ION EXCHANGE (INDIA) LTD (IONEXCHANG) Q4 FY23 Earnings Concall Transcript

ION EXCHANGE (INDIA) LTD (NSE:IONEXCHANG) Q4 FY23 Earnings Concall dated May. 30, 2023 

Corporate Participants:

Anuj Sonpal — Chief Executive Officer

Vasant Naik — Group Chief Financial Officer

Aankur Patni — Executive Director

N. M. Ranadive — Group Head of Financial Planning and Risk Management

Analysts:

Samir Palod — AUM Fund Advisors LLP — Analyst

Akshat Mehta — Sameeksha Capital — Analyst

Pratik Kothari — Unique Asset Management LLP — Analyst

Dhruv Rathod — Solidarity Investment Managers — Analyst

Mahesh Bendre — LIC Mutual Fund — Analyst

Unidentified Participant — — Analyst

Rahil Shah — Crown Capital — Analyst

Sanjay Kumar Elangovan — ithought Financial Consulting — Analyst

Saket Kapoor — Kapoor & Company — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to Ion Exchange India Limited Q4 FY ’23 Earnings Conference Call. [Operator Instructions]

I now hand the conference over to Mr. Anuj Sonpal from Valorem Advisors. Thank you, and over to you.

Anuj Sonpal — Chief Executive Officer

Thank you. Good afternoon, everyone, and a very warm welcome to you all. My name is Anuj Sonpal from Valorem Advisors. We represent the Investor Relations of Ion Exchange India Limited. On behalf of the Company, I’d like to thank you all for participating in the Company’s earnings call for the fourth quarter and financial year ending 2023.

Before we begin, let me mention a short cautionary statement. Some of the statements made in today’s earnings call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management’s beliefs as well as assumptions made by and information currently available to management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decisions. The purpose of today’s earnings call is purely to educate and bring awareness about the Company’s fundamental business and financial quarter under review.

Let me now introduce you to the management participating with us in today’s earnings call and hand it over to them for opening remarks. We have with us Mr. Aankur Patni, Executive Director; Mr. Vasant Naik, Group Chief Financial Officer; and Mr. N. M. Ranadive, Group Head of Financial Planning and Risk Management; and Mr. Milind Puranik, Company Secretary.

Without any further delay, I request Mr. Vasant Naik to start with his opening remarks. Thank you, and over to you, sir.

Vasant Naik — Group Chief Financial Officer

Thank you, Anuj. Good afternoon, everybody. It is a pleasure to welcome you to the earnings conference call for the fourth quarter and the financial year ended 2023. For the fourth quarter under review, on a consolidated basis, the Company reported operating income of INR6,475 million, an increase of around 30% year-on-year and 26% quarter-on-quarter. EBITDA reported was INR1,064 million, representing an increase of around 12% year-on-year and 70% quarter-on-quarter.

EBITDA margin stood at 16.43% and net profit was INR812 million, a decrease of around 2% year-on-year, but an increase of 70% quarter-on-quarter, while the PAT margin was in the region of around 12.5%. For the financial year 2023, on a consolidated basis, the operating income stood at INR19,896 million, an increase of around 26% year-on-year. The EBITDA stood at INR2,550 million, an increase of around 20% year-on-year, and the EBITDA margin was reported at 12.82%. Profit after tax stood at INR1,950 million, an increase of around 21% on a year-on-year basis and the PAT margin was reported at 9.8%.

Let me now take you through the quarterly segmental performance on a consolidated basis. In the Engineering division, the revenue for the quarter was INR4,526 million, an increase of 41% year-on-year. The EBIT for this segment was INR560 crores, a decrease of — INR560 million, a decrease of 23.5% [Phonetic] year-on-year. While the execution of the Sri Lanka order remains significantly affected, the Company’s discussion among all the stakeholders are moving in a positive direction, and we are hopeful of the project closure in FY ’24. The execution of the UP Jal Nigam project is progressing satisfactorily and revenue has been recognized based on the work completion.

The execution of the other engineering orders picked up pace during the quarter on the back of the increased order flows and the high order backlog. The Company continues to invest in engineering infrastructure, including manpower to enhance its execution capabilities for handling the increased order backlog. The Company during the quarter also increased — witnessed steady order flows both in the domestic and the international market.

Moving to the Chemical division, the revenue for the quarter was INR1,640 million, which increased by 8.25% year-on-year. The EBIT was INR482 million, an increase of 40% year-on-year. The sales in the domestic segment continued to record steady growth while the export volumes remained muted. The segment witnessed improved margins aided by stability to input costs and improved volumes of higher-margin product lines. The third segment, the Consumer Division segment, the revenue for the quarter was INR515 million, an increase of 21% year-on-year. The loss for the quarter was INR7 million versus INR16 million loss in the same period of the previous year. This segment continues to record healthy top line growth.

With this, we can now open the floor for the question-and-answer session.

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question comes from the line of Samir Palod from AUM Fund Advisors LLP. Please go ahead.

Samir Palod — AUM Fund Advisors LLP — Analyst

Yeah. Hi, am I audible? Hello?

Aankur Patni — Executive Director

Yes, you are. Please go ahead.

Samir Palod — AUM Fund Advisors LLP — Analyst

Yes, hi. Thank you for the opportunity. If you can just tell us a little bit about what is going on in the Engineering business, which has seen very good sales growth during the quarter compared to the same quarter last year, but the EBIT margins have gone down by more than 10 percentage points. So a little bit of color on what is going on in that business, what kind of work you’ve executed, and why the margins have dipped so dramatically during the quarter?

