ION Exchange (India) Limited — Q3 FY26 earnings call

Call held 2 Feb 2026

Management summary

Ion Exchange reported a mixed Q3 FY26, with consolidated operating income growing 6% YoY but EBITDA and net profit declining significantly due to exceptional items, adverse product mix, and initial costs from the Roha facility. The Engineering and Chemical segments faced profitability headwinds, while the Consumer Product division continued strong revenue growth but incurred losses due to ongoing investments. Management highlighted positive order inflows and the long-term benefits of the Union Budget, while addressing challenges in project execution and margin pressures.

Highlights

  • Operating income for Q3 FY26 increased 6% year-on-year to INR 7,344 million.

  • Operating income for nine months FY26 increased 8% year-on-year to INR 20,516 million.

  • Consumer Product division revenue grew 28% year-on-year to INR 987 million, with healthy volume growth.

  • Order inflow during Q3 FY26 was INR 5,160 million, and 9M FY26 order inflow exceeded last year's annual intake.

  • Secured two domestic solar sector contracts aggregating INR 2,050 million for ultra-pure water systems, effluent treatment plants, and zero-liquid discharge solutions.

  • Roha facility's margin profile is expected to be better than the Ankleshwar facility once fully commissioned and stabilized.

Concerns

  • EBITDA for Q3 FY26 declined 21% year-on-year to INR 593 million, with EBITDA margin at 8.07%.

  • Net profit for Q3 FY26 was INR 206 million, with PAT margin at 2.81%.

  • Engineering division EBIT was down 28% year-on-year to INR 186 million, impacted by deferred international contracts and muted UP Jal Nigam order execution.

  • Chemical division EBIT declined 18% year-on-year to INR 431 million, due to product mix and Roha facility costs, compounded by rupee depreciation on input costs.

  • Consumer Product division reported a loss of INR 33 million for the quarter, compared to a loss of INR 29 million in the previous year.

  • An incremental provision of INR 169 million was recognized as an exceptional item towards gratuity and leave-related employee benefits due to Labour Codes notification.

Key financials

2 periods

Q3

  • Operating Income
    ₹734.4 Cr
    YoY +6%
  • EBITDA
    ₹59.3 Cr
    YoY -21%
  • EBITDA Margin
    8.1%
  • Net Profit
    ₹20.6 Cr

9M

  • Operating Income
    ₹2,051.6 Cr
    YoY +8%
  • EBITDA
    ₹190.2 Cr
    YoY -9%
  • EBITDA Margin
    9.3%
  • Net Profit
    ₹118.9 Cr

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 (Q3)
₹759.1 Cr Total
  • Engineering ₹429.7 Cr 56.6%
  • Chemical ₹230.7 Cr 30.4%
  • Consumer Product ₹98.7 Cr 13.0%

Order book

high confidence

Total value

₹2,833 Cr

as of 2025-12-31 quantified

Inflow this quarter

₹516 Cr

Composition

  • Solar Sector Contracts (product) ₹205 Cr
  • UP Jal Jeevan Mission (project) ₹400 Cr

Cancellations & deferrals

  • deferred: Planned dispatches of certain high-value engineering contracts for the international market got deferred to the fourth quarter of FY25-26.
Order inflow has been positive, exceeding last year's annual intake in the first nine months, despite being selective in picking up orders.

Source: Prepared remarks

Capital allocation

high confidence
  • Capex ₹450 Cr
    • Roha facility construction ₹450 Cr
    • Zero Liquid Discharge (ZLD) plant for sustainability
    the total CAPEX of Roha is estimated to be in the region of Rs.450 crores
  • Debt Debt disclosed
    • New borrowing Long-term loan tied up with a banking institution for Roha facility. ₹345 Cr
    The overall increase in loans is primarily on account of the term loan which we have taken on account for the Roha facility.

Guidance & targets

Capacity

  • Roha facility commissioned capacity Capacity · end of Q3 FY26 · High confidence 40-45%
    And in terms of the capacity which has come on stream at the end of the 3rd Quarter, it is in the region of 40% to 45% range.

    — Vasant Naik

Capacity Utilization

  • Roha facility capacity utilization Capacity Utilization · next financial year (FY27) · High confidence 25%
    And our outlook consistently for the next financial year has been 25% of the overall plant.

    — Indraneel Dutt

Profitability

  • Roha facility margin profile Profitability · once fully commissioned and stabilized · High confidence better than Ankleshwar facility
    Once the plant is fully commissioned and the stabilization of the product is in place, we expect the margin profile to be better to what we would get from our Ankleshwar facility.

    — Vasant Naik

Revenue

  • Roha facility revenue growth Revenue · subsequent or next financial year · Medium confidence significantly increase
    So, we expect the revenues to significantly increase in the subsequent or the next financial year.

