Ion Exchange (India) Limited (500214) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Ion Exchange (India) Limited Q4 FY '20 Earnings Conference Call. [Operator Instructions] I now hand the conference over to Mr. Anuj Sonpal from Valorem Advisors. Thank you, and over to you, Mr. Sonpal.

Thank you, Ritesh. Good morning, everybody, and a 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 financial year ended and fourth quarter ended 2020. Before we begin, I would like to 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. I would now like to introduce you to the management participating with us in today's earnings call and give it over to them for their opening remarks. We have with us Mr. Aankur Patni, Executive Director; Mr. N. M. Ranadive, Executive Vice President of Finance; Mr. Vasant Naik, Senior Vice President of Finance; and Mr. Milind Puranik, Company Secretary. I request Mr. Vasant Naik now to give his opening remarks. Thank you, and over to you, sir.

Thank you, Anuj. Good morning, everybody. It is a pleasure to welcome you to this fourth quarter and financial year ended 2020 earnings con call. First, let me brief you on the COVID-19 impact on the business operations of the company during the lockdown. In compliance with the directions issued by the government of India, the company has suspended operations at all its offices and manufacturing locations in India with effect from 21st March, 2020, to ensure the safety of our employees and their families and to contain the spread of the virus. However, with the progressive lifting of the lockdown and the relaxations given by the government, the company has resumed its operations at its manufacturing locations based on the permissions which it has received from the respective local government administration. Our industrial services activity, mainly the operation and maintenance, has continued at the locations wherever the customer units are in operation and customers have arranged for such permissions from local administration. The company had also received necessary permission from the Sri Lanka government to resume our civil activities for a major project being executed in that country. Our loan repayment, interest servicing and other financial commitments to banks and financial institutions have been met as per schedule, and we have not opted for any moratorium being offered currently by the RBI. The company has taken all precautions and safety measures necessary for the containment and prevention of COVID-19. It is following all the regulation and conditions as required to comply with the permissions given by the respective government authorities. Now coming to the fourth quarter financial performance of the company on a consolidated basis. Operating income for the quarter was INR 3,511 million, which was a decrease of approximately 19% on a year-on-year basis. Operating EBITDA reported was INR 393 million, which was a decline of about 34% on a year-on-year basis. The margins stood at 11.19%, which decreased by 268 basis points year-on-year. Net profit after tax reported was INR 287 million, which decreased by 21% on a year-on-year basis. And the margins were 8.17%, a decrease of 19 basis points on a year-on-year basis. Operations of the company were affected in Q4 FY '20 due to the COVID-19 pandemic and the resultant lockdown in several geographies, including India. This resulted in the deferral of despatches in all the 3 segments thereby impacting the sales and margins. And as I mentioned, with the phase wise lifting of the lockdown, all our manufacturing operations and offices are functional. We have invoked force majeure clause for our major projects where the company foresees contractual delays due to the lockdown. And now I'll take you through the quarterly segmental performance on a consolidated basis. In the Engineering division, the turnover was INR 2,198 million as against INR 2,919 million for the corresponding period last year, a decrease of 25%. The EBIT was INR 263 million as against INR 310 million, a decrease of 15%. Revenue recognition for the Sri Lanka project in the quarter was affected due to the COVID-19 impact. Post receipt of necessary permissions from the Sri Lanka government, we have recently resumed our supplies and the civil works. Whilst the Engineering order book remains healthy, the order intake for the quarter was muted due to the general economic slowdown and the delay in the order finalizations caused by the lockdown. Chemical division recorded a turnover of INR 1,102 million as against INR 1,203 million for the corresponding period last year, a decrease of 8% on a year-on-year basis. The reported EBITDA for this segment was INR 224 million as against INR 234 million, a decrease of 4%. Margins improved due to the operational efficiencies resulting from the capacity increases, coupled with change in product mix due to the seasonality of certain product lines. In the Consumer Product division, the turnover was -- reported was INR 323 million as compared to INR 326 million in the corresponding quarter of the previous year. Loss for the quarter was INR 28 million as INR 6 million in the fourth quarter of the corresponding year. Here also, the adverse impact of the COVID-19 lockdown affected the volumes, thereby resulting in the lower recovery of the fixed costs. Coming to the annual performance on a consolidated basis, operating income for the full year was INR 14,798 million, witnessing a growth of approximately 27% on a year-on-year basis. EBITDA reported was INR 1,346 million which grew 26% on a year-on-year. And the percentage -- and the EBITDA margin percentage stood at 9.1%, which decreased by 7 basis points on a year-on-year. The net profit after tax was INR 940 million, a growth of 43% year-on-year. And the PAT margins stood at 6.35%, a growth of 68 basis points over the corresponding period last year. Coming to the annual segmental performance in FY '20 on a consolidated basis. In the Engineering division, the turnover increased by -- increased to INR 9,386 million as against INR 6,851 million for the corresponding period last year, an increase of 37%. The EBIT was INR 770 million as against last year's INR 561 million, a growth of 37%. The Chemical division recorded a revenue of INR 4,689 million as against previous year of INR 4,234 million, a growth of 11% on a year-on-year basis. The EBIT was INR 734 million as compared to INR 564 million in the corresponding period last year, a growth of approximately 30%. In the Consumer Products division, the turnover was INR 1,257 million as compared to INR 1,099 million in the previous year, a growth of almost 15% -- 14%. Loss pool of INR 70 million as against INR 27 million in the previous year. Finally, I'm also happy to announce that the Board of Directors has recommended a final dividend of INR 1.50 per equity share for the financial year '19-'20. Considering the interim dividend of 45% declared in March, the total dividend for the year is around 60%. With this, we can open the floor to the question-and-answer session.

