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

Ladies and gentlemen, good day, and welcome to the Ion Exchange India Limited Q4 and FY '22 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. 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 call for the fourth quarter and financial year ended 2022. Before we begin, let me mention a short cautionary statement. Some of the statements made in today's con 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. Now let me introduce you to the management participating with us in today's earnings call and hand it over to them for opening remarks. We have with us Mr. Ankur Patni, Executive Director; Mr. N. M. Randve, Group Chief Financial Officer; Mr. Vasant Naik, Executive Vice President of Finance; and Mr. Milind Puranik, Company Secretary. Now without any further delay, request, Mr. Vasant Naik, to start with his opening remarks. Thank you, and over to you, sir.

Thank you, Anuj. Good afternoon, everybody. It is a pleasure to welcome you to the earnings conference call for the fourth quarter and for the financial year ended '21, '22. Let me first take you through the financial performance of our company on a consolidated basis for the fourth quarter. The operating income for the quarter was INR 4,964 million, an increase of 11.5% year-on-year. Operating EBITDA reported was INR 951 million, an increase of 11% year-on-year, and the EBITDA margin stood at 19.16%. Net profit after tax reported was INR 832 million, an increase of 18% year-on-year, while the PAT margin percentage was 16.76%. For the financial year ended '21, '22 on a consolidated basis, the operating income stood at [ INR 15769 million ], an increase of around 9% year-on-year. Operating EBITDA stood at INR 2,132 million, an increase of 5.4%. The EBITDA margin reported was 13.5% and net profit was at INR 1,617 million, an increase of about 13%. PAT margin was reported around 10.25%. Coming to the segment, [indiscernible] Operational Performance. In the Engineering division, the revenue for the quarter was INR 3,208 million, an increase of about 10%. The EBIT for the quarter for this segment was INR 732 million, an increase by about 31% on a year-on-year basis. For the financial year ended, the revenue from this segment was INR 9,351 million, a slight decrease of 0.6% and EBIT stood at INR 1,068 million, an increase of about 7% compared to last year. Regarding the Sri Lanka order, the company in this quarter had commenced progressive handover of the completed stages of the project to the Sri Lanka Water Board. However, the uncertain economic outlook and the ensuing turmoil have impacted the pace of execution. We have since received further time extension from the customer for completion of the contract, and we do not perceive any credit risk in this contract. The execution of the UP Jal Nigam project has picked up pace in this quarter and the revenue has been recognized based on the work completion. Further, the execution of other engineering contracts also picked up pace on the back of the higher order backlog while the overall margins have improved, the rise in input costs remained a concern in this quarter. Coming to the order book as of 31st March '22, we continue to witness encouraging order flows, both in the domestic and the international segments. Our order book stood at approximately INR 1,267 crores. This excludes the Sri Lanka and the UP Jal Nigam order. And if we add these 2 orders, our total order book would be approximately INR 2,674 crores. Further, we have a big pipeline of around INR 6,700 crores, which gives us strong revenue visibility for the next 2, 3 years from the Engineering segment. Coming to the Chemicals division, the revenue for the quarter was INR 1,515 million, an increase by approximately 17% on a year-on-year basis. The EBIT reported was INR 345 million, a decrease by 11% year-on-year. For the full year, the revenue from the Chemicals segment stood at INR 5,579 million an increase of 27% and EBIT stood at INR 1,208 million, an increase of 14% compared to last year. The sales in the domestic segment continued to record steady growth. The export volumes have also improved with the relaxation in the COVID cup. However, the logistic issues continue to hamper the dispatches. The increased raw material costs continued to post pressure on the margins in this segment. While the company has resorted to periodic price hike, the volatility and the cost increase impacted the margins. Coming to the consumer segment, the revenue for the quarter was INR 425 million, an increase about 13% on a year-on-year basis. The loss for the quarter in this segment was INR 16 million. And for the full year, the segment clock revenue of around INR 1,366 million, an increase of 26% year-on-year, and loss stood at INR 36 million as compared to INR 37 million in the previous year. New product launches and the increased market coverage has resulted in sequential improvements in the turnover. With this, we can now open the floor for the question-and-answer session.

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

Sir, my first question is on the other expense. I mean we have seen this for the whole annual basis to grow much faster than revenue. If you can throw some light on that.

