ION Exchange (India) Limited — Q2 FY26 earnings call

Call held 7 Nov 2025

Management summary

Ion Exchange reported a mixed Q2 FY26, with strong revenue growth driven by normalized operations post-SAP implementation and robust performance in Chemical and Consumer segments. However, profitability was impacted by flat EBITDA and a slight decline in net profit, primarily due to low margins in the Engineering division from legacy projects and elevated infrastructure costs. The company commenced commissioning of its Roha greenfield plant and secured new orders with better profitability profiles, signaling potential margin improvement in the latter half of the fiscal year.

Highlights

  • Q2 FY26 Operating income increased by 14% YoY to INR 7,339 million, driven by normalized operations post-SAP implementation.

  • H1 FY26 Operating income increased by 9% YoY to INR 13,171 million.

  • Chemical segment revenue grew 11% YoY to INR 2,184 million, with EBIT up 13% YoY to INR 591 million, reflecting consistent operational performance.

  • Consumer product division revenue increased 24% YoY to INR 858 million, reducing its loss from INR 35 million to INR 27 million.

  • Stage-wise commissioning of the Roha greenfield manufacturing plant commenced in September 2025, strengthening manufacturing capabilities.

Concerns

  • Q2 FY26 EBITDA remained largely flat YoY at INR 685 million.

  • Q2 FY26 Net profit declined slightly by 1.4% YoY to INR 499 million.

  • Engineering segment EBIT declined by 5% YoY to INR 224 million, with margins at 4.91%, primarily due to elevated infrastructure costs and legacy projects.

  • Execution of the UP Jal Nigam order remained muted during the quarter due to funding issues.

Key financials

2 periods

Q2

  • Operating Income
    7,339 Mn
    YoY +14%
  • EBITDA
    685 Mn
    YoY 0%
  • EBITDA Margin
    9.3%
  • Net Profit
    499 Mn
    YoY -1.4%
  • PAT Margin
    6.8%

H1

  • Operating Income
    13,171 Mn
    YoY +9%
  • EBITDA
    1,310 Mn
    YoY -1%
  • EBITDA Margin
    9.9%
  • Net Profit
    984 Mn
    YoY +3%
  • PAT Margin
    7.5%

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 (Q2)
7,604 Mn Total
  • Engineering Division 4,562 Mn 60.0%
  • Chemical Segment 2,184 Mn 28.7%
  • Consumer Product Division 858 Mn 11.3%

Order book

high confidence

Total value

₹27,110 Mn

as of 2025-09-30 quantified

Inflow this quarter

₹4,700 Mn

Pipeline

other

Active offer bank

Order book includes several projects with better margins, expected to enhance overall profitability in Q3 and Q4.

Source: Prepared remarks

Capital allocation

high confidence
  • Capex Capex disclosed
    • Total CAPEX for Roha plant ₹450 Cr
    • H1 FY26 CAPEX spent ₹160 Cr
    • Roha plant portion of H1 CAPEX ₹120 Cr
    • Balance FY CAPEX (excluding Roha) ₹80 Cr
    We have indicated in the past that our total CAPEX on the Roha plant is in the region of Rs. 450crores roughly. The half year CAPEX spent was around Rs. 160 crores out of which roughly Rs. 120 crores would have been in the Roha plant. And the balance CAPEX largely is in our existing manufacturing engineering facilities, as well as in the membrane and in the chemical segment facilities. As far as the total CAPEX expectation for the year, excluding the Roha plant, it should be in the region of around Rs. 80 crores to Rs. 100 crores, roughly.
  • Debt Gross ₹400 Cr
    one of our gross debt has gone up from Rs. 300 odd crores to Rs. 400 odd crores in this September closing quarter. So, what peak debt level are we looking at, let us say, by FY'26 end? We should be having another 50 crores, roughly, addition in the gross debt level from the current.
  • M&A MAPRIL Acquisition · Integrated

    Leveraging local presence and relationships to promote Ion Exchange product portfolio and grow in European continent.

    The overall performance has been good. There were some debt on the books and we continue to work towards paying them off. I think the teams are now fully trained on our product lines. We are leveraging the local presence and their relationships locally to promote the Ion Exchange product portfolio.. We continue to look at that business to be the springboard for the company's growth in the overall European continent.