[Operator Instructions] First question comes from the line of Sunil Kothari from Unique Investment.

Sir, I think this 7, 1, star is not known for everybody. So I think -- please again repeat this for how to ask question, so other people -- because normally, we have habit of star and 1. So just to remind you. Yes. Sir, my question is -- basically 2 questions I want to understand broadly. Chemical segment seems to be doing really well in terms of profitability but maybe capacity concern or whatever reason, we are not able to grow as much which we were anticipating and expecting. Since last 1 or 2 year, the growth rate is maybe 10%, 11%. March -- we can understand March quarter was lower. So some more thoughts on how we want to grow this business. Capacity constrain or any capacity addition, what we are planning to do? That is my first question. And second is, sir, broadly, there is a -- we are basically an engineering company. Our majority turnover comes from engineering and EPC. And order inflow during last 1, 1.5 year is very muted and very slow. So how will you look at the scenario? We will be taking a little bit risk and taking a little bit at a lower margin some orders now because otherwise we'll not be utilizing our capability which we already created and we are spending. So these 2 broad questions on chemical and engineering.

Let me answer by -- one, by saying that the performance which you see for the entire year, whatever growth has come, is in spite of the severe constraints faced in the last quarter, right. And the 11% or so growth which you've seen in the Chemical segment is in spite of it. So Chemical segment would have grown more if the last quarter was a normalized one. Capacity constraints, which you mentioned, we have recently increased capacity in our critical chemical lines. So this is a continuous process as I have been talking over the last few con calls. We keep increasing capacity as and when we feel that there is a need to augment in any particular line. Further, I had mentioned in the previous con calls that we are evaluating a greenfield expansion. And that is also going to go ahead once we will see the economic environment improve a little bit. As far as the Engineering segment is concerned, our order book today is significantly stronger than what it used to be a few years back. And we continue to make sure that we take in orders which are commercially strong. So we are not very inclined to go overly aggressive and take risks on our balance sheet, but rather make sure that our -- the orders are conducive to long-term growth rather than create lumpy growth, which could be one big order, but then followed by cash flow troubles. So I understand your concern, and rest assured that we are working continuously to make sure that we have good profitable growth in all segments.

