ION Exchange

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.

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.

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.

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.

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.

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.

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.