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

Ladies and gentlemen, good day, and welcome to the Ion Exchange India Limited Q2 FY '22 Earnings Conference Call. [Operator Instructions] 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, sir.

Thank you. Good afternoon, everyone, and a very warm welcome to you all. My name is Anuj Sonpal from Valorem Advisors. We represent the Investor Relations of Ion Exchange India Limited. On behalf of the company, I would like to thank you all for participating in the company's earnings conference call for the second quarter of financial year 2022. Before we begin, I'd 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 focus 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. 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; and Mr. Milind Puranik, Company Secretary. Without any further delay, I request Mr. Vasant Naik to give 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 first half and second quarter of financial year 2022. Let me first take you through the financial performance for Q2 of current year on a consolidated basis. Now operating income for the quarter was INR 3,782 million, a slight decrease of 3% on a year-on-year basis. Operating EBITDA reported was INR 397 million, a decrease of approximately 3% year-on-year, and the EBITDA margin stood at 10.5%. Net profit-after-tax reported was INR 272 million, an increase of 2.3% year-on-year, while the PAT margin percentage was 7.19% an improvement of 37 basis points on a year-on-year basis. For the first half of FY 2022, the operating income stood at INR 6,923 million, an increase of 5.7% compared to the first half of last year. Similarly, operating EBITDA stood at INR 755 million, an increase of 4.6%. EBITDA margins were reported at 10.91%, a slight decrease of 11 basis points, and PAT stood at INR 505 million, an increase of 14.5%. The PAT margin percentage improved to 7.29% compared to 6.73% during the first half of the previous financial year. Let me take you through the quarterly segmental performance on a consolidated basis. In the Engineering division, the revenue for the quarter was INR 2,208 million, a reduction of approximately 16% as compared to the same period of last year. EBIT for this segment was INR 131 million, a decrease of about 22% on a year-on-year basis. For the first half of FY '22, current revenues from this segment were INR 3,975 million which was a decrease of 8% and EBIT stood at INR 222 million, a decrease of about 20% compared to the same period of last year. We have a healthy order book on the back of steady flows of medium-sized orders, coupled with the 2 large EPC orders received from UP Jal Nigam and IOCL Paradip Refinery, respectively, in the earlier quarter. The execution of the Sri Lanka order was affected during the quarter due to the COVID-related restrictions in that country. However, execution of other engineering projects picked up pace during the quarter. The rising commodity prices continue to affect the margins in this segment. As regard the UP Jal Nigam project, the site has been mobilized and revenue will start upping from the third quarter of the current financial year. In terms of the order backlog, as on 30th September '21, it was around INR 1,037 crores, excluding the Sri Lanka and the UP Jal Nigam order. If we add both these large EPC size orders, our total order book would be more than INR 2,500 crores. We have a big pipeline of approximately INR 5,970 crores. And with this, we have a strong revenue visibility for the next 2 years from the Engineering segment. Coming to the Chemicals division, the revenue for the quarter recorded was INR 1,347 million, an increase of 20% on a year-on-year basis. The EBIT was INR 283 million, an increase of 25%. For the first half of this financial year, the revenue from the Chemicals segment stood at INR 2,598 million, an increase of 33% and EBIT stood at in INR 555 million, an increase of 37% compared to the previous year. The sales and dispatches improved in the domestic segment; however, the logistic challenges continue to affect the company's exports. The margins were under pressure due to the unabated increase in the raw material cost. The company has taken measures to mitigate the impact, including passing costs to the customers wherever possible. And coming to the last segment, the Consumer Division segment, the revenue for the quarter was INR 353 million, an increase of about 59% on a year-on-year basis. The losses for the quarter were down to INR 5 million versus a loss of INR 8 million for the same period in the previous financial year. And for the first 6 months, this segment clocked revenue of INR 589 million, an increase of 40%, and the losses stood at INR 18 million compared to INR 17 million in the same period of last year. New product launches at the end of the first quarter are getting a good response in the market, and we are hopeful that this segment will performed better in the ensuing quarters. With this, we can open the floor for the question-and-answer session.

[Operator Instructions] The first question is from the line of Pratik Kothari from Unique PMS.

