Ion exchange concall aug 2022
-SHRILANKA ORDER
-UP Jal Nigam
-CAPEX
-GROWTH
-PERFORMANCE
-OTHERS
1…SHRILANKA ORDER
A…RECEIVABLES
Q=Have we received all the money or the money is retained by them.
Ans= I cannot give any specific details about the contract.
B…CREDIT RISK
=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
C…EXECUTION
=The residual part of the contract which is remaining to be executed is
just under 250 crores.
=The execution progressed at a slow pace due to the current political
uncertainties and the commodity shortages.
=We remain hopeful that in a short period of time, we would get the
necessary go ahead from Sri Lankan government and funding agencies
to start execution at a faster pace.
Q=We are sure that the project is going to be finish sooner or later ?
Ans: We remain hopeful that very shortly the conditions for execution of the contract will improve. 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
D…DELAY
=The overstay which is caused by the
customer or because of the actions attributable to the customer is
covered under the contract and we can claim for this stay. So those costs are not going to be a loss for us .
…
2…UP Jal Nigam
=On the other hand, execution of the UP Jal Nigam is progressing satisfactorily and revenue has been recognized based on work completion.
…
3…CAPEX
3A… Engineering segmemt
=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.
3B…Chemical segment capex
B1…Debottlenecking :
=That’s an ongoing process We have a lot of headroom for expanding our revenues.
B2…Greenfield expansion
=The total CAPEX on that is
expected to be in excess of 200 crores.
=We are still awaiting the
environment clearance .Person who is supposed to give the clearance is finally get appointed
=Currently, our expectation is that the plant will go into operation in FY23-24
=It will take about 12 odd months when we receive the approval to put up the plant and operationally.
=Product profile is not going to be very different. Of course, there will be something new which will get added. But the overall product profile is similar to what we are doing currently. The plant is awaiting environment clearance so we have not really started in earnest to spend on that.
=Capacity expansion in 2 phases
-first phase we will double our capacity and thereafter in the second phase we will again add an equivalent capacity.
3C…Membrane capex
=Our total CAPEX will be in the region of around 60 crores and the major CAPEX would be in our enhancement of membrane facility, and also the incremental CAPEX, which we keep on doing in the chemical segment that will also be done.
…
4…GROWTH
A…Future growth
=For the company as a whole, I would expect a 30 to 35% growth on top line.
=The engineering segments will go at a higher pace and as far as
chemical segment is concerned, it will continue its growth momentum
which is not as high as the engineering segment’s
B…Future margin
=We are certainly hoping to equal or better the year end margins achieved on the engineering as well as the chemical segment. Certainly on the consumer product side, we are very
hopeful that we will be in the back in this year. So, with i all of this
combined, I am very hopeful that we will improve the overall margin
percentage.
C…Engineering segment -Order book and future growth
=Order book as of June 30, 2022, it stood at approximately INR 1529
crores excluding the Sri Lanka and the UP Jal Nigam order and if we
add both to the order book, the cumulative order book would be in
the region of INR 2912 crores.
=We also have a bid pipeline of INR 8000 crores. With this, we have a strong visibility revenue for the next two three years from the engineering segment.
=In the coming quarters, we expect to see a significant improvement on the engineering revenue for FY23 as a whole… We also have a very strong order book at this point of time and further witnessing a good inquiry bank. From this inquiry bank, our prospects of converting orders are also bright.
=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 significant growth going forward, not just in the next couple of years, but the visibility which we seem to be building up is a good healthy engineering
segment at least over the next 4 to 5 years.
=After long we are having
sizable order book, sizable deck for further inquiries. (From one investor)
D…Chemical segment growth
=Utilization level for the chemical segment is roughly in the range of 70
to 75% and you asked about.So, there is a reasonable amount of headroom available, we would certainly be looking at higher utilizations in the coming period.
=Certainly over the last three or four years, we would have had volume
growth, but I, unfortunately do not have ready reference to that
number
=As we have been mentioning over the past few calls, and we are eagerly
awaiting the environmental clearance for our new Greenfield plant.
Once those capacities come in, we will be hoping to increase the
capacity utilization percentage in the new plant also quite rapidly
Q=Why existing capacity utilization is also low maybe 70-75%. So which are the roadblock for achieving 90% and 100% capacity before this new plant comes.
Ans=A…At the moment the there is a slight demand stress or pressure on the demand in the international markets.
B=The first quarter is typically a light quarter as you may know from the trends.The capacity utilization will rise up as we move towards the next
quarter
=Our current market share in India for resins would 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.
E…Consumer segment
=Hydrolife
The market acceptance of the product is very good and the revenue
potential is very high. In coming times we should see much better
numbers coming from this product compared to what we have done
in the current quarter
=Apart from Hydrolife, there are other key product lines which also contribute significantly to the consumer product segment
=The Consumer 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
products to start contributing in a bigger way in the coming times.
=EBIT margin of consumer segment
Q=I think on a top line,
this time on a top line of 50 crores. We did PBT of 31 lakh. So what should be the normalized margin and a sustainable one?
Ans=If you will evaluate the way consumer segment has moved in terms of its EBIT margin profile. It is a factor of the scale which we have been able to achieve for this segment. As scale of operation rises, you will
see sequential improvements in the EBIT margins. The products are
quite profitable and my expectation is that it will start contributing to
a much bigger extent to the overall bottom line of the company in
times to come.
=Consumer segment has a very large potential. Potentially the revenue could even more than double in the coming 2-3 years time. The market size is much more than that. Our market shares are in single digits at the moment.
…
5…PERFORMANCE
4A…Engineer segment
Q=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%
Ans=The margins for engineering segment as we discussed earlier, they
have been impacted for primarily two or three reasons,
A1… 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. So, this cost which is currently hitting us on the bottom line would no longer be so in the coming quarters because the
corresponding revenues would also come in.
A2…The second is the rise in
input costs in earlier quarters affected the segment margin in the
current quarter because of the inventory which was carried over and
also purchase orders placed during earlier quarters, which got delivered during Q1 and were used for the invoicing.
B…Chemical segment
=Chemical division performance was quite steady. Because the Greenfield plant has been postponed to the
next year and we were operating in nearly the optimal capacity.
C…Consumer segment
=Coming to the consumer division segments, the revenue for the quarter was INR 505 million, an increase of around 115% on a year-on-year basis. The profit for the quarter was INR 4
million compared to a loss of INR 13 million in the last year.
=The steady improvements in volumes driven by acceptance of new
product launches enabled improvement in the financial performance. We expect the segment to sustain its growth momentum
…
5…OTHERS
A…Consolidation of subsideries
=consolidation of subsidiaries is also on course. We will start the
formal process in the second half of the current year.
B…Price variation clause
= As far as price variation is concerned, some contracts, especially with the government and PSUs, do have a price variation clause .Because of the way the price volatility has impacted margins of not just company like us, but across the globe and across industries, the customers have been quite considerate and we have managed to get pricing escalations from customers, even where a price variation clause did not formally exist in the contract
C…Green hydrogen opportunity
=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. 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.
Disc…invested
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