Ion Exchange (India) Limited

The company does make Ion Exchange Membranes which are used in the machineries they supply to companies, these membranes manufactured by them are also extensively used in the water purifiers they make.

Ion Exchange Result came. Good YOY performance. Not so good QOQ wise. May be due to Covid 2nd wave during Apr and May Month.

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Mentioning you since I see healthy discussion points from you in the recent past on this topic.

There are lots of subsidaries of this company which they have clearly mentioned in annual report with info on their revenue/profits (only for some). I generally have a bad feeling when this happens as the promoter could be siphoning money off the company. Honestly speaking they didn’t need so many - maybe one subsidary in 1 country is ok, but they have multiple in India, Bangladesh. I know many more (well performing) companies in B2B/heavy engineering space which have only 1 to serve all regions in India + exports. That’s a much simpler capital structure.

Would like your unbiased (since you seem to be invested) opinion as I am also holding this company because of future prospects, but management quality…


There have been Corporate Governance slips in the past. There’s no doubt about that (The more serious one being the Equity issues to the Promoters).

However, there has been no such incident in the recent past and the management has also started conducting Concalls regularly. I personally don’t think having multiple subsidiaries is a big issue (See Motherson Sumi Systems, for instance), especially when most of the Subsidiaries don’t have a lot of Revenues. You can question the management in one of the Concalls about this, should you wish.

Ultimately, if you’re uncomfortable still, you should really ask yourself whether you want to continue holding. Nothing and I mean nothing is worth losing your peace of mind in investing.


Yes that happened in the past, even now I feel the management’s cash compensation is high compared to other companies of similar size. Though I am willing to ignore it because their execution has been above average - particularly this year cash flows were better despite Covid affecting this industry. And maybe you are right most of subsidaries don’t have significant contribution to revenues - however that makes me more suspicious.

nothing is worth losing your peace of mind in investing

Well, my position in this stock is not big enough compared to PF size to let me loose peace of mind. I am actually doing this effort to decide whether to average up. And there’s some element of risk we need to take when expecting alpha.

Given that opportunities for this industry are probably going to expand in the future (it already has as per their annual report) and the okish execution of the management, I am looking forward to a small dip now :slight_smile:


ION exchange operates in a very niche business and that makes it different.
The second thing is the demand for Fresh Water and Solid waste management will increase, also depends on a lot of factors.
Company has a market penetration.
The thing is the company has a B2B model.


Q2 results - no major growth coming through both in Revenue and EPS


Good Concall after a long time, I feel.

Insights on upcoming opportunities and how the GOI EPC (Ex: Nal Se Jal, Jal Jeevan) work breaks down.


I am new to this. Now it’s good to invest in ion exchange at current levels?
There is still lot of work to do nal se jal yojna as our fm said and on water waste also.
Please share your views.

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Ion exchange is completing work in sri lanka , can anyone confirm whether that contract amount is at risk due to bad health of srilankan economy or it’s secured & funded by any external body ?


Why is the stock price falling so much? From a high of around 2900, it has fallen to 1600 levels. They had a decent set of numbers in the Dec 2021 quarter. What could be the reason?

In the latest conference call, the company management had clarified that the Sri Lanka project does not have external risks. The project complition will be delayed due to the 2nd and 3rd wave of COVID.

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Can u share screenshot of reply from management about shrilankan project


Ion Exchange: Call with Valorem Analysts

Sep 24, 2020


In AR 20-21 the company had said that Order book is there till 2023. Just wondering that with the current appreciation in prices of almost all commodities, does the company have an risk to this. Do their orders have any price escalation clause. Is this reflected in the profits of the last few quarters as the orders would now be getting completed. Thank you


Ion exchange concall june 2022

1…Shrilanka order

=Regarding the Sri Lanka order, the company in this quarter
had commenced progressive handover of the completed stages of the project to the Sri Lanka Water Board.

A=For us, the major challenge
has been operational, because the availability of fuel, of manpower, of subcontractors, became a little bit
unpredictable and uncertain, and led to slowdown in the pace of execution. This has led to extension of the period of execution. Now we have from the Sri Lankan Water Board,
extension approved till the second quarter of the current
financial year. We should be in a good position to complete
this contract by that time, again hoping that the situation
would be smooth on the ground for execution.

B=We do not expect to have any credit risk because we’re not getting paid
directly by the Sri Lankan government. And plus, these payments are insured and guaranteed. So, with those things
in place we do not really have any credit risk, but the pace of
revenue recognition has slowed down and there is a little bit
of an uncertainty about that. We are going with the guidance
of the concerned ministries and our insurers and we would
accordingly pace the execution.