Aankur Patni — Executive Director

We’ve broadly done significantly larger amount of business during the quarter. However, there were a few factors which have contributed to this despite a dip in the overall margin percentages. The key reason is that we’ve had a typical way in which the orders get executed. We tend to be a little bit cautious towards the way the margins are recognized, and as the contract progresses, our estimates for the cost to completion of a project is getting revised. So there would be some contracts, which would have been in a initial period of execution, and we would hope to see slightly better margins as we go forward. That’s one thing.

The second aspect is that we do have a lot of infrastructure and capabilities, which we are building up on our Engineering businesses to build up for the upcoming invoicing, which is going to be a substantial increase over what we have managed to do in the past. So there is a little expenditure on that front, which has got accounted. And there would always be some variation because of the composition of projects or the project mix which gets executed during the particular quarter. So there is no real cause of worry there. We should be able to keep delivering good growth and reasonably good margin in the period coming forward.

Samir Palod — AUM Fund Advisors LLP — Analyst

Sir, I asked this question because same quarter last year, the EBIT margins were almost 22%, in this quarter is down to 12%. So if you were to look at this business on a slightly longer-term basis, what is a reasonable EBIT margin to assume for the Engineering business on a more sort of steady-state basis ignoring the quarter-to-quarter variations?

Aankur Patni — Executive Director

If we look at the kind of order book that we carry today and also the scale at which we hope to be executing orders in future, we should be seeing an improvement over what we have achieved in the current year.

Samir Palod — AUM Fund Advisors LLP — Analyst

Okay. And this — and would you say that even in your bid pipeline of about INR8,000-odd crores, you’re bidding with those sorts of EBIT margins, which are — which will be higher than what you achieved in the current year?

Aankur Patni — Executive Director

Yes, the EBIT margins are also a function of the scale at which we operate. And that is why we see quarter-to-quarter variations because the scale of operation in different quarters tends to be different. But if you look at margins on individual contracts, they tend to be slightly better, and we do expect that as these inquiries, of course, mature into orders, we should be able to maintain or better the EBIT margins which we are currently reporting.

Samir Palod — AUM Fund Advisors LLP — Analyst

And the bid pipeline, sir, would consist mostly of projects like the Jal Nigam of the various states, like the one that you have for UP and Delhi, would it be a similar types of bids that you are making?

Aankur Patni — Executive Director

No, it’s a good mix of industrial ESG projects and the municipal or infrastructure projects would be relatively lesser.

Samir Palod — AUM Fund Advisors LLP — Analyst

Okay, thank you for that. I’ll jump back into the queue. Thanks.

Aankur Patni — Executive Director

Yeah.

Operator

Thank you. Next question comes from the line of Akshat Mehta from Sameeksha Capital. Please go ahead.

Akshat Mehta — Sameeksha Capital — Analyst

Yeah. Can you hear me?

Aankur Patni — Executive Director

Yes, we can hear you.

Akshat Mehta — Sameeksha Capital — Analyst

Sir, my question was on the working capital side. What is the reason that our receivables have gone up and our payables have gone down sharply during the year?

Aankur Patni — Executive Director

Your question is on working capital, did I understand it right?

Akshat Mehta — Sameeksha Capital — Analyst

Yeah. So I was asking the reason why our receivables have gone up and payables have gone down more sharply during the year?

Aankur Patni — Executive Director

Well, I’ll ask Vasant to respond to that.

Vasant Naik — Group Chief Financial Officer

We had a disproportionate high invoicing in the month of March, that was the reason why the receivables have gone up sharply in that period as of March ’23.

Akshat Mehta — Sameeksha Capital — Analyst

Okay. And payables?

Vasant Naik — Group Chief Financial Officer

Payables also, I mean the overall levels of payables have gone up if you really see. I mean…

Akshat Mehta — Sameeksha Capital — Analyst

Yeah, but as a percentage of sales if you see even number of days, I mean the payables have gone down sharply by around 20 days. So why is that, because that is affecting your working capital efficiency overall?

Vasant Naik — Group Chief Financial Officer

I think we were also carrying a large amount of inventory during the quarter, and many of — much of the invoicing happened during the quarter end. So that has slightly distorted the working capital position. But if you see in the first quarter of 2023, 2024, the working capital position should get normalized because then the financial indicators in the current assets and liabilities would have got evened out. So we don’t foresee much of a issue in the working capital cycle.

Akshat Mehta — Sameeksha Capital — Analyst

So you were saying that we can maintain the cycle that we had in FY ’22, correct? FY ’23 [Phonetic] is a bit of a year and optical abnormality, but FY ’22, we can maintain, right?

Vasant Naik — Group Chief Financial Officer

Yeah, we should be able to normalize the working capital cycle in FY ’23-’24.

Akshat Mehta — Sameeksha Capital — Analyst

Okay. Secondly, if you can give a number on what is the kind of advance that we have received during the year from our customers? And any color on order inflows that you’re seeing coming in for next year?

Vasant Naik — Group Chief Financial Officer

The total advances which are outstanding in the books as of March end are in the region of around INR200 crores.

Akshat Mehta — Sameeksha Capital — Analyst

INR200 crores.

Vasant Naik — Group Chief Financial Officer

Yeah.

Akshat Mehta — Sameeksha Capital — Analyst

And any color on order inflows for the next year that you’re seeing?

Vasant Naik — Group Chief Financial Officer

Hello?

Akshat Mehta — Sameeksha Capital — Analyst

Hello?

