IONEXCHANGNSEfinancial year 2023November 18, 2022

ION Exchange (India) Limited

7,142words

176turns

16analyst exchanges

0executives

Key numbers — 40 extracted

INR 4476 million

mance of Q2 FY23 of our company on a consolidated basis. The operating income for the quarter was INR 4476 million, an increase of around 18% on a year-on-year basis and 17% quarter- on-quarter. EBITDA reported wa

18%

solidated basis. The operating income for the quarter was INR 4476 million, an increase of around 18% on a year-on-year basis and 17% quarter- on-quarter. EBITDA reported was INR 533 million, an incre

17%

ncome for the quarter was INR 4476 million, an increase of around 18% on a year-on-year basis and 17% quarter- on-quarter. EBITDA reported was INR 533 million, an increase of around 34% on y

INR 533 million

an increase of around 18% on a year-on-year basis and 17% quarter- on-quarter. EBITDA reported was INR 533 million, an increase of around 34% on year on year and 62% quarter-on-quarter. EBITDA margin stoo

34%

year basis and 17% quarter- on-quarter. EBITDA reported was INR 533 million, an increase of around 34% on year on year and 62% quarter-on-quarter. EBITDA margin stood at 11.91%. Net profit a

62%

arter. EBITDA reported was INR 533 million, an increase of around 34% on year on year and 62% quarter-on-quarter. EBITDA margin stood at 11.91%. Net profit after tax reported was INR 387 mill

11.91%

increase of around 34% on year on year and 62% quarter-on-quarter. EBITDA margin stood at 11.91%. Net profit after tax reported was INR 387 million, a increase of around 42% year on year and 4

INR 387 million

year and 62% quarter-on-quarter. EBITDA margin stood at 11.91%. Net profit after tax reported was INR 387 million, a increase of around 42% year on year and 41% quarter-on-quarter, while the PAT margin percentag

42%

A margin stood at 11.91%. Net profit after tax reported was INR 387 million, a increase of around 42% year on year and 41% quarter-on-quarter, while the PAT margin percentage was 8.65%. For the fir

41%

%. Net profit after tax reported was INR 387 million, a increase of around 42% year on year and 41% quarter-on-quarter, while the PAT margin percentage was 8.65%. For the first half of the year FY2

8.65%

crease of around 42% year on year and 41% quarter-on-quarter, while the PAT margin percentage was 8.65%. For the first half of the year FY2023, the operating income stood at around 8,300 million an i

8,300 million

percentage was 8.65%. For the first half of the year FY2023, the operating income stood at around 8,300 million an increase of around 20% year on year. EBITDA stood at INR 862 million, an increase of around

Guidance — 20 items

NM Ranadive

opening

“Regarding Sri Lanka order the execution remained affected due to the ongoing uncertainties in the Sri Lanka on the other hand, execution of the UP Jal Nigam project is progressing satisfactorily and revenue has been recognized based on the work completion.”

NM Ranadive

opening

“The order book as on 30th September 2022 is to approximately INR 1458 crores excluding Sri Lanka and UP Jal Nigam project.”

NM Ranadive

opening

“Investment in infrastructure and new product are giving encouraging results and we expect the segment to sustain its growth momentum.”

Aankur Patni

“It is not generally possible to predict an exact timeline when the orders would eventually fructify, but we are certainly working on it and hopefully, we will be able to announce something soon.”

Chetan Vohra

“And so, basically, it will be the back ended thing and on the margin front also for the first half also and the engineering we saw pressure on the raw mat and because of the margins has been like 5% while the chemicals margin has improved, so, how do we see situation going ahead?”

Chetan Vohra

“Okay fine and how do we see the as the earlier question was also being asked that the bid pipeline which stands right now nearly about 8000 odd crores, and how much of that will be in the advanced stage of talking and that was the first thing and the second thing was of the UP thing, the UP order has started getting executed here under the execution.”

Aankur Patni

“We do not give contract specific data but as we have been saying that we 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.”

Aankur Patni

“We have heard some positive developments very recently and our expectation is that we will get the environmental clearance , that we were waiting for , within this month and we expect to start commercial production in FY 24-25.”

