IONEXCHANG - Ion Exchange (India) Ltd Share Price

Management Outlook:
Ion Exchange (India) Limited anticipates 15"“20% revenue growth in FY25, driven by steady execution in its engineering division, expansion in chemicals, and scaling consumer products. Margins are expected to recover post-H1 FY26 as onerous contracts conclude. Key highlights:

1. Engineering Division:

   • Growth: 15"“20% revenue growth guided for FY25.
   • Margins: Depressed due to a legacy project (UP Jal Nigam and another onerous contract), dragging EBITDA margins by ~150"“200 bps. Completion expected by H1 FY26, with margin recovery thereafter.
   • Order Book: INR 3,405 crores (as of Q3 FY25), with inquiries from sectors like green hydrogen, semiconductors, and data centers.

2. Chemical Division:

   • Capacity Expansion: Roha plant (INR 400 crores) 50% completed; commercial production expected by Q1/Q2 FY26. Targets long-term contracts to utilize new capacity.
   • Growth: 10"“15% revenue growth guided for FY25, with backward integration improving margins.

3. Consumer Products:

   • Growth: 23% YoY revenue growth in Q3, focusing on premium residential markets. Losses persist due to reinvestment in distribution and product launches. Targeting INR 500 crores revenue before profitability.

4. International Expansion:

   • Portuguese subsidiary (Mapril) gaining traction in Europe for chemicals and engineering contracts.

Challenges:

• Delayed execution and funding for UP Jal Nigam project (INR 719 crores pending).
• Margin pressure in engineering to persist until H1 FY26.

Key Catalysts:

• Resolution of legacy projects, new chemical capacity, and international order inflows.

Question 1: "So, first on engineering, so this quarter we had a good execution which led to that 34% Y-o-Y sales growth in engineering, but our new order inflow was little muted as compared to previous quarter. So, could you please highlight, in an engineering project in both domestic as well as international market, from which sector are we witnessing more order inquiries is it the core sector like steel, power, oil and gas, which are typically larger sales order, or is it the smaller ticket size from various other sector, I just wanted to understand from where are we seeing more visibility and conversions?"
Answer: Order inquiries are primarily from core sectors (steel, power, oil & gas), though conversions for large projects remain slow. Emerging sectors like green hydrogen, semiconductors, and data centers are under discussion, with order inflows expected in upcoming quarters.

Question 2: "Okay. And sir any update, for example any order inquiries we are getting for sunrise industry, like data centers or semiconductor because there is a lot of traction which is happening there?"
Answer: Active discussions are ongoing for orders in green hydrogen, biotechnology, semiconductors, and data centers. Management anticipates stronger inflows from these segments in the next few quarters.

Question 3: "Okay. And sir now coming to engineering margin. So, this quarter, on Y-o-Y we saw in 150 basis point decrease in the EBIT margin. Could you please elaborate on that, are we sacrificing the margin to fuel growth or is it that the competition intensity is becoming higher, or is it more to do with higher execution of that one onerous order which we spoke about in the last quarter, what is happening there from margin front and for the whole year, as well as Q4 what is the revenue and EBITDA guidance, margin guidance are we giving?"
Answer: Margin decline is attributed to an onerous contract (impacting margins by 150"“200 basis points) and project mix variability. FY25 engineering growth is projected at 15"“20%, with margins ~1% lower than FY24.

Question 4: "Okay. And sir one last question from my end, this one bookkeeping question. So, I have noticed in several past years the Q4 the tax rate suddenly drops from, let's say 27%, 28% to around 20% to 23%, can you explain why that happens in Q4 every quarter. This has been a trend since last three, four years."
Answer: Tax rate fluctuations arise from consolidated tax contributions across 21 subsidiaries. Higher domestic profitability in Q4 skews the effective rate downward.

Question 5: "I have two questions. Could you please give us an update on the ongoing litigation about the IEEF subsidiary, and there has been some progress in the quarter. And secondly, the onerous contract when do you think that will be completed. Thank you."
Answer: The onerous contract will largely conclude in H1 FY26. Litigation with SEBI is pending at the Securities Appellate Tribunal, with hearings scheduled for February 10; the company remains optimistic.

Question 6: "Sir, as mentioned that you told that legacy project which is having a cost overrun will be getting completed by first half FY26, is it right?"
Answer: Yes, the project is expected to conclude in H1 FY26. Delays stemmed from civil site challenges and funding constraints. Margins remain consistent with prior disclosures.

Question 7: "Sir, for the bid pipeline of 8648 crores, what could be our conversion ratio and the execution timeline for that?"
Answer: Typical conversion ratio is ~15%, with order execution spanning 2"“3 years.

Question 8: "Sir, one final question, the working capital days have been inching upwards. So, what would be a moderate assumption going forward, that would be a reasonable?"
Answer: Working capital increased due to advances from large contracts. Days are stabilizing as project execution normalizes.

Question 9: "Just two quick questions, number one is, what portion of our engineering revenue comes from the industrial segment, and then within industrial also, how much is ZLD. And the follow up question would be, if you could just provide a brief outlook on the same, on the industrial segment especially the ZLD, has the traction increasing, has the government's taken any step, probably which is increasing the adoption in the ZLD, I want this perspective, especially from the domestic point of view. Thank you."
Answer: Government policies are driving environmental tech adoption (including ZLD), though ZLD's revenue share varies. Industrial projects account for ~10% of engineering revenue, with government contracts forming <5% of inquiries.

Question 10: "As we are in the fag-end of the financial year, what engineering business orders are we expecting in next 50 to 60 working days, this is a question number one. And question number two, regarding chemical business in the Q1 concall also you said we are operating 65% to 70% of the planned capacity and there is a headroom for chemical business, but consistently, we are doing 200 crores of revenue consecutive three quarters. Why chemical revenue has stuck at 200 crores because there is still room for the plant capacity. So, any specific reason for that, and are we expecting Roha plant from quarter one onwards 40 to 50 crores revenue will come from quarter one, or it will start from quarter two only?"
Answer: Near-term engineering orders are not quantified. Chemical revenue (~10"“15% FY25 growth) is constrained by product-specific capacity utilization. Roha's contribution will likely begin in Q2 FY26 post-commissioning.