Ladies and gentlemen, good day, welcome to the Ion Exchange India Limited's Q1 FY 2023 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode, there will be 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 touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Anuj Sonpal from Valorem Advisors. Thank you, over to you, Mr. Sonpal.
Thank you. Good afternoon, everyone, 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 would like to thank you all for participating in the company's earnings call for the first quarter, financial year 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. Now, let me introduce you to the management participating with us in today's earnings call, hand it over to them for opening remarks. We have with us Mr. Aankur Patni, Executive Director; Mr. N.M. Ranadive, Group Chief Financial Officer; Mr. Vasant Naik, Executive Vice President of Finance; Mr. Milind Puranik, Company Secretary. Without any further delay, I request Mr. Vasant Naik to start with his opening remarks. Thank you, over to you, sir.
Thank you, Anuj. Good afternoon, everybody. It is a pleasure to welcome you to the earnings conference call for the first quarter of financial year 2023. Let me first take you through the financial performance for first quarter of the current year on a consolidated basis. The operating income for the quarter was INR 384 million, an increase of around 22% year-on-year. Operating EBITDA reported was INR 329 million, a decrease of around 8% year-on-year, and the EBITDA margin stood at around 8.6%. Net profit after tax reported was INR 274 million, an increase of 18% year-on-year, while the PAT margin percentage was 7.17%, a decrease of 22 basis points on a year-on-year basis. 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 2,024 million compared to INR 1,767 million during the same period last year, an increase of 15%. The EBIT for this segment was INR 81 million compared to INR 92 million on a year-on-year basis. The company has witnessed robust order flow both in the domestic and international markets. Regarding the Sri Lanka order, the execution progress has slowed due to the current political uncertainties and the commodity shortages. On the other hand, execution of the UP Jal Nigam project is progressing satisfactorily, and revenue has been recognized based on work completion. Margins in the engineering segment were impacted because the company has strengthened the infrastructure on the back of the increased order backlog to enable increased pace of execution in the subsequent quarters.
Secondly, the rise in the input cost in the earlier quarter also affected the segment margin in the current quarter. Coming to the order book as of 30th June 2022, it stood at approximately INR 1,529 crores, excluding the Sri Lanka and the UP Jal Nigam order. If we add both to the order book, the cumulative order book would be in the region of INR 2,912 crores. We also have a big pipeline of INR 8,000 crores. With this, we have a strong revenue visibility for the next two, three years from the engineering segment. Moving to the chemical division, the revenue for the quarter recorded was INR 1,458 million, which increased around 16% from INR 1,251 million on a year-on-year basis. The EBIT was INR 313 million, which increased from INR 273 million year-on-year. The sales in the domestic segment continued to record steady growth.
While there was reduced volatility in the raw material cost, the sharp appreciation of the dollar kept the input cost under pressure. Coming to the consumer division segment, the revenue for the quarter was INR 505 million, an increase of around 115% on a year-on-year basis. The profit for the quarter was INR 4 million compared to a loss of INR 13 million in the last year. The steady improvements in the volume driven by acceptance of our new product launches enabled this improvement in the financial performance. We expect the segment to sustain its growth momentum. With this, we can now open the floor for the question-and-answer session.
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchtone phone. 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 is from the line of Pratik Kothari from Unique Portfolio Managers. Please go ahead.
Hi. Thank you. Good afternoon. My first question is on the engineering part, you have highlighted a point in our presentation that we invested some to strengthen our infrastructure for future orders. If you can just highlight, where is it, what is it that we are strengthening, and what is the outlook there?
Sir, you are not audible.
Hi, Pratik. We have strengthened the design planning and execution teams as far as the infrastructure for engineering is concerned. There has also been up-gradation of facilities, which has impacted the expenditure side. These are the important factors which have led to margin decrease.
That is essential. My question was more from on internally, what have we prepared? Because we see very healthy growth in order book, the pipeline that we have, your outlook seems very positive at least for the near future. Wanted to understand what is it that we have done to strengthen this. I understand, you take the hit for a quarter or two on your margins. What have we done to strengthen this? Which are those areas that we are improving on?