Vasant Naik — Group Chief Financial Officer

Can you please come again on the second part of the question?

Akshat Mehta — Sameeksha Capital — Analyst

I was asking if you can give some color on the order inflows that you’re seeing for the next year?

Vasant Naik — Group Chief Financial Officer

As we discussed in the first part of the — first question in the con call, the total inquiry bank, it is around INR8,124 crores. So I mean it is a very healthy order of a bank, and we are hopeful that we should be in a position to have the same level of order inflow what we have seen in the current year of ’22-’23.

Operator

Thank you. Mr. Mehta, we request that you return to the question queue for follow-up questions. Next question comes from the line of Pratik Kothari from Unique Portfolio Managers. Please go ahead. And also please restrict yourself to two questions. Thank you.

Pratik Kothari — Unique Asset Management LLP — Analyst

Sure. Hi, good afternoon, and thank you for the opportunity. Sir, my first question is on the Engineering side. We — for the last two quarters, three quarters, we have been speaking about that we are kind of investing in our infra, in our manpower to execute much larger orders or much larger pace of execution going forward. And this is quite reflected in our numbers, like three years back, our order book used to be INR1,000 crores, it’s at INR3,500 [Phonetic] crores right now, but the execution is not up to the mark. So if you may just talk about what kind of preparations have we made, what can this lead to maybe two years, three years out?

Aankur Patni — Executive Director

Well, in terms of the capability enhancement, there has been significant investments in our ability to execute projects but also on the manpower and other related infrastructure. So our ability to manage a project or ability to execute in terms of equipments, machineries, fabrications, etc. So everything needs to go hand in hand. And it’s very much now geared to handle the level of invoicing that we expect in the coming period. As you rightly pointed out INR3,400-odd crores of order book, which — of which a good portion will get executed during FY ’23-’24. And therefore, the level of execution capabilities needed to be much higher. In fact, when I answered the first question as to the impact of these costs on our margins, so it has had a gearing on the way our margins have got reflected also.

Pratik Kothari — Unique Asset Management LLP — Analyst

Fair enough. Sure. And sir, a couple of clarifications. One, what would be our UP execution for this year? And second, just to clarify to your earlier comment, you did say that in quarter four, we completed a few orders and we have not recognized the margins to which we should being conservative, etc., and hence the lower margins?

Aankur Patni — Executive Director

No, that’s not what I meant. See, customarily, we — when we look at forecasting the cost of — the cost of completion for major projects, it always tends to be conservative towards the beginning of the contract. And then these gets revised as the contract progresses. So there would be a few contracts, which — few large contracts, which are still at a relatively early stage of execution, and hence we would tend to be conservative when we estimate the cost of completion.

Pratik Kothari — Unique Asset Management LLP — Analyst

Fair enough. Sir, my last question is on the chemicals. One, we announced that we have started this exhibition at Roha. Just wanted to clarify, this is the same that we were waiting an environment clearance on? And also, there were some articles which spoke about we putting our chemical facility in Odisha. If you can just clarify regarding the same?

Aankur Patni — Executive Director

Yes, Roha is the one for which we were waiting for the environmental clearance. We have received that in the last quarter. And the construction work has commenced on the plant. We expect that the plant will be operational by FY ’25-’26. Regarding the investment in Odisha, yes, there is another backward integration project which is planned there.

Pratik Kothari — Unique Asset Management LLP — Analyst

Any more color on what kind of capex, what products, what would you be doing there?

Aankur Patni — Executive Director

Still at a relatively early stage. I will certainly give more information in the next call.

Pratik Kothari — Unique Asset Management LLP — Analyst

Fair enough. Thank you, and all the best, sir.

Aankur Patni — Executive Director

Thank you.

Operator

Thank you. Next question comes from the line of Dhruv Rathod from Solidarity Investment Managers. Please go ahead.

Dhruv Rathod — Solidarity Investment Managers — Analyst

Hello, good afternoon, sir. So my first question was related to your Engineering division. I just wanted to understand what is the red line while looking out for EPC contracts as there have been instances where players have burned money hereby taking the wrong projects?

Aankur Patni — Executive Director

That’s right. The EPC business tends to be a little bit tricky because it gives a large quantum of revenue, but it does come up with risks which needs to be managed. In terms of the type of risks, one is to do with how aggressively that you would bid for the contract, and we tend to be relatively conservative. We don’t want to put our balance sheet and the bottom line at risk. So that’s one area, where we are very careful. The other, of course, is an execution risk, where we see that there are challenges, whether it is geopolitical or anything else, which we expect to face when we are executing the contract.

We are also very careful about the payment terms that we get, careful about the kind of customers that we’re talking about, whether we will get paid in time. I mean there are numerous parameters which we take into account when we consider which contracts to bid and which not to. And this is what has led to a slightly conservative focus towards higher number because we would rather be safe than sorry, and that’s sort of been the defining line for us.

Dhruv Rathod — Solidarity Investment Managers — Analyst

Got it. In your Chemical business, what is the expectation for growth, like what is exactly changing in that particular business? So initially, your growth was not that strong, but now the expectation for growth is increasing. So how is it changing a lot?

Aankur Patni — Executive Director

You’re saying expectation of growth?

Dhruv Rathod — Solidarity Investment Managers — Analyst

No. So the performance in the Chemical business has been improving. So what is changing exactly in your Chemical business?

