Ladies and gentlemen, good day and welcome to Ion Exchange India Ltd Q4 FY 2023 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Anuj Sonpal from Valorem Advisors. Thank you, and over to you.
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 Ltd. 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 when 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.
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 INR 6,475 million, an increase of around 30% year-on-year and 26% quarter-on-quarter. EBITDA reported was INR 1,064 million, representing an increase of around 12% year-on-year and 17% quarter-on-quarter.
EBITDA margin stood at 16.43%, and net profit was INR 812 million, a decrease of around 2% year-on-year, but an increase of 17% 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 INR 19,896 million, an increase of around 26% year-on-year. The EBITDA stood at INR 2,550 million, an increase of around 20% year-on-year, and the EBITDA margin was reported at 12.82%.
Profit after tax stood at INR 1,950 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 INR 4,526 million, an increase of 41% year-on-year. The EBIT for this segment was INR 560 million, a decrease of 23.5% year-on-year. While the execution of the Sri Lanka order remains significantly affected, the company's discussions among all the stakeholders are moving in a positive direction, and we are hopeful of the project closure in FY 2024.
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 witnessed steady order flows both in the domestic and the international market.
Moving to the chemical division, the revenue for the quarter was INR 1,640 million, which increased by 8.25% year-on-year. The EBIT was INR 482 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 in the input cost and improved volumes of higher margin product lines. The third segment, the consumer division segment, the revenue for the quarter was INR 515 million, an increase of 21% year-on-year.
The loss for the quarter was INR 7 million versus INR 16 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.
Thank you. We will now begin the question- and- answer session. Anyone who wishes to ask a question may press star and one on your touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Samir Palod from AUM Fund Advisors LLP. Please go ahead.
Yeah. Hi, am I audible? Hello.
Yes, you are. Please go ahead.
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. The EBIT margins have gone down by more than 10 percentage points. 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.
We've broadly done a significantly larger amount of business during the quarter. However, there were a few factors which have contributed to this slight dip in the overall margin percentages. The key reason is that we've had the typical way in which the orders get executed. We tend to be a little bit cautious towards the way the margins are recognized. As the contract progresses, our estimates on cost to completion of a project keep getting revised.
There would be some contracts which would have been in an 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 capability which we are building up on our engineering businesses to build up for the upcoming invoicing, which is going to be substantially increased over what we have managed to do in the past. There is a little expenditure on that front, which has got accounted.
There would always be some variation because of the composition of projects or the project mix which gets executed during a particular quarter. There is no real cause of worry there. We should be able to keep delivering a good growth and reasonably good margins in the period coming forward.
Sorry. Sir, I ask this question because same quarter last year, the EBIT margins were almost 22%, and this quarter it is down to 12%. 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 steady-state basis, ignoring the quarter-to-quarter variations?
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.
Okay. Would you say that even in your bid pipeline of about INR 8,000 odd crores, you are bidding with those sorts of EBIT margins, which will be higher than what you have achieved in the current year?
Yes. The EBIT margins are also a function of the scale at which we operate, that is why we see quarter-to-quarter variations. The scale of operation in different quarters tends to be different. If you look at margins on individual contracts, they tend to be slightly better. We do expect that as these inquiries offers mature into orders, we should be able to maintain or better the EBIT margins which we are currently reporting.
The bid pipeline, sir, would consist mostly of projects like the Jal Nigams of the various states, like the one that you have for UP and Delhi. Would it be similar types of bids that you're making?
No, it's a good mix of industrial EPC projects, the municipal or infrastructure projects would be relatively lesser.
Okay. Thank you for that. I'll jump back into the queue. Thanks.
Yeah.
Thank you. Next question comes from the line of Akshat Mehta from Sameeksha Capital . Please go ahead.
Yeah. Can you hear me?
Yes, we can hear you.
My question was on the working capital side. What is the reason that your receivables have gone up and your payables have come down sharply during the year?
Your question is on working capital, did I understand it right?