That's what I have said, Pratik. The strengthening is of the design planning and execution teams and also of the facilities. This is going to have a direct impact on the scale of operations that we are able to manage through these teams. As we look at the coming quarters, where there is a substantial order book which we need to execute, we would need these teams to work parallelly, and hence the requirement for improvement of this internal infrastructure.
Okay. Fair enough. Sir, the second question is on the chemical. If you can highlight the CapEx plan that we had earlier announced. Any update on the same?
Yes. The CapEx plan stays on course, except that we've had a long period where the concerned gentleman who would have given us the approval, which we were waiting for, that seat was empty for quite some time. Now we understand that the seat has been filled up. We should be receiving the due approvals in the near future. Currently, our expectation is that the plant will go into operation in FY 2023, 2024.
Okay. This would take about 12 odd months once we receive the approval to put up the plant and operationalize.
That's right.
Okay. Fair enough. The other debottlenecking that we are doing in our other chemical division?
That's an ongoing process, Pratik, and it continues. We have lot of headroom there for expanding our revenues.
Fair enough. Sir, last clarification. We were in works to consolidate all of the various subsidiaries that we have as part of the parent company. Anything you would like to highlight there?
The consolidation of subsidiaries is also on course. We will start the formal process in the second half of the current year.
Okay. We'll go through here. Thank you, sir, all the best.
Thank you.
Thank you. The next question is from the line of Kiran Sebastian from Franklin Templeton. Please go ahead.
Yeah. Thank you. Hello, sir. Thanks for the opportunity.
Thank you.
Yeah. My first question was on CapEx. Just wanted to be clear about this. We are still awaiting the environment clearance, right? Now, is my understanding correct?
That's right.
Right. The person who's supposed to give the clearance finally has been appointed. That is the status.
That's right.
There is a high chance that we will be getting the approval, and then right away we can start the construction.
Again, correct.
Yeah. Parallelly, is there any plans to augment the capacity inorganically in case we get delayed with this capacity expansion?
As of now, our expectation is there could be no further delay. That's our understanding based on discussions. We are almost always on the lookout for opportunities inorganically. If we do get something which is very interesting, we will certainly evaluate that also.
Right. The second question is related to Sri Lanka. I see that not much execution is happening there. Have we at least ring-fenced's liabilities. Sometimes you see projects where execution gets delayed, and you keep burning cash and you end up with a lot of losses. Can you just give me some color around the risk management around this particular exposure?
Sure. For one, we do not expect to have any credit risk in this job.
Okay.
We are not being paid directly by the Sri Lankan government, and this project is funded by World Bank.
Yeah.
To that extent, credit risk is not something which is on the top of the mind. We also feel that the costs on account of overstay are covered through our contract. Any overstay which is happening on site, as per contractual provisions, cost on account of extension which is attributable to customers can be claimed by the companies. There, again, as far as the overstay cost is concerned, it would not impact. We remain hopeful that in a short period of time, we would get the necessary go-ahead from the Sri Lankan government and the funding agencies to start execution at a faster pace.
Got it. Thank you, sir.
Thanks.
Thank you. The next question is from the line of Chetan Vora from Abakkus Asset Manager. Please go ahead.
Yeah. Good afternoon, sir. Sir, would like to understand what will be the execution for UP during this quarter, what would be the margins made on those?
During the quarter, you ask?
Yeah.
Sorry to interrupt, sir. Mr. Vora, I would request you to use your handset to ask the question because
Yeah. Is it clear now?
Yes, please. Okay.
It's clear, yes.
Yeah. The execution of UP for the quarter, sir.
Can I request Vasant, if you have approximate number which we can suggest to them?
Ladies and gentlemen, we have lost the line of the management. Please stay connected while I reconnect them. The line of the management has been connected now. Please proceed with the conference.
Vasant, can you share some approximate numbers for the UP contract estimated revenue during the second quarter?
Sir, my next question was, till the time we get the answer, the margins in engineering for the quarter has gone down to nearly about close to 6%. How should we consider the trajectory going ahead? Because for the full year, we were guiding out anywhere between 10%-11% margin. How should one see this quarter, particularly? I understand we should not extrapolate the quarterly performance, but would like to understand how the commodity pressures are and how should we see the margin trajectory going ahead for the engineering division?
