you are increasing the capacity of anion and cation raising by at 6000 metric ton each and the amount would be 400 crores. Is my understanding correct sir.

Aankur Patni

as I have been mentioning in this the figure is going to be well in excess of 200 crores and the capacity expansion would lead to doubling of our current capacities in the first phase. Tushar Raghatate: Okay sir, again, can you please just tell me like how many phases are in this expansion? There will be two phases. That is what is currently planned. Tushar Raghatate: Okay fine sir. So in the first phase we will double our capacity and thereafter in the second phase we will again add an equivalent capacity. Tushar Raghatate: Okay sir what would be our gross profit margin for chemical business?

Sir for the capacity addition in the chemical segment, the expanded capacity which we were augmenting currently, what is our current market share and for the industry as a whole, how much whether the product is imported currently or totally indigenous?

Aankur Patni

Our current market share in India for resinswould be around 40%. There are imported resins available in the market and they have been so for large number of years. The capacity augmentation is targeted not just for India, but substantially for the international market. For the international market as a whole, our market share would be in single digits. So, there is a lot of headroom for expanding our volumes in the international market. And sir, how are sourcing our raw material, our dependability on the raw material. Having siad it would be much affected by that also, so if you could throw so

Thank you all for participating in this Earnings Con Call. I hope we are being able to answer your question satisfactorily. If you have any further questions or would like to know more about the company, we will be of happy to assist. We are very thankful to all our investors who stood by us and have also in confidence in the company’s growth plan and focus and with this I wish everyone a great evening. Thank you.

Management

Speaking time

Aankur Patni

Saket Kapoor

Moderator

Chetan Bohra

Vasant Naik

Pratik Kothari

Kiran Sebastian

Santosh Kumar Kesari

Anurag Patel

Tushar Raghatate

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Opening remarks

Anuj Sonpal

Thank you. Good afternoon, everyone and a warm welcome to you all. My name is Anuj Sonpal from Valorem Advisors. We represent the investor relations for ION Exchange India Limited. On behalf of the company, I would like to thank you all for participating in the company’s earnings Conference Call for the first quarter and financial year 2023. Before we begin, I would like to mention a short cautionary statement. Some of the statements made in today’s Conference Call may be forward-looking in nature. Such forward-looking statements are subject to risk and uncertainties which could cause the actual results to differ from those anticipated. Such statements are based on management’s belief as well as assumptions made by and information currently available to the management. Audiences are cautioned not to place undue reliance on these forward-looking statements in making any investment decisions. The purpose of today’s Earnings Conference Call is purely to educate and bring awareness about t

Vasant Naik

Thank you Anuj. Good afternoon, everybody. It is a pleasure to welcome you to the earnings conference call for the first quarter of financial year 2023. Let me first take you through the financial performance for first quarter of the current year on a consolidated basis. The operating income for the quarter was INR 3824 million, an increase of around 22% year-on-year. Operating EBITDA reported was INR 329 million, a decrease of around 8% year-on-year and EBITDA margin stood at around 8.6%. Net Profit After Tax reported was INR 274 million, an increase of 18% year-on-year while PAT margin percentage was 7.17%, a decrease of 22 basis points on a year-on- year basis. Let me now take you through the quarterly segmental performance on a consolidated basis. In the engineering division, the revenue for the quarter was INR 2024 million compared to INR 1767 million during the same period last year, an increase of 15%, EBIT for this segment was INR 81 million compared to INR 92 million on a year

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