Sir, a couple of questions on the chemical side. One, if you can highlight, I believe there are a couple of ongoing either planning or execution of CapEx, which is undergoing on the chemical side. If you can just highlight the same? And what would be our current capacity utilization?

We had announced CapEx in the Chemical division in a couple of quarters or so back. That CapEx continues to be on track. We are -- for the major capital expenditure greenfield project. We are awaiting environmental clearance, and once that is available, the execution on the ground will get started. Capacity utilizations have increased during the quarter, and we are in the range of roughly 75% to 80% at the moment.

Okay. Fair enough. And so if you look at our Chemical division over the last many quarters, maybe 10 or 12 quarters, excluding the COVID one, we have been in the range of INR 110 crores and INR 130 crores on a quarterly basis for past 3 years now. So just wanted to get your -- because we still have capacity which is left to be utilized. I mean when do we break out of this quarterly chemicals, the revenue that we are doing? And why is it being stuck here for past many quarters now?

I think part of the answer lies in the question which you put. We have been facing quite an unprecedented situation over the last [indiscernible] to COVID and now even when the global economy starts to see some bit of uptick in terms of mitigation of the COVID risks, we continue to face significant challenges on the front of logistics and the associated costs. I am quite hopeful that in the ensuing quarters, the situation would turn towards more normal. In any case, we have seen a good amount of growth coming in from the Chemicals division during the current period. The growth would have been even better if the challenges related to supply chain issues, the challenges related to price rises and logistics were not there. So you should expect to see improvements in the coming quarters.

Fair enough. And sir, last part on this. We did highlight that the raw materials have increased significantly, and we are in the process of passing this. So how much would that affect we and what should we consider as sustainable margins here? Because even currently, we are higher than what we used to do, say, a year or 2 back?

The current period has been affected by the increased prices of raw materials. We continue to be affected. Unfortunately, we have seen almost 1-day rise of a lot of input materials. In fact, some of the input materials have seen price rises of even 100%, 200% odd. It's quite unprecedented in recent times. As we try to pass on these price rises to customers, we are faced with a situation where we are not getting stability in these prices and hence, the margin stabilization, which would normally have happened after an input price rise, that has not yet come to be. I do hope that in the coming quarters, we will see less amount of volatility and at least some degree of downward trend of these prices when the margins would start to come towards improved levels. I am not able to give you a very optimistic guidance for the third quarter, given these uncertain price trends on the commodity prices and the input prices. So you should continue to expect a strain on margins at least during the coming quarter.

[Operator Instructions] The next question is from the line of Mike Sell from Alquity.

Could you just give us an update on how you're doing getting the company listed on the National Stock Exchange as well as the Bombay Stock Exchange?

Sure. Milind, would you please update?

Basically, we have already made application to National Stock Exchange. And our application is at advanced stage of consideration. Because of some technical queries which are being replied and applied with, the application is -- will take some time to process. But we have already taken a decision to list on NSE, and we are actively following up with the National Stock Exchange to list our shares.

And although it's impossible to be definitive, do you think we're talking 3 months, say a year. What's your best guess?

No, I won't predict any timeline because there are various issues involved with that. So we are actively following it up with National Stock Exchange and maybe I can't give you any concrete time line as such for that, completion of the NSE listing.

The next question is from the line of Saket Kapoor from Kapoor Company.

[Foreign Language] Sir, as being answered by you to the earlier participant regarding the Chemical segment that due to the volatility in the raw material prices, we are -- we would be observing a subdued quarter going forward also. So if you could give us some color on what constitutes the raw materials, sir, and the end product names? And how are the price variations being and its application?

It's quite a wide basket of input raw materials that we use. We have petroleum based inputs. A lot of other input materials, which are non-petroleum based. Unfortunately, as you might have heard from other quarters as well, the price rise on input materials has been quite widespread, and it's not restricted to 1 or 2 small buckets only. It is impacting both our Resins and Water Treatment Chemicals portfolio. As mentioned earlier, we are expecting the strain on the margins to continue as you would have seen in the current quarter. And as I had highlighted earlier, some of the raw materials, we continue to go beyond the uptrend. Price increases are quite extreme and quite unprecedented in recent times. It is, at the moment, difficult for me to accurately portray how much the impact is going to be. But I do expect that this one-way upward trend would see some kind of plateauing in the coming quarters and then hopefully go towards more normal levels.