Sure. Let me answer that for you while Vasant can get back to you on expected numbers for UP during this quarter.
Right.
The margins for engineering segment, as we discussed during the earnings conference, they have been impacted for primarily two or three reasons. One being that we have strengthened the infrastructure on the back of increased order backlog.
We expect increased pace of execution in the coming quarters.
Okay.
This cost, which is currently hitting us on the bottom line, would no longer be so in the coming quarters because the corresponding revenues would also come in. The second is the rising input costs in earlier quarters affected the segment margin in the current quarter because of the inventory which was carried over, and also purchase orders placed during earlier quarter, which got delivered during Q1 and were released for the invoicing. There was a clear impact on these two accounts. In the coming quarters, however, we expect to see a significant improvement on the engineering revenue. For FY 2023 as a whole, we expect a substantial increase. We also have a very strong order book at this point of time, and are further witnessing a very good inquiry bank.
From this inquiry bank, our prospects of converting orders are also very bright. With all that outlook, we are certainly hoping for a very good growth over whatever we have seen in the previous year, both in terms of the invoicing as well as the order book.
Correct.
As far as margin is concerned, conservatively, we should maintain the full year margin percentage, similar to what we achieved in the past year.
Mm-hmm. All right. Sir, thank you. For the UPI, would it be possible to give the details?
Yes. Let me just Vasant, are you there on the call?
I am there, I just missed the question. We were disconnected. What was the specifics of the question?
Mr. Vora, could you please repeat the first question that you asked?
Yeah, sure. Sir, I wanted to understand what was the execution for UP Jal Nigam during the quarter and the margins made on those for the quarter.
The execution for this quarter was around INR 27 crores. Regarding the margin profile, we don't discuss the specifics of the contract in the conference.
All right. I understand from Mr. Patni what he gave the answer to the next question, that due to the strengthening of the infrastructure for the UP Jal Nigam to gear up for the execution front, so the cost was front-loaded. Going forward, we would be seeing a healthy execution, and accordingly, the expenses would now be increasing in line with that, and we should be seeing the operating leverage benefit. Is it right, sir?
Yes, that is our expectation. That's right.
All right. Sir, the other question was that during the quarter, we have got other income of nearly about, in the standalone I am talking about, close to INR 18 crores. Could you elaborate the details on that?
The other income primarily comprises of the interest income, and also for this quarter, because of the strengthening of the US dollar, we have an exchange gain of just around INR 8-9 crores.
Okay. The Forex gain is INR 8-9 crores, and the balance is the interest on the loan. Interest income, basically.
That's it.
Okay. The chemical division performance was quite steady. How should we see the remaining part of the year in terms of the revenue there? The greenfield plant has been postponed to the next year. We were operating at nearly the optimal capacity, whether there will be a growth on the chemical division?
We will certainly see a good growth in the coming periods also. We expect the growth trends which we've seen in the first quarter to continue. For the year as a whole, we should see better full year margin as compared to what we have achieved in the past year. However, we still should look at contingent upon stability in commodity prices. Resolution of the supply chain issues, which is affecting the commodity market, and certainly a stable exchange rate. If those small caveats in place, we should be seeing a better full year margin compared to last year.
All right. Sir, lastly, the bid pipeline of over INR 8,000 crores. Would it be possible to say how much % of the bid pipeline we would be in the advanced stage of talking, the split between the domestic and whether it is in the domestic part of that or whether it is in the overseas?
There is a mix of international as well as domestic opportunities in that bid pipeline. As far as the stage at which the discussions are, these are at varying stages of discussions. I would put roughly around 30% or so at a more advanced stage.
Okay. Fine. Sir, the CapEx for the year would be what? Considering the greenfield plant expansion is postponed to the next year, as and when we receive the clearances.
That's right.
Keeping that aside, what would be the maintenance CapEx for the year?
Vasant, can you please elaborate on that?
Yeah. Our total CapEx will be in the region of around INR 60 crores, the major CapEx would be in our enhancement of our membrane facility, the CapEx which is currently being done. Also the incremental CapEx, which we keep on doing in the chemical segment. That will also be done. In the region of INR 60 crores is our estimate of the CapEx.
All right. Lastly, what would be the mobilization advance received from the U.P. government, and are we paying any interest on that?