Yog Rajani

“What EBITDA margins can we expect from this division over the next three years?”

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Risks & concerns — 9 flagged

This segment improve margins in spite of the impact of rising US dollar rates on input prices.

— NM Ranadive

And so, basically, it will be the back ended thing and on the margin front also for the first half also and the engineering we saw pressure on the raw mat and because of the margins has been like 5% while the chemicals margin has improved, so, how do we see situation going ahead?

— Chetan Vohra

Only when we feel that the recoverability is not going to be a challenge and execution can be at desired pace we will start again in earnest.

— Aankur Patni

We do not give contract specific data but as we have been saying that we do not expect to have any credit risk in this job.

— Aankur Patni

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

— Aankur Patni

It is difficult to give you very exact or accurate predictions of how these things would pan out in future.

— Aankur Patni

And in terms of Sri Lankan order project while I agree that we do not run a major credit risk, because of the Exim.

— Romil Jain

Given the international, economic and geopolitical scenario, there is certainly an impact of that on demand, especially from Europe & America.

— Aankur Patni

Our effort is to make sure that the opportunities that we pick up do not put us to risk as far as our balance sheet or our bottom lines are concerned.

— Aankur Patni

Q&A — 16 exchanges

Hi, good afternoon. Thank you for the opportunity. Sir my first question is on the engineering field. I mean, if we compare ourselves three years back, which is pre- COVID, our order book is substantially higher 2x when you look at the execution, it is very similar to the run rate that we used to have them. So, you can just talk about our execution capabilities, what are we building to kind of shift to our highest trajectory in terms of the execution that we do on the engineering field.

Aankur Patni

Good afternoon Pratik, we are going to witness substantially increased level of execution in the coming quarters and we have strengthened the infrastructure including manpower, engineering, whatever is required to handle the execution, you will see the benefits of that in the coming quarters. Sir the investment or preparedness has already been done. It is just that is yet to reflect in on ground exhibition. That's right. That's good to hear. And sir, for the last few quarters mentioning that we are almost on the verge of signing of a large order maybe in the international market or domestic ma

Yeah, good afternoon sir I wanted to understand on the engineering front, growth has been like 5 to 10% and at the start of the year, we were riding out for like overall growth of 30% and chemical also has reported revenue growth of 16% the first half so where do we stand in that scheme of thing?

Aankur Patni

Chetan your voice was very unclear it's a bit muffled. Can you repeat it? What I was asking at the start of the year, we had given a looking out for the revenue growth of nearly about 25 to 20%, but in the first half our engineering growth has been like 11% and the chemical has grown by like 16%. So, where do we stand in that scheme of things sir. We should substantially increase the pace of execution in the coming quarters. We retain our expectation of the year end revenues from engineering segment and overall numbers. Which is 20-30% right? Yes, we should be looking at a growth of around 30

My first question is what is the maximum revenue potential of the consumer product division facility, chemical division facility and the membrane facility?

Aankur Patni

You are asking the maximum revenue potential. Yes from the current capacities that we have in the three divisions. Consumer Product division, we do not really have a significant capacity constraint. We can go to 2x or 3x of where we stand without much of a strain and likewise, our ability to rampup revenues from our chemical division is pretty strong as we are able to add capacity modularly to the extent required and which is product line specific. In case of Resins, as we have announced, we are looking at a greenfield expansion, which will increase capacity to double of where we are at presen

As of now the UP contract, which is one of the larger contracts is a government contract. Similarly, Sri Lankan contract, we would classify under the government contract. Typically, one large contract from the government side would tend to create significant bias towards that segment. It is difficult to give you very exact or accurate predictions of how these things would pan out in future. But based on reasonable assumptions, I would expect that in a timeframe of three to five years, the direct government contracts should be in the region of around 20 to 35%, somewhere in that bracket. Pranay

Aankur Patni

See if we get a very large contract in the international market, something like Sri Lanka, which we have been talking about, that would tilt or skew the numbers slightly, but again, based on reasonable assumptions, I expect the domestic to be somewhere around 60 to 65%. Pranay Roop Chatterjee: Got it all clear and my second question is on competition side, also on the engineering segment? If you could, it's okay if you don't give an exact number, but a broad range or as to what has been your bid win rate in the past and continuing on that given your bid pipeline and the type of projects you bi

Hello, thanks for the opportunity, sir and congrats on a good set of numbers. Sir, just want to understand at the at the ROC level, whether our exports business will be doing better or domestic business will be doing better overall.