Yes. The other expenditure primarily includes the majority of the expenses in the Chemical segment and in the Consumer Products segment. So what we have seen is the increase in the overall turnover in the chemical and the consumer product segment. So they've broadly represent for the Chemicals segment, the factory-related expenses, the utilities -- and in the Consumer Product segment, the marketing and the distribution costs. So broadly, they have increased in line with what turnover increases we have seen in these 2 segments. Further, we've also seen some increases in the freight cost during the year, and that also is forming part of the other expenses. And lastly, the travel expenses, I mean, with the relaxation in the COVID curves, now the travel has started, so that element of expenditure has also increased.

Okay. Fair enough, sir. Then the other one, we had a couple of quarters back, we had announced a large CapEx on the chemical side, about [ INR 200 or INR 300-odd crores]. So as of status of the same?

Can you come back again on the question. It was not very clear to...

Sure. My question was a couple of quarters back, we had announced large greenfield CapEx on the region side of INR 250 crores. And on the other chemical side, we are going to spend some INR 50 crores, INR 60-odd crores between FY [ '20 ] and '23. But the CapEx numbers don't reflect the spending, which it should have. So has there been some delay in meting some clearances, just an update on the CapEx part?

Yes, the CapEx is slightly delayed. We are still awaiting clearance that we see from the relevant authority. And as soon as that is available with the company. We will initiate the CapEx as we have been announcing. As of now, it seems that we would not be able to complete this by the end of FY '23. It will spill over to the first half of FY '24.

So any specific reason regarding this delay?

The signatory, who is going to release this document is currently not available. One relevant gentleman is available, the document should get signed and released.

Okay. Fair enough. And sir, can you share what would be the volume growth that you have seen on the Chemical division for the whole year?

It's actually very difficult to come back on specific volume details because there's a very wide variance in the type of products which we deal. And the profile of the chemicals, the margin profiles and even the units of measurements are different. Therefore, difficult to directly comment on what's the change in volumes for the overall segment.

Our next question is from the line of Karan Asli with Maximal Capital.

Just continuing on the last participant on the chemicals. So could you just help me out with the utilization level of getting chemicals in Q4?

You said to give the international business on chemicals?

Right. Just the capacity utilization in chemicals in Q4?

Capacity utilization?

Yes.

The overall capacity utilization would be in the range of around 75%.

Okay. And this is for the fourth quarter?

This is for the fourth quarter.

Right. So does that imply there has been more volume growth because in Q3 as well, the utilization was 75%. So sequentially, is it fine to say that there has not been much volume growth?

For the chemicals side of business, the volumes have been more or less similar to what we have seen in the third quarter, there would be differences somewhere in different product lines. But per se, when we are looking at capacity utilizations, they would be in that range of 75%.

Sure. Understood. And sir, could you help me up with the CapEx reserves for FY '22 and to FY '23? And towards which segment would this CapEx be for?

FY '22 figures, [indiscernible] on each share...

The overall CapEx was in the region of around INR 49 crores. And the major CapEx we have incurred is largely in the -- what we have mentioned in the earlier call that we're in the process of enhancing the capacity of our membrane plant. So that's why a part of the CapEx has gone. And also, we have gone into in terms of improving the capacities at our engineering divisions, which are manufacturing the standard plants. And also some incremental CapEx has gone in the chemical divisions. So largely this, our total INR 49 crores CapEx is largely in these 3 segments. In terms of the next year '22/'23, our total CapEx, we expect in the region of around 60 INR crores TO INR 70 crores. And here again, the major CapEx would be in completing the capacity enhancement of our membrane facility in '22, '23, plus the incremental CapEx which we do every year in the region of INR 15 crores to INR 20 crores in our Chemical segment, that will continue.

Sure, very helpful. And just a quick question for the [indiscernible]. Last 3 years, engineering, we've seen the revenue roughly in the range of about INR 935 crores to INR 940 crores. So what is the outlook going forward? Could we hope to sort of drop that INR 1,000 crore revenue mark in FY '23?

We certainly see a significant improvement on the change in revenue in FY '23. We are sitting with a very strong order book at this point in time. And we are also witnessing good inquiry bank some prospects of converting further orders are also very bright. With that we should be looking at a very good growth over what we have seen in the previous year.