Great, sir. Sir, one last question is if you can provide us order book compared to last year 31st March and currently? And second, I think we were very strong in industrial in some semi-developed and developed markets. So we were anticipating some good orders also. So if you can just throw some light on where -- which are the hiccups, where this orders is not coming? Any thought process on this EPC related product segment.

Current order book size is INR 643 crores. And this is as compared to last year, it was INR 860 crores. Last year...

Sorry?

Last year, it was INR 860 crores. Back then, we have received a large order on the Cairn Energy which was INR 400 crore plus. And during the year, whole year, order inflow have been INR 402 crores. And the order, as mentioned earlier in our opening segment, order inflow was muted in our fourth quarter. And regarding the large infrastructure jobs which you are referring, we are still pursuing the large infrastructure jobs in different geographies. And because of this current situation, decisions have been deferred by most of the governments. But we are hopeful something will click in third or fourth quarter or at least the jobs will keep on moving on third and fourth quarter. However, largely, all those things depend on how things are shaping up in next few months.

[Operator Instructions] Next question comes from the line of Chirag Dave from Emkay Global Finance.

Sir, I just wanted to have an update on the Sri Lankan order. Firstly, is the order executed in the current quarter? And secondly, do we foresee a delay further in this order?

Sri Lankan, during the current quarter, we have invoiced INR 40 crores. And the cumulative invoicing for the '19-'20 is INR 294 crores, which is close to 50% of the invoicing done so far. We have already received the extension from the Water Board. And we are seeking furthermore extension because of this COVID condition as we have already invoked the force majeure clause.

Okay. Secondly, sir, I have seen that your marketing plans include many hotels for...

Can you speak a little louder?

Sir, am I audible now?

Yes.

Sir, I've seen that your marketing plans include many hotels as of now. So that might have taken an impact in your revenue for the current quarter and the year ahead as well.

So the hotel industry is certainly impacted substantially during this period due to the pandemic and we expect that the industry will take a little bit time to come back to normalcy as travel restrictions remain in force. We have a presence in almost all the major brands across the country. And that segment of the market is certainly not expected to do well in the first quarter and in the ensuing quarter. But we hope that things will pick up after the second quarter. That's our hope and expectation. But on an overall basis, this particular segment is not a significant contributor to the revenue of the company.

Next question comes from the line of [ Manish ] from Nippon AMC.

I have a question on the working capital. Since 95% of our clients are private sector clients and the impact we have seen of the lockdown more in Q1, so it would be great if you can give some color on working capital outlook, whether that will impact our execution going forward? My next question is on the product side. The EBIT loss has increased this quarter. So can you give some color on when we will be able to breakeven this part of our business. Though it's small, but still it eats away the profits that we make in other 2 segments. So these are 2 questions from my side.

If I understand it right, you are asking about the EBIT cycle for a particular segment. It was not very clear which segment?

Product segment, the third, the smallest segment of...

The consumer, the consumer segment.

Consumer, sorry, consumer, consumer, yes.

Right. Your question was that we're seeing a negative number in the last quarter and when we will be able to recover from that? Is it right?

Yes.

See, the consumer segment, because of the nature of selling in that industry, suffered quite badly in the months of February and March. And we have taken a lot of measures in -- during the last few months to make sure that our product lines are improved and our presence on the digital marketing front is substantially ramped up in order to cope with this new environment of selling. That has yielded some benefits. But I don't think that we will be hitting normalcy in terms of the revenues till we see the economy opening up a little bit more, which I expect that should happen in a couple of months' time. So once that happens, we should be back to a growth track. The segment was showing very good promise till the third quarter where you were seeing significant growth on a year-on-year basis. And I am very confident that we will see significant growth again once things start to improve on the overall economic front. And the other question was to do with working capital. And if you can repeat the question again, please?

