Release Date: May 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Ion Exchange (India) Ltd (BOM:500214, Financial) reported a 21% year-on-year increase in operating income for Q4, reaching INR7,818 million.
- The company saw a 41% quarter-on-quarter increase in operating income.
- Net profit for Q4 increased by 54% quarter-on-quarter to INR725 million.
- The Chemical segment recorded a 21% year-on-year increase in revenue for Q4.
- The company successfully completed the merger process with two of its Indian subsidiaries, enhancing operational efficiency.
Negative Points
- EBITDA for Q4 decreased by 13% year-on-year, despite a 31% quarter-on-quarter increase.
- Net profit for Q4 decreased by 11% year-on-year.
- The Engineering segment experienced slower-than-expected execution, partly due to election-related delays in a significant UP contract.
- The Consumer division reported a loss of INR28 million for Q4, higher than the INR7 million loss in the same quarter of the previous year.
- The company's receivables increased from 120 to 145 days, attributed to a high volume of March billings.
Q & A Highlights
Q: Can you give us a flavor of the INR8,000 crore bid pipeline that you mentioned? What kind of projects are expected there? And can you comment on the success ratio of bidding?
A: Most of the bid pipeline is to the private sector and to a much lesser extent to the PSU and government sector. The municipal sector is insignificant in this pipeline. Major portions are in the domestic segment, excluding any mega opportunities. The success ratio is traditionally between 15% to 20%.
Q: Given the huge CapEx in the hotel industry, have you seen traction from clients like the Taj Group, Leela, Hyatt, and Oberoi?
A: We work with almost all major hotel brands and expect growth from that segment. The opportunity size from each hotel property is not very large, but we are witnessing an overall increase in the pipeline from this segment.
Q: When do you see the turnaround of the consumer business in terms of profitability?
A: We are investing significantly in the business. While we have seen volume growth, the breakeven has not yet happened due to ongoing investments. We hope to see the bottom line turn positive soon but cannot provide a specific timeline.
Q: The execution in the Engineering segment seems slower than anticipated. What is causing the delay?
A: The Engineering segment saw growth but fell short of expectations due to a significant slowdown in a UP contract, influenced by the election period. We expect this pressure to continue in Q1 of the current financial year.
Q: Can you provide details on the significant international orders and the domestic pipeline?
A: We have significant orders from Saudi Arabia for a water treatment plant worth INR120 crores and from UAE worth INR250 crores. There are also large domestic orders under discussion, which will be declared as they are finalized.
Q: What is the reason for the reducing margins in the Engineering segment over the last two years?
A: Margins have suffered due to unforeseen cost increases in a significant industrial EPC job and infrastructure buildup in subsidiaries. We expect margins to improve as project volumes increase and specific cost issues are resolved.
Q: Is there a relation between the increase in receivables and the slowdown in the Engineering segment?
A: The increase in receivables is not related to the slowdown but is due to the majority of fourth-quarter billing occurring in March. We expect a normalized level around midyear.
Q: What is the expected execution timeline for the order book in the Engineering business?
A: The execution timeline for significant contracts is roughly around two years. We expect good growth in the Engineering business, projecting around 15% to 20% growth for FY25.
Q: How do you plan to utilize your cash reserves?
A: Significant CapEx is planned for the resin facility at Roha. A portion of the cash is held as margin money with banks for bank guarantees, and some is project-specific advances.
Q: What is the expected commercialization timeline for the Roha facility, and how long will it take to ramp up to optimal utilization?
A: The Roha facility is expected to be commercialized in FY25-26, with full utilization expected over the next three to four years.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