Q=Good that you’re well
secure on that count, but one question sir, are you fully protected on the profitability side given the time delay

Ans=Yes, there is no material change in the profitability profile

2…Up jal nigam order

=The execution of the UP Jal Nigam project has picked up pace in this quarter, and the revenue
has been recognized based on the work completion.

=The UP order would be executed over a period of 18 to 24 months. The firmed up portion of the contract which we have already in hand will get executed by FY24. There is a small
portion in this contract which is still under processing and once that also gets firmed up that would get completed by the first half of FY25.

=The UP order was under the Jal Sa Nal scheme, the flagship of central government.

=There are many more opportunities to work on. The current contract has an execution period of 18 months to 24 months. And there are many more opportunities which are
available. We have been a little bit cautious about the quantum of work that we want to pick up for this particular segment and have been very carefully analyzing the risk
profile attached with each and every such opportunity. And
we are working on only those where we are very comfortable
with the overall risk. We will be picking up more of these, but
as of now this is the only one that we have converted into a

3…Order book

=Our order book stood at
approximately INR 1267 crores, this excludes the Sri Lanka and the UP Jal Nigam order and if we add these two orders the total order book would be approximately INR 2674

=Further, we have a bid pipeline of around 6700 crores, which gives us strong revenue visibility for the next
two three years from the engineering segment.

=The industry sectors which typically contribute to the larger contracts would be the refinery sector,the power sector andthe steel sector.

= Apart from this we also have opportunities from the relatively smaller size industries like textile,
pharma, the chemical industry, the sugar industry and the
food and beverage industry.

=And in the last constituent of
this segment from the industrial side would be the institutional and hotel kind of business.

= Besides this, there is the government and infrastructure side of business which also contributes significant quantum


A…The overall CAPEX was in the region of around 49 crores. As
we have mentioned in the earlier calls, we are in the process
of enhancing the capacity of our membrane plant.

= Also we have gone into in terms of improving the capacities at our
engineering divisions,

=and some incremental CAPEX has gone in the chemical divisions. So largely our totals 49 crores
CAPEX is largely in this three business lines

B… In terms of the next year 2022-23, our total CAPEX will be in the region of around 60 to 70 crores. And here again,

=the major CAPEX
would be in completing the capacity enhancement of our membrane facility plus

= the incremental CAPEX which we do every year in the region of 15 to 20 crore in our chemical
segments, that will continue.

C…Major capex
=Couple of quarters back we had announced large greenfield
CAPEX on the region side of 250 crores and on the other chemical side we were going send some Rs.50, Rs60 odd crores between FY22 and 23.

= There’s been some delay in getting some clearances. Just an update on the CAPEX part

=We are still awaiting clearance from the relevant authority and as soon as that is available with the company, we will initiate the CAPEX as we
have been announcing.

= As of now it seems that we would
not be able to complete this by the end of FY23, it will spill over to the first half of FY24.

=The govt. signatory who is going to review this document is
currently not available. Once the relevant gentleman is
available, the document should get signed and released.

5…Engineer segment

=We certainly expect to see a significant improvement on the
engineering revenue in FY23.

=We have a very strong order
book at this point of time and we are also witnessing a good
inquiry bank. Prospects of converting further orders are also
bright and we should be looking at a good growth over what
we’ve seen in the previous year.

Q=you say just now that there is a significant scope of improving revenue. So are we prepared for a higher numbers and higher execution orders?

Ans=We are quite well prepared to execute these orders and work
at a much higher scale than currently. We keep augmenting
our capacities and our ability to execute these projects. And
we’ll be able to supplement current capacities as and when required.

6…Chemical business

=Revenue from the chemical segment stood at INR 5579 million, an
increase of 27%.However, the logistic issues continue to hamper the dispatches. The increased raw material costs continue to put pressure on the margins in this segment.

=For the chemicals side of business, the volumes have been
more or less similar to what we have seen in the third quarter
although, there would be variations somewhere in different
product lines.

=Capacity utilization as a whole would be in the range of 75%

=There were some hiccups faced in the last couple of years arising out of logistic challenges, availability of containers and the cost of transportation. This had slowed down our progress in the international markets.

=I do hope that in the coming year, we would be able to achieve much stronger growth as compared to the last couple of years.

=Substantial increase in the resin capacity is anticipated in the next couple of years. That should give a
good boost in terms of revenues coming from the resin business.

7…Membrane plant

=We are currently working at well over 90% capacity utilizations,
expansion is on and we should see the implementation of
that expansion in the 4th quarter of 2022-23

8…Consumer business

=We should almost certainly see a turnaround of that business
in the current financial year that is FY23. The growth
momentum has picked up which is evident if we compare
quarter-to-quarter growth. We are seeing increased level of
business even after the fourth quarter and this should
translate into substantial improvement in the overall
turnover of the business that should lead to positive EBITDA.

