ION Exchange (India) Limited — Q1 FY26 earnings call

Call held 1 Aug 2025

Management summary

ION Exchange reported a mixed Q1 FY26, with consolidated operating income up 3% and net profit up 8% YoY, but EBITDA declined 2%. The quarter was impacted by SAP migration challenges and delays in large order finalization. The consumer product division showed strong growth, while the Roha greenfield plant is set for commissioning in Q2 FY26, targeting export markets.

Highlights

  • Operating income increased by 3% year-on-year to INR 583.2 crores.

  • Net profit grew by 8% year-on-year to INR 48.4 crores, with PAT margin around 8.3%.

  • Consumer product division revenue saw a significant increase of almost 36% year-on-year to INR 90.2 crores, reducing its loss from INR 3.4 crores to INR 0.9 crores.

  • Engineering division EBIT increased by 48% year-on-year to INR 27.8 crores.

  • Payments from Sri Lankan authorities received, facilitating expeditious closure of the contract.

Concerns

  • EBITDA declined by 2% year-on-year to INR 62.7 crores, with EBITDA margin at 10.75%.

  • Company migrated to SAP environment, leading to certain transition-related challenges that partly impacted business volumes, especially in the chemical segment in April.

  • Delays in the finalization of certain large value opportunities impacted both order inflow and backlog for the engineering division.

  • Execution of the UP Jal Nigam order remains muted due to slow fund inflow and elevated receivables.

Key financials

  1. Operating Income ₹583.2 Cr +3%YoY
  2. EBITDA ₹62.7 Cr -2%YoY
  3. EBITDA Margin 10.8%
  4. Net Profit ₹48.4 Cr +8%YoY
  5. PAT Margin 8.3%

What they filed

Q1 FY27: revenue up 20.1%, net profit down 93.7% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue644 691 835 583 734 +14%734 +6%863 +3%700 +20%
EBITDA68 75 86 63 68 +0%59 −21%20 −77%32 −49%
Net profit51 50 63 48 50 −1%21 −59%24 −62%3 −94%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

Share of Revenue
₹597.1 Cr Total
  • Engineering Division ₹318 Cr 53.3%
  • Chemical Division ₹188.9 Cr 31.6%
  • Consumer Product Division ₹90.2 Cr 15.1%

Order book

high confidence

Total value

₹2,664 Cr

as of 2025-06-30 quantified

Pipeline

other

Bid pipeline

Cancellations & deferrals

  • deferred: Delays in finalization of certain large value opportunities impacted order inflow and backlog.
  • deferred: Muted execution of UP Jal Nigam order.
The company continues to pursue opportunities selectively in the market, but delays in large order finalization and muted execution of the UP Jal Nigam order impacted order inflow and backlog.

Source: Prepared remarks

Capital allocation

medium confidence
  • Capex ₹400 Cr
    • Greenfield manufacturing plant at Roha ₹400 Cr
    • Cost optimization measures within Roha plant ₹125 Cr
    • Manufacturing base value for Roha plant ₹275 Cr
    So my question is related to Roha greenfield. We have done a CAPEX of Rs.400 crores, and we have an asset turnover of 2.5 times. So is it a fair understanding that by FY'28 we will be able to reach Rs.1000 crores in terms of revenue and also adding another one, just wanted to understand that how this Roha Greenfield facility will be used to cater the export business for chemicals? ... But out of the total CAPEX of Rs.400 crores, Rs.125 crores are towards the cost optimization measure what we are introducing in the new facility. Our manufacturing base will be on a value of around Rs.275 crores.
  • Liquidity Liquidity disclosed Temporary cash surplus parked in FDs, contributing to other income.
    Other income, it comprises of the interest income on the temporary cash surplus which we are parking in FDs, and also there is a element of exchange gain..

Guidance & targets

Capacity

  • Roha Plant Commissioning Capacity · Q2 FY26 · High confidence Commissioned
    The Roha plant will get commissioned in this quarter

    — Management

  • Roha Plant Full Capacity Utilization Capacity · over a period of the next three to 4 years · High confidence Full capacity
    So this plant is a very large plant, and supposed to increase in phases as of now. Our plan is to go up to full capacity over a period of the next three to 4 years.