Our next question is from the line of Sunil Kothari with Unique PMS.

Sir, congratulation Mr. Patni and team for such good numbers and very manageable and credible EBITDA performance. Sir, coming out from this 2 years challenging environment, how do you look at engineering business, per se, in terms of execution or preparedness because it seems that now there should be very high -- you said just now that there is a significant scope of improving revenue. So are we prepared for a higher number and higher regulation orders? That is one question. And second on, I think we are expecting some big order from international market, which is yet not happening -- some of the -- whatever reason. So if you can explain possibilities of getting those orders from international market and our preparedness to execute higher orders in current year.

We are quite well prepared to execute these orders and work at a much higher scale than we are today. We keep augmenting our capacities and our ability to execute these projects and we'll be able to supplement current capacities as and when required. As regards to international orders, which we have been in discussion for quite some time. There is progress on these orders, and we are sitting quite close to finalization on some of these contracts. But I still do not have anything to declare for at this point of time and certainly hope that we would be able to do so in the very near future.

Right. Fine, sir. And sir, what is your outlook, say, compared to last 2, 3 years experience and our preparedness, both the segment, if you can a little bit -- looking at the interest of scenario the people want now China plus 1 extra source from Western world, people would like to source more from country like India. Both the division, how do you see opportunity for the next 2, 3 years, broad thought process.

I think we are standing at a very interesting juncture with some of the checks post the pandemic seeming to be behind us. With the Ukraine war also having been absorbed and the impacts of it having been seemingly absorbed in terms of perceptions. There seems to be an uptick in growth expectations across the board. India is certainly witnessing an increased flow of inquiries. There is also improvements which we are witnessing in Southeast Asia, the Middle East and in the other geographies. The one area of concern still is Europe, which is facing relatively higher impacts of the ongoing war. I do hope that we would be setting these well behind us in the very near future. And once that happens and there is an economic recovery of source across the board, we should be seeing a substantial increase in opportunities for us. In any case, we are quite expectant of good growth coming in from the international market as well as domestic markets, it seem to be now reviving. The next 3 years outlook I would say, is quite good for us.

And in terms of chemical, sir?

Please come again.

Chemical segment?

Chemical segment, likewise, we have been growing quite well in terms of our Chemical business in the international market, resins and other chemicals, both of them. There were some hiccups faced in the last couple of years arising out of logistic challenges, availability of containers and the cost of transportation, both coming into play. That had slowed down our growth in the international markets somehow. I do hope that in the coming years, we would be able to show much stronger growth as compared to what we have been able to in the last couple of years. Added to this, the increasing capacities, which we have been announcing of the con calls and the substantial increase in the review capacity, which we anticipate in the next couple of years, that would give a big flip to leap in terms of revenues coming from the resins business. Both of these together should see good growth coming in from the chemical segment also.

Sir. And my last question is some outlook on margin for current year, both the division?

On an overall basis, I am quite hopeful that we would be able to improve margins if the trend of the raw material prices softens a little bit. They have been at an escalated level for quite some time now and the expectations of softening of these rates has been on the cards. And once that happens, the margin expansion should take place. But even so, my overall conservative thought processes, we should be able to maintain the full year margin similar to what we have achieved in the past year.

Our next question is from the line of Ishrat Khatri from Omkara Capital.

So I wanted to understand the margins for the engineering business. So we see that we've had 1 of the -- in fact, the highest margins that we've ever reported. And this -- we saw a similar trend in Q4 last year as well. So is there a seasonal trend that we can expect going ahead? And one, why was the margin so high? I mean I understand it should possibly not be sustainable, but any reason for the margins being so high?

Jump in margins coming into the last quarter of the financial year. This has been sort of a trend for some years now. It happens on account of maybe 3, 4 different factors coming into play altogether. One of the key factors is the scale at which the last quarter numbers come in, they're much higher than what the other quarters are reporting. And therefore, we managed to leverage the fixed costs much better and the EBIT margins and EBITDA margins would fail up account of that. The other reasons are we have a little bit of a different mix of products and the revenue contributions from the slightly higher profit margin business has increased, and that also contributes to a corresponding increase in the overall margin level. Some of the costs, which were at an escalated level and we were trying to pass on these costs to the customers. We have been progressively able to pass on some of these costs and that also improved our overall margin. So a few of these factors have together led to a pump. If I have to talk about sustainability of these margins, I think the year -- overall year numbers that we have reported margins for the entire year, that we should be well in a position to repeat on a continuous basis. You would see variations from quarter-to-quarter, but the year-end numbers should be almost in the same range.