Yes. I was asking the reason why our receivables have gone up and payables have come down more sharply during the year.
Well, I'll ask Vasant to respond to that.
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 2023.
Okay. Payables?
Payables also, the overall levels of payable have gone up if you really see.
Yeah, as a percentage of sales, if you see in number of days, payables have gone down sharply by around 20 days. Why is that? That is affecting your working capital efficiency overall.
No, I think we were also carrying a large amount of inventory during the quarter and much of the invoicing happened during the quarter end. That has slightly distorted the working capital position. If you see in the first quarter of FY 2023-2024, the working capital position should get normalized then all the financial indicators in the current assets and liabilities would have got evened out. We don't foresee much of a issue in the working capital cycle.
You are saying that we can maintain the cycle that we had in FY 2022, correct? FY 2023 is a bit of an error and optical abnormality. FY 2022 we can maintain, right?
Yeah, we should be able to normalize the working capital cycle in FY 2023, 2024.
Okay. Secondly, if you can give a number on what is the kind of advance that we've received during the year from our customers and any color on order inflows that you are seeing coming in for next year.
The total advances which are outstanding in the books as of March end, are in the region of around INR 200 crore.
INR 200 crore.
Yeah.
Any color on order inflows for the next year that you're seeing?
Hello.
Hello.
Can you please come again on the second part of this question?
I was asking if you can give some color on the order inflows that you are seeing for the next year.
As we discussed in the first part of the first question in the concall, the total inquired bank detail is around INR 8,124 crore. It is a very healthy order book, 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 2022, 2023.
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. Also please restrict yourself to two questions. Thank you.
Sure. Hi, good afternoon, and thank you for the opportunity. My first question on the engineering side, for the last two, 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. This is quite reflected in the numbers. Like three years back, our order book used to be INR 1,000 crore. It's at INR 3,500 crore right now, but the execution is not up to the mark. Can you just talk about what kind of preparations have you made? What can this lead to maybe two, three years out?
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. Our ability to manage a project, our ability to execute in terms of equipments, machineries, fabrications, et c. Everything needs to go hand in hand and it is very much now geared to handle the level of invoicing that we expect in the coming period. As you rightly pointed out, INR 3,400 odd crore of order book, of which a good portion will get executed during FY 2023, 2024, and therefore the level of execution capability needed to be much higher.
In fact, when I answered the first question as to the impact of these costs on our margins. It has had a bearing on the way our margins have got reflected out.
Fair enough, sir. Sir, couple of clarifications. One, what would be our UP execution for this year? 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?
No. That's not what I meant. Customarily when we look at forecasting the cost to completion for major projects, it always tends to be conservative towards the beginning of the contract. Then these get revised as the contract progresses. There would be a 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.
Fair enough. Sir, my last question is on the chemicals. One, we announced that we had started this execution at Roha. Just wanted to clarify, this is a theme that we were waiting an Environmental Clearance on, and also there was some article which spoke about we putting up a chemical facility in Odisha. If we just clarify regarding the same.
Yes. Roha is the one for which we were waiting for the Environmental Clearance. We have received that in the last quarter. The construction work has commenced on the plant. We expect that the plant will be operational by FY 2025, 2026. Regarding the investment in Odisha, yes, there is another backward integration project which is planned there.
Any more color? What kind of CapEx? What products? What would we be doing there?
Still at a relatively early stage. I will certainly give more information in the next call.
Fair enough. Thank you and all the best.
Thank you.
Thank you. Next question comes from the line of Dhruv Rathod from Solidarity Investment Managers. Please go ahead.
Hello. Good afternoon, sir. 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 burnt money hereby taking the wrong projects.
That's right. EPC business tends to be a little 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. 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 customer that we are 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. This is what has led to a slightly conservative progress towards higher number, because we would rather be safe than sorry, and that's sort of been the defining line for us.
Got it. In your chemical business, what is the expectation for growth? What is exactly changing in that particular business? Initially, your growth was not that strong, but now the expectation for growth is increasing. How is it changing a lot?
You're saying expectation of growth?