So my question was, since 95% or more than 90% of our client base is from the private sector, so any stress or any concerns on the working capital on the receivable side that we are facing because quarter 1 was the most impacted because of lockdown. So just any -- looking for any color on that part, the working capital.

You're right. Working capital, there are a lot of customers who had cash flow issues during this period. And quite a few of our customers also suffered this cash flow impact. While we have been continuously endeavoring to make sure that our payments do not get stuck and a lot of the new business that we are doing takes into account this uncertainty. And our commercial terms have been modified to minimize the impact of the situation. Nonetheless, some of the larger and small clients, there have been slight delays in the payments coming from them. We do not really foresee any major issues going forward. And we are taking all possible steps, legal, commercial and otherwise, to make sure that our interests are not impacted.

Next question is from the line of Jinal Sheth from Awriga Capital.

I'm just trying to understand the opportunity at the global level in terms of the Chemicals business. So that also would include, I'm presuming, your resins and your water treatment. Is the turf -- I mean is the global level a turf for you? Or is it India that you're kind of focusing on? I wanted to get a bit of understanding on that.

We are looking at the global opportunity. And you're right, we are looking both at resins and water treatment chemicals. It's a product-based business wherein our ability to reach to markets far and wide is quite significant. And we continue to grow strongly in the international as well as in the domestic business.

Sir, a question related to that. When we look at the industry structure globally, of course, there are some larger questions within that, it gives us strength to kind of grab share in that light. So inputs on that will help.

We have been competing with all the majors on the international front for quite a few years. And most of these players are present in India as well. And we have found reasonably good success in the past few years. And I believe that our products are very capable of competing with any manufacturer across the globe. And we will continue to gain market shares in our targeted geographies. That's what the trends show us. In terms of our domestic market, also on the international, it's a lot to do with the domestic players. We have been able to establish our credentials both as a high-quality supplier and somebody who offers very good value for money.

Okay. And lastly, just -- so the market -- which are the key markets globally that we are focusing on? Besides, I'm talking about the Chemicals business here and the water treatment.

So we're spread quite far and wide, as I said earlier. We -- lot of our products go to the Americas, the North American market, to the European market, Middle East and Southeast Asia and also to the African region. So spread quite wide.

Next question comes from the line of [ Sarab Singh ] from -- he is an individual investor.

Sir, I had a question. So who would be our competitors in the chemical space? Hello?

Yes.

Sir, who would be our competitors in the chemical space? And...

Sorry, I didn't get the last couple of words which you mentioned.

Sir, our competitors in the chemicals and the resin space.

Chemicals and the resin space. The resins market tends to be dominated by -- internationally dominated by very large players. Purolite is one of them. Then there is Dow Chemical which is there. They tend to be the largest ones. And in the domestic market, we have Thermax, which is a competitor in the resin space. Chemicals front, you have Ecolab which is there. You have GE. We've got [ SMS ] which is there. So there are multiple of these large players which compete on the chemical front. In the domestic market, again, we have the likes of Thermax, which is present in some of the markets. Then we have got people like VASU Chemicals and Chembond. So quite a wide spread -- depends on the specific product line, and you have different set of customers in -- or different set of competitors in each of this.

Sir, so I mean most of the players in this industry are organized players? Or how is the market structure, I mean, in the chemical space?

Yes. It's quite -- the resin market is largely organized. And the chemical market for the larger industries tends to be competed by organized players. But when you go down to small consumers and customers, then you would get some of the unorganized players stepping in.

Sir, my next question is for the Engineering segment. You mentioned your order book stands at, like, INR 630 crores. If I'm correct, last con call, it was at, say, INR 760 crores. So is that your orders that have been executed or there has been some cancellation? And same for the bid book, if you could give us some color on the bid book, sir?