Can you give them the name of the few key chemicals that constitute this, out of the topline of INR 131 crores for the quarter, which key chemicals contribute to it? Or how many of them constitute the basket? If you could give some color on this?

The 2 major categories of products that we manufacture and we highlight. One is resins, which are -- which have petroleum-based inputs to a significant extent. And other is water treatment chemicals. So these are the 2 major product lines that we have.

And you -- and as told earlier, that if the utilization levels are in the vicinity of 82%, 85%. So going forward for H2, the utilization levels are going to remain in that bracket? Or can we see an uptick depending upon the demand scenario?

The utilization levels are in the range of around 75% to 80%, and we are witnessing a slight uptick on this. Hopefully, we -- towards the end of the year, we should see a slightly higher utilization than this. We are keeping our optimism high in getting resolution to the current situation of international logistics challenges. If the container availability and container movements comes back to somewhat more normal levels, we will have a corresponding impact on our export revenue, which should give a further uplift to the revenue growth.

And sir, out of the total sales, what is the export contribution?

Vasant can throw some light on it.

It is around 35% in the Chemicals segment.

Right. And I have 2 more questions. One for engineering and one for consumers. Sir, for the consumer to come first, I think this quarter, we have seen improvement over the previous quarter in terms of revenue and also for the PBT losses. So looking at today's environment, how is particularly with COVID relaxations in place, how are you seeing this segment reporting for the H2?

You're asking about Engineering segment?

No, sir, consumer product. And engineering also, I have a question, but firstly the consumer products have performed better for this quarter, sir, over the June quarter. So I think so the restrictions -- the COVID restrictions being uplifted, that has been a major contributor, if I'm not wrong. So how are things shaping up? And it would also include a bit of the AMC part of the story, if I'm not wrong? So please elaborate on the same.

Our Consumer segment is doing better during the current year. A few of the new product launches have got a good reception from the customers. We are quite hopeful that in the coming periods would see further improvement in the trend. The COVID related restrictions have had a negative impact on the overall new story. If they had not been there, you would have seen further improvements in both the top line and correspondingly to the bottom line. But as we have all been reiterating, quite hopeful that in the coming quarters, the situation would improve and the consumer product and the consumer segment would start to come back into the [ black ] and contribute to the -- positively to the bottom line of the company.

So we may exit this year, sir, with a positive, at least PBT level for the consumer product depending upon today's business environment?

We are hopeful that we may come pretty close to the breakeven levels, whether or not there would be enough flip to the revenues during the close of the year, which will push it towards the positive remains to be seen. But certainly, we will be much closer to breakeven this year.

Sir, I'll come in the queue for the engineering segment and I have one question about the tax payment also, if I may allowed then I may ask.

The next question is from the line of Rahul Dhruv an Individual Investor.

I specifically wanted to talk about the UP project and the margins therein because of -- because we can see that in the first 2 quarters, the engineering margins have actually come off to close to 6% or lower, actually 5%, close to 5%. So when we see an uptick in the next quarter because of the UP project, what kind of margin should we be looking at?

Vasant, you can confirm the margins on the Engineering segment, I think it is closer to 6%, right?

Yes. On a 6 monthly basis, the segment margins are 6.5%. And on the -- for the quarter is 6.1% on a stand-alone basis.

Yes, I was looking at the consolidated number.

To answer your question on the impact of the UP projects, the UP projects are reasonably comfortable on the margins. And once we start executing these, and the revenues from these start to flow in, they would have a positive impact on the number that you currently see.

Secondly, on the Sri Lanka project, again, over the last quarter, we have not seen a major execution. The number remains the same. So -- and, of course, that was primarily because of COVID, but what do you see going forward?

We expect execution to pick pace and we are still quite hopeful that very substantial portion of the execution, at least, most of the significant elements of the contract, we would be able to close execution of those by the end of the financial year.

And one last question. I was seeing a big spike in inventory for this quarter from around INR 127 crores to INR 170 crores -- INR 171 crores. So any specific reason why that has happened?

This is a contingency measure against the volatility that you've been seeing in various commodities and input materials, both from the perspective of price as well as from the perspective of availability. It's a very conscious decision by the company.