No. The performance in the chemical business has been improving. What is changing exactly in your chemical business?
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 pace, but also to provide an additional fillip 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. 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, we continue to have a stable scenario on all these fronts, we should be able to maintain the margins that we have seen.
Got it. Just a final question. You are still actually making losses on the consumer business. What are your plans exactly, and what needs to change in this particular business for it to improve?
Yes, we've not turned around in the consumer business, as we continue to invest for future growth. We could potentially have reported just about a breakeven, but 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 has also been significant expenditure on marketing, which has gone up during the year. All of this has contributed to the bottom line, which is slightly shy of a breakeven.
We will continue to see good growth in this segment, and hopefully we will be much better off as far as the bottom line is concerned in the next year.
Got it. Thank you so much for your answer.
Thank you. Next question comes from the line of Mahesh Bendre from LIC Mutual Fund. Please go ahead.
Sir, given the current order book and the business outlook you mentioned, what kind of growth we are possibly looking for our water business and chemical business in the current year?
Our order book is extremely strong and I would dare say that a good portion of that order book would need to get executed in the current year. 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. As of now, I would just say that we expect a significant growth in the current year as far as the engineering business is concerned. On the chemical segment, we should continue to grow at a reasonable pace.
Last year we've done roughly around 11.5% 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 chemical segment should also grow at a good pace.
Okay, sure. Sir, what is the capital expenditure plan for next two years?
We have the Roha project, which is the resin manufacturing expansion. That project would have roughly around INR 400 crores of investments. Apart from the Roha project, we should be looking at around INR 60 crores in FY 2023, FY 2024.
Cumulative will be some INR 500+ crores over the next two years.
Over the next two years, yes. More than INR 500 crores.
Sure. Thank you. Thank you so much, sir.
Thank you. Next question comes from the line of Shristi Jain from Niveshaay. Please go ahead.
Hello?
Yes, go ahead please.
Sir, thank you for the opportunity. Sir, we have seen few desalination plants coming from countries like Saudi Arabia, Egypt, or Africa. Are we looking for some opportunity there? For this quarter, like our export sales, the percentage of sales has also decreased. What can be expected during the coming quarter for that?
Sorry, your voice was not very clear to me. I understood that you're asking about potential of getting engineering contracts, including desalination from the export market. Is that right?
Right.
Yes, we are actively working on a few projects, which means we are executing a few projects of the majors in Africa and in the Middle East. We continue to look at more and more prospects, and certainly of a larger size in Africa.
Sir, exports have decreased significantly as of this quarter. If you can give any number to that.
You're saying exports has decreased over the year?
This quarter as a percentage of revenue.
As a percentage of revenue, you said?
Yes.
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 at 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.
Yeah. Excluding Sri Lanka, yes.
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.
Thank you, sir. Sir, for the current order book and bid pipeline, can you give a breakup between municipal and industrial orders?
Industrial and municipal?
Yes.
For the order book, is that right?
Yes.
Industrial would be roughly around 65% of.
Okay. Thank you, sir. That was all.
Thank you. Next question comes from the line of Rahil Shah from Crown Capital. Please go ahead.
Hello, sir. Good afternoon.
Good afternoon.
Yes. My question was again on the. You said you're not giving a clear guidance. I just wanted to ask, do you see an improvement in FY 2024 from here on in terms of top-line and EBITDA margins, especially the EBITDA margins which have dropped on a consolidated level?
I do expect a significant growth on the top-line. We spoke about the order book that we carry and the expectations of further conversions of the entire bank that we have. The prospect 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 here onwards.
Okay. You mentioned the INR 500 odd crores of CapEx for the next two years. How are you planning to fund it?
How are we planning to fund it?
Yes. The CapEx.
Well, a portion of it would come from our internal accruals, we have already established a conversation with the lenders who would be in a position to fund it. We are pretty confident of getting whatever external funding that is required.
All right. Which division you feel will be a key driver in FY 2024? I'm sorry if it's a repeating one.