Guidance & targets

Margin

  • Engineering Segment EBIT Margin Margin · H2 FY26 · Medium confidence 6-7%
    We expect the second half performance to be better than 2nd quarter performance and expect engineering margins for second half in the region of 6/7%

    — Indraneel Dutt

Capacity

  • Roha Plant Capacity Utilization (first 12 months) Capacity · first 12 months of production · High confidence around 25%
    We expect that in the first 12 months of the plant's production, we should be able to reach a capacity utilization around 25%.

    — Indraneel Dutt

  • Roha Plant Full Capacity Utilization Capacity · over the next three to four years · High confidence full capacity
    But as I said, the full scale-up of production of this plant is envisaged over the next three to four years.

    — Indraneel Dutt

Revenue

  • Chemical Segment Year-on-Year Growth Revenue · FY26 · Medium confidence 9-10%
    We do not give a specific guidance on a particular location, but we are looking at, about 9% to 10% of year-on-year growth for the year for Chemical segment.

    — Indraneel Dutt

Capex

  • Roha Plant Capitalization Capex · before the year-end · High confidence entire plant capitalized
    And before the year-end, we should have the entire plant capitalized.

    — Vasant Naik

Other

  • Depreciation (due to Roha capitalization) Other · Next year · High confidence around Rs. 40 crores
    Next year, depreciation, should be in the region of around Rs. 40 crores a year.

    — Vasant Naik

What to watch in Q3 FY26

Engineering Segment Margin Improvement

H2 FY26
Current 4.91% EBIT margin (Q2 FY26)
Target 6-7% EBIT margin

Why it matters

Key to overall profitability recovery and signals successful execution of new, higher-margin orders.

We expect the second half performance to be better than 2nd quarter performance and expect engineering margins for second half in the region of 6/7%.

Risks & concerns

  • Low Engineering Segment Margins

    medium

    Margins impacted by elevated infrastructure costs, legacy projects, and aggressive pricing in the marketplace.

    Management acknowledged

  • UP Jal Nigam Funding Issues

    medium

    Execution activity for the UP Jal Nigam order remained muted due to slower-than-expected fund flow.

    Management acknowledged

  • Chemical Segment Margin Volatility

    low

    Profitability in the chemical segment is dynamic, influenced by market pricing and raw material volatility.

    Management acknowledged

Q&A highlights

8 direct
Engineering Segment Margins and Legacy Projects Direct
I think this has been consistent with what we have been calling out in the past few quarter calls where we have already highlighted about the challenges in one or two of the projects that we are going to execute. And we had informed the stakeholders that we expect to continue for some more time.. UP execution has been slow but we continue to bear the corresponding expenses of fixed nature.

Analyst challenged the low engineering margins (4.8%) despite revenue growth, and management explained the impact of ongoing legacy projects and fixed costs.

Asked by Chetan Vohra

Roha Plant Commissioning and Capacity Utilization Direct
We are happy to say that in September, we were able to commence with the commissioning of the plant. We have already said that we expect this plant to reach optimal capacity utilization of the proposed capacity over the next three to four years. It is a gradual ramp-up that we are planning.

Clarification on the timeline and phased approach for Roha plant commissioning and its expected capacity ramp-up.

Asked by Chetan Vohra

Chemical Segment Growth and Profitability Outlook Direct
I think the outlook is good at this point in time and we believe we can continue this trajectory of growth for the balance of the year. ... It will be our endavour to try to maintain these margins at around these levels.

Analyst questioned the H1 chemical growth and high Q2 margins, seeking full-year guidance on both.

Asked by Chetan Vohra

MANN+HUMMEL Strategic Partnership Details Direct
This particular collaboration is happening on the membrane product line, which is a part of our engineering segment. ... This is not going to be a JV route. This is more of a technology licensing that we are doing with MANN+HUMMEL.

Analyst sought details on the new partnership, clarifying its nature (technology licensing, not JV) and strategic benefits for local manufacturing and market expansion.

Asked by Deepak

Roha Plant CAPEX and Debt Impact Direct
We have indicated in the past that our total CAPEX on the Roha plant is in the region of Rs. 450crores roughly. ... We should be having another 50 crores, roughly, addition in the gross debt level from the current.

Analyst inquired about the total CAPEX for the Roha plant and its contribution to the increase in gross debt.