Aankur Patni

As a thumb rule, we would expect it to be almost the same maybe with a slight bias towards the international sector. Okay and currently of the order book how much is the export order book and how much is the export bid pipeline? Roughly 20% is exports and bid pipeline in total is around 8000 odd crores, of which exports is roughly 30%. And in terms of Sri Lankan order project while I agree that we do not run a major credit risk, because of the Exim. Can you just let us know how much obviously only the small part of the execution is now left, so what kind of money have you already received on t

Sir in your presentation under this engineering order book and pipeline, it is mentioned that engineering project is 1458 crores, whereas outstanding for SriLanka is 256 crores. So, this is the worth of content pending to be executed for Sri Lanka.

Aankur Patni

That's right 1458 is excluding Sri Lanka and UP. Yes, separate figures are mentioned. 256 is the outstanding portion of Sri Lankan contract. And sir as you have correct me as you mentioned that for the Greenfield project, we are in the process of receiving the environment clearance within this month, we are expecting it for this month. Yes, we are expecting to receive it this month. Okay. Sir could you give me some more color on the size of the investment we are going to and what are the contours of this resin project sir? As I have been saying, we will be doubling the capacity of resin manufa

Sir my question is basically as the industry grows and becomes highly profitable, like chemical industry becoming engineering also seems to be very lucrative or maybe it is next 2,3, 5 years, mutually competition will be increasing. So, how we will keep ourselves ahead of competition with profitable and really respectable profit and growth? So, what internally we will be doing with both the division or what we are doing so getting competition little bit at bay.

Aankur Patni

As it stands today, I believe our margins and control on various aspects of the business will possibly be amongst the best in both engineering and chemical segment, we will continue to be proactive on all fronts. We are taking continuous steps to improve productivity & efficiency of the manufacturing setup and also trying to ensure that we take these steps proactively. Our costs including input costs are under control and we continue to be vigilant on all fronts., We hope that we will be able to maintain the edge. This is all in terms of profitability and costs but in terms of product innovati

Hi, thanks for the opportunity. My first question will be what is your growth outlook within each segment you expect your chemical segment to grow faster than engineering or overall are this 30% growth that you are guiding what will be the segmental growth outlook that you see?

Aankur Patni

We should see stronger growth in the engineering segment and relatively lesser growth in the chemical segment. The order book which we carry for the engineering segment is very strong. So, is the bid pipeline and expected wins, we should not only be having substantial revenue generation during the next two quarters, but we are hoping to carry forward very strong order book into the next year. Chemical segment would continue to grow at a good pace, but comparatively it would be engineering segments which would grow more. Understood thanks and in terms of your export and domestic mix is, could y

Sure. No worries. Thanks a lot.

Management

Mr. Patni, I was just going to your EBIT margin segment I can see both in engineering chemicals, the margins have been improving since last three, four years. So, particularly in the engineering segment, do you see margin improvement from here also, and in chemical space too or is it the peak as per your calculation.

Aankur Patni

We should see improvement from here on. By the end of the year, we should be maintaining the full year margins similar to what we have achieved in the past and in chemical segments, we should be achieving the margins which we had in FY2021. So, we will certainly be seeing improvement from here on. You are saying sir, in both the segments, we can see further improvement in EBIT margins. That is right. That is encouraging sir. that’s on full year basis. Yeah, I understand sir. Second question is on the CPD on the consumer product segment. You on one previous question, you mentioned that on a sca

Is my audio better now?

Management

Couple of questions, one on the chemical segment. Are there any specific proprietary products for example, in this segment that we will be launching with the expanded capacities and B, would you be tying up somebody for white label manufacturing kind of a contract or would these all be under ion exchange own brand?