Okay. I think about 11%, 1.5-odd percent EBIT margins is what we made in FY '22. So that according to you should be sustainable for the coming years as well, right?

That's right.

Okay. Also, sir, another question. I understand that situations are very uncertain in Sri Lanka and timing, again, we've been able -- we've not been able to complete the Sri Lanka project. But just if you could throw some light on the situation at Sri Lanka. I Understand you've written that there's no credit risk for Sri Lanka and we should be able to get whatever INR 250-odd crores of an executed portion that is still there. But if you could just throw some light in terms of the execution, the pace, by when can we tentatively expect completion for this project.

The situation on the ground in Sri Lanka is quite uncertain. You would all be reading about the economic turmoil that the country has gone through. And consequently, other challenges which they are facing. For us, the major challenge has been operational because the availability of fuel of manpower of subcontractors. They are the ones which became a little bit unpredictable and uncertain and led to a slowdown in the pace of execution. That has led to extension of the period which we were earlier estimating. And now we have from the Sri Lankan water board and time extension up to the second quarter of the current financial year. We should be in a good position to complete this contract by that time. Again, hoping that the situation would be smooth on the ground for execution. We do not have any credit risk because we are not directly getting paid by the Sri Lankan government , And thus, we have got guarantees for lease payments, it's insured and guaranteed. So with those things in place, we do not really have any credit risk. But the pace at which we were hoping that the revenues would get, that has slowed down, and there is a little bit of an uncertainty about that. We are going with the guidance of the concerned ministries and our insurers and everyone else. And we would accordingly pace the condition.

Okay. Got it, sir. I'll just Ranadive sir mentioned that we'll be doing about INR 60 crores to INR 70 crores CapEx for the chemicals business for this year. From what I remember, the overall CapEx, was it INR 150 crores to INR 200 crores? Or was it INR 200 crores to INR 250 crores that we were intending to do for the resins plant, the greenfield CapEx?

The greenfield CapEx would be upward of INR 200 crores what we -- number significantly above INR 200 crores.

So out of that INR 60 crores to INR 70 crores should be in FY '23? And you mentioned that by the end of first half of FY '24, we expect completion. So a major chunk of it would be in FY '24 is what I'm assuming?

So the figure of around INR 50 crores to INR 60 crores, which was mentioned is on top of this figure, which would come in for the greenfield project.

Okay. But sir, next year for the greenfield, what can we expect, sir?

On account of the greenfield project, we would be having some portion of that expense coming in. It is not a front-ended expenditure, which would happen. There would be a good portion of the expenditure would happen in the later part of execution. But we are waiting for the [indiscernible] clearance to happen first. Based on when that happens, we would be able to project how much would happen in the current year.

Sure. So -- meanwhile just one last thing. Meanwhile, at the resin plant at Ankleshwar, we have enough capacities to grow because you mentioned overall utilization for chemicals was 70%. But for the resin plant, specifically at Ankleshwar, I believe we used to run at over 90% utilization, and we've done some brownfield as well. So what would be the utilization level for the Ankleshwar plant?

So there is still some headroom available both at Ankleshwar and we are also trying to see if we can incrementally make some more adjustments there to augment capacities for the time being. There is substantial headroom available in our other chemical facility. So for the Chemicals segment as a whole, we should be able to cover quite a bit of increased revenue in the coming year.

Our next question is from the line of Siddharth Malhotra, an Investor.

My question was just on the sale, because the crude prices are to remain high, do we foresee any business from that particular area, oil and gas, especially from the Middle East? Is that a potential sector for us for business going forward?

Oil and gas and refinery are significant consumers of water and other chemicals and products, which go into the wastewater side of the treatment cycle. Therefore, an uptick in investments or operation levels of these facilities, would have a consequent opportunity for companies like us. To the extent that the current level of prices sustain themselves and also the relevant organizations convert these into CapEx plans as we could see further business coming in.