We are not paying any on the mobilization advance. Regarding the quantum, as I mentioned earlier for another question on the framing of contract, we don't discuss the specifics of the contract.
Okay. That's fine. Thank you, sir.
Thank you.
Thank you.
The next question is from the line of Santosh Kumar Kesari from Kesari Wealth. Please go ahead.
Good afternoon, sir. Am I audible?
Good afternoon.
Yes.
Good afternoon.
Please proceed.
Yeah. I have one question. Regarding all these projects that you have, do you have any cost escalation clause built in? For example, for the rise in input cost. Did we receive any compensation from the project owners? That's the first question.
Yes, what's your second one?
Yeah. The second one is about Sri Lanka project. There, I understand from the previous participant's question that there is some work going on. I want to ask that, have we booked any loss on that or any expected loss considering that this may not move for another year or so considering the economic and political situation in Sri Lanka? Are we expecting any loss or have we booked any so far in the finances?
Let me answer the second one first. No, we do not expect any loss arising of it. As I explained, the overstay which is caused by the customer or because of the actions attributable to the customer is covered under the contract and we can claim for this overstay. Those costs are not going to be a loss for us. The other risk which are attached to this are the credit risk, which again, I explained that we don't have a direct exposure to the Sri Lankan government. Because of that, credit risk is also not there. We do not expect to have any loss on this.
Is there any intervention body, for example, financial institution, which has given the contract to us?
No, this contract funding is through IDBI Bank. That's why the credit risk is not there. EXIM Bank of India.
Okay. We are sure that the project is going to be finished, and sooner or later, the realization.
We remain hopeful that very shortly, the conditions for execution of the contract will improve, and we will go ahead with execution in consultation with the funding agencies and the Sri Lankan government only when we feel that the recoverability is not going to be a challenge and the execution can proceed at a desired pace. That is when we would go ahead and start invoicing for the balance of the plant. As we have indicated during in our operational highlights and also in the introductory statement that currently the project execution is moving at a very slow pace.
Okay. Regarding my second question.
As far as price variation is concerned, some contracts, especially with the government and PSUs, they do have a price variation clause. We managed to get from our customers, in spite of the fact that price escalations may not exist because of the way the price volatility has impacted the margins of not just company like us, but across the board and across industries. The customers have been quite considerate, and we've managed to get price escalations from customers even where a price variation clause did not formally exist in the contract.
Okay. Thank you so much.
Thanks.
Thank you. The next question is from the line of Vikas Goel, an individual investor. Please go ahead.
Thank you, ma'am. Thank you for the opportunity. My question is, what type of opportunities we are looking for this green hydrogen pool, because water is the key ingredient for this. What type of opportunities we are looking in this field and how big it can be for us?
This is an interesting opportunity for us. We are indeed working with all major players in India who are evaluating large-scale infrastructure setup for green hydrogen. We would certainly be a part of almost all these projects. You are right in saying that water is an important part of this entire process. We hope to be able to contribute to this particular industry in a big way.
Sir, my next question is, how is Hydrolife progressing, sir? What is the progress related to Hydrolife water?
The market acceptance of the product is very good. There is substantial up in volumes which we have been able to generate from this product. In coming times, we should see much better numbers coming from this product even compared to what we have done in the current quarters.
Sir, how much of value percentage of consumer segment is driven by this product?
I would not be able to disclose exact numbers. I'm sorry for that. It is a significant contributor. Still, I wouldn't say that it is the only big contributor. There are other key product lines which also benefit the consumer categories.
Sir, my last question is, are we manufacturing uniform particle size resins in our Rajin Energy plant ?
Yes, we do.
Okay, thank you. Thank you very much.
Thank you.
Thank you. The next question is from the line of Tushar Raghatate. The next question is from the line of Anurag Patil from Roha Asset Managers. Please go ahead.
Thank you for the opportunity. Sir, what will be the contribution from private sector in our current order book?
Let me see if I have that number handy. We should be looking at roughly around 40%-50%. Am I right, Vasant, on that?
Yeah. I think around 40, 45 will be a right figure, sir.
Okay. Sir, in the chemicals greenfield CapEx, what is the total CapEx plan and how much we have spent till date?