    — Indraneel Dutt

Project Completion

  • Roha facility full commissioning Project Completion · next financial year (FY27) · High confidence fully commissioned
    Yes, definitely we are trying earlier, but definitely in the next financial year, the plant will be fully commissioned, all product lines.

    — Indraneel Dutt

Payback Period

  • Roha facility payback period Payback Period · within 5 years · High confidence 4-5 years
    We are expecting in the region of around four to five years. Under five years, the payback should happen for this facility.

    — Vasant Naik

Engineering Segment Performance

  • Q4 FY26 performance Engineering Segment Performance · Q4 FY26 · Medium confidence better than Q3
    So, Q4 should be better than Q3. That is what I think we can say right now.

    — Indraneel Dutt

Engineering Segment Outlook

  • FY27 outlook (execution, invoicing, profitability) Engineering Segment Outlook · FY27 · Medium confidence similar, if not slightly better
    So overall, we expect a similar, if not slightly better outlook from the execution, both from an invoicing as well as from a profitability standpoint for a segment.

    — Indraneel Dutt

Chemical Segment Profitability

  • Margin recovery from rupee depreciation Chemical Segment Profitability · next quarter · Medium confidence partly recover
    the price impact due to the rupee depreciation, I think we will try to recover partly in the next quarter.

    — Indraneel Dutt

Consumer Product Growth

  • Year-on-year growth Consumer Product Growth · expected to sustain · High confidence 30%
    The business has continued to show a 30% year-on-year growth so far. YTD... to sustain this 30% growth that we are seeing. We expect next year to continue on a similar trend.

    — Indraneel Dutt

What to watch in Q4 FY26

Engineering Segment Q4 Performance

next quarter
Current Weak Q3 performance
Target Better than Q3

Why it matters

To assess if deferred international projects and improved execution can reverse the Q3 decline in the engineering segment.

So, Q4 should be better than Q3. That is what I think we can say right now.

Risks & concerns

  • UP Jal Jeevan Mission Funding Delays

    high

    Lack of funds from the UP government for Jal Jeevan Mission projects has slowed execution and impacted receivables, though budget allocation has increased.

    Management acknowledged

  • Legacy Project Profitability Headwinds

    medium

    Ongoing execution of legacy projects continues to face adverse headwinds in profitability, impacting overall engineering segment margins.

    Management acknowledged

  • Roha Facility Ramp-up and Stabilization

    medium

    The new Roha facility requires time for phased commissioning, product stabilization, and obtaining certifications, leading to low initial capacity utilization and impacting chemical segment profitability.

    Management acknowledged

  • Rupee Depreciation Impact on Input Costs

    medium

    Rupee depreciation has increased input costs for the chemical business, contributing to moderation in profitability, though steps are being taken to pass on costs.

    Management acknowledged

  • High Competition in Project Business

    medium

    Intense competition in the project business makes achieving high profitability challenging, requiring selective bidding.

    Management acknowledged

  • Consumer Product Division Losses

    low

    The Consumer Product division continues to incur losses due to ongoing investments in advertising and promotion to build a scalable revenue platform.

    Management acknowledged

Q&A highlights

7 direct
Gross Margin Decline and Expense Increase Direct
it was a combination of full impact of depreciation and interest of Roha facility hitting us from this particular quarter. and because of rupee depreciation, some of our input costs have also gone up, which we are taking steps to pass on to customers.

Explains the reasons behind the significant margin compression and increased costs in the quarter, linking it to new facility commissioning and external factors.

Asked by Chetan Vora

Roha CAPEX, Funding, and Capacity Details Direct
the total CAPEX of Roha is estimated to be in the region of Rs.450 crores, and we have tied up a long-term loan of around Rs. 345 crores with a banking institution. In terms of the capitalization in the books, just under Rs.285 crores has been capitalized in the books. And in terms of the capacity which has come on stream at the end of the 3rd Quarter, it is in the region of 40% to 45% range.

Provides specific financial figures for the Roha project, including total cost, funding, capitalized amount, and current operational status, crucial for understanding asset base and future potential.

Asked by Chetan Vora

Roha Capacity Utilization and Revenue Ramp-up Direct
Our original plan has been to get to full capacity utilization in four years. We stand by those numbers. ... And our outlook consistently for the next financial year has been 25% of the overall plant.

Clarifies the expected ramp-up timeline and utilization targets for the new Roha facility, indicating a gradual rather than immediate impact on revenues.

Asked by Kishore Kumar

Semiconductor Opportunity and Project Selection Direct
We participated in two projects which have been awarded, but we did not pick up the order because we felt that the current price levels were not conducive for a profitable execution. There are other projects that we continue to bid.

Reveals management's disciplined approach to project selection, prioritizing profitability over order book size, even in high-growth areas like semiconductors.

