ION Exchange (India) Limited — Q4 FY25 earnings call

Call held 30 May 2025

Management summary

ION Exchange reported a mixed Q4 FY25, with consolidated operating income growing 7% YoY but EBITDA and net profit declining 7% and 13% respectively. For the full FY25, operating income grew 17% and EBITDA 8%, though the reported net profit of INR 283 million with a 7.6% PAT margin indicates a significant discrepancy in the transcript. The engineering segment faced challenges from muted execution of the UP Jal Nigam project and lower order inflows, while the chemical division showed strong growth, with the new Roha plant expected to boost future performance. The consumer product division continues to incur losses but targets profitability from Q3 FY26.

Highlights

  • FY25 Operating income of INR 27,371 million, up 17% YoY.

  • FY25 EBITDA of INR 2939 million, up 8% YoY.

  • Q4 Chemical division revenue of INR 2228 million, up 12% YoY.

  • Q4 Chemical division EBIT of INR 522 million, up 9% YoY.

  • Sri Lanka order saw positive development with authorities committing funds to expedite job progress.

Concerns

  • Q4 Consolidated EBITDA declined 7% YoY to INR 858 million.

  • Q4 Consolidated Net Profit declined 13% YoY to INR 632 million.

  • Engineering division Q4 EBIT declined 23% YoY to INR 412 million.

  • Consumer product division reported an EBIT loss of INR 52 million in Q4 FY25, compared to INR 28 million loss in prior year.

  • Muted order inflow for the engineering segment in Q4 FY25 due to aggressive pricing and timing issues.

  • UP Jal Nigam project execution remains muted due to funding issues, leading to elongated debtors and a significant reduction in reported backlog.

Key financials

2 periods

Q4

  • Operating Income
    8,346 Mn
    YoY +7%
  • EBITDA
    858 Mn
    YoY -7%
  • EBITDA Margin
    10.3%
  • Net Profit
    632 Mn
    YoY -13%
  • PAT Margin
    7.6%

FY25

  • Operating Income
    27,371 Mn
    YoY +17%
  • EBITDA
    2,939 Mn
    YoY +8%
  • EBITDA Margin
    10.7%
  • Net Profit
    283 Mn
    YoY +7%
  • PAT Margin
    7.6%

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 Q4 Revenue
8,560 Mn Total
  • Engineering Division 5,553 Mn 64.9%
  • Chemical Division 2,228 Mn 26.0%
  • Consumer Product Division 779 Mn 9.1%

Order book

high confidence

Total value

₹2,762 Cr

as of 2025-03-31 quantified

Execution

UP project expected to continue throughout FY26 and early FY27; other legacy projects by end of FY26/early FY27.

Composition

  • UP Jal Nigam project (project) ₹378 Cr

Pipeline

other

A lot of opportunities in the EPC space, both in India and abroad, being aggressively pursued.

Cancellations & deferrals

  • descoped: Reduction in UP Jal Nigam project outstanding order book from ₹719 crores to ₹378 crores due to foreclosures and conservative view.
Management is being selective on engineering projects due to aggressive pricing and timing issues, focusing on quality orders. Order inflow was muted in Q4, with some large opportunities spilling over.

Source: Prepared remarks

Capital allocation

high confidence
  • Capex ₹400 Cr 80% debt component
    • Greenfield manufacturing facility at Roha for resin production ₹400 Cr
    As we have informed in earlier calls, the total CAPEX of the Roha plant is in the region of around Rs.400 crores, and the debt component is around the 80% of that.
  • Debt Debt disclosed Cost 9.9%
    the interest cost is just below 10% for this term loan.
  • M&A Mapril Acquisition · Integrated

    Good reference base in South Europe (Portugal and Spain), taking more products to that geography.

    So that's working well, this is about close to two years since we acquired the company. We have kind of been over the integration process. It's gone well, we are fully integrated, they have a good reference base in South Europe, specifically in Portugal and Spain.

Guidance & targets

Capacity

  • Roha Plant Go-Live Capacity · Q2 FY26 · High confidence Go on stream in Q2 FY26
    Our greenfield manufacturing facility at Roha for resin production, is expected to go on stream in the 2nd Quarter of the financial year 25-26.

    — Vasant Naik

Revenue

  • Chemical Segment Revenue Traction from Roha Plant Revenue · Q2-Q3 FY26 · High confidence Building from 2nd Quarter and 3rd Quarter onwards
    Will effectively, we start to be able to see the revenue traction building from say 2nd Quarter and 3rd Quarter onwards, is that understanding fair? Management: Yes, our sales people will get very busy very soon.