    — Management

Operational Efficiency

  • SAP Transition Recovery Operational Efficiency · next two, three months of this quarter and the first month of the next quarter (for engineering); 2nd Quarter (for chemical) · High confidence Stabilized and back to usual terms
    For our engineering business it is more of a timing issue. which we hope to recover in the next two, three months of this quarter and the first month of the next quarter. ... For that particular the few weeks, but we are now on the recovery part, the chemical business platform has stabilized, and we expect us to be back on usual terms of business for this 2nd Quarter.

    — Management

Project Completion

  • Legacy Projects Closure Project Completion · end of this Financial Year · High confidence Substantially close
    while we are hoping that the legacy project as of now, we are expecting to substantially close by end of this Financial Year.

    — Management

  • UP Jal Nigam Project Continuation Project Completion · some time of the next year also · High confidence Continue
    That's right, the UP project will continue for some time of the next year also

    — Management

Profitability

  • Consumer Product Segment Performance Profitability · this particular year · High confidence Hold performance levels
    For this particular year we will try to hold on to this performance levels, but over the longer term, we expect that the performance of this segment will improve.

    — Management

What to watch in Q2 FY26

Roha Plant Commissioning and Initial Production

Q2 FY26 (this quarter)
Current In process of commissioning, product stabilization
Target Commercial operations and initial product shipments

Why it matters

Successful commissioning is key to realizing new capacity and export growth, impacting future chemical segment revenue.

The Roha plant will get commissioned in this quarter, ... We have made good progress, we are in the process of commissioning, product stabilization and getting the right quality products out. So we are hopeful that we should be able to give you good news by the time we come back for the next quarter update.

Risks & concerns

  • UP Jal Nigam Project Delays and Receivables

    high

    Execution of the UP Jal Nigam order remains muted due to slow fund inflow from the government, resulting in elevated receivables and a conservative adjustment to the order backlog.

    Management acknowledged

  • SAP Transition Challenges

    medium

    Migration to new SAP platform led to transition-related challenges and impacted Q1 business volumes, particularly for the chemical segment in April.

    Management acknowledged

  • Delays in Large Order Finalization

    medium

    Delays in finalizing certain large value opportunities impacted order inflow and backlog for the engineering division, though the inquiry pipeline remains steady.

    Management acknowledged

  • Tariff Impacts on Export Markets

    medium

    The company is studying new tariffs in markets like the US and Europe, but previous tariffs had no impact, and they are confident in maintaining business.

    Management acknowledged

  • Intense Competition in Engineering Segment

    medium

    The engineering segment faces brutal and intense competition with significant pressure on pricing, leading the company to remain selective in project bidding.

    Management acknowledged

  • Monsoon Season Impact on Project Execution

    low

    Projects with significant outdoor work in India are impacted during the monsoon season, though indoor work and international projects continue unaffected.

    Management acknowledged

Q&A highlights

3 direct
Engineering EBIT Margin Sustainability Partial
In the current quarter, the EBIT margin has benefited from a one-time extra cost rebate, which we got from one of the large EPC contract, which is presently under execution. Considering that the current year revenue is lower than the previous year and. and if we exclude the above one time impact, the margins would have been definitely lower as compared to what we have disclosed in the previous year, because the infrastructure cost are at a much elevated level, and they are designed to meet to much higher volumes.

Analyst questioned the sustainability of the high EBIT margin in engineering, and management clarified it was due to a one-time benefit and not indicative of underlying improvement.

Asked by Deepak

UP Jal Nigam Project Receivables and Execution Partial
As of now the flow has not yet improved, but we are getting continuous indications that the flow should improve in the coming months. So we remain hopeful that once the flow improves, apart from our receivables getting liquidated, execution on this project should also get ramped up.

Analyst sought clarity on the problematic UP Jal Nigam project, and management confirmed continued delays in fund inflow and elevated receivables, impacting execution.

Asked by Mihir Vyas

SAP Transition Impact on Sales Quantification Partial
So we don't give specific numbers, but I would say that this is contained within a single digit percentage impact.

Analyst asked for quantification of the SAP migration's impact on sales, which management provided as a qualitative range rather than an exact figure.

Asked by Chetan Vora

Consumer Product Division Growth Drivers Partial
So, with due respect Deepak, a lot of this possibly will consider as business confidential. We are in a very, very competitive space that you would appreciate and agree, our teams are out there in the market, helped by launch of newer products we play across the water spectrum, be it in residential B2C, in commercial as well as an institution and the rural segment, we have been introducing our water purification technologies across the B2C spectrum we have launched, health products like alkaline water, hydrogen water. We continue to expand our presence in neighboring geographies, like Nepal.