So in the last quarter of the year, Q4, the order inflow was quite muted because of the overall slowdown that we were witnessing during that quarter and also the impact of pandemic. And there were quite a few orders which got executed. So that's the reason for some shrinkage there in the overall order book. Cancellations, there has not been any significant cancellations which we've seen.

Okay. Sir, one last question. Where does your bid book stand today? Hello?

Yes, just a minute. Our inquiry book should -- would be in the region of around INR 4,000 crores.

And the same 20% win rate, sir?

That's been the traditionally -- traditional win percentage. Yes.

We should expect the same.

Next question is from Mr. Anurag Patil from Roha Asset Managers.

Sir, how much of the deferred revenue from Q4 to Q1? And can we expect this deferred revenue to compensate for the loss of revenue in the Q4 due to lockdown?

Unable to hear.

Am I audible now, properly?

Still inaudible.

Yes. Go ahead again.

Hello. Am I audible now?

Yes.

Yes. So sir, how much was the deferred revenue in Q4 due to COVID and lockdown issues? And can we expect this deferment to Q1 compensating the overall loss in the Q1 due to lockdown? Means, what run rate we can expect in the Q1?

If you compare to what we were expecting in January of this year, the March ending we were short by at least more than INR 200 crores. So that was the kind of impact which we had. And we -- some of this, we would certainly be able to recover in this first quarter. But as things go, it will take time for the overall scenario to improve enough for normalcy return -- normalcy to return.

And sir, in terms of Sri Lanka, I mean, Vedanta order, how much would be the pending executions as of now?

Sri Lanka, the pending execution, as we have mentioned earlier, is around 50% of the contract value. And regarding Vedanta, we don't give specifics for each contract in the con call.

Okay. So sir, in terms of Vedanta order are we facing any payment issue or delay or postponement as of now?

Vedanta, we have been in discussion with the client. They certainly had some hiccups in terms of their cash flows. But our discussions with them have been quite productive, and we have started to again receive payments from them. We do not expect that we will continue to have -- or we will have any problems eventually.

Okay. And then last question. What would be our CapEx number in FY '21?

CapEx, presently, in view of the current uncertainty, we are going slow on the major CapEx' which we had planned last year. Presently, we are restricting it to our essential and the maintenance CapEx. We'll be able to have a fair view of what is going to be the CapEx maybe at the end of Q2 when the business scenario is much more clearer.

Next we have Mr. Pratik Kothari from Unique AMC.

Sir, on the Chemical side, if you can talk about what kind of volume growth did we see this year? What kind of capacity utilization do we have? And given the recent CapEx that we did, which was largely on the Chemical side, what kind of base that we can see or what kind of revenues that we can do out of this division?

The Chemical division now effectively have capacity utilization of roughly 60% on a normalized scale. So we should be able to substantially ramp up the overall revenues from Chemicals based on our current capacities.

Fair enough. And what would be the volume growth for the year?

You're talking about the year ago?

For the chemical again.

FY '20, you're asking?

Yes, yes.

As we had mentioned on -- in the earlier calls, the product mix is extremely varied. And it's very difficult to give you a sense of what the volume growths look like. It has to be assessed on the basis of the overall revenue growth.

Fair enough. So the huge jump in margin which we saw on the Chemical side was largely due to product mix?

Substantially due to product mix and also because of efficiencies, which were improved because of various measures taken as also the capacity enhancements in some product lines.

Fair enough. And sir my last question on the Engineering side. Now when you go and talk to clients in terms of orders which are already pending or in terms of getting new orders, what sense are you getting from there in terms of time line? I mean are they asking that let's execute this 6 months later? Or in terms of getting a new order, the things which were in your pipeline, is the discussion more around let's talk about it in FY '22? If you can just give us some sense of how you are seeing the industry pan out in terms of order inflow?

Certainly, there have been a lot of deference in the discussions, especially during April and May. We are now increasingly seeing some degree of optimism return. And discussions have started in earnest with a large portion of the customers with whom we were earlier in dialogue. I am quite hopeful that as the months roll by, we will see most of the discussions resuming full steam.