So basically, this inventory is at a much higher price than previous quarter. And if we have a reduction in these prices -- this raw material prices, will we still be able to pass them on?

Basically, this inventory gives us protection both on the revenue and margin fronts. If you don't build up inventory, we would feed on our contracts. So it has to be done, and it's a measure to protect both the revenue and the margins.

The next question is from the line of Chetan Vora from Abakkus.

Sir, just wanted to ask that after the quarter 4 results, we had said that for the FY '22, our revenue growth will be 20% overall, and we would be able to maintain our yearly margins in the Engineering and the Chemical division. So in the first half, the revenue growth in the Engineering division has been negative at -- down by 8%. And on the margin front, for the first half, the Engineering Division had a margin of 6.5% versus a full-year margin of 10%. And whereas the Chemical did a margin of close to 22% versus the full year last year 25%, 24.6% to be precise. Sir, now, we are already one month passed in quarter 3, so I would like to understand where do we stand in terms of meeting our -- the guidance what we had given for FY '22, sir?

In order to compare the margins performance in the current year versus how we performed in the last year. Given the trends of revenue that we typically see, it's always better to compare year-to-date versus year-to-date of last year. If you do that comparison, you would see that the margins have been somewhat comparable to what we have seen last year. Vasant can put in the numbers. but we have been either equal or better if you look at year-to-date numbers...

Yes, year-to-date numbers, we have done better, but the quarter 4 of last year was like in Engineering, we did a close to 17-odd-percent margin. And in chemicals, we did 29% margin. So whether it would be -- try to extrapolate that in the March quarter, we would be doing the same numbers? That's why I was just giving a full year numbers. That's what you had guided out. We would be outpacing our FY '22 numbers in terms of margin versus FY '21 margin, sir?

Typically, we have the second half of the year, if you look at the trends over the last few years, the second half always tends to be better than the first half and the last quarter does tend to be the heaviest quarter of the year. You should expect something similar in the current year also. The margins in accordance with the scale that is achieved and the operating leverage, therefore, you should see much better percentage of margin coming in the later half of the year. With that said, the first half has been quite impacted by price rises as we had discussed over the last few minutes in the call. And as I had mentioned, we do expect some of these increased price trends to continue into the third quarter and maybe even further. So it is very difficult for me to give you the same degree of comfort with regard to achieving the itemed margins, especially on the Chemical segment. On Engineering segment, I still feel we would be coming close to what we achieved last year. On the Chemicals segment, the impact of the raw material price rises is a little bit more heightened. And while we will strive to achieve the same margins as last year, the strain and stress there is a little bit higher.

And sir, lastly, by how much we would have taken the price hike and what would be the remaining the price hike we need to take to ensure that we are comfortable at the margins level?

It is a continuous process. And depending upon the products and the contracts, the price variation are discussed with the customers and taken. It is -- so it's not a flat price rise, and it's not always across the board as a same percentage. I'm unable to give you a guided response there. And it is also not a single onetime price rise. As we just discussed, we are seeing a continuous one way upward trend. And we have been forced to take multiple price rises from customers. And this typically happens after -- it's not immediate. It takes a little bit time for the price rises to get passed on to customers. And I am quite expectant hopeful that by the end of this quarter, we should see a reversal of the one way upward trend. And if that happens, the margins hopefully would become better.

And sir, lastly, on the Engineering, Whether the first half year, the revenue decline was 8%. So what sort of the UP billing will start from this quarter onwards? So would it be fair to assume that Engineering will be reporting a growth on a Y-o-Y level, sir?

Yes. As guided earlier, we are hopeful that we will get to this 20% revenue growth that we had told earlier, and we should see the improvements in margin coming in the second half of the year.

The next question is from the line of Shantanu, an individual investor.

Sir, I wanted to ask questions with regard to the Engineering segment. So we can see that in quarter 1, our order book was roughly INR 730 crores. And at the end of this quarter, it is roughly INR 1,030 crores. So in which industry do we received the order as in -- it's a huge jump of 40%?

I think there was one major order, which has got added to the overall order book, and that came from IOCL Paradip.

Okay. Okay. Sure. And so -- so a few more set of questions for Engineering segment only. Like I understand that our Engineering segment has roughly 2 sections as in one nice project that is EPC and other is O&M. So what is the contribution between EPC and O&M?