The total CapEx on that is expected to be in excess of INR 200 crore. At the moment, the execution of this new plant has not started. As we highlighted a little bit earlier in the call, we are waiting for the environmental clearance to be formally signed. Only after that we will start working in earnest.
Okay. sir, in terms of asset turns , can we expect around 2x for this CapEx?
You mentioned?
Revenue potential from this 200 crore CapEx. Any ballpark figure?
Yes, it will be 2x-3x. It will take some time for it to reach the full capacity utilization. When it does, it should be in that range of 2x-3x.
Okay. One last question, sir. Any progress on our international orders? We were looking at some large orders we were working on.
We continue to work on those. The movement on that, unfortunately, there is nothing yet to report on it. Hopefully, we will have something to inform you in the near future. As of now, nothing has materialized out of this.
Okay, sir. That is it from my side. Thank you very much.
Thank you.
Thank you. The next question is from the line of Tushar Raghatate from KamayaKya Wealth Management Private Limited. Please go ahead.
Good afternoon, sir.
Good afternoon.
Sir, what would be your gross profit margin for your chemical business, and can we expect the chemical business to increase in terms of share in the two to three years down the line?
You're saying chemical business to increase in terms of share in the overall revenue?
Yes, sir.
Let me answer that, and then I'll ask Vasant to give you the chemical segment EBIT margins as you have reported. In terms of percentage share of chemical in our overall revenue, we certainly expect the chemical segment margins to improve substantially over a period of next two to three years. Likewise, we also expect the engineering margins to climb. As we have been talking about the overall order book and the pace of execution thereof, those orders should be improving in the coming quarters and in the years to come. Given both of these, I'm not able to accurately give you a statement on how much the percentage variations would take place in each of these segments from quarter to quarter. On an absolute level, we should certainly see improvement on both of these segments.
Fair enough, sir.
Thank you.
Thank you.
Thank you. Anyone who wishes to ask a question may press star and one now. The next question is from the line of Saket Kapoor from Kapoor & Company. Please go ahead.
Yeah. T hank you for this opportunity. Sir, I joined a bit late, so pardon me for any repetition. Sir, firstly on the consumer products division, sir, how is this segment going to contribute going ahead? Are we able to make the key changes or are the COVID factors now behind us wherein that has affected the profitability of this segment earlier?
COVID has certainly impacted the consumer segment substantially. I do believe that the current working environment has helped us to put the COVID factors significantly behind us. The segment as a whole is doing very well. On revenue terms, you would have seen that compared to the first quarter of the previous year, we have grown by more than 100%. The outlook going forward is also very strong. We will continue to maintain the growth momentum.
Sorry, sir. Your voice is breaking. Could you please repeat what you said?
Individual products which we have launched in recent times, they are also doing very well. The market acceptance is very good. I expect these new products to start contributing in a big way in the coming times.
Sir, what kind of sustainable margins can we look forward from this segment? I think on a top line of INR 50 crore, we did PBT of INR 31 lakh. What should be the normalized margin and a sustainable one on this? Then I'll come to the other two segments, sir. Sir, I'm unable to hear you. Hello?
A few years, yes. If you evaluate the way consumer segment has moved in terms of its EBIT margin profile, it is a factor of the scale which we are being able to achieve for this segment. As the scale of operation drives, we will see sequential improvements in the EBIT margins. The products are quite profitable, and my expectation is that it will start contributing to a much bigger extent to the overall bottom line of the company few times to come.
Okay. Any ballpark ideas that you can give? Because these are only at the break-even points, which we are currently facing.
That's right. We are only looking at the break-even point now. I would not really like to forecast the exact year-end number. It is a factor of scale which we are able to achieve. We would certainly see substantially better than what we are seeing now.
Just dwelling one more line, sir. Since you are dwelling upon the utilization, what is the potential of the segment going ahead on the top-line basis, sir?
consumer segment is a very large segment. Potentially, the revenue could maybe more than double in the coming two, three years' time. That's as far as potential is concerned. The market size is much more than that. Our market shares are in single digits at the moment.
Dwelling into this, sir, engineering part, I missed your earlier comment. The factors that has led to the lower margins for the engineering segment for this quarter, they will be mitigating going ahead? For the full year as a whole, what should be the normal margins in the engineering segment that one should look?