It has happened in India as well as in the international market. As you rightly identified, Middle East is one of the important markets when it comes to this particular sector.

Our next question is from the line of [indiscernible] Shah, an investor.

Yes. Sir, most of the questions have been answered.

[Operator Instructions] Our next question is from the line of [indiscernible] with B&K Securities India Private Limited.

We were actually expecting some risk by specific in consumer product business in terms of [indiscernible]. So we actually could not be able to -- in this quarter for [indiscernible] so when can we expect the turnaround of this business as of now?

We should rather certainly see a turnaround of that business during the current financial year, that is FY '23. The growth momentum has picked up, that would be probably visible if you compare quarter-to-quarter growth, which has been happening. We are seeing increased level of business even after the fourth quarter. And this should translate into substantial improvement in the overall turnover of the business. And that would lead to a positive EBITDA. That's our belief as of now.

Our next question is from the line of Anupam Agarwal with [indiscernible] Lucky Investment.

My question was the same as earlier participant.

Our next question is from the line of Jain Amdoshi with Quest PMS.

During the last con call, there was a discussion pertaining to the company's role in Purified Water segment for the semiconductor business. And also, it was mentioned that the company is into active discussions for some big opportunities. So can you please provide some insights along with the numbers for the same if possible?

Yes, we continue to be interested in the opportunity and we are engaging in several discussions with potential contracts. There have been a couple of opportunities which have been converted and orders are given to the company. But unfortunately, the -- these are the numbers which we're not really sharing details of each and every contract with the stock exchange. And as such, I can only reflect that the opportunity remains interesting and we have converted some of these, and we will continue to -- and hopeful to get more of these opportunities into our bank.

Our next question is from the line of Karthi Keyan from Suyash Advisors.

One question on your project business. How is the international pipeline looking like? And is there a rethink on this part of the business at all given the rather unpleasant experience in Sri Lanka. Obviously, it's been an accident. Some thoughts on that.

Not sure what incident experience that you are talking about. For us, the business which we got from the Sri Lankan Water Board has been quite a good one in terms of the revenue as well as margins. And as I had mentioned earlier, there is no credit risk envisaged. We have been getting good payments and the cash flows have been pretty strong on account of this contract. The future projection from this contract also remains quite good. But if you're referring to the political uncertainties, which have cropped up for the economic uncertainties -- certainties which have cropped up in recent times, yes, we are well aware of that. And that's the reason that we take a lot of time to ensure that we are mitigating all possible risks, including credit risks of this nature and continue to be conservative and careful looking at these opportunities and finally converting to contracts. The future outlook is quite strong. As I've been mentioning over a few of the calls. We are working on some very large opportunities in the international market, along with the smaller and medium-sized ones. All of these continue to remain on the table for us and attractive business prospects.

I was, of course, referring to the political situation rather than just the project-specific dynamics. Good that you are well secured on that count. But 1 question, sir, are you fully protected on the profitability side given the time delays -- are you fully protected on the profitability side in these projects in this particular project?

Yes. There is no material change in the profitability profile.

Our next question is from the line of Saket Kapur from Kapoor & Company.

On the UP projects, what have been the -- how have been the execution for this year, per the quantum? What percentage have we executed? And when is the remaining going to be executed the remaining part of the order? And do we have for other milestone or are there any follow-up of any orders in the pipeline from the same? Or is it done with our -- with the completion of the existing orders?

Because the order would get executed over the sale of -- 18 to 24 months. A good portion of what we have already in hand would get executed by FY '24. And there is a small portion of this contract that is still under processing. And once that also gets converted into a firm invoice at the moment that would also materialize by the first half of FY '25. So that's the projection for what this order would be looking like current numbers, Vasant can you share?

Current numbers, hello?

Vasant, can you share?

And sir, it is all in the just in schemes or scope of work that we have got this order under Jal Nigam -- under that scheme only.

Sorry, I couldn't get your question. What are you asking?

The UP order was from the -- under the Jal Nigam scheme, the flexing of the center government?

That's right. That's right.

Okay. But sir, here, I think the size of the order, I mean, the execution will be over a much larger period of time. So do we envisage more of orders coming up even post 2024 or because I think the scope of work is there for at least 3, 4 years to continue. Or do we think that the -- in our domain, the work would get over by 2024.