    — Ajaz Lakhani (question), Management (confirmation)

Profitability

  • Consumer Division EBITDA Profitability Profitability · Q3-Q4 FY26 · High confidence Profitable from 3rd and 4th Quarter onwards
    we remain hopeful that as the volumes have picked up... we should be having a much better margin profile to disclose in the results going forward from the 3rd and the 4th Quarter onwards.

    — Management

Project Completion

  • UP Jal Nigam Project Completion Project Completion · Early FY27 · High confidence Spill over to beginning of FY27

    Previously Q2 FY26 → Spill over to beginning of FY27

    What was mentioned now was with reference to the UP project which is going to spill over to the beginning of the ‘26-27

    — Management

  • Other Legacy Projects Completion Project Completion · End of FY26 · High confidence Largely get over by end of FY26
    while the other legacy project we expect to largely get over by the end of the current financial year.

    — Management

What to watch in Q1 FY26

Overall FY26 Outlook and Guidance

End of Q2 FY26 presentation
Current Management deferred specific guidance for FY26.
Target Specific revenue, margin, and segment-wise guidance for FY26.

Why it matters

Provides crucial clarity on the company's financial trajectory and strategic priorities for the current fiscal year.

we should be able to come back and give you a better outlook somewhere in the 2nd Quarter presentation.

Risks & concerns

  • UP Jal Nigam Project Delays, Funding Issues, and Backlog Correction

    high

    Project execution is slow due to funding issues, leading to elongated debtors and a significant reduction in reported backlog (from ₹719 Cr to ₹378 Cr) due to expected foreclosures. The project is now expected to spill into early FY27.

    Both acknowledged

  • Muted Order Inflow and Aggressive Pricing in Engineering Segment

    medium

    Order inflow was slow in Q4 FY25 due to aggressive market pricing and some large opportunities spilling over to the next fiscal year.

    Management acknowledged

  • Chemical Segment Margin Compression

    medium

    Q4 chemical margins declined due to seasonality of certain product lines and input cost increases, though actions are being taken to pass on price increases.

    Management acknowledged

  • Legacy Projects Impacting Engineering Margins

    medium

    Other multi-year legacy contracts continue to put pressure on engineering segment margins, expected to continue through FY26 and potentially early FY27.

    Management acknowledged

  • SAP Implementation Disruption

    low

    SAP implementation across the company is causing minor timing issues and disruption, but is expected to normalize in the third month of Q1.

    Management acknowledged

Q&A highlights

7 direct, 1 evasive
Muted Order Inflow and Engineering Segment Growth Outlook Direct
some of the jobs that we had bid, a couple of large orders we could not win. There was a lot more aggressive pricing in the market. And then a few other key jobs that we have been pursuing have spilled over to the next financial year.

Explains the reasons for lower order intake in Q4, highlighting competitive pressures and timing delays for future opportunities.

Asked by Ashmita

Chemical Segment Margin Compression Direct
The 4th Quarter, if you are comparing with the immediate preceding quarter, there has been a decline, due to the seasonality of certain product lines. And also we have seen some input cost increases. We have now taken action to pass on the price increases to the customers.

Clarifies the factors contributing to the decline in chemical margins and management's strategy to mitigate input cost increases.

Asked by Ashmita

FY26 Revenue and Margin Outlook Evasive
we don't like to give a call out before the first half ends... we should be able to come back and give you a better outlook somewhere in the 2nd Quarter presentation.

Management defers providing specific financial guidance for FY26, indicating a need for more clarity or a preference to wait until later in the year.

Asked by Michael Sel

UP Jal Nigam Project Backlog Reduction and Execution Challenges Direct
We have taken, a correction on order backlog based on what we see on the ground... we expect some foreclosures to happen, and also, because the project has taken an inordinate long time to deliver and our objective is to close the project, we have taken a conservative view of the remaining order backlog and that is why you see a drop in the order backlog.

Explains the significant reduction in the reported UP project order book (from ₹719 Cr to ₹378 Cr) due to expected foreclosures and prolonged delays, impacting future execution.

Asked by Ajaz Lakhani

Roha Plant Commissioning and Chemical Segment Revenue Traction Direct
as Roha plant comes on stream, your ability which today is constrained because from a utilization standpoint, you are pretty much maxed out in chemicals. Will effectively, we start to be able to see the revenue traction building from say 2nd Quarter and 3rd Quarter onwards, is that understanding fair? Management: Yes, our sales people will get very busy very soon.

Confirms the timeline for the new Roha plant to become operational and contribute to revenue growth, addressing existing capacity constraints in the chemical segment.

Asked by Ajaz Lakhani

Consumer Division Profitability Timeline Direct
we remain hopeful that as the volumes have picked up... we should be having a much better margin profile to disclose in the results going forward from the 3rd and the 4th Quarter onwards.