Analyst pressed for specific drivers of the strong consumer product growth, but management cited business confidentiality while giving general strategic initiatives.

Asked by Deepak

Roha Expansion Target Geographies and Tariff Impact Direct
We currently operate across nearly all regions globally, with active markets spanning the Americas, Europe, Asia-Pacific, and the Middle East. Our company continues to serve these areas, and we remain committed to further expanding and strengthening our presence within them with the Roha plant coming on stream. ... In the last revision that was circulated, which was in effect till now, there was no impact on the products that we were selling. So we are taking a look at the new tariffs that have been announced, and based on the situation then we will appropriately respond.

Analyst inquired about the export focus of the Roha plant and potential tariff impacts, which management addressed by listing target regions and their approach to new tariffs.

Asked by Sabil

Order Book Margins Excluding Legacy Projects Direct
Our remaining order book margins will align closely with our engineering segment business margins for FY 24-25.

Analyst sought clarification on the profitability of the order book once problematic legacy projects are excluded, and management provided a clear positive outlook.

Asked by Hemal Bagadia

Employee Trust Shareholding Direct
So these are employee trust which are holding shares for benefit of all the employees of the company. And trust have been existing since the 80s and 90s of the previous century, and there are no plans to dilute any form of equity from that. ... The income flow from these shares, which is dividend, that is what is used for the benefit of all the employees and if at any point of time there is any other form of cash accrual which is directly attributed to these shares. These are for the benefit of all the employees of the company and would accordingly be distributed.

Analyst questioned the nature and perpetuity of the 16.18% equity held by an employee trust, and management clarified its purpose and lack of dilution plans.

Asked by Saket Kapoor

3 min read 7 chapters

Detailed narrative

Q1 FY26 Financial Performance Overview

Ion Exchange reported an operating income of INR 583.2 crores for Q1 FY26, marking a 3% year-on-year increase. Despite this, EBITDA saw a 2% decline to INR 62.7 crores, with the EBITDA margin standing at 10.75%. Net profit, however, increased by 8% year-on-year to INR 48.4 crores, achieving a PAT margin of approximately 8.3%.

Impact of SAP Migration on Q1 Operations

The company's migration to a new SAP platform in Q1 FY26 presented transition-related challenges, which partly impacted business volumes. The chemical business was particularly affected in April, leading to some unrecoverable revenue loss. For the engineering division, the impact was more of a timing issue, with recovery anticipated within the next two to three months of the current quarter and the first month of the next quarter, as operations have largely stabilized.

Segmental Performance Analysis

The Engineering division's revenue decreased by 2% YoY to INR 318 crores, but its EBIT surged by 48% YoY to INR 27.8 crores, partly due to a one-time extra cost rebate. The Chemical division experienced a 5% YoY revenue reduction to INR 188.9 crores, with EBIT down 6% YoY to INR 46.7 crores, though it maintained its margin profile. The Consumer Product division demonstrated strong growth, with revenue increasing by 36% YoY to INR 90.2 crores, significantly reducing its loss from INR 3.4 crores to INR 0.9 crores.

Order Book and Bid Pipeline Status

As of the end of Q1 FY26, the total order book stood at INR 2664 crores, complemented by a robust bid pipeline exceeding INR 9200 crores. However, the engineering division faced delays in the finalization of certain large value opportunities, which impacted both order inflow and backlog. The execution of the UP Jal Nigam order remained muted, contributing to these challenges.

Roha Greenfield Plant Commissioning and Strategy

The greenfield manufacturing plant at Roha, involving a CAPEX of INR 400 crores (with INR 275 crores for the manufacturing base and INR 125 crores for cost optimization), is on track for commissioning in Q2 FY26. This plant is primarily designed to cater to the company's export markets across the Americas, Europe, Asia-Pacific, and the Middle East, with full capacity utilization expected over the next three to four years.

Challenges with UP Jal Nigam Project

The UP Jal Nigam project continues to be a point of concern due to very slow fund inflow from the government, leading to elevated accounts receivables and muted execution. The company has taken a conservative approach by reducing its estimate in the order backlog for this project. Management remains hopeful for an improvement in fund flow in the coming months, which would facilitate liquidation of receivables and ramp up execution.

Employee Trust Shareholding Clarification

Management clarified that 16.18% of the company's equity is held by an employee trust, which has been in existence since the 1980s and 90s. These shares are held for the benefit of all employees, and there are no current plans to dilute this equity. The income generated from these shares, primarily dividends, is utilized for employee benefits.

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