I did make a statement on this earlier. We will be able to certainly improve the margins significantly in the coming quarters. Conservatively, we should be able to maintain the full-year margin % similar to what we have achieved in the past year.
Right, sir. On the utilization levels for the chemical segment, if you have made any comment, what are currently our utilization levels, and how have the raw material prices behaved for the chemical segment?
The utilization level for the chemical segment is roughly in the range of 70%-75%. You asked about.
Yes, sir. Do we see any uptick also, sir, or are these the optimum levels?
Well, there is a reasonable amount of headroom available. We would certainly be looking at higher utilizations in the coming period. As we have been mentioning over the past few calls, we are eagerly awaiting the environmental clearance for our new greenfield plant. Once those capacities come in, we would be hoping to increase the capacity utilization percentage in the new plant also quite rapidly. Certainly, we will be expecting a significant uptick from the current capacities.
Okay. For the new plant environmental clearance, how much have we invested in that plant, and the product profile is significantly different from what we are currently doing?
No, the product profile is not going to be very different. Of course, there will be something new which will get added, but it's not a new product, and the overall product profile is similar to what we are doing currently. The plant is awaiting environment clearance, so we've not really started too earnest to spend on that. The overall CapEx plan is in excess of INR 200 crore, and we should be expecting the plant to go on stream in FY 2023, 2024.
How much have we invested in the plant?
Sir.
Yes, ma'am. I'll come in the queue, ma'am. Just sir was answering that question. How much have you invested, sir? I'll come in the queue for another two questions.
That's not a very significant amount as yet.
The total CapEx is of INR 200 crore. That will happen only once we get the requisite clearances from the government authorities.
Yes, it is significantly more than INR 200 crore.
Okay. Where it is located? Where the plant will be located?
It's going to be in Maharashtra.
Okay. I'll come join the queue once again, sir. Thank you for all the answers.
Thank you. Anyone who wishes to ask a question may press star and one now. The next question is from the line of Sunil Kothari from Unique Investment. Please go ahead. Mr. Kothari, we cannot hear you. Can you please join again to ask a question? Mr. Kothari, you are not audible.
Hello.
Yes, please proceed.
Yeah. Hello. You are getting my voice, sir?
Yes. Please proceed.
Hello.
Yes, we can hear you.
Hello.
Sorry, but very feebly.
Hello.
Yes, we can hear you now.
Mr. Kothari, if you're speaking right now, we cannot hear you. I would request you to rejoin the queue, please.
Sure.
The next question is from the line of Hemal, an individual investor. Please go ahead.
Hi. Thank you for taking the question. I appreciate it. Just very quick question on the chemical. You said it was 72, 75% utilization. I just wanted to know, what is the last three-to-four-year volume growth in our chemical business? If you have a data or anything that you could give in volumes.
Let me check. Vasant, do you have a readily available number to give as far as volume growth data over the last four years is concerned?
Last four years, I'm sorry, Aankur, I will not be having right now.
Okay.
Anything on year-over-year.
I'll try to give you a ballpark, but I may be off by a few percentage points. I will not hazard a guess at the moment. You can get back through Valorem and we will be able to provide you the details.
Okay. You believe year-over-year would be, at least last year to this year, or do you believe there is a volume growth expected, or this is all due to price realization?
Well, certainly over the last three, four years, we would have had volume growth. I unfortunately don't have a ready reference to that number, hence my hesitance in offering you a reply. As I mentioned, I'll ask our investor relations firm. Can you get in touch with him, we will provide that number to you.
Okay, sir. Thank you. I really appreciate it. That's all from my end. Thanks.
Thank you. The next question is from the line of Sunil Kothari from Unique Investment. Please go ahead.
Yeah. Thanks for the opportunity. Are you getting my voice now?
Yes. Much better.
Yeah. Thank you. Thank you, sir. Sir, really hearty congratulations for such a good order book. After long, we are having sizable order book, sizable ability for further inquiries. Sir, my first query. Now, as expected after last two, three years comparable of COVID situation and very difficult situation, commodity pricing and volatility, next two, three years seems to be reasonably hopefully better. You rightly only started investing in designing capability, execution capability. So which are the major focus areas which allow you to generate substantially higher utilization in engineering division?