Sir, because we hear a lot about all companies deferring the CapEx. We ourselves also said that we won't be doing any major CapEx this year. We'll do only some maintenance. So just trying to get a sense, how challenging will this year be for us?

No. Certainly, as I said, that there have been deference in the first couple of months, April and May. And some of these people who were not willing to talk, and those ones had deferred their plans. They -- some of them have started to relook, and there are quite a few active discussions now going on. And as I said, I expect that as the months roll in, we will see increased flow of these things. And most of the guys should start discussing in earnest. These CapEx items from the start of discussion to conclusion could take anywhere between 1 to 6 months. And the actual CapEx -- the actual execution happens thereafter. So we will see -- certainly this will normal, and hopefully by end of the second quarter, things should start looking much better.

Next question is from the line of [ Vikas ]. He is an individual investor.

Sir, my question is regarding the revenue breakup for the last year where you have shown INR 188 crore revenue from the sale of services. Sir, I want to know what type of revenues are booked under this service. Is this operation and maintenance revenues only or there is something else going?

This is largely service and operation and maintenance revenue and some of the modifications which we do on the job.

Okay, sir. And my second question is, sir, regarding the shares of employees trust. Recently, we have sold some shares, and we have included INR 20 crores as other equity. So can we assume the balance share also whenever they will be sold their profit will also be included in the other equity?

Yes.

Okay. Okay. And sir, my third question is nowadays we are seeing the curb in China imports. So our industry will be benefited from this? We will directly benefit from this curb from China imports?

A lot of the products which we manufacture compete with the Chinese products in the international as well as in the Indian market, resins, chemicals and membranes in particular. And we certainly expect to benefit from these curbs on Chinese products. Having said that, across industries, you would have read and probably know that a lot of the input raw materials come from China in varying degrees. And all players across industries are struggling to find alternate vendors. Some of the products, which we use, were also sourced from China. And while we have taken all steps to identify alternate suppliers and we've switched in some cases, this is not a problem which you can wish away in the short term. So there will be some degree of impact on the overall industries wherein the Chinese product reliance would come to play. And I do not expect that it would be easy to tide over in the short term.

And sir, my last question is regarding -- beyond pure water we are -- I have heard somewhere we are now launching healthy water also, which is some sort of antioxidant water. So can you throw some light on this if it is true?

Your voice was very unclear. I couldn't get most of the question. Can you please repeat?

Sir, I have heard somewhere we are now launching healthy water. It is basically superior water than the pure water. Is it true? And can we throw some light on this? Is this some sort of antioxidant water, which I know? Can you throw some light on this?

So our Consumer Product segment continues to go towards improving the product profile and also improving the quality of water that is offered through our products. We are in the process of launching a new product, which we hope would be significantly more value-added than our past line of products. So you would hear more detail about it shortly as we go into a full project launch.

Next question comes from the line of [ Amit Jain ] from retail investor.

Yes. I see there is a big jump in trade receivables from less than INR 1 crore in financial year '19 to INR 89 crores in financial year '20. While I also see working capital actually reduce from INR 54 crores in '19 to INR 49 crores in financial year '20. So could you just explain a bit about that?

You're talking of the trade receivables? Yes, can you come again on the figure?

Yes. From INR 89 crores last year, it is -- from INR 1 crore last year, it has become INR 89 crores this year.

No, I think the trade receivable figure for the current year is around INR 513 crore. So which figure? If you can be more specific, then I can answer that.

Next question comes from the line of [ Aditya Dubey ] from [ Huber Advisors ].

Sir, my question was that you're present in the wastewater treatment category. I wanted to understand. Are we getting -- or do we have the technology to be into sewage treatment opportunities that are coming along in India, which some of our competitors are bidding for? And definitely looks like a opportunity which could be running into 8 to 10 years from now because there aren't too many sewage treatment plants across India for most of the cities. So just if you can give some light on this.