Aankur Patni — Executive Director

Well, the Chemical business has been progressing quite nicely over the last few years. The top line growth has been fueled both by improvements in the domestic market and in the international market, as also our continuous effort to improve the product mix, we keep striving to weed out underperforming product lines and to add more and more of value-added products to our portfolio. That has helped in not just keeping the top line growth in sales but also to provide an additional lift to the bottom line.

About a couple of years back, we faced quite a bit of a challenge when there were sudden spikes in commodity prices across the globe and there were also supply chain challenges of various nature, which fortunately we have not encountered during the last year, and we had stability in commodity prices as well as relatively certain supply chain and exchange rate scenario. The challenge continues to be the geopolitical situation, which we know in some parts of the globe still affects the market. If all things remain as they are and we continue to have a stable scenario on all these fronts, we should be able to maintain the margins that we have seen.

Dhruv Rathod — Solidarity Investment Managers — Analyst

Got it. And just a final question. So you are still actually making losses on the Consumer business. So what are your plans exactly and what needs to change in this particular business for it to improve?

Aankur Patni — Executive Director

Yes, we have not turned around in the Consumer business as we continue to invest for future growth. We could potentially have reported just about a breakeven that we have incurred a good amount of expenditure during the last few quarters as we ramp up the capabilities of this segment for future growth. There have also been significant expenditures for marketing, which has gone up during the year. All of this has contributed to bottom line which is slightly shy of breakeven, but we will continue to see good growth in this segment, and hopefully, we would be much better off as far as the bottom line is concerned in the next year.

Dhruv Rathod — Solidarity Investment Managers — Analyst

Got it. Thank you so much for your answers.

Operator

Thank you. Next question comes from the line of Mahesh Bendre from LIC Mutual Fund. Please go ahead.

Mahesh Bendre — LIC Mutual Fund — Analyst

Sir, given the current order book and the business outlook you mentioned, I mean what kind of growth we are possibly looking for our Water business and the Chemical business in the current year?

Aankur Patni — Executive Director

Our order book is extremely strong. And I would say that a good portion of that order book would need to get executed in the current year. And therefore, the prospects for the current year are quite good. I would desist from giving out exact number guidance as of now. I will certainly give it after the first quarter is over. But as of now, I would just say that we expect significant growth in the current year as far as our Engineering business is concerned. On the Chemical segment, we should continue to grow at a reasonable pace. Last year, we’ve done roughly around 11%-odd growth. We should be able to deliver a better number if the geopolitical situation in Europe and the Americas improves further, and we do hope that the export numbers would start ramping up again. If those things fall in line, our Chemicals segment should also grow at a good pace.

Mahesh Bendre — LIC Mutual Fund — Analyst

Okay. Sure. And sir, what is the capital expenditure plan for next two years?

Aankur Patni — Executive Director

We have the Roha project, which is the resin manufacturing expansion. That project would have roughly around INR400 crores of investments. And apart from the Roha project, we should be looking at around INR60 crores in FY ’23-’24.

Mahesh Bendre — LIC Mutual Fund — Analyst

So cumulative will be some INR500 crores plus over next two years?

Aankur Patni — Executive Director

Over the next two years, yes, more than INR500 crores.

Mahesh Bendre — LIC Mutual Fund — Analyst

Sure. Thank you. Thank you so much, sir.

Operator

Thank you. Next question comes from the line of Srishti Jain [Phonetic] from [Indecipherable]. Please go ahead.

Unidentified Participant — — Analyst

Hello?

Aankur Patni — Executive Director

Yes, go ahead, please.

Unidentified Participant — — Analyst

Yeah, sir, thank you for the opportunity. Sir, we have seen huge desalination plants coming from countries like Saudi Arabia, Egypt or Africa. Are we looking for some opportunities there? And sir, this quarter, like our export as a percentage of sales has also decreased. So what can be the expected run rate moving forward in that?

Aankur Patni — Executive Director

Sorry, your voice was not very clear to me. I understood that you are asking about potential of getting engineering contract, including desalination from the export market. Is that right?

Unidentified Participant — — Analyst

Right.

Aankur Patni — Executive Director

Yes, we are actively working on a few projects, which we are executing a few projects of the nature in Africa and in the Middle East. And we continue to look at more and more prospects and certainly of a larger size.

Unidentified Participant — — Analyst

Sir, exports has decreased significantly as of this quarter, so if you can give any number to that?

Aankur Patni — Executive Director

You’re saying exports has decreased over the year?

Unidentified Participant — — Analyst

For this quarter as a percentage of revenue.

Aankur Patni — Executive Director

As a percentage of revenue you’re saying?

Unidentified Participant — — Analyst

Yes.

Aankur Patni — Executive Director

I think for the year as a whole, our engineering exports have done quite well. If I exclude the Sri Lanka project, which you all know is for the moment growing at a very slow pace. If I exclude the impact of the Sri Lanka project, exports have grown by a very healthy margin, I think it would have more than doubled, Vasant, engineering exports?

Vasant Naik — Group Chief Financial Officer

Yeah, excluding Sri Lanka, yes.

Aankur Patni — Executive Director

So we are doing pretty well on engineering exports and we should continue to do well. The next year should also see a further growth on top of this number.

Unidentified Participant — — Analyst

Thank you, sir. And sir, for the current order book and bid pipeline, can you give breakup between municipal and industrial orders?

Aankur Patni — Executive Director

Industrial and municipal?

Unidentified Participant — — Analyst

Yes.

Aankur Patni — Executive Director

For the order book you said, right?

Unidentified Participant — — Analyst

Yes.

Aankur Patni — Executive Director

Industrial would be roughly around 65%-odd.