You're saying which division would be a key driver for the CapEx?
No. For the growth in FY 2024. Where are you seeing the most promising area?
Well, engineering has by far been the largest segment, and it would continue to be the largest segment in the coming year also.
Okay, sir. Thank you, and all the best.
Thank you.
Thank you. Next question comes from the line of Sanjay Kumar from iThought Financial Consulting. Please go ahead.
Hi, sir. Thanks for the opportunity. First, just a clarification on the resins CapEx. I was going through the EC document, which says CapEx of INR 400 crore. In today's call, you mentioned CapEx of INR 500 crore in next two years. Are we doing both phase 1 and phase 2 back to back? If you could give the timeline for the resins CapEx.
I said the resins CapEx would be INR 400 crore around. There are other CapEx which are apart from the resin plant. For the next two years, they would add up to more than INR 100 crore. That's how the figure goes to more than INR 500.
Okay. We'll be doing both phases in the next two years.
No.
Okay. Can you give?
I'll again repeat my answer. The resin project is INR 400 crore. 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 INR 100 crore over the next two years. Resin project continues to be around INR 400 crore.
Got it. Can you give the realization for the resins on average? In IndiaMART, I'm seeing a range from INR 100 per kg to even INR 250. What is the application of these resins for which we are putting up CapEx? The EC report says end use is water treatment. Is it across the board and the capacity is kind of fungible?
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.
Specifically for this CapEx.
Specifically for this CapEx.
Right.
The resin applications tend to be pretty wide. For most part, it is used in water treatment, but resin applications would also be in non-water kind of areas. It is used in purification of various things, including beverages. It is used in pharma. It is used in extraction of chemicals from certain stream of fluids. The applications of resin 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.
Okay. What will be the realization, sir? Per kg realization on average, rough figures will help us calculate the potential.
It varies very widely. If you're trying to assess the kind of revenue that this CapEx is going to bring in, out of this CapEx of INR 400, a little over INR 100 and INR 125, thereabout, is for a backward integration project which is integrated with the resin plant. If I exclude the impact of that, we should get an asset turnover roughly around 2x.
2x?
2x. Roughly 2x.
Okay.
Excluding the backward integration of INR 125, the project cost for the resin would be roughly around INR 275. We are talking 2x of that.
Got it, sir. What is driving this CapEx? Because Thermax is also talking about a CapEx in 18 months. Is there a ready import substitution opportunity, or are we gaining market share from global players and exports? If you could give us a sense of why you're putting up this huge CapEx, given a competitor is also putting up CapEx.
Ion Exchange would have roughly a 40% market share in the Indian market. The Indian market continues to grow. Apart from that, in the international market, our market share would be a very small number, maybe around 2% kind of a figure. The headroom for growth in the international market is phenomenal. That is what we would tap into. We have got in the past quite good response from the international market. We are sure that as we bring this capacity on board, we would be able to quickly get more share in the international market.
It's predominantly for export sale. Just one final request, sir. I don't know if you have gone through the investor presentation of VA Tech 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. If you could give that'll be very helpful. 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 within these four and how do we compete with VA Tech Wabag.
Well, that's not a breakup that we typically provide. I can tell you that as far as industrial versus municipal is concerned, our order book would be roughly 65% in favor of industrial. As far as domestic versus international is concerned, we would be roughly around 85% domestic.
Okay. In terms of water versus desal or ETP, do we have an upper hand in any of these segments or does VA Tech Wabag have upper hand in desal, for example?
I'm not getting into a competitive analysis, I'm sorry, at this time. 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 may be showing higher levels.
Got it. Thanks. Thank you a lot. That's it from my side. Bye.
Thank you. Next question comes from the line of Mahesh Agarwal from Agarwal Family Office. Please go ahead.
Hello. Hi, am I audible? Hello.
Hello.
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. If you look at the ion exchange resins product that we have, want to understand how our prices compare to Chinese manufacturers who sort of dominate, I think, around close to 40% of the market share. Then vis-à-vis that, what is the risk of dumping by these players ever in India? If there's any import duties in place of that sort to protect against any kind of actions by Chinese players.