In terms of technology, we are very much there in sewage treatment technologies. And this is -- over the past many years, various municipalities have been trying to set up the STPs. And the current effort across India is to augment the capacities of these sewage treatment plants as well as improve the technology package on which these are run. We are very much present as a participant, and we will selectively participate in the upcoming opportunities. We are very careful in assessing the specific states and municipalities with which we are comfortable to work and where we feel our strengths would help us gain orders. So we are not present across the board, but you will see us participate in some of these opportunities.

And sir, what would be the kind of margin profile for this kind of sewage treatment in particular project as compared to our traditional margin profile?

For the government segment, especially in the municipal side, these are all tendered jobs, and one has to compete to become the lowest-priced bidder. So the margins tend to be significantly squeezed. And there's another aspect of this sewage treatment or effluent treatment business, which is more to do with industries in the consumer side where it tends to be better than in other areas.

Next in line, we have Mr. Sunil Kothari from Unique Investment.

Sir, my question is which are the cost levers we have raised where we can control our costs and maybe because of this tough environment we can maintain or try to reduce our cost pressure? Because what I see is other expenses figure, if we take quarterly, it ranges between INR 45 crore to INR 50 crore. I'm talking about standalone other expenses. Whether top line our revenue is INR 400 crore or INR 300 crore, so which type of these other expenses are -- and which cost levers we have to control our cost?

We are taking quite a few steps in the current period to ensure that our overall cost profile is improved. Substantial measures have been initiated to reduce costs on almost all -- or reduce fixed costs in almost all fronts. But it has to be a balanced approach because we do expect the economy to start revising not too far into the future. And that's why it's not only about cost cutting, but to make sure that we are just removing the flab and make sure we remain efficient and competitive. So that's as far as the cost reduction side is concerned. You asked about what the other expenses are constituted of?

Right, sir.

In terms of the other expenses, largely they comprise of the utility expenses for our Chemical segment. So the administration expenses related to -- and the selling and distribution expenses, let's say, advertisement is there, travel is there, freight and packing is there. So these are the broad contours of the composition of other expenses.

So these are mainly fixed type of expenses?

No. As Mr. Patni mentioned, like, for example, travel and sales related or freight and packing, there also -- there is a component of percentage to the turnover also. Like freight and packing will have a component to the turnover what we do in the segment. Travel is related to the selling and distribution where we are -- as was mentioned, we have instituted strict controls on cutting the discretionary costs in this head. So there is an element of fixed and variable in this other expenses.

Right. Right. And sir, my next question is, how much is the pending execution, absolute numbers, for Sri Lanka?

Sri Lanka, we have already finished close to 50% of the jobs. So close to 50% is spent.

Yes. So what is that number, sir, if you can please inform?

It will be -- in Indian currency could be INR 400 crores.

INR 400 crores. Great, sir. And sir, my last question is to Mr. Patni. Sir, we have faced this type of industrial downturn maybe in 2008 onwards previously also. We have a very good experience of facing these tough situations. Do you see any major structural change in terms of players, in terms of competition? Because whenever good times come, people try to compete very heavily. And then when tough time comes, they lose the market, and they're removed from the market also. So do you see any major change in the attitude of the players who behave sensibly? Like you always are careful about bidding to the municipality orders and all these things. So if you can throw some light and make us understand how any major change is happening in the thought process of the players?

I think even before the pandemic struck, we were seeing a lot of slowdown, which was hitting some of the players and especially in the EPC part of the market. You would have seen some players suffer quite badly on their balance sheet and sort of withdraw. But I think for the industry as a whole, it is important that all the large players take due precautions and restructure and reorient their strategies, so that we -- as an industry, we don't get affected by these shocks or at least we are able to restrict the adverse impact of these shocks. I certainly see that a lot of the larger players have taken a more cautious approach. They are much more aware of the problems associated with the shocks or reliance on single customers. And thankfully, the reorientation seems to be doing well for some of them. Smaller-sized competitors, some of them have certainly been shed during this period of the pandemic. And unorganized market on the MSME side of the competition, there would be a lot of them who have not been able to carry their bag through this period. But as you said, as we see better times return, we will see new competition again resurface. So it's an ongoing thing. One has to keep their eyes and skills open to these competitions whether from existing organized players or from new emerging players all the time.