Unidentified Participant — — Analyst

Thank you, sir. Thank you so much.

Operator

Thank you. Next question comes from the line of Rahil Shah from Crown Capital. Please go ahead.

Rahil Shah — Crown Capital — Analyst

Hello, sir. Good afternoon.

Aankur Patni — Executive Director

Good afternoon.

Rahil Shah — Crown Capital — Analyst

My — yeah. My question was again on the — so you said you’re not giving exact guidance, but I just wanted to ask, do you see an improvement in FY ’24 from here on in terms of top line and EBITDA margins, especially the EBITDA margins which have dropped on a consol level?

Aankur Patni — Executive Director

I do expect significant growth on the top line. We spoke about the order book that we carry and the expectations of further conversions of the inquiry bank that we have. So the prospects for top line growth remains pretty good. We also outlined the various reasons why the bottom line or the margin percentages have behaved in the way that they have. I would expect that if things remain in the channel for stability, we should be seeing an improvement hereafter.

Rahil Shah — Crown Capital — Analyst

Okay. And you mentioned the INR500-odd crores of capex for the next two years, how are you planning to fund it?

Aankur Patni — Executive Director

How are we planning to fund it?

Rahil Shah — Crown Capital — Analyst

Yes, the capex.

Aankur Patni — Executive Director

Well, a portion of it would come from internal accruals, and we have already established conversation with the lenders who would be in a position to fund it. And we are pretty confident of getting whatever external funding that is required.

Rahil Shah — Crown Capital — Analyst

All right, all right. And which division you feel will be a key driver in FY ’24? I am sorry if it’s a repeated one, but…

Aankur Patni — Executive Director

You’re saying which division would be a key driver for the capex?

Rahil Shah — Crown Capital — Analyst

No, no, no, for the growth in FY ’24. So where are you seeing the most promising…

Aankur Patni — Executive Director

Well, Engineering has by far been the largest segment, and it would continue to be the largest segment in the coming year also.

Rahil Shah — Crown Capital — Analyst

Okay, sir. Thank you, and all the best.

Aankur Patni — Executive Director

Thank you.

Operator

Thank you. Next question comes from the line of Sanjay Kumar from ithought Financial Consulting. Please go ahead.

Sanjay Kumar Elangovan — ithought Financial Consulting — Analyst

Hi, sir. Thanks for the opportunity. First, just a clarification on the resins capex. I was going through the EC document, it says capex of INR400 crores, and in today’s call, you mentioned capex of INR500 crores in next two years. So are we doing both Phase 1 and Phase 2 back to back, if you could give the timeline for the resins capex?

Aankur Patni — Executive Director

I said the resins capex would be INR400 crores around, and there are other capex which are apart from the resin plant. For the next two years, they would add up to more than INR100 crores. So that’s how the figure goes to more than INR500 crores.

Sanjay Kumar Elangovan — ithought Financial Consulting — Analyst

Okay. So we’ll be doing both phases in the next two years?

Aankur Patni — Executive Director

No, no.

Sanjay Kumar Elangovan — ithought Financial Consulting — Analyst

Can you give…

Aankur Patni — Executive Director

I’ll again repeat my answer. The resin project is INR400 crores, and there are other capex which are planned in other works of the Company, other segments of the Company, and these capex would add up to more than INR100 crores over the next two years. So it is resin project continues to be around INR400 crores.

Sanjay Kumar Elangovan — ithought Financial Consulting — Analyst

Got it, sir. And can you give the realization for the resins on average, sir? In IndiaMART, I’m seeing a range from INR100 per kg to even INR250 per kg. And what is the application of these resins for which we are putting up capex? The EC report says end users water treatment or is it across the board and the capacity is kind of fungible?

Aankur Patni — Executive Director

So I’ll try to repeat your question to make sure that I understood it. You want to know what is the kind of applications that resins are used for and the kind of…

Sanjay Kumar Elangovan — ithought Financial Consulting — Analyst

Specifically for this capex.

Aankur Patni — Executive Director

Specifically for this capex, right. The resin applications tend to be pretty wide. For most part, it is used in water treatment, but the resin applications would also be in non-water kind of areas. It is used in purification of various things, including beverages, it’s used in pharma, it is used in extraction of chemicals from certain stream of effluents. So the applications of resins tends to be very wide. And depending upon the chemistry and the application and the complexity of the specific product involved, the prices of the product and also the margins vary.

Sanjay Kumar Elangovan — ithought Financial Consulting — Analyst

Okay. And what would be the realization, sir, per kg realization on average rough figures will help in — help pick up the potential revenue?

Aankur Patni — Executive Director

They vary very widely. And if you’re trying to assess the kind of revenue that this capex is going to bring in, out of this capex of INR400 crores, a little over INR100 crores and INR125 crores thereabouts is for the backward integration project, which is integrated with the resin plant. So if I exclude the impact of that, the — we should get an asset turnover of roughly around two times.

Sanjay Kumar Elangovan — ithought Financial Consulting — Analyst

Two times?

Aankur Patni — Executive Director

Roughly two times.

Sanjay Kumar Elangovan — ithought Financial Consulting — Analyst

Okay. And what is…

Aankur Patni — Executive Director

So excluding the backward integration of INR125 crores, the project cost for the resin would be roughly around INR275 crores and we’re talking two times of that.

Sanjay Kumar Elangovan — ithought Financial Consulting — Analyst

Got it, sir. And what is driving this capex, because Thermax is also talking about the capex in 18 months. Is there a ready import substitution opportunity or are we gaining market share from global players in exports? If you could give us a sense of why you are putting up this huge capex given the competitor is also putting up capex?