In order to answer that question, let me give you a perspective of how a typical large user of resins would go 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. In a typical scenario where resins are used for a critical or semi-critical operation, they would not go in for something which is not very well proven.
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, they have tried to position themselves not just in the international market but also in the Indian market. We've managed through that scenario reasonably well till now. We hope that we will be able to continue with our strategies and be able to maintain 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.
Their costs have undergone an increase over the last few years because of increased degree of compliance with environmental laws and other such concerns which have been thrown up by a lot of customers. 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 one front, including quality, cost, and otherwise. We hope that we would be able to scale our market shares in the international market also.
Understood. 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.
It depends upon product to product. There would always be differences. They would position themselves at a higher or lower level as far as cost is concerned, depending upon the customer, the geographies they're addressing, et c. In some cases, they may be higher price than us. In some cases, they could be marginally lower. The price difference could be 10% or more in some circumstances, but it's not always true.
Got it. Are there any import duties in place on our key products to protect from any kind of dumping scenario?
Yes, the government does protect us through various means and measures. I won't say that they completely put an embargo on them, but it does provide a reasonable degree of protection. I would ask Vasant to clarify on the exact import duty which is there on resins specifically.
Aankur, I'll need to check, quite frankly. To my mind, there is no sort of protectionist import duty on the import of resins.
There's no anti-dumping kind of a provision?
No.
Understood. Got it. That could be something worth exploring and just keeping back of our mind in case that scenario ever pops up. 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-à-vis Chinese or other global players.
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 will 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.
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.
Understood. 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 the right to win or what is driving more export demand for us? Is the China Plus One that we're seeing 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?
Our share of exports in chemicals would be roughly around 25% this year. As far as what's driving the export, China Plus One was, I think, a consideration for a couple of years or even slightly more. 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 would be quite strong.
Understood. Got it. That's all from my side. Thank you so much, and good luck on the new Portugal subsidiary integration as well. We're looking forward to that.
Yes. We're just going through the final phases of that company, and we do expect that those entities will start showing substantial contribution in the coming year.
Thank you. Next question comes from the line of Saket Kapoor from Kapoor & Company . Please go ahead.
Namaskar, sir, and thank you. Thank you for the opportunity.
Hello.
Yes, sir. Firstly, sir, you mentioned about that INR 125 crore backward integration that goes into the INR 400 crore CapEx. 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 INR 125 crore?
What exactly the INR 125 crore backward integration is, as I said, I wouldn't be able to give you too much of detail on that. It is targeted towards improvement in the cost profile of the product as well as to improving the plant efficiency. I think overall, we are expecting a payback for this project in space of roughly around four years.
When you mentioned about INR 500 crore CapEx, that includes also the Odisha one which is on the drawing board, or that would be a separate project?
No. Odisha project is not included in this INR 500 crore.
All right. Sir, for the other income part, I think so this year the other income when comparison to last year are on the similar line. We have booked it on separate quarters. That has also resulted in the reporting numbers being different. If you could explain the nature of other income appearance in last year, fourth quarter, it was INR 21 crore, and this year it is INR 5.5 crore. If you could explain the nature and what should be the trajectory going ahead in terms of this other income part.
Sir, in the employee benefit expense, you did mention that we are preparing ourselves for higher execution scale of execution. 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 which the employee costs have also gone up?
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. 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. That's a nominal and normal increase, which would in any case happen. Further to that, we have expanded manpower in various fronts.
Engineering has certainly seen a substantial addition to manpower. There has also been addition to manpower in our consumer segment and other segments. Overall, the company is preparing and getting itself ready for a higher scale of operations and ensuring that the growth trajectory is maintained.
Sir, 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? That would give an understanding whether when we start executing order in a disproportionate way, then this percentage would look lower. Can you give us some understanding for this quarter? It is closer to 10%, the employee benefit expense.