If I get your question right, you were asking for a bifurcation between service revenue and project engineering revenues. Is that what you're asking?

That's the same.

Vasant, you can put in -- it's roughly around 20% or so for the revenues.

If you exclude the Sri Lanka, EPC is 1/3 of the total engineering and our services also is 1/3 of the total engineering and 1/3 is from the standard projects.

Could you please come on the last 1/3, what is the 1/3?

1/3 is the balance, 1/3 is the standard equipment.

Standard equipment. And this includes UP Jal Nigam and Sri Lanka projects. Am I right?

It doesn't UP, so UP -- as well as a Sri Lanka project because that then it will reshape the picture.

And sir, so in all these 3 line of businesses, what is the domestic and export contribution?

Vasant had given the...

Approximately 80%. And if you exclude the Sri Lanka, it is export to 20%.

20% export in EPC, right?

Yes, EPC and...

And what about the standard equipment?

Yes, when I said export, 20% includes both, standard equipment as well as EPC.

And O&M also, it is 20% only?

O&M is not much because O&M are generally in India only, and the outside O&M are handled by our subsidiary companies.

So on a consolidated basis, how much that will be?

I think traditionally, we are not getting into too much of a micro level of detailing on these numbers, unfortunately. Some of this information may not be out in the public domain, and we would like to keep it like that.

So last question, if you have to consider Engineering segment as a whole, then how much will be domestic and how much will be export?

I think that question was responded by Vasant. It is, if you take the overall engineering revenues. The service revenue would be somewhere in the range of 20% to 25%, and exports would be somewhere in the range of around of around 35%. Vasant, you can correct the number if.

Yes, that should be okay.

We'll move on to the next question. That is from the line of Indrajit Chakraborty, an individual Investor.

Good afternoon, Mr. Patni and the management of Ion Exchange. I have 2 questions. Firstly, what is the update about the large international order, which the company has been pursuing? And you if could kindly update about it? And number 2 is this consumer goods segment, we have such a beautiful product lineup, why is it that the company is not very aggressive. It seems to me the company is not very aggressive in increasing this consumer goods segment, if you can kindly explain? Thank you very much.

So with regard to the Consumer Goods segment, we are quite committed to [indiscernible] overall segments profile and do a number of new product launches. We are targeting segments which are having a relatively low competitive intensity, especially where we don't need to commit a lot of funds to upfront marketing. And since the consumer segment contributes less than 10% of our revenues. We are very careful about how we distribute our funds and assets so that not to jeopardize the other segments. With that said, we are -- you are going to see an increased bit of activity from the company to promote its products. I had mentioned earlier, the new product launches are getting very good reception from the customers. And as the revenues from this pick up, you would see more visibility obviously. Hopefully, we will be able to address your concern...

And regarding the large international orders, if you could kindly update that what is the scenario right now? What is our position? Maybe we can win within this year or maybe next year or something like that? If you can please update?

We continue to pursue these very large international opportunities and over the last quarter, there have been positive movements on a few of these. As we continue to say over the past few calls, until and unless we are able to ink the documents, the expected timelines are not really predictable. These are government contracts, which go through multiple layers of approvals and validations. So it becomes difficult to predict when exactly those discussions will conclude. But we are still hopeful that really, at least, one of them, we will see -- we'll be able to make some kind of announcement by the end of the financial year, but it remains a matter of chance.

The next question is from the line of [ Rushabh Shah ] from [ RS Capital ].

Sorry, I had joined the call late. Sir, some time back, there are some rumors that DuPont was trying to take over the company or -- you can share some thoughts here? And also promoter stake is around 27%. So is there any plan to increase or decrease hare going forward?

So I think a similar question was posed in the previous con call also, and I had voiced my concern over reliance on rumors. I would again request you please do not pay attention to rumors and stick to the facts as being declared by the company. So with regard to -- you had another question, right? What was that?

Yes, on the promoter stake, is there any plan to increase or decrease it going forward? And by how much if it is?

If you look at the trend of disclosures and financial spending, we were disclosing a higher percentage, not 27%, it was closing to the range of 44% pursuant to some modification to SEBI guidelines, the overall holdings had to be recast and the disclosures were changed. So part of that 44%, now gets disclosed as non-promoted nonpublic shareholding and there has been no change as such in the way the promoters continue to hold their shares. There is no immediate plan to have a change in the current status of holdings.