Aankur Patni — Executive Director

Ion Exchange would have roughly a 40% market share in the Indian market and the Indian market continues to grow. Apart from that, the international — in the international market, our market shares would be a very small number, maybe around the 2% kind of a figure. So the headroom for growth in the international market is phenomenal, and that is what we would tap into. We are — we have got in the past quite good response from international market. And we are sure that as we bring this capacity on board, we would be able to get more share in international.

Sanjay Kumar Elangovan — ithought Financial Consulting — Analyst

It’s predominantly for export. So just one final request, sir. I don’t know if you have gone through the investor presentation of Wabag. They give very detailed information like breakup of municipal, industrial, breakup of geography segment-wise, not just for revenue, they give for order intake and order book. They also list the key orders received and the order intake figures every quarter. So if you could give that, that will be very helpful? And in terms of our order book and bid pipeline, can you give the breakup in terms of desalination, ETP, STP and drinking water, so that we could judge our forte of — within these four and how do we compete with Wabag?

Aankur Patni — Executive Director

Well, that’s not a breakup that we typically provide. I can tell you that as far as industrial versus municipal is concerned, the — our order book would be roughly 65% in favor of industrial. And as far as domestic versus international is concerned, we would be roughly around 85% domestic.

Sanjay Kumar Elangovan — ithought Financial Consulting — Analyst

Okay. And the — in terms of water versus desal or ETP, do we have an upper hand in any of these segments or does Wabag have upper hand in desal, for example?

Aankur Patni — Executive Director

I’m not getting into a competitive analysis, I’m sorry, at this time. But I can tell you that we continue to do well on all product lines. We do not have a very strong presence and somewhat by choice in the municipal segment, and that is where some of our competitors really showing higher numbers.

Sanjay Kumar Elangovan — ithought Financial Consulting — Analyst

Got it, got it, sir. Thanks. Thanks a lot. That’s it from my side.

Aankur Patni — Executive Director

Thanks.

Operator

Thank you. Next question comes from the line of Mahesh Agarwal [Phonetic] from Agarwal [Phonetic] Family Office. Please go ahead.

Unidentified Participant — — Analyst

Hello. Hi, am I audible? Hello?

Aankur Patni — Executive Director

Hello.

Unidentified Participant — — Analyst

Hi, Aankur, congratulations on a good set of numbers to you and the team. I wanted to take a step back and understand something at a bit more high level. So if you look at the Ion Exchange resins product that we have, I wanted to understand how our prices compare to Chinese manufacturers, who sort of dominate I think around close to 40% of the market share? And then vis-a-vis that what is the risk of dumping by these players ever in India? And if there’s any import duties in place of that sort to protect against any kind of actions by Chinese players?

Aankur Patni — Executive Director

Well, to — in order to answer that question, let me give you a perspective of how a typical large users of resins would know about selecting the right product. He would not just look at price, he would also look at the quality of the products, the kind of support and service that one would provide. And also the extent to which our products have been proven for the application that he is using it for. So in a typical scenario, where resins are used for critical or semi-critical operation, they would not go for something which is not very well proven. So that’s one.

Two is, Chinese manufacturers of resins have been in the market for now a lot of years, a long number of years, and they have tried to position themselves not just in the international market, but also in the Indian market. We managed through that scenario reasonably well till now, and we hope that we would be able to continue with our strategy and be able to retain market share in the domestic market. As far as the international market is concerned, the Chinese have been in a way cost leaders for some time, but their costs have undergone an increase over the last few years because of increased degree of compliance with regard to laws and other such concerns which has been thrown up by a lot of customers. So their costs are now at a much more higher level compared to what they were earlier. We managed to compete quite well with them on all fronts, including quality, cost and otherwise. So we hope that we would be able to scale our market shares in the international market also.

Unidentified Participant — — Analyst

Understood. And sorry, just to understand a bit more on that. Would we be within, say 10% or so broadly of prices of the Chinese guys, just to understand where we as a country stand today relative to their kind of cost curve?

Aankur Patni — Executive Director

It depends upon product to product. There would always be differences and they would position themselves at a higher or lower level as far as cost is concerned depending upon the customer, the geography which they are addressing, etc. In some cases, they may be higher price levels. In some cases, they could be marginally lower, and the price difference could be 10%-odd in some circumstances, but it’s not always true.

Unidentified Participant — — Analyst

Got it. And then are there any import duties in place on our key products to protect from any kind of dumping scenario?

Aankur Patni — Executive Director

Yes. The government does protect us through various means and measures, not — I don’t say that they completely put an embargo on them, but it does provide a reasonable degree of protection. But I would ask Vasant to clarify on the exact import duty which is there on resin specifically.

Vasant Naik — Group Chief Financial Officer

Aankur, I need to check quite frankly, but to my mind, there is no sort of protectionist import duty on the import of resins.

Aankur Patni — Executive Director

There is no dumping — anti-dumping kind of provision?

Vasant Naik — Group Chief Financial Officer

No.

Unidentified Participant — — Analyst

Understood. Got it. That could be something worth exploring and just keeping back of our mind in case that scenario ever pops up. And then Aankur, if you could just share the same kind of understanding for our wastewater treatment chemicals and the membrane aspect as well, how we kind of stack up there vis-a-vis Chinese or other global players?