Provides a specific timeline for when the consumer division is expected to achieve EBITDA profitability, indicating the anticipated impact of recent investments.

Asked by Prem Singh

Reasons for Increase in Debtors Direct
One major contract which has contributed to the increase in debtors is the UP contract, as I mentioned the funding issues in this contract has led to an elongated debtors level in this contract. And second is, we had a spike in invoicing in the month of March, which has slightly distorted the overall debtors level.

Identifies the problematic UP project's funding issues as a primary cause for the increase in debtors, alongside a March invoicing spike.

Asked by Chetan Vora

Extended Closure Timeline for UP Project Direct
That is our conservative estimate looking at the run rate of how this project has moved in the last six months... we expect the balance of this project to continue throughout this financial year, and we should be able to hopefully wrap it up early in the next financial year.

Management provides a conservative and extended timeline for the completion of the critical UP project, reflecting ongoing challenges in execution and fund flow.

Asked by Saket Kapoor

3 min read 7 chapters

Detailed narrative

Q4 and FY25 Consolidated Performance Overview

For Q4 FY25, Ion Exchange reported an operating income of INR 8346 million, a 7% year-on-year increase. However, EBITDA declined by 7% to INR 858 million, resulting in a 10.28% margin, and net profit fell by 13% to INR 632 million, with a PAT margin of 7.6%. For the full financial year 2025, operating income grew 17% to INR 27,371 million, and EBITDA increased 8% to INR 2939 million, with a margin of 10.74%. The reported net profit for FY25 was INR 283 million, up 7% year-on-year, alongside a stated PAT margin of 7.6%, indicating a significant mathematical inconsistency in the transcript.

Engineering Segment Challenges and Order Book Dynamics

The engineering division's Q4 revenue increased by 5% to INR 5553 million, but EBIT declined significantly by 23% to INR 412 million. For FY25, revenue grew 17% to INR 17,038 million, but EBIT saw a slight decline of 2.5% to INR 1091 million. The total order book for the engineering division stood at INR 2762 crores at the end of Q4 FY25. Management noted muted order inflows in Q4 due to aggressive pricing and large opportunities spilling into FY26, alongside ongoing challenges with legacy projects and the UP Jal Nigam order.

UP Jal Nigam Project Delays and Financial Impact

The UP Jal Nigam project, a significant component of the engineering backlog, has seen its outstanding value reduced from INR 719 crores (as of Dec 2024) to INR 378 crores due to a conservative reassessment based on expected foreclosures and prolonged delivery. Execution remains muted due to funding issues, which have also contributed to an increase in the company's debtors. Management expects the balance of this project to continue throughout FY26 and potentially spill into early FY27.

Chemical Segment Growth and Roha Plant Commissioning

The chemical division demonstrated strong performance, with Q4 revenue growing 12% to INR 2228 million and EBIT increasing 9% to INR 522 million. For FY25, revenue was up 15.5% to INR 8184 million, and EBIT grew 17% to INR 2066 million. The new greenfield manufacturing facility at Roha, with a total CAPEX of INR 400 crores (80% debt-funded at just below 10% interest), is expected to go on stream in Q2 FY26. This plant is crucial for addressing capacity constraints and driving revenue traction, particularly for exports, from Q2-Q3 FY26 onwards.

Consumer Product Division Performance and Profitability Outlook

The consumer product division recorded a 7% year-on-year revenue increase to INR 779 million in Q4, and a 14% increase to INR 2902 million for FY25. However, the segment continued to incur an EBIT loss of INR 52 million in Q4 (compared to INR 28 million loss in prior year) and INR 149 million for FY25. Management anticipates that with increasing volumes, the division should achieve EBITDA profitability from Q3-Q4 FY26 onwards, following substantial investments in infrastructure and distribution.

Strategic Focus on Quality Orders and International Markets

Ion Exchange emphasized a selective approach to engineering projects, prioritizing good quality orders to maintain or improve profitability amidst aggressive market pricing. The company is strengthening its international market presence, particularly in South Europe following the integration of the Mapril acquisition, to leverage export opportunities for its chemical and membrane products. The Mapril acquisition, integrated over the last two years, provides a strong reference base in Portugal and Spain.

SAP Implementation and General Outlook

The company is undergoing an SAP implementation across the organization, which has caused minor disruptions and timing issues. However, management expects to be back on a normal course by the third month of Q1. Overall, the management refrained from providing specific FY26 guidance, stating they would offer a better outlook during the Q2 presentation, while noting a similar trend is expected in the coming year.

This is an AI-generated summary of a publicly available earnings call transcript.
View original transcript

More Utilities earnings calls