Asked by Deepak

Engineering Segment Margin Recovery and Competition Direct
We continue to see very aggressive pricing in the marketplace as far as large projects are concerned. ... Our effort is to see that we get towards high single digit of profitability on the engineering side.

Analyst questioned if engineering margins could return to historical double-digit levels, and management acknowledged severe competition while outlining efforts to improve profitability.

Asked by Pratik Kothari

Roha Plant Capitalization and CWIP Direct
No, we have commissioned 10% of the manufacturing plant and machinery. But the utilities and the other service centers, they have been fully completed. So that has also got capitalized. That is the reason why there is a 10% manufacturing capacity capitalization. But the overall value of capitalization is much higher.

Analyst sought clarification on the percentage of Roha plant capitalization given the CWIP balance, and management explained the components of capitalization.

Asked by Kishore Kumar

Lessons Learned and Future Engineering Margins Direct
The company, as I said, has taken lessons from a couple of those legacy projects, which is why you see us becoming very selective in the kind of orders we pick up. And I am happy to share that some of the projects we picked up in the last quarter, definitely a lot more comfortable from a profitability standpoint for us.

Long-term investor questioned the decline in engineering margins and management's strategy to return to higher profitability through selective order picking and focus on higher-margin projects.

Asked by Sunil

2 min read 7 chapters

Detailed narrative

Q2 FY26 Consolidated Performance Overview

Ion Exchange reported a Q2 FY26 operating income of INR 7,339 million, marking a 14% year-on-year increase. For the first half of FY26, operating income grew 9% YoY to INR 13,171 million. EBITDA for Q2 stood at INR 685 million, largely flat YoY, resulting in a 9.33% margin, while net profit slightly declined by 1.4% YoY to INR 499 million, with a PAT margin of 6.8%.

Engineering Segment Challenges and Outlook

The engineering division's revenue increased by 16% YoY to INR 4,562 million in Q2 FY26, but segment EBIT declined by 5% YoY to INR 224 million, leading to a low margin of 4.91%. This was attributed to elevated infrastructure costs, legacy projects, and muted execution of the UP Jal Nigam order due to funding issues. Management expects H2 FY26 engineering margins to improve to 6-7% as new, higher-margin orders are executed.

Chemical Segment Strong Growth and Roha Plant Commissioning

The chemical segment delivered strong performance, with Q2 FY26 revenue growing 11% YoY to INR 2,184 million and EBIT increasing 13% YoY to INR 591 million, achieving a robust margin of 27.06%. The company commenced stage-wise commissioning of its greenfield manufacturing plant at Roha, Maharashtra, in September 2025, aiming for 25% capacity utilization in the first 12 months and full capitalization by the end of FY26.

Consumer Product Division Expansion

The consumer product division recorded healthy growth, with Q2 FY26 revenue increasing 24% YoY to INR 858 million. The segment reduced its loss to INR 27 million from INR 35 million in the prior year, driven by market share expansion, brand promotions, and geographical reach into neighboring markets like Nepal. The company continues to reinvest profits to fuel further growth in this segment.

Strategic Partnership with MANN+HUMMEL

Ion Exchange entered a strategic technology licensing partnership with MANN+HUMMEL Water & Membrane Solutions to locally manufacture hollow-fibre ultrafiltration and membrane bioreactor membranes in India. This co-branding arrangement under the HYDRAMEM brand will leverage MANN+HUMMEL's technology to enhance cost efficiency, reduce import dependence, and expand offerings in wastewater and biopharma applications, with manufacturing at the Goa facility.

Capital Expenditure and Debt Profile

Total CAPEX for the Roha plant is approximately INR 450 crores. In H1 FY26, the company spent INR 160 crores on CAPEX, with roughly INR 120 crores allocated to the Roha plant. Gross debt increased from INR 300 crores to INR 400 crores by September 2025, with an anticipated additional INR 50 crores by FY26 end. Depreciation is expected to be around INR 40 crores annually next year due to Roha capitalization.

Order Book and Pipeline

The current order book stands at INR 27,110 million, with an order inflow of INR 4,700 million during Q2 FY26. The bid pipeline is robust at INR 9,011 crores, with a win ratio of 15-20%. The company is selectively pursuing opportunities in ultra-pure water, high-purity water, desalination, and emerging sectors like electronics and solar, aiming for a better margin mix.

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