I think the opportunities to grow on the engineering segment exists both domestically and internationally. We are now looking at an inquiry bank of more than INR 8,000 crore. A significant portion of that is internationally also. We are hopeful that we will be able to convert a good portion of this inquiry bank, hence the need to expand our overall infrastructure, not just to execute the current order book, which we discussed was in the range of around INR 3,000 crore, but also to prepare ourselves for the incoming order flow from the inquiries which are under discussion. We should be looking at a significant growth going forward, not just in the next couple of years, but the visibility which we seem to be building up is a good healthy engineering segment over the next four to five years also.
Mm-hmm. Sir, for that you will be having more vendor-based supply chain, or internally we are increasing our capability?
We are improving our internal capabilities in line with what we would normally be expected to do. The vendor base enhancement would be in accordance with the requirements of individual contracts. In general, the portion of contract which we would execute internally, that remains substantially the same areas. There are significant amount of bolt-ups which we source optimally through a very wide group of vendors. There is no real necessity to evaluate that vendor base internally. Certainly we do that on a case-to-case basis, depending upon the requirement of the contract.
Okay, sir, on chemical front, I think it seems that we have really a good variety of customer base interest. Also we have already proven our capability and product acceptance. Because of this delayed environment clearance or whatever reason, now we are not able to keep new plant. Our existing capacity utilization is also low, maybe 70%-75%. Which are the roadblocks for achieving 90%-100% capacity before this new plant comes?
At the moment, there is a slight demand stress or pressure on the demand in the international markets, where there is some degree of demand contraction or suppression or decrement, which we have seen in some of the key markets, especially Europe and the Americas. Because of this, the volume there may not have happened to the extent that we would have liked.
Okay.
It is also a question of movement from quarter to quarter. The first quarter is typically a light quarter, as you would know from the trends.
Sure.
The capacity utilization will rise up as we move towards the next quarter.
Sir, my last question is, looking at the high utilization and the revenue momentum trajectory that we are talking about, [Mr. Patni ] also making that mention about two, three, five years better engineering division. Overall trajectory of margin, EBITDA margin, which currently we are achieving is 13 and a half, 14%. Can it cross 10% +? Would you like to comment anything qualitatively on that?
Well, I mentioned towards an earlier question I had responded, that we are certainly hoping to equal or better the year-end margins achieved on the engineering as well as the chemical segment. Certainly, on the consumer product side, we are very hopeful that we will be in the black in this year. If you take all of this combined, I am very hopeful that we will improve the overall margin %.
Great, sir. Wish you good luck. Thanks a lot.
Thank you. Thank you so much.
Thank you. The next question is from the line of Madhusudhan Reddy, an individual investor. Please go ahead.
Good afternoon, sir. Thanks for the opportunity. Sir, this is regarding strengthening of our human resources. As you elaborated, we have a very good growth pathway for the next five years. You are strengthening your resource base. My question is regarding the strengthening of your human resource base with regard to the board or the senior management team. As if I'm thinking out loud, adding young talent into our board or our senior management team without affecting any of our philosophy or our competitiveness. Sir, your thoughts on this.
Thanks for that question, Mr. Reddy. We have a culture at Ion Exchange which is very pro employees. As a testament to that, a large number of our senior management team have been with the company for more than 25, 30 years. We continue to adapt the policy of being extremely pro employee and really value the contributions made by our experienced team, both in terms of managerial and technical capabilities. Having said that, the induction of young blood into the entire team is also necessary, which happens at various levels, both at middle management and junior management level, sometimes at a relatively more senior management level also. We certainly do not and will not compromise on the overall values and principles which the company carries. That would be the underlying factor of the kind of conservatism that you talked about.
We really value the business which comes out of this workforce consequence, therefore, there's no intention to change the ethics.
Yes, sir. Thank you, sir.
Thank you. The next question is from the line of Tushar Raghatate from KamayaKya Wealth Management Private Limited. Please go ahead.
Yes, sir. Sir, just want to confirm about the CapEx, sir. As per the application, so you are increasing the capacity of anion and cation resin by 6,000 metric ton each. Sir, the amount would be INR 400 crores. Is my understanding correct, sir?