9…R and D

Q=We have invested very high on R&D centers, our second R&D center
two to three years investment of 30, 35 crore. So what type of work we are doing and what’s the outcome

Ans=The kind of business that we are in, we need to continuously
innovate and bring out new products, that is core
requirement of our business and also fulfills our ability to
maintain margins at a level which is better than what
otherwise is available for commodity players. Therefore, this
is an important investment for us to make. We have more
than 100 people employed in our R&D efforts. And we continue to come out with new products as well as innovate
in various ways to ensure that the competitiveness of the
company’s products is maintained.

10…International orders

=. As regard international orders which we have been in discussion for quite some time, there is progress on these
orders. And we are quite close to finalization on some of
these contracts. But I still do not have anything to declare for
at this point of time. We hope that we would be able to do so in the very near future

=The future outlook is quite
strong. as I’ve been mentioning over a few of the calls, we are working on some very large opportunities in the
international market, along with smaller and medium sized ones. Most of these continue to remain attractive business prospects.


=Raw material costs have been at the escalated level for quite some time
now. And once that happens the margin expansion should take place.

=We hope to see improvement in margins here from and while there is
still an impact of the increased prices of raw material, hopefully the impacts
will keep going down.

= The quantum of impact you can see
evident from the lower year-on-year margin percentages
especially on the chemicals part of the business.

= But even so conservatively we should maintain the full year margin similar to what we have achieved in the past year.

…engineer segment ebita

Q=Sir I wanted to understand the margins for the engineering
business. So we see that we’ve had one of the highest margins that we’ve ever reported. And we saw similar trend in Q4 last year as well. So is it sustainable?

Ans=We do witness a jump in margins in the last quarter of the financial year, this has been sort of a trend for some years now. It happens on count of multiple factors coming into play altogether.

A… One of the key factors is the overall scale of operation in the last quarter. It is much higher than what is
witnessed in the other quarters. Therefore, we manage to leverage the fixed cost much better and the EBIT margins and EBITDA margins scale up on account of that.

B…The other reasons are, we have slightly different mix of products and
revenue contributions from slightly higher profit margin business tend to increase. This also contributes to an increase in the overall margin.

C…Further we have been able to
progressively pass on some of the cost which were at anescalated level. This has also contributed to our overall margin.

= If I have to talk about sustainability of these margins, I think the overall margin % that we have reported
for the entire year, that we should be in a position to repeat on a continuous basis. You would see variations from
quarter-to-quarter, but the yearend margin of numbersshould be almost at the same

=About 11%, 11.5% odd EBIT margins is what we made in FY22 should be sustainable in future

12…private v/s government order

=It tends to vary from time to time based on significant
contracts which gets converted. Traditionally we have not
been very active on the municipal side or direct government
order. But as you would know that out of our current order
bank, good portion is provided by the Sri Lankan order as well
as the UP order. That would constitute the lion chunk of the
overall order book. However, if you look at the opportunities
that we are focusing on, PSUs are also included in the industrial part of business and there is a good portion of business which we are expecting from the industrial bucket

13…Why low dividend

=The effort of the company is to use the retained earnings for future value creation. Part of the internal generation would be used for capacity augmentations.

=As you know that we are looking at expanding capacities on our chemical business which would yield good returns to the shareholders in
coming times.

= So, that’s one of the efforts and other effort is to use additional cash available with the company to further
expand our projects and the engineering side of business.
Again, as you would have seen from our balance sheets of
previous years, that substantial amount of investment is
required, especially when the contract sizes are large. So, as
we strive to go into larger scale of executions, we will require
additional capital in the company to support this growth. And
we are hoping that with these increased revenues and the higher scale of operation, we would be able to create more
value for the shareholders

14…Consolidation of indian subsideries

=In the next few months, , we will
initiate this merger exercise which will involve more than two
companies. And this is the first step of consolidating some of
our subsidiaries. This first action would also be followed by
more such consolidations


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Few points from from
credit rating@july 2022

1…Company bagging an order worth Rs 1,165 crore from the Uttar Pradesh government under the Jal Jeevan Mission. The order worth Rs 250 crore in Sri Lanka should be completed in fiscal 2023. The strong bid pipeline of Rs 6,700 crore also offers strong revenue visibility.

2…Operating margin should be in the range of 14-15% with greater share of higher-margin engineering projects and sustenance of strong profitability in the chemical segment.

3…The diverse end-user industry base protects the Ion Exchange group from downturn in any industry.



Ion exchange concall aug 2022

-UP Jal Nigam



Q=Have we received all the money or the money is retained by them.

Ans= I cannot give any specific details about the contract.


=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


=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


=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.


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.


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

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

=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

=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


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.


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


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.


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management interview guiding for a 40 percent revenue growth and 200 basis points margin growth.