Aankur Patni

We have quite a few products within our portfolio which are proprietary in nature and the new capacity will look at a wide mix of products. We do offer our products to various players in the market including competitors, but per se white labeling is not something which we have envisaged Given the substantial expansion we are looking at, whom would you be displacing sir in the international market and what specific advantages would we have versus them? Sorry, your question was not very clear. Can you come again? I was asking you given that you would be displacing somebody because your expansion

Yeah. So, wanted to understand and just wanted to reconcile some number. So, last quarter, we had total order book of 2912 and in this quarter, we have 2795 so 117 crore reduction in overall order book and I assume that whatever reduction is should reflect in incremental sales here in engineering side. So, is this understanding correct here?

Aankur Patni

That is right. So, incremental sales at 66 crore from Q1 to Q2 while our order book has contracted by 117 crores. Yes, there is additional order inflow also during the quarter. Sir in initial order input has been executed earlier and then there has been no addition to order book that is what you are saying. No, there has been an additional order inflow, it is around 120 crores. Okay. Yeah, I think we will understand it offline. Secondly, in balances sheet side also, you see that it is the inventory increase of some 50 odd crores. So, is this related to chemical or engineering. This is largely

Sir just one follow up what I have seen the order inflow so far in the year and what is your annual target for this year?

Aankur Patni

The order inflow in engineering segment was around 528 crores for the first six months. Okay, any sense you can give us a full year what your target would be? In the second half we should have substantially more than what we had in the first half. Okay, okay. One question. I think we were also kind of doing some restructuring on the entire group level right the subsidiaries and all. So, one is what is the progress of that the treasury shares also and we have a substantial cash balance and we are also getting good cash flows. So, what is the thought process. Of course, 250 crores of CAPEX is li

The overall market size for resins on a global basis is in excess of $2 billion. That is why I have been talking about substantial headroom for growth being available there. The proposed greenfield capacity should take roughly three years to reach optimum levels of utilization. Pranay Roop Chatterjee: Got it. Thanks a lot. I will be back in queue.

Management

Hi, thanks for the opportunity for the follow up. So, just again, speaking about growth drivers going forward where you see the substantial growth opportunities, especially in your engineering segment is it going to be largely public and government related contracts, is going to be increased of private companies as they try to ramp up their ESG efforts and environmental efforts, where do you see majority of the growth happening going forward?

Aankur Patni

I think we are seeing opportunities evolve on almost all fronts. Firstly, both domestic and international markets and secondly in each of these markets from all segments, including industry, the public sector, as well as from the government directly. Our effort is to make sure that the opportunities that we pick up do not put us to risk as far as our balance sheet or our bottom lines are concerned. We continue to be relatively conservative when we pick up these new opportunities to make sure that we maintain not just the growth trajectory, but also maintain a healthy bottom line. There would n

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Speaking time

Aankur Patni

Moderator

Ranveer Singh

Romil Jain

Saket Kapoor

Chetan Vohra

Yog Rajani

Shriram Kapoor

Pratik Giri

Karthik Keyan

Opening remarks

Anuj Sonpal

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

NM Ranadive

Thank you Anuj. Good afternoon, everybody. It is a pleasure to welcome you to the earnings conference call for the second quarter and first half of the financial year 2023. Let me first take you through the financial performance of Q2 FY23 of our company on a consolidated basis. The operating income for the quarter was INR 4476 million, an increase of around 18% on a year-on-year basis and 17% quarter- on-quarter. EBITDA reported was INR 533 million, an increase of around 34% on year on year and 62% quarter-on-quarter. EBITDA margin stood at 11.91%. Net profit after tax reported was INR 387 million, a increase of around 42% year on year and 41% quarter-on-quarter, while the PAT margin percentage was 8.65%. For the first half of the year FY2023, the operating income stood at around 8,300 million an increase of around 20% year on year. EBITDA stood at INR 862 million, an increase of around 14% year on year. EBITDA margins were reported at 10.39% and that stood at INR 661 million and incr

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