The next question is from the line of Amit Jain, a Retail Investor.

If you can share your views on what kind of policy action is expected from NGT and Central Pollution Control Board and what kind of opportunities can come for the sector and for our company?

Amit, we are seeing a great deal of action and initiatives by both these bodies. The approach towards the environment, as you all may have noticed has turned towards the positive, and it's a global drive towards the overall ESG component of business. We do expect that from the Indian Central and state governments, the push to have greater compliance, which would support environmental initiatives would keep going up. As this takes or gathers momentum, we do expect to benefit from your company, as you would know, is present across the board of various solutions, which address this valued for water treatment, waste treatment, effluent treatment, sewerage treatment, technologies and [indiscernible] water and also minimize usage of freshwater there wherever that concern exists. So we do expect to benefit greatly from this from this side.

[Operator Instructions] The next question is from the line of Pratik Kothari from Unique PMS.

Sir, just one question on the engineering side. And so we've been hearing quite some that on-ground private sector CapEx is about to start maybe next 6 to 12 months, a lot of capacity building on the steel, cement, et cetera. And given the environmental norms now, none of them would be able to proceed without keeping us in the loop. I mean so do you see the same on the ground in terms of heightened inquiries, at least, from domestically at least?

Yes, it is evident. The overall level of inquiries that we are receiving from the Indian industries is much better than what it was. And all indications are that the level of activity or increased CapEx is only going to increase in the coming months unless the current round of economic uncertainty caused by the spike in the raw material prices and the logistics and shipping challenges changes that scenario towards the negative. With that said, the current book of inquiries itself is quite healthy for us, and I do expect a lot of them would convert into orders in the coming months.

Sir, similar question on the international market side because I believe a year or 2 back, we spoke about some large inquiries from Asia or even Africa for that matter. So anything that is materializing there? Any pace that you see on that side?

I think one of the callers just a couple of questions back had raised the same query. We are seeing movements on some of these very large opportunities and unable to really comment on when those will come to a close and we'll be able to announce a new order build. But certainly, there is positive movement on a few.

But this would be largely on the EPC side of things? Or we would be supplying some products because you are slightly not sure of doing EPC in international markets?

These very large opportunities are on the EPC side.

[Operator Instructions] The next question is from the line of Saket Kapoor from Kapoor Company.

Sir, so just to sum it up, for the Chemicals segment, the margins will hit a trough for the third quarter also because of the visionaries has been outlined by the management? And if -- and if the same reverses, we can see an improvement in margins from fourth quarter onwards. And sir, for the Engineering segment also, there should be an uptick in the execution cycle for H2 as has been the case last year. For Consumer products, we are seeing an uptick and that is going to be the continuity for the second half? Are these observations correct, sir?

Engineering, yes, the second half would see increased revenue and its corresponding impact on margins would be coming. So that is a positive impact. Consumer segment also, what you say is correct. As far as Chemical segment is concerned, the revenues, we do expect that they would see a degree of uptick as would happen as you would have seen in earlier years also. The second half does tend to be heavier on revenues. As far as margin is concerned, what I was commenting was as compared to last year's -- last full year's margin, we will strive to attain that same level. But I'm not very sure how much we will be able to compensate for the dip in margin that we have seen during the first half and the continuing pressure on the raw material prices. So that's a degree of uncertainty there, but I do hope that the one-way upward trend of raw material prices will abate and we would be able to turn this positively for the company.

And sir, for the Engineering segment since last year was a COVID-affected year, although this year also, unfortunately, the first quarter was. So we could see a growth numbers in terms of revenue also -- the execution would be higher than what we closed last year as for the current environment?

Yes, we will see an increased degree of execution in the Sri Lankan contract, I'm expecting to take a significant amount of pace here in forward. We will also see execution for [indiscernible] contract and other segments or subsegments of the engineering business do seem to be in line to give the normal trend of heavy third and fourth quarter. So all of these together would ensure improved revenue numbers.

Sir, on the tax part, when we look at the cash flow, the tax paid net of is INR 40 crores, INR 396,400,000. And whereas for the first half, our provisioning is to the tune of INR 21 crores INR 22 crores. So what should one read into this tax payment of INR 40 crores for the first half?

