ION Exchange

For Q3 FY25, Ion Exchange reported a consolidated operating income of INR 6905 million (₹690.5 crores), marking a 25% year-on-year increase. EBITDA grew by 7% YoY to INR 754 million (₹75.4 crores), with a margin of 10.92%. Net profit stood at INR 496 million (₹49.6 crores), up 5% YoY, achieving a PAT margin of 7.18%. For the nine months ended FY25, operating income was INR 19026 million (₹1902.6 crores), an increase of 22% YoY, with EBITDA at INR 2080 million (₹208 crores) and PAT at INR 1450 million (₹145 crores).

The engineering division's revenue for Q3 FY25 was INR 4301 million (₹430.1 crores), a significant 34% increase year-on-year, primarily driven by improved execution of large EPC contracts. However, EBIT for this segment grew by a more modest 7% YoY to INR 257 million (₹25.7 crores), indicating margin pressure. The total order book for the engineering division at the end of Q3 FY25 stood at INR 3405 crores, with a bid pipeline of INR 8648 crores. Management expects 15-20% growth for the engineering division in FY25, but margins are anticipated to be lower than last year by approximately one percentage point.

The chemical segment recorded a revenue of INR 1993 million (₹199.3 crores) in Q3 FY25, a 6% increase year-on-year, with EBIT also growing by 6% to INR 523 million (₹52.3 crores). The company is progressing with its Roha plant expansion, a ₹400 crore project, with over 50% of the cost spent as of December. Commercial production is expected to commence in Q1 FY26, potentially stretching to Q2. The additional capacity is projected to be utilized over three to four years, with an asset turnover of roughly 2.5 times on ₹275 crores. The chemical segment is targeted for 10-15% growth for the full year.

The consumer product division demonstrated strong growth, with revenue increasing by 23% year-on-year to INR 772 million (₹77.2 crores). This growth is attributed to greater market penetration and acceptance of the company's product offerings, particularly in the premium residential segments. Despite the revenue growth, the segment reported a loss of INR 29 million (₹2.9 crores) in Q3 FY25, compared to a loss of INR 15 million (₹1.5 crores) in the prior year. The company is investing in expanding its field force and distribution channels to achieve a target revenue of ₹500 crores for this segment.

Consolidated EBITDA margin for Q3 FY25 was 10.92%, lower than the revenue growth rate. This was primarily due to an 'onerous contract' in the engineering division, which is impacting margins by an estimated 150-200 basis points and is expected to continue until H1 FY26. Additionally, the execution of the UP Jal Nigam contract remained muted due to government funding constraints and slow approvals, affecting invoicing pace. Management anticipates overall company margins for FY25 to be slightly short of last year's levels, but expects improvement in engineering margins in FY26 as the impact of the onerous contract diminishes.

The company noted an increase in working capital days, attributing it to the quantum of advances carried from customers and large contracts. Specifically, delays in collection from the UP Jal Nigam project have contributed to this. Management is hopeful for positive movement on funding for the UP project in the coming month, which should accelerate execution and improve receivables. The company has received extensions from the government for the UP project and continues to apply for further extensions due to the prolonged nature of the contract.

The Portuguese Mapril acquisition is progressing well, serving as a base to expand the company's product offerings, including chemicals and engineering solutions, into the European market. The strategy leverages the European market's preference for local companies. The subsidiary has shown good developments in securing engineering contracts and has contributed to increased volumes from resin and chemical sales. Management remains optimistic about further volume improvements and the overall success of the acquisition in the coming months.