Yes, this number would vary depending upon how much of revenue we've been able to capitalize based on the additional manpower. If the manpower is a recent addition and 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 current period, the revenues for which have not yet come.
Correct, sir. One small point also on the UP Jal Nigam project, sir. What was the total size of the project? In percentage terms, sir, what portion of the project will get executed for this year?
Sir, you're asking about the Sri Lanka project?
No, no, I'm asking from 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?
During the current year.
Yes, the current year. Current year execution, executable revenue that we'll be garnering from this project.
During the current year, the invoicing is a little less than INR 200. I think it's around INR 190 crores. The total value of the contract is INR 1,200 crores. That's the estimated contract value.
For FY 2024, the execution will be done for this financial year, or will it roll over to the next year also?
We should be completing a major portion of, or majority of this contract by FY 2023, 2024, and there will be a small spillover into FY 2024, 2025.
Does this contract have any O&M part also, sir, wherein we will be garnering post the execution any revenue for an extended period, or it is totally execution based only?
Yes, O&M is there. It's a 10-year O&M after this.
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.
Yeah, thanks again. I also want to ask you, if I understand correctly, you said that in the chemical segment this quarter has been seeing very good margins because there has been on account of few product mix, higher margin products have 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?
Well, we have seen sequential improvements in the margins, and are quite hopeful of maintaining the FY levels achieved in 2022, 2023. However, it is contingent upon the continued stability in commodity prices and stability in supply chain and exchange rate, as well as also the geopolitical situation for the European market.
Okay.
If those remain stable, we should be able to maintain the margins.
Maintain a full year margin of 26% or quarter full margin of 30%? Full year margin, right?
Yeah, I'm talking about the full year margin.
Okay. I also want to understand in terms of the new Portugal acquisition that you've done for MAPRIL. Can you throw some color on what is the kind of synergies that will come in? How do you see the top line and the bottom line going for that company in the next couple of years or so? Broad color.
Well, we look at a 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 do probably around a quarter or so later. However, I can give you a broad indication that we should be able to generate significant multiples of our acquisition price.
Okay. Thank you.
Thank you.
Thank you. Next question comes from the line of Pratik Kothari from Unique Portfolio Managers. Please go ahead.
Thank you again. Sir, my one question to understand that thinking and a strategy, earlier for the region plans are, the CapEx outlay of INR 200 crore-INR 250 crore and we're adding about INR 100 crore, INR 125 crore of backward. Odisha, we plan to do some backward integration there. Just why so much focus on backward integration? What are we thinking? How are we thinking?
Well, backward integration does give us a significant cost advantage, Pratik, and we are looking at improving our overall EBITDA for the investments which we are making fresh, which is in Roha, as also for the investments which we already have and the product lines which are already in existence. They would bring in an extra point of margin. As I said that on an overall basis with the advantage or benefit of the integrated project, we should see a payback of roughly four years for our Roha project.
All of this, the material or the base product that we were continuing to manufacture the resin, was this all imported maybe from China and that is why we are doing this?
The products which we use for manufacturing resins, we do have a significant amount of imported content. These are more commodities in nature. We have spoken about the key component of resins being styrene, which we can source both internationally as well as in the domestic market. This particular project that we are talking about is not intended to be for styrene.
Okay. Fair enough. Sir, when we consolidated two of our subsidiaries this year within a sense, GCSL and IEEML for this year?
Sorry, Pratik, I couldn't get your question very clear.
Sure. My question was we consolidated two of our wholly owned subsidiaries within Ion Exchange this year. We were on a path to kind of simplify the corporate structure. If you can highlight, are there more subsidiaries that we plan to consolidate this year?
Look, we are looking at a total of three subsidiaries we are getting merged into Ion Exchange during the course of the coming period. We would look at more possibilities after we complete this particular phase.
Fair enough. Great. Thank you again.
Yes, please.
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 Ltd for closing comments.
Thank you all for participating in this earnings conf 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 will 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. With this, I wish everyone a great evening. Thank you.
Thank you. On behalf of Ion Exchange India Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.