Next question comes from the line of [ Sharath Singh ]. He is an individual investor.

Sir, my question was in regards to membranes that you put out. Can you please explain like what the market for this is, the membrane market?

You're asking the size of the Indian market? It is not very clear.

Size, sir. The size and the target industries that is planned to employ it.

Okay. The membrane market in India is roughly around -- to the tune of around INR 700 crores, I mean, roughly INR 700 crores, INR 750 crores. And a good portion of this market is -- will also open to traders, not necessarily manufacturers. We tend to participate more in the organized part of the market and also supply substantially to the OEMs who use our products in their manufactured engineering equipments, so not necessarily going to the end-customer in all cases. Wherever the product involves membrane technology, like, for example, the reverse osmosis products or seawater desalination product, our membranes would have a market in all these areas.

Okay. And sir, so when you say a good portion of this market belongs to traders. So are these imports or are these other players making the membranes in India?

No, some portion of the market is dominated by traders who would import low-value membranes from countries like China. And it's -- at least, in these low-value or low-value-added product side, where quality is not the most paramount, we do not tend to participate in those markets.

Sir, what would be our target market share in the 1 or 2 years? Like of the INR 700 crore total market, what would be your target share?

We would like to target substantial position in this market, at least get to the pole position in a period of around 3 years' time.

Sorry sir, what percent you are saying?

We'll take the -- and we'd like to take the pole -- I mean we like to be one of the top players in this market in a period of 2 to 3 years' time.

So, 60%, sir?

Come again?

60% share as a dealer or more?

Definitely not. It is not -- it does not become so one-sided. Normally, if one gets a share of around 20%, 25% in this market one would be in the top 3.

Okay, sir. And next for the Chemical side, what would be the market again for the resins and the chemicals sir and our target, both India and abroad, overseas?

The resin chemical market is a very large market. I mean if you start talking internationally it would run into few billion dollars as a whole, and resins, for example, would top the figure of $2 billion. And if you look at our opportunity in that market space, we do not necessarily have that full gamut of products to play in this $2 billion market, but we play in a substantial part of this market. So our product range will enable us to continuously grow and expand our presence both in Indian market and in the global market.

So would it be fair to assume we will be slowly moving towards specialty chemical in the company from the current engineering companies in future, I mean 2 years down the line?

Our approach and our principle has been to be a total water management company, which means looking both -- looking at all the requirements of the customer, which are relevant to the space of water and environment in which we play. So we would like to retain this character and offer services in all fronts, engineering, chemicals as well as services.

We will take the last question for the day, and the question comes from the line of [ Amit Jain ] from retail investor.

Yes. I would like to know the company has launched surface and hand sanitizers. These are targeted at industrial consumers or retail consumers? And what would be the revenue the company is expecting from here?

We are looking to reach out both to industrial as well as retail customers. And the product has just been launched. It's not been very long. And we hope that we will be able to generate sizeable revenue from this, but more importantly offer the right quality of products to customers who have come to sort of trust us and rely on us in terms of the quality which we offer. So more than just targeting very large revenue, we hope that if we reach out to all the customers where we have had presence in the industrial as well as in the consumer market. I would expect that the revenue from all these product lines taken together would not end up being a very significant number, but probably would add to something like INR 15 crores or INR 20 crores even in the macro hiccups.

Thank you. I now hand the conference over to Mr. N. M. Ranadive from Ion Exchange (India) Limited for closing comments. Over to you, sir.

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 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.

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. Thank you all.