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

Ladies and gentlemen, good day, and welcome to Ion Exchange India Limited's Q3 and 9 Months FY '25 Earnings Conference Call, hosted by Valorem Advisors. [Operator Instructions] I now hand the conference over to Ms. Nupur Jainkunia from Valorem Advisors. Thank you, and over to you, ma'am.

Good afternoon, everyone, and a very warm welcome to you all. My name is Nupur Jainkunia from Valorem Advisors. We represent the Investor Relations of Ion Exchange India Limited. On behalf of the company and Valorem Advisors, I would like to thank you all for participating in the company's earnings conference call for the third quarter and 9 months ended financial year 2025. Before we begin, let me mention a short cautionary statement. Some of the statements made in today's earnings call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management's belief as well as assumptions made by information currently available to management. Audiences are cautioned not to place 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. Let me now introduce you to the management participating with us in today's earnings call and hand it over to them for opening remarks. We have with us Mr. Aankur Patni, Vice Chairman; Mr. Vasant Naik, Group Chief Financial Officer; Mr. N. M. Ranadive, Group Head of Financial Planning and Risk Management; and Mr. Milind Puranik, Company Secretary of the company. Without any further delay, I request Mr. Vasant Naik to start with his opening remarks. Thank you, and over to you, sir.

Thank you, Nupur and your team. Good afternoon, everybody. It is a pleasure to welcome you all to the earnings conference call for the third quarter and 9 months ended of financial year 2025. For the third quarter under review on a consolidated basis, the company reported operating income of INR 6,905 million, an increase of around 25% year-on-year. The EBITDA reported was INR 754 million, an increase of around 7% year-on-year, while the margin stood at 10.92%. And the profit was INR 496 million, increase of 5% year-on-year, while the PAT margin was around 7.18%. For the 9 months ended for the financial year 2025, the company reported an operating income of INR 19,026 million, an increase of around 22% year-on-year. The EBITDA reported was INR 2,080 million, representing an increase of around 16%, while the EBITDA margin stood at 10.93% with a net profit of INR 1,450 million, an increase of 18% year-on-year, while the PAT margin was around 7.62%. Now let us take you through the quarterly segmental performance on a consolidated basis. In the Engineering division, the revenue for the quarter was INR 4,301 million, an increase of around 34% year-on-year. The EBIT for this segment was INR 257 million, an increase of 7% year-on-year. The increase in turnover was largely due to the improved execution of some large EPC contracts. However, the execution of the UP Jal Nigam contract remained muted. The segment saw a modest order inflow during the quarter and the domestic inquiry bank remains steady. At the end of the Q3 of financial year '25, the total order book for the Engineering division stood at INR 3,405 crores. Coming to the Chemicals segment, the revenue for the quarter was INR 1,993 million, an increase of around 6% year-on-year. The EBIT was INR 523 million, an increase of 6%, while the segment continued to show improvement in both turnover and margins. For the Consumer Product segment, the revenue for the quarter stood at INR 772 million, which has increased by around 23% year-on-year. The losses for the quarter was INR 29 million compared to a loss of INR 15 million in the same period of the previous year. This segment continues to witness consistent turnover growth driven by greater penetration and acceptance of the company's product profile. With this, I conclude the opening remarks, and we can now open the floor to the question-and-answer session.

[Operator Instructions] We have our first question from the line of Deepak from Sundaram Mutual Funds.

So sir, first on Engineering. So this quarter, we had a good execution, which led to that 34% Y-o-Y sales growth in Engineering, but our new order inflow was a little muted as compared to previous quarter. So could you please highlight in an Engineering project in both domestic as well as international market, from which sector are we witnessing more order inquiries? Is it the core sector like steel, power, oil and gas, which are typically larger size order? Or is it the smaller ticket size from various other sectors? I mean I just wanted to understand from where are we seeing more visibility and conversions?

Sure. On a global level, it is across the board. But yes, the inquiry book that we carry would be heavier on the core sectors. Even in terms of order conversions, it is across the board. The bigger ticket ones are -- have not seen much of a traction during the current period. That's why you see that the order book per se has not built up that much. But on the inquiry book, the concentration is across the board, but as also the core sector.