No, there are many more opportunities to work on. The current contract, which we have got that has got an execution period of 18 months to 24 months. And there are many more opportunities which are available for the taking. We have been a little bit cautious about the quantum of work that we want to pick up for this particular segment and very carefully analyzing the risks to file attached with each and every such opportunity. And we are wanting to -- and we are working on only those where we are very comfortable with the overall risk. And we will be picking up more of these. As of now, this is the only one that we have work [indiscernible] contract.

Our next question is from the line of [ Krish Babaria ] with B&K Securities India Private Limited.

Can you give some more color on what kind of pipeline are we looking at? So basically, we have you stated that we have a bid pipeline of around INR 67 billion. Can you throw some light on what kind of key end markets are we looking for the same.

What portion of this inquiry bank would be targeted at projects, which is the capital expenditure by large and medium industries, the industries, we still to give the larger-sized contracts would be the refinery segment, the power segment, the steel sector, some of these sectors, which have traditionally been the largest size of orders. Apart from this, we also have opportunities from the relatively smaller-sized industries like textile, like pharma, like the chemical industry and the sugar industry or the food and beverage industry. And the last constituent of this segment from the industrial side would be the institutional and the hotel kind of business, which also contribute some quantum. Besides this, there is the government and infrastructure side of business, which also contributes, significant quantum. So that's on a very broadly kind of industries which constitute this.

Pertaining to the same. So what kind of mix are we expecting? So what is the mix between private products and [indiscernible].

It tends to grow from time to time based on a significant contract which gets converted. Traditionally, we have not been very active on the municipal side or direct government orders. But as you would know that out of our current inquiry bank, good portion is provided by the Sri Lankan order as well as the UP order that would give line shrunk of the overall order bank. However, if you look at the opportunities that we are focusing on, there is a good portion also coming into industries, which will include PSUs. It's not necessarily private sector. PSUs are also included in the industrial part of business, and there is a good portion of business, which we are expecting from the industrial pocket also.

Our next question is from the line of [ Amarjeet Chaturvedi ], an investors.

I just have 2 questions. My first question is that, to what extent has the company been able to pass on these high input costs like the cost of oil and stuff like that? And has it dented the demand in any way? And my small second question is that the semiconductor business numbers, that would add to which segment, would it get club to the engineering segment, isn't it?

I guess there has been very [indiscernible] and we have witnessed a period which is [indiscernible] side for you [indiscernible] that has led to [indiscernible]. But over a period of time, achieved some degree or price increases even when the contract did not think our customers have a [indiscernible].

Yes, there is -- I can't -- it's getting -- I can't hear you sometimes.

Is it better now?

Yes.

So we have been increasingly [indiscernible] passing on some of these price rises, we continue to strive to do so. However, there is specific to the overall margin profile, there is a slight reduction compared to what we had achieved. And we are hoping that in the next quarter or so, will come back to more in line with what we have achieved a year before. I don't know if -- if you're going, I can [indiscernible].

Hello?

Are you being able to hear now?

Yes, again, I can hear you, sir. So as I said, I do hope that we would be able to success [indiscernible]. And also there's volatility, which we are continue [indiscernible] the project. In which case, the overall margins will improve further.

Okay. And right now, what is the effect on the margins because of this price increase on percentage terms maybe?

We have seen some improvement in the overall margin...

This is operator. There is echo from your line. Please stay connected. I'll disconnect and call you. Ladies and gentlemen, gentlemen. We have our management connected.

This is better now?

Yes, I can hear you now.

Okay. So I think I'll just quickly on -- we should see improving margins here from -- I'm sorry for technical issues that we are having. I think the short answer to question is that we will see improving margins here from. And yes, there is still an impact of the increased prices, which will -- hopefully the impacts will be down. The quantum of impact, you can see evident from the year-end margin percentages, especially on the chemicals part of the business. Hello?

We can hear you, Aankur. We can hear you.

I don't know if...

Have we lost conference. Have I been heard?

Okay. So regarding the semiconductor numbers, that gets clubbed to the engineering section, right?

So the business, which we do with a particular industry depends on the product line that we are offering to that industry, to that engineering project. [indiscernible] engineering. We are offering our [indiscernible].

Okay. So semiconductor goes to -- it can go engineering or chemicals, right?

Yes. depending upon the product, which is being [ low ].

Our next question is from the line of Ishrat Khatri with Omkara Capital.

Just a follow-up. I wanted to understand what is the situation with the membrane plant? What kind of annual revenues do we book under the membrane plant because you mentioned we are also expanding capacity there. So what would be the utilizations?

Currently -- I think the echo is gone now. So it's probably more to do with the side of the previous caller. Anyway. So as far as the membrane plant is concerned, we are currently working at well over 90% capacity utilization. Expansion is on, and we should see the implementation of that expansion by the [indiscernible]. So we'll have that extended capacity online.

Okay. So is it safe to assume that we book about INR 80 crores to INR 90-odd crores of revenue because I remember at 100%, we were expecting INR 100 crores to INR 110 crores of revenues from the membrane plant, right?

So we would be looking at somewhere around INR 60 to INR 70 crores with 100% utilization on a 2-shift basis. and we will now be doubling that capacity.

Okay. Great to you, sir. So on the other projects that the company has received the IOCL project, the recent Morocco win that we've had for desalination. Would you want to throw some light on the new wins as well? And have we started execution for any of these projects?

These projects, the initial work has started, but the invoicing from these typically takes a little bit of a time before the first revenue start to get booked. So once the order is in maybe 2 or 3 months of time which would go for initial engineering and the work which would ultimately translate into [indiscernible].

Okay. And just 1 last thing. Sir, have we completed the execution of the [ Cairn ] project?

No, it's in the [ far end ] of execution.

Our next question is from the line of Sunil Kothari with Unique PMS.

Sir, my question is on dividend and capital allocation. We have done really good earnings and cash flow. Our dividend is really very small. So what's your thought process? .

I think the attempt from our side is that we use the internal projectior for as you know, like we are looking at expanding capacities on our chemical business, which would yield good returns to the shareholders in coming times. So that's 1 of the efforts and the other effort is to use additional cash available with the company to further expand our project and the engineering side of business. Again, as you would have seen from our balance sheet of previous years that during the period where we execute these projects, a substantial amount of investment is required, especially where the contract sizes are large. So as we strive to go into larger scale of executions, we would require additional capital in the company to support this growth, and we are hoping that with these increased revenues and the higher scale of operation, we would be able to create more value for the shareholders.

Fair, sir. And sir, second question is on chemical segment. We have listed very high on R&D center, so our second R&D center writing 2, 3 years back, we invested INR 30 crores, INR 35 crores. So what type of work we are doing and what the outcome, what's your thought -- I mean, the observation on the R&D investment we made and what benefits over a period we should expect about....

Ladies and gentlemen, we have lost line for Mr. Patni. Please stay connected while we join him back in the call again. We have the line for the management connected Mr. Kothari, you can proceed with your question.

Should I repeat the question?

I'm sorry, Mr. Kothari, you have to, because I got disconnected in between.

Okay. So basically, what I was trying to ask is we invested some INR 30 crores, INR 35 crores on R&D. New R&D centers of 1.5, 2 years back. So I would like to understand what we are doing exactly, what are the benefits you see over a period, our thought process on R&D expenses and the efforts we are taking.

I would ask [indiscernible] to throw light on the exact quantum of investments which we made, I don't have a record of that off hand. But the kind of business that we are in, we need to continuously innovate and bring out new products. That is core requirement of our business and also propels our ability to maintain margins at a level which is better than what otherwise is available for commodity players. Therefore, an important investment for us to make. We have more than 100 people employed in our R&D efforts. And we continue to come out with new products as well as innovate in various ways to ensure that the competitiveness of the company's products is maintained testing.

Sir, my second question is on some, I think, a year back also, you confirmed that we are also planning to consolidate our Indian subsidiaries and some associates. Any progress on that?

Yes, there is a progress in the next quarter, we will initiate this merger exercise, which would involve more than 2 companies. And this is the first step of consolidating some of our subsidiaries. This first action would also be followed by more such consolidation in coming time.

Ladies and gentlemen, this was the last question for today. I now hand the conference over to Mr. N. M. Ranadive from Ion Exchange for closing remarks.

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, please reach out to our Investor Relations managers [indiscernible].

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.