Aankur Patni — Executive Director

Well, I would say that the same summary applies very much to almost all the product lines, both with respect to the domestic consumers and the international consumers. Membranes, of course, we have just started. We are quite new in the field. And we’re already running at more than 90% capacity utilization for our membrane plant. We have just expanded capacity, which is double our capacity. And I’m expecting that we will use up this additional capacity within the next couple of years. We’ve already got our plants ready for further expansion. So membrane growth should happen at a very, very rapid pace for us. We should be able to garner further market share in India as well as abroad.

Unidentified Participant — — Analyst

Understood. And just a last final up on this, if you could give us a sense of what percentage of chemicals is export today, and then also what is kind of the right to win or what is driving more export demand for us? Is China Plus One that we see play out in other industries also playing out for us where there is a move to just procuring from India due to quality, service, price or whatever other reasons?

Aankur Patni — Executive Director

Share of exports in chemicals would be roughly around 25% this year. As far as what’s driving the exports, China Plus One was I think a consideration for a couple of years or slightly more. But once we got our foot in and the customers have experienced our products and our services, especially our ability to look at their issues and their problems and solve it in a meticulous manner. And further to these two aspects, the reliability of our Company as a supplier, all of these factors have aided in further expansion into the international customer mind space. I would believe that as time goes by, the stickiness of these customers will be quite strong.

Unidentified Participant — — Analyst

Understood. Got it. That’s all from my side. Thank you so much. And good luck on the new Portugal subsidy integration as well. We’re looking forward to that.

Aankur Patni — Executive Director

Yes, we are just going through the final phases of that company. And we do expect that those entities will start showing substantial contributions in the coming years.

Operator

Thank you. Next question comes from the line of Saket Kapoor from Kapoor & Company. Please go ahead.

Saket Kapoor — Kapoor & Company — Analyst

Yeah, [Foreign Speech], sir, and thank you for the opportunity. Firstly, can you — yes, sir. Firstly, can you mention about that INR125 crore backward integration that goes into the INR400 crore capex. So if you could explain much more about what sort of backward integration will come into play, and what will be the exact payback from this INR125 crores?

Aankur Patni — Executive Director

What exactly this INR125 crores backward integration is, as of date, I wouldn’t be able to give you too much of detail on that. But it is targeted towards improvement in the cost profile of the product as well as to increasing the plant efficiency. I think overall, we are expecting a payback for this project in space of roughly around four years.

Saket Kapoor — Kapoor & Company — Analyst

Correct, sir. And then you mentioned about INR500 crore capex, that includes also the Odisha one, which is on the drawing board or that would be separate from this?

Aankur Patni — Executive Director

No, that Odisha project is not included in this INR500 crores.

Saket Kapoor — Kapoor & Company — Analyst

Correct, sir. And sir, for the other income part, I think so this year, the other income when compared to last year are on the similar line, but the — but we have booked it on separate quarters. So that has also resulted in this — in the reporting numbers being different. So if you could explain the nature of other income appearance in last — last year fourth quarter, it was INR21 crores, and this year, it is INR5.5 crores. So if you could explain the nature and what should be the — what could be the trajectory going ahead in terms of the other income part? And sir, in the employee benefit expense, you did mention that we are preparing ourselves for execution, higher execution — scale of execution. So does that commensurate with this increase in the employee cost or is it the higher execution we have done in the Engineering segment because of this, the employee costs have also gone up?

Aankur Patni — Executive Director

Let me address your question on other income first. During this last quarter, we had some exchange loss as against an exchange gain which happened in the previous year’s fourth quarter. So that’s a significant swing, which is causing a lot of difference in the overall number. As far as employee cost is concerned, typically, the existing employees would get a pay increase every year. So that’s a nominal — a normal increase, which would in any case happen.

Further to that, we have expanded manpower in various fronts. Engineering is — has certainly seen a substantial addition to manpower. There has also been addition to manpower in our Engineering segment and other segments. So overall, the Company is preparing and getting itself ready for higher scale of operation and ensuring that the growth trajectory is maintained.

Saket Kapoor — Kapoor & Company — Analyst

Sir, if we look at the — just continuation to it, if we look at the percentage of employee cost to the sales revenue, is that a correct way to look at it, because that would give an understanding whether — when we start booking — executing order in a disproportionate way, then this percentage would look lower. So can you give us some understanding for this quarter, it is closer to 10%, the employee benefit expenses?

Aankur Patni — Executive Director

Yes. This number would vary depending upon how much of revenue we have been able to capitalize based on additional manpower. If the manpower addition in the revenues would take a little bit time to fructify, the percentages would get skewed a little bit. And that is what would happen in a period where we are adding substantial capabilities, especially for executing larger scale of projects in the coming period, the revenues for which has not yet come.

Saket Kapoor — Kapoor & Company — Analyst

Correct, sir. And one small point also on the UP Jal Nigam project. Sir, what was the total size of the project? And in percentage terms, sir, what portion of the project will get executed for this year?

Aankur Patni — Executive Director

So you’re asking about the Sri Lanka project?

Saket Kapoor — Kapoor & Company — Analyst

No, no, I’m asking for the Uttar Pradesh Jal Nigam project, what was the total size of the project when we were awarded? And what portion of it would be executed for this year?

Aankur Patni — Executive Director

Do you mean the current year?

Saket Kapoor — Kapoor & Company — Analyst

Yes, the current year, current year execution — execution one, revenue that we will be garnering from this project?

Aankur Patni — Executive Director

During the current year, invoicing is a little less than INR200 crores, I think it’s around INR190 crores. The total value of the contract is INR1,200 crores, that’s the estimated contract value.