Asked by Rushabh Shah

EPC Project Risk Management Direct
We have a fairly strong and we have put in a stronger review mechanism in terms of the appropriate profile of projects to pick up. So, clearly, the project profitability is important. Clearly, the creditworthiness of the customer is important. Clearly, the cash flow profile of the project is important.

Details the stringent criteria used for selecting EPC projects, indicating a shift towards de-risking the engineering segment after past challenges.

Asked by Rushabh Shah

Jal Jeevan Mission Receivables and Future Strategy Direct
No, in the current construct, the way the scheme is we do not anticipate to take up more projects. Our current focus is to execute these projects. ... Beyond this, this is not an area of focus for us.

Provides clarity on the company's cautious stance on future JJM projects, focusing instead on resolving existing receivables and shifting focus to other high-purity water segments.

Asked by Raghav Maheshwari

Engineering Segment Profitability Outlook Partial
So, yes, over the longer term, I would agree with your assessment that the overall profitability and the segment performance of the engineering side should increase, but that is in the longer term. We still have, I would say, a time period to cover where both UP and the legacy project execution will continue.

Suggests that while long-term profitability improvement is expected, near-term challenges from legacy and UP projects will persist, indicating a gradual recovery.

Asked by Kishore Kumar

Roha Facility Payback Period Direct
You know, it is slightly longer than what we wanted. But the reason is that this is a fully sustainable, fully circular plant. One third of the CAPEX has gone to ensure that, every, not a drop of water is discharged out. It is a zero liquid discharge plant.

Explains the rationale for a longer payback period for the Roha facility, highlighting the significant investment in sustainability and zero liquid discharge technology.

Asked by Chetan Vora

3 min read 7 chapters

Detailed narrative

Q3 FY26 Consolidated and Segmental Performance

Ion Exchange reported a consolidated operating income of INR 7,344 million for Q3 FY26, marking a 6% year-on-year increase. However, EBITDA declined by 21% YoY to INR 593 million, resulting in an EBITDA margin of 8.07%. Net profit stood at INR 206 million, with a PAT margin of 2.81%. For the nine months, operating income grew 8% YoY to INR 20,516 million, but EBITDA decreased 9% YoY to INR 1,902 million, with a margin of 9.27%. An exceptional provision of INR 169 million was made for Labour Codes.

Engineering and Chemical Segment Headwinds

The Engineering division's revenue was flattish YoY at INR 4,297 million, while EBIT fell 28% YoY to INR 186 million. This was attributed to deferred international contracts and muted execution of the UP Jal Nigam order. The Chemical division saw revenue growth of 16% YoY to INR 2,307 million, but EBIT declined 18% YoY to INR 431 million, primarily due to an adverse product mix, initial costs from the Roha facility, and increased input costs from rupee depreciation.

Consumer Product Division Growth and Investment

The Consumer Product division demonstrated strong growth, with revenue increasing 28% year-on-year to INR 987 million. Despite this, the segment reported a loss of INR 33 million, slightly higher than the INR 29 million loss in the prior year. Management indicated continued investment in advertising and promotion to build a scalable revenue platform, expecting to sustain a 30% year-on-year growth trajectory.

Roha Facility Commissioning and Payback

The Roha facility, with an estimated CAPEX of INR 450 crores, has seen INR 285 crores capitalized and INR 130 crores in CWIP. Approximately 40-45% of the capacity has been commissioned by Q3 end, with full commissioning expected by the next financial year. The facility's cation stream is stabilized, and other product lines are being phased in. The payback period is estimated at 4-5 years, slightly longer than desired due to significant investment in a fully circular, zero liquid discharge plant.

Order Book and Project Selection Strategy

The total order book stands at INR 28,330 million, with an inflow of INR 5,160 million during the quarter. This includes two domestic solar sector contracts worth INR 2,050 million. Management emphasized a selective approach to project bidding, prioritizing profitability and customer creditworthiness. They declined semiconductor orders due to unfavorable pricing and are not pursuing new UP Jal Jeevan Mission projects, focusing on executing the existing INR 400 crore backlog and recovering receivables.

Union Budget Implications and Growth Opportunities

Management views the Union Budget positively, highlighting continued government commitment to infrastructure, sustainability, and the water sector. Key areas of opportunity include the extended Jal Jeevan Mission (until 2028), increased outlay for sunrise industries like semiconductor (Rs. 40,000 crores additional outlay), mega-textile parks, critical mineral processing, and cloud-based data centers. These areas are expected to drive demand for ultra-pure water, ZLD solutions, and chemicals.

Outlook and Path to Profitability Improvement

Management expects Q4 FY26 performance to be better than Q3, driven by deferred international engineering contracts. For FY27, the outlook for the engineering segment is expected to be similar or slightly better. While legacy projects will taper off, UP Jal Jeevan Mission execution will continue for a couple of years. Efforts are underway to pass on increased input costs in the chemical segment, and Roha's margin profile is anticipated to improve over time, contributing to overall profitability in the longer term.

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