As I've been mentioning, yes, the figure is going to be well in excess of INR 200 crores and the capacity expansion would lead to doubling of our current capacities.
Okay. Sir, can you please tell me how many phases will be there in this expansion?
There'll be two phases. That's what is currently planned.
Oh, fine.
In the first phase, we will double our capacity, and thereafter we will again add an equivalent capacity.
Okay, sir. Sir, what will be your gross profit margin for chemical business?
I think, Vasant, can you indicate the segment margins for the chemical segment?
The gross margin we want.
The segment margins, what we are disclosing is 22% for the chemical segment.
Very much, sir. Thank you.
Thank you.
Thank you. The next question is from the line of Saket Kapoor from Kapoor & Company. Please go ahead.
Yes. Hello.
Yes, please go ahead.
Yes, sir. Just for the capacity addition in the chemical segment, the expanded capacity which we are augmenting currently, what is our current market share? For the industry as a whole, whether the product is imported currently or it's totally indigenously sold?
Our current market share in India for resins would be in the region of around 40%. There are imported resins available in the market, and they have been so for a large number of years. The capacity augmentation is targeted not just at India, but substantially for the international market. For the international market as a whole, our global share would be in single digits. There's a lot of headroom for expanding our volumes in the international market.
Sir, how are we sourcing our raw material, our dependability on the raw material? We've not sure affected that also. If you could throw some more light on this, that requirement will also go up in proportion.
Certainly, raw material requirement will go up in proportion to the volumes which we drive. These raw materials are sourced both domestically and internationally. When you look at the international component, it is quite widely sourced. We continuously strive to increase the geographic spread of our vendors to ensure that there is no individual geography which has undue concentration or an individual vendor which has an undue concentration.
What would be the key raw material mix, sir, in percentage terms? What are the key raw materials for the chemical segment?
It's a wide group of raw materials. There are some which are petroleum-based, and there are some which are non-petroleum-based. A significant percentage would be petroleum-based.
Correct, sir. Sir, lastly, sir, as you have mentioned that first quarter is generally a soft quarter in terms of the execution cycle for the engineering segment. You also mentioned that we would be aiming for engineering segment posting revenues higher than what the last year's been, and the margins, if not, it will be equal to what last year was. This understanding is correct, sir, for the engineering segment as well, sir, again, around?
Yes, we will certainly be posting more than what we did last year, in fact, significantly more. For the company as a whole, I would expect a 30%-35% growth on top line.
Last year on a consolidated level, it was INR 935 crores. We are looking at a growth of 35% on this number.
30%-35% for the company as a whole, not just for the engineering segment.
Okay. If we could look for Engineering as a segment, I think that is the major of the contribution.
That growth will be more than 30% to 35%. That will be more than 30%-35%.
Okay.
Yes.
My question was, since you have already commented upon the Consumer Products growing significantly, and that has been seen in the first quarter at 100% growth, although it was last year was a COVID-affected quarter, so comparables are not there, but still we have grown, and you are looking for Engineering to grow higher, so there will be lower growth for the Chemical Segment in that way, in that vicinity? Otherwise, this 30%-35% on an overall, how will it match the number?
Engineering Segment will grow at a higher pace. As far as Chemical Segment is concerned, it will continue its growth momentum, which is not as high as the Engineering Segment is.
Correct. On the Sri Lankan part of the story, sir, what will be the receivable number from them as on date? Does that have any interest component also as a delay in?
Vasant, can you answer that, please?
The residual part of the contract which is remaining to be executed is just under INR 250 crores.
The receivable numbers are from them, or the ones which we have executed also, have we received all the money, or their money is retained by them?
I can't give you any specific details about the contract.
In any case, the receivables, if any, are not from the Sri Lankan government, but the money would be coming from EXIM. That's why we have been maintaining there is no credit risk involved.
Thank you. As that was the last question for today, I would now like to hand the conference over to Mr. N.M. Ranadive from Ion Exchange India Limited for closing comments.
Thank you all for participating in this earnings con call. I hope we have been able to answer your questions satisfactorily. If you have any further questions or would like to know more about the company, we will be of happy assistance. We are very thankful to all our investors who stood by us and also had confidence in company 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, and you may now disconnect your lines.