Some part of the tax would be pertaining to the previous year also.

Okay sir. Because there is no breakup provided that, so if you could give...

I mean this disclosure is as per the format which is mandated by SEBI. So that is how we have disclosed it.

There's some portion may be related to the previous year at the time of finalization of accounts for March '21?

Yes, during the year, you would have paid some tax pertaining to the previous one. That's right.

Lastly, sir, what is the size of the order book from unexecutable portion from the Sri Lankan? And UP, I think so we have not started execution. So what is the size? And what is the scope of work for the Uttar Pradesh government part?

Sri Lanka order or backlog is USD 41 million as on September 30.

$41 million.

USD 41 million.

And for Uttar Pradesh?

Uttar Pradesh, current order backlog since we have not started executing, close to [ INR 400 crores ].

And what is the scope of work there for the UP project sir and with elections falling next year, when will be commencing, the Uttar Pradesh project? And what is the advance that we have received from the government, and what is the schedule?

The process of execution for Uttar Pradesh contracts is a staggered one, which -- because the projects entail providing drinking water to individual households spread across various villages. And this requires us to create a detailed project support and followed by signing of agreements with various clusters of villages. So this process is on. We have received mobilization advances against almost 1/3 of the total number of villages envisaged. Once we start execution and the agreements are signed to that effect, we are expected to complete that contract within 18-month period. So this period has started for 1/3 of the villages. The remaining villages, we would take up once the respective agreements get signed for those clusters.

And what is our scope of us, sir, the delivering of -- I think the Jal se Nal scheme is -- should be the one where we are participating?

That's right.

So what is our scope of work here? I think there's a long EPC project by other companies will also be -- the ecosystem will be very large for this project?

Our scope starts from taking the water from the source right up to delivering it to the household. We don't do the work inside the household. We leave the pipeline outside the household.

That is the DI pipe laying part?

Sorry to interrupt.

Yes, ma'am. Ma'am, just I was seeking the clarification on this. There is no other questions I have. I will come to the answer queue. Is it only the laying of the DI pipe part? Or I just wanted to understand that.

No, this involves -- so since we are taking water from the source, there's a treatment involved for a clusters of villages. Once the treat -- water is treated and then there is the question of distribution. So distribution is a part of the overall delivery, but there is treatment of water, which is the starting point.

The next question is from the line of Madhusudhan Reddy, an Individual Investor.

Sir, my question is regarding this UP order. Government orders are notorious for their receivable problems and all. And our company is aware of this and it used to be very cautious about this. But this is one prestigious order which we got I mean, I just want to know your thoughts on this. Is there any change in the way government is working on receivables thing? Do you see any problems that do you foresee any problem?

We've been very conscious of this very fact as outlined by you, and we continue to be conservative on this front. We take each of these opportunities and evaluate it very cautiously. With the current scheme under which we are working, we have done a very detailed evaluation of the various risks involved, including that of receivables. The scheme, which -- under which we are working, this is substantially financed by the Central Government. And the fund flow is very well defined and well there is a significant amount of advance, which comes with each of these contracts. And these are all very fast-track contracts, each single contract or DPR on which we are working is for a small cluster of villages. So it's not one very large contract. It is actually an aggregation of multiple smaller-sized contracts, which makes it a little bit better to manage the overall cash flows and keep the risks under check. So while -- your question is valid, but yes, we have considered all aspects and we remain just as careful as we were earlier.

The next question is from the line of Indrajit Chakraborty an Individual Investor.

Sir, I'm back more with one small question. I just want to ask something regarding the international orders, which we are hopeful about. Is it that we are looking at something which is similar in size to the Sri Lankan order? Or will it be much bigger than that? That's my small question, sir.

These contracts are in the same range as the Sri Lankan contract. It may be slightly bigger or slightly smaller.

Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. N.M. Ranadive from Ion Exchange India Limited for his 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 would be happy to be of assistance. We are very thankful to all our investors who stood by us and also had confidence in the company's growth plan and focus. And with this, I wish everyone a great evening. Wish you safe, prosperous and Happy Diwali. Thank you.

Thank you. Ladies and gentlemen, on behalf of Ion Exchange India Limited, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.