Saket Kapoor — Kapoor & Company — Analyst

And for FY ’24, are we going to — the execution will be done for this financial year or will it roll over to the next year also?

Aankur Patni — Executive Director

We should be completing major portion of — or majority of this contract by FY ’23-’24, and there will be a small spillover into FY ’24-’25.

Saket Kapoor — Kapoor & Company — Analyst

And does this contract have any O&M part also, sir, wherein we will be garnering post the execution any revenues for an extended period or it is totally executable — execution based on this?

Aankur Patni — Executive Director

Yes, O&M is there, it’s a 10-year O&M after this.

Operator

Thank you. Mr. Kapoor, we request that you return to the question queue for follow-up questions. Next question comes from the line of Akshat Mehta from Sameeksha Capital Private Limited. Please go ahead.

Akshat Mehta — Sameeksha Capital — Analyst

Yeah, thanks again. Sir, I just want to ask you — if I understand correctly, you said that in the Chemical segment this quarter as we’ve seen very good margins because there has been on account of the product mix, higher-margin products were sold more during the quarter. Going forward, let’s say for the next year, how do you see the margins being in the Chemical segment? Will it be around 24%, 25% itself or it can be higher?

Aankur Patni — Executive Director

Well, we have seen sequential improvement in the margin, and we’re quite hopeful of making the FY levels achieved in ’22-’23. However, it is contingent upon continued stability in commodity prices and stability in supply chain, exchange rate, as well as also the geopolitical situation for the European markets. So if it would remain stable, then we should be able to maintain the margins.

Akshat Mehta — Sameeksha Capital — Analyst

So maintaining a full year margin of 26% or quarter four margin of 30%, full year margin, right?

Aankur Patni — Executive Director

Yeah, I’m talking about the full year margin.

Akshat Mehta — Sameeksha Capital — Analyst

Okay. And I also wanted to understand in terms of the new Portugal acquisition that you’ve done for MAPRIL, can you provide some color on what is the kind of synergies that will come and how do you see the top line and the bottom line growing for that company in the next couple of years or so in broad terms?

Aankur Patni — Executive Director

Well, we should be able to look at reasonably good growth coming in from the European market. Still, early days for me to give you a number projection. We have obviously got our numbers internally, but I wouldn’t want to yet put it out as a guidance. We would like to give preferably around a quarter or so later. We would — however, I can give you a broad indication that we should be able to generate significant multiples of our acquisition point.

Akshat Mehta — Sameeksha Capital — Analyst

Okay. Thank you.

Aankur Patni — Executive Director

Thank you.

Operator

Thank you. Next question comes from the line of Pratik Kothari from Unique Portfolio Manager. Please go ahead.

Pratik Kothari — Unique Asset Management LLP — Analyst

Thank you, again. Sir, my one question to understand our thinking and our strategy. I mean, earlier for the resins plant, sir, the capex outlay of INR200 crores, INR250 crores and we are adding about INR100 crores, INR125 crores of backward, Odisha, we plan to do some backward integration there. So just why so much focus on backward integration, I mean what are we thinking, how are we thinking?

Aankur Patni — Executive Director

Well, backward integration does give us significant cost advantage, Pratik. And we are looking at improving our overall paybacks for the investments which we are making fresh, which is in Roha, as also for the industries, which we already have in the product lines which are already in existence, and they would bring in an extra quantum of margin. As I said that on an overall basis with the advantage or benefit of the integrated projects, we should see a payback of roughly four years for our Roha project.

Pratik Kothari — Unique Asset Management LLP — Analyst

So this — I mean, so all of this, the material or the base product that we were continuing to manufacture the resins, will this all imported maybe from China and that is why we are doing this?

Aankur Patni — Executive Director

So the products which we use for manufacturing resins, we do have a significant amount of imported content, but these are more commodity in nature. We have spoken about the key component of resins is styrene, which we can source both internationally as well as in the domestic market. But this particular project that we are talking about is not intended to be for styrene.

Pratik Kothari — Unique Asset Management LLP — Analyst

Okay. Fair enough. And sir, we consolidated two of our subsidiaries this year within ourselves, BCSL and IWML for this year?

Aankur Patni — Executive Director

Sorry, Pratik, I couldn’t get your question very clearly.

Pratik Kothari — Unique Asset Management LLP — Analyst

Sorry. So my question was, we consolidated two of our wholly-owned subsidiaries within Ion Exchange this year and we were on a path to kind of simplify the corporate structure. So if you can highlight are there more subsidiaries that you plan to consolidate this year?

Aankur Patni — Executive Director

I think we are looking at a total of three subsidiaries getting merged into Ion Exchange during the course of the coming period. And we would look at more possibilities after we complete this particular phase.

Pratik Kothari — Unique Asset Management LLP — Analyst

Fair enough. Great, and thank you again.

Aankur Patni — Executive Director

Yes, thanks.

Operator

Thank you. Ladies and gentlemen, due to time constraints, that was the last question for today. We have reached the end of question-and-answer session. I would now like to hand the conference over to Mr. N. M. Ranadive from Ion Exchange India Limited for closing comments.

N. M. Ranadive — Group Head of Financial Planning and Risk Management

Thank you all for participating in this earnings con call. I hope we have been able to answer your queries, questions satisfactorily. If you have any further questions or would like to know more about the Company, we would be happy to be of assistance. We are very thankful to all our investors, who stood by us and also had confidence in the Company’s growth plan and focus. And with this, I wish everyone a great evening. Thank you.

Operator

[Operator Closing Remarks]