Okay. And sir, any update like, for example, any order inquiries we're getting for Sunrise industry like data centers or semiconductor because there's a lot of traction which is happening there.

Yes, there are several under discussion on these sectors. The green hydrogen piece, the biotechnology piece, the semiconductors, the data centers at all. And we are certainly expecting that in the course of the next few quarters, we will see a good flow of orders from this.

Okay. And sir, now coming to Engineering margin, so this quarter, we -- on Y-o-Y, we saw a 150 basis point decrease in the EBIT margin. Could you please elaborate on that? Means are we sacrificing the margin to fuel growth? Or is it that the competition intensity is becoming higher? Or is it more to do with higher execution of that one onerous order, which we spoke about in the last quarter? What is happening there from margin front? And for the whole year as well as Q4, means what is the revenue and EBITDA guidance -- margin guidance are we giving?

So there are 2 impacts which I can talk about largely. One is to do with this contract, which you just mentioned about. That continues to have an impact of roughly 150 to 200 basis points and upwards on the overall Engineering revenue. That's depressing the margin quite a bit as also the mix of project that keeps changing from year to year. In some years, you have -- the mix favors a slightly higher margin. The other years, the mix may favor slightly lower margin. But that impact is also there. But the primary reason for the depressed margin numbers is that it's...

Okay. And sir, for this FY '25 and, let's say, next year, what is our guidance in terms of Engineering division sales growth and margins?

Engineering should see 15% to 20% growth. And in terms of margin, unfortunately, because of the way things have been and as far as we can see, we will be lower than the last year kind of visibility that we have that overall dip should be in the region of roughly about 1 percentage point.

Okay. Okay. Got it. You are talking about FY '25, right, versus FY '24?

Yes.

Okay. Got it. And sir, coming to Chemical division, so that Roha project of INR 400 crore, could you please elaborate of that INR 400 crore plant, how much was spent until December?

I'll ask Vasant to fill in on that, please.

Just upwards of 50% of the total project cost has been spent as of December.

Okay. And that is including both the actual capacity as well as backward integration, right?

Yes. I mean the INR 400 crores includes the backward integration part also, so...

Okay. So sir, the time line of that commercial production in Q1 of FY '26, that remains intact, right?

Yes. We are expecting Q1 with the possibility of switching to Q2, but thereabouts, not much more.

Okay. Okay. And sir, let's say, optimal utilization from this Roha plant, what could be our ROCE profile whenever that happens, 3 or 4 years down the line?

The overall margins that we have been looking at from the Chemical division that you are -- that visibility is very much available. And as we have been indicating, the asset turnover that we expect is on a figure of INR 275 crores, roughly 2.5x.

Okay. Got it. And sir, 2 questions I have for Vasant sir. Sir, because now you indicated 50%, a little over that has been spent for this Roha plant. And if I recall correctly, 20% was supposed to be financed through internal accrual and 80% was through debt, right? And since we have spent more than 50%, and -- but our interest outflow seems to be very flat. So what explains that? Means is more of the CapEx has been funded through internal accrual rather than debt, which was initially envisaged?

No, it's not the case. Our contribution for the total project remains at 20% of the project cost. But since the project is not yet commissioned, the interest expense is getting capitalized in the books. So as and when the commercial production starts, it will get reflected in the financials in the P&L.

Okay, okay. And sir, one last question from my end, this one bookkeeping question. So I have noticed in several past years, the Q4, the tax rate suddenly drops from, let's say, 27%, 28% to around 22%, 23%. Can you explain why that happens in Q4 or every quarter? I mean this has been the trend since last 3, 4 years.

Are you talking of the consolidated numbers or the current...

Consolidated.

See, the consolidated numbers, the tax rate per se, you cannot really take that because it is a summation of the tax across the 21 subsidiaries and the group companies. It's not a percentage of -- so individual companies' tax still gets submitted. So it will not be a fair reflection to see at the totality level, the percentage.

Okay. So the reason for this drop in tax rate in Q4 of the last 3, 4 years, more to do with contribution from Indian operation? Means how should I look at it?

Yes, because generally, the fourth quarter, the domestic companies show a much better turnover as well as on the bottom line. So maybe that can be one of the reasons that can be attributed to the distortion in the tax rate.

We have our next question from the line of Mike Sell from Alquity.

I have 2 questions. Could you please give us an update on the ongoing litigation by about the IEEF subsidiary. I think there's been some progress in the quarter. And secondly, the onerous contract, when do you think that will be completed?

Let me first answer the second one. We are expecting this contract to run into -- likely to look at substantially completing the invoicing in the first half of the '25, '26 year. As far as the litigation is concerned, I'll ask Mr. Ranadive and Mr. Puranik to fill in.

Yes, the Enviro Farms matter, which is a SEBI-related matter. We have appealed the matter at Securities Appellate Tribunal and SEBI has filed a reply in the matter, and the matter is now listed for 10th February for hearing. SEBI has...

Do we think that there will be a resolution or this is something that could continue for some more years before we get to a satisfactory resolution?

Once the judiciary accepts our stand, the matter will end there.

And are you optimistic about the outcome? Or it could be either way?

Yes, we are always optimistic about the legal stand. But ultimately, the judiciary has to apply its mind and take a decision.

And if it goes against you, you can appeal further?

Yes, there is an appeal available at the Supreme Court of India.

We have our next question from the line of Chetan Vora from Abakkus Asset Manager.

Sir, you've mentioned that -- you told that legacy project, which is having a cost overall and will be getting completed by first half of FY '26. Is it right? Hello?

Yes, yes. It's going to spill into the next financial year, and we expect first half to be in the kind of period.

Okay. Can you quantify what was the size of that project and how much that has been completed and what margins we have made in that project?

As we've been mentioning, this is having a negative impact on the overall margins of the Engineering division. There is still some bit left for this to be executed. And that's why spilling into the next year in terms of impact. We have not been giving the contract name and the other specifics of the contract, unfortunately.

And would it be possible to highlight, okay, what went wrong in this project? And when it was bidded? And when we had got this power project, basically in which year? And why it has faced such a cost overrun wherein we have seen such cost overruns?

This was to do with the specifics of the site. Unfortunately, we did encounter significant overruns specifically on the civil side. This is roughly -- Vasant, please correct me if I'm going wrong on the period, but it's around 1, 1.5-year-old contract.

And it is a domestic contract?

It is a domestic EPC contract.

Okay. And can you quantify why this UP project is getting -- the execution is on a slower front wherein we had to complete -- we were supposed to complete this UP project by the end of this year, right, if I'm not wrong?

Yes. The project is facing constraints in terms of funding from the government. And as we would have -- we had spoken about this in the last quarter's call that there was an expectation of improved funding and speed of execution on this contract. Unfortunately, the constraint on funds remain as also relatively slow process of approvals and documentation, which is hampering the pace at which we have been able to invoice. We still remain hopeful that it would pick up pace soon, but that's not something I'm now being able to give you an accurate forecast of as to how quickly or how quickly the funding pace would improve and the other constraints will go away. However, hope that the second half, which is second half of this financial year, we will be able to invoice more than what we did in the first half.

Yes, but still it will be quite low because second half is anyways good vis-a-vis the first half seasonally. I would like to understand if the project defers in execution, what happens if there is a cost escalation next year. Whether we will be able to pass it on or we will have to absorb it?

We have got extensions from the government, and we continue to apply to the government for further extensions because of the way that the contract is getting extended. The impact of an extended stay certainly does have a play. We are not being able to bill while we maintain the teams at sites and the infrastructure is being retained. So that impact certainly cannot be negated. However, the overall margins that we -- on the contract remain within what we have been showing for this over the last couple of years.

And on the Engineering side, though this year, you are saying that the margins will be lower than FY '24. So -- and you said 100 bps lower, right?

Yes, roughly. That is how it looks.

And on the -- but on execution, we are saying that the momentum will be sustained on the execution side?

Yes. As I said, around 15% to 20% growth is what we are hoping to get.

And what about also the Chemical side next year, whether that capacity increase will be helping it out or whether we will be growing in the same rate in the range of 12%, 15% as what we have seen this year?

We are looking at using up that additional capacity over a period of 3 to 4 years. And therefore, there would be an increased rate at which this deployment of capacity will happen and its impact on our overall top line. But as I said, we will not necessarily get the entire year's benefit as the capacity gets commissioned in the first quarter and with a slight chance of slipping a little bit into the second one.

Right. And sir, we used to make the margins on the Engineering side on an annual basis in the range of like 9% to 10%. But since last 2 years, it has been 8-ish percent. This year, it will be lower than 8%. How do we see this trajectory on the Engineering side?

So there are a couple of things. One is to do with the kind of contracts that we get and the margins associated therewith. And as we have been speaking about this one rogue contract, which has been depressing the overall margins. Besides that, in general, we do continue to get good contracts on the international market. And those are at improved levels of margins as compared to what you see for the overall segment. As the ratios for these higher-margin contracts, both international and domestic, improved in the future quarters, I'm quite hopeful that the margin percentages will improve.

So next, my -- last question from my side. The next, you are seeing this on the project, which is facing -- cost overall will be getting over by first half of next year. So how do we see the margin trajectory for the next year as a whole for the Engineering side? This will be better than FY '25, it will be lower than or flat, similar to FY '25?

Hopefully, it will be better. However, I can't give you very exact guidance at this point of time. I hope that I'll be able to do that in the coming quarters. But my expectation is it will -- it's likely to be much better than what you have seen in the current year.

We have our next question from the line of Pratik Kothari from Unique PMS.

Sir, first question, again, on the UP project. I mean given the actual outcome is going much slower than what our anticipation was or what the earlier time line that we were anticipating. And I believe in the past, we were mentioning that we were kind of investing a lot in terms of manpower, et cetera, to kind of do this very quickly. So just one comment on then -- I mean, shouldn't this be hurting our margins as well, I mean, apart from the onerous contract? And also, second, this expectation that -- I mean if we get all the approvals or invoicing in line, I mean, we should be able to do this very quickly. So how easy or hard it will be for us to kind of ramp the execution up very quickly, if faster required to?

As I responded to the previous question also, yes, the continued deployment of our resources and the revenues or the invoicing not happening at that pace is having an impact. But again, as I mentioned that our overall margins remain in line with what we have been showing against this contract over the last few quarters. In terms of being able to ramp up or with the increased fund flow executed at a faster pace, we are very much able to do that. The only unknown is when this ramp-up of funding would happen and how we would get all the documentation and approvals at a faster pace.

Correct, correct. And sir, I understand this quarter, maybe your order flow were a bit modest. But in terms of from a domestic order inquiry pipeline, the conversion, et cetera, I mean, any -- do you see anything -- any stock change in kind of the conversation that you're having with your end clients from the domestic angle?

Yes. We are seeing a good flow of inquiries and higher qualities of inquiries in terms of the execution profile as well as margin profile coming from international market. And we are -- we remain very excited about the prospects in the near term, in the medium term from the international market. In terms of the domestic market, yes, the competitive intensity keeps varying from period to period. And we are hoping that soon enough, we should be able to get a few orders on the domestic front also.

Correct. And sir, last question on the Chemical. I mean we have been at this slightly under INR 200 crores range for the last 3, 4 quarters. And we have a large capacity also which will come in, say, in the next 6, 9 months. So just one in terms of demand, I mean, our plan to ramp this up. Even in our current capacity, our current facility, we have some capacity which is left. And then there's the traditional one, which is coming in a few months down the line. So just some thoughts, color on how do we plan to ramp it up.

There are several conversations in place with large consumers of the product. And we are expecting that once the facility is ready to produce, we will sign several of these contracts, which ensure that the pace at which we occupy this capacity is relatively rapid. We are also adapting the 2 plants to make sure that we would take the best use of the facilities available and modify the product mix coming out of each facility to ensure that overall, the maximization of revenue and profits can be achieved.

Correct. Sir, in terms of product approval or that customer kind of approving us as a company, that is all done and either taken care of. I mean it's just ramping up of incremental volume that they would place with us.

So the product approvals and -- to ensure that we are able to meet their quantity as well as quality requirements, that's a process, which is in some cases done, in some cases underway. And we are, therefore, hoping that by the time we execute this project in full and are ready for commercial -- commercialization, we will have several of these long-term arrangements in place.

We have our next question from the line of Aejas Lakhani from Unifi.

Mr. Patni, I just want to understand the consumer segment. We've not spoken about this in the call. So can you please qualify where is the growth really coming from? Is it coming from the commercial segments or the residential segments? And also, while a lot of this is product sale, how much of the support revenues is built out in this INR 300 crore run rate, which we are at today from a revenue standpoint?

There is a good mix of commercial as well as residential in this overall revenue that you see. Large -- or I would say, a significant portion is coming from the residential market as the kind of products that we have been launching of late, they are targeted at slightly more premium segments, which are flats, apartment owners, et cetera. In terms of the support or service revenue as a part of the overall thing, I would ask Vasant to share with you some guidance on it.

Yes. In the Consumer Products segment, the services portion will be in the region of around 20% to 25% range.

Okay. And is it fair to assume that the services portion has a significantly higher margin? But today, you're choosing to redeploy the product margins as well as the services margin in building out the business to your desired scale of INR 500 crores before you start to show any EBITDA in that segment?

Yes, we are deploying the margins back and investing in various places, including people to ensure that we ramp up at a faster pace.

Okay. And sir, any visibility that you can provide as to in terms of number of field force that you have put in place, touch points that have been covered, which gives us the visibility to reach that INR 500 crore number from the INR 300 crore number today that you're talking about?

We've not been sharing that data, but the pace at which we are increasing our field force or our reach into the market in terms of distributors, channels, et cetera, is quite rapid. And we would be several times of where we were maybe 2 or 3 years back. And we will continue to increase the pace at which we are expanding because, as you rightly mentioned, we are looking at a significantly higher revenue number than where we stand today.

Got it. Mr. Patni, next is on the overall margin outlook, and I want to understand your reason for a slightly better confidence for next year on the margin front. Because as I stand it and what you have said in the call, is the first half will be a drag on account of the onetime large project, which are hopefully to continue? The UP is continuing to drag resources and infrastructure. So there's a cost which were not getting compensated. And third is, as the new Roha facility sort of comes up, there will be employee cost, OpEx cost that we'll have to build ahead before the ramp-up really takes place. So our ability to really extract better margins for next year, could you tell me where you get the confidence?

So the question was on Engineering margins. And second, in terms of the -- this rogue contract that we've been discussing as well as in case of UP project, the expectation is that we will be able to increase the pace at which we are invoicing these and that would give us -- for UP projects, certainly, the margins would flow as we execute the project. And for the other project, it's related percentage as in the pie of the overall Engineering revenue would then come down. In any case, I'm not expecting this drag to continue right through the next year. So the remaining portion after this contract is exhausted, would give us a higher margin number compared to where we stand today. So that would hopefully be able to give us a slightly higher number than where we stand today. In terms of the overall company margin and the impact of Roha on -- in terms of interest and depreciation and all of that cost, that's to be expected. But we are also -- as we mentioned just a while back, looking to close several discussions with large buyers so that our capacity utilization in the first year itself is reasonably good and we don't end up creating a massive negative impact of this depreciation and interest burden.

It's very clear. Mr. Patni, could you just speak a little bit about the Portuguese Mapril acquisition that you have done? It's been some time. So could you just call out that how is it playing out? I remember from the call out then that it was primarily a channel to distribute to Europe. So have we made progress on that front? Could you just call out a little more on Mapril, please?

Yes, we've made progress. There are the subsidiaries now being used as a base to push all our products, Chemicals as well as Engineering. The response that we seem to be getting from the European market is a preference to have a European company rather than coming out of any other location that seems to be giving us the advantage that we were hoping for. And the pace at which we were expecting the Engineering side of business to pick up from that subsidiary. There, we are seeing good developments happening. Hopefully, we will be able to deliver a few Engineering contracts from that subsidiary in the near term. For the Chemical piece, there was an inherent revenue in that subsidiary when we acquired it, and we've been able to add volumes from our sales of resins as well as other chemicals during the period -- during the past few months. And we are also seeing a significant number of discussions with buyers in that region for further improving this volume. So yes, the acquisition seems to be playing out reasonably okay. We would have hoped for even better, but then that's something which we remain hopeful will play out over the next few months.

Perfect. And Mr. Patni, just finally, in the fourth quarter, you had called out for an overall revenue growth of closer to 15%, which would imply about INR 800 crores of execution in the fourth quarter, which is typically our seasonally the strongest quarter. So are we on course to achieving that?

For the company as a whole, we are looking at 15% to 20% kind of a number.

We have our next question from the line of Nishant Gupta from Minerva Global Capital.

My first question is in the Chemical segment, who are your direct competitors?

Chemical segment for resins, we compete against global majors like DuPont and there is Ecolab and then we are also competing against domestic competition, specifically Thermax, which is one of the larger manufacturers in India.

Got it, sir. Sir, for the bid pipeline of INR 8,648 crores, what would be a conversion ratio and the execution time line for that?

Please come again?

For the bid pipeline of INR 8,648 crores, what would be the conversion ratio and a typical execution time line of that?

We normally expect a conversion of 15% and thereabouts. In terms of the -- once we get the order, the average period of the order book tends to be between 2 to 3 years.

Got it, sir. Got it. Sir, one final question. The working capital days have been inching upwards. So what would be a moderate remission going forward? I mean that would be a reasonable...

I think in terms of the working capital increase compared to a few years back, the shift has been the quantum of advance that we've been carrying from the customers. And there were a few large contracts where there were significant amount of advances sitting in the books, which had made the working capital slightly lopsided. As we see the days of the various asset groups within working capital, I think this is relatively more normalized than what it was a few years back.

We have our next question from the line of Jolyon from Amiral Gestion.

I just have one question also on working capital. I noticed that on the segmental basis, Engineering net asset is kind of flat, which means that on a Q-on-Q basis, asset is flat, liability is kind of flat, which implies that actually probably the working capital for the segment has not come down despite the fact that we are supposed to collect some receivables for the UP project. Is this an accurate observation? If not, could you just help me understand maybe on the collection of receivables this quarter?

I'll ask Vasant to comment on that question. Please, Vasant.

In terms of the working capital days, what we have seen in the last 2 quarters, they are basically roughly at the same level what we have been seeing. And specifically coming to the Engineering segment, the new segment has grown by almost 36% on a year-on-year basis. And that accounts for the increase in terms of the absolute number of the working capital, which is deployed in the business. And specifically to the UP contract, yes, there have been some delays in the collection from the UP contract that was referred to in our earlier con call. But overall, the working capital days for the segment as a whole is largely stable at what we have seen in the September and the March level.

Okay. And maybe just a follow-up on the UP project. You mentioned there have been some delays in the collection of the receivables. When would that be resolved? And as we subsequently build more projects on the UP side, are we expecting to face the same number of days for collection of the bills?

If I understand the question, you are asking whether -- what is the possibility of recovery of the debtors from UP project? That is what you referred to, right?

Yes. That's the first part of the question.

Yes. The expectation is that in next month, we should get some positive movement on the funding for this UP project. And consequentially, we do expect then the execution of this contract to pick up in the coming months.

Okay. But if you were to execute the project in the coming months, so we'll start billing the UP government for the execution of the project. Are we going to face the same issue in terms of the fund not being released to us afterwards? Any commentary around that?

We do hope that once the funding resumes, our expectation is the funding should then normalize. But as we have seen in the past also, it is very difficult to predict the funding from a government project. So we're also being cautious as far as the execution is concerned. As and when the funding does improve, the execution will improve on this project.

We have our next question from the line of Rahil Shah from Crown Capital.

So just one question. Overall for the company, if you can share or reiterate the guidance in terms of revenue and EBITDA margins for FY '25 and FY '26? And this order book that you have around INR 3,400 crores for the Engineering as a whole, what's the execution period over there?

The execution period is between 2 -- roughly around 2 years and it's slightly more. In terms of the expected growth revenues for the year, we are looking at between 15% to 20% growth. And in terms of the margins, as we spoke about, we are expecting to take a hit compared to last year on the Engineering margin percentages. Overall for the company, I don't think we will be able to reach the same levels in terms of percentage as we did last year. We will be slightly -- we'll be falling slightly short of it.

Slightly short of the margins, you mean, right?

The margin percentages, which we achieved last year, we will be slightly short of that.

Short of that. Okay. Any -- so the 15%, 20% growth is overall for the company, right, next year as well? Are you targeting that?

'24, '25, 15% to 20% is what we are looking at. For '25, '26, I'm not calling out a number as yet. And for the moment, I think you'll have to look at our order books and the general trajectory of growth, but I will come out with more clearer thought and guidance on it in the coming period.

We have our next question from the line of Saket Kapoor from Kapoor & Co.

Yes. Sir, firstly, a clarification. You mentioned that the legacy order, which is dampening our margin, that spillover will happen until the first quarter of the next financial year and the margin dent will be on a hold basis to the tune of 200 basis points. This is what the conclusion is?

Yes, I was saying that this particular contract would spill over into the next financial year, roughly the first half of the next financial year. And the overall impact that we have seen of this on our Engineering margins is to the tune of 15 (sic) [ 150 ] to 200 basis points, slightly in that region and above.

And sir, out of the total revenue, which we have booked for the Engineering segment of INR 417 crores, if we take the stand-alone numbers, what would be a ballpark number, which would have constituted to the execution of the projects which you are talking about?

While we are not giving out the specifics of the contract in detailed breakup of the constituents of the revenue, however, as I mentioned, the impact is of -- 150 to 200 is on the overall Engineering revenue. So what you see for the entire Engineering segment 150 to 200 basis points of that.

Correct, sir. And sir, just to -- not to harpen more, but is this the project -- is the consent project being stalled right now and that is the reason it will take longer time? Or what is the reason why it will take another, I think so, 3 quarters to culminate or 2 quarters rather to culminate?

One of the reasons is that we are trying to make sure that we do as much as is possible to curtail the damage. And no, it is not stalled. We are committed to delivering all the contract and completed. But yes, we are trying whatever means available to us to make sure that if we can recover some of these costs, we will certainly make an attempt.

Okay. And one more question and then for the UP project, sir. Generally, what we look at whenever these size of projects are there, there are packages in which there are 4, 5 packages which are distributed in order to reduce the client specification risk also. So this particular project is also constituting other packages? Or are we the sole people managing the entire project?

For -- this is you're asking for the UP project?

Both ones, sir. This one, which is denting our margins and the UP project also.

So this is a large EPC footprint project, which is being executed by the customer, and we are delivering a part of that large project. Whereas for the UP contract, the government had given out clusters of villages for which we had to deliver a certain project and which had -- so a DPR was created and certain BOMs were made -- the bill of material was made against it. And we were supposed to deliver the material as well as the project. Of course, as the project gets executed, the ground-level reality of UP may not necessarily be right according to what the DPR was, and there are changes that we are seeing. But as such, for each village and the cluster, we are the ones who are delivering this entire piece. So there is no other -- we're not working as a subcontractor to anyone.

Okay. Because sir, when we look at the time and the unexecuted portion, it was INR 751 crore and this quarter, it is INR 730 crore, including the Delhi part, which you generally club in your investor presentation, that means there's hardly any execution that happened. Is that understanding correct for this quarter?

Let me ask Vasant to give you the numbers for the quarter.

And for the 9 months also, sir, what portion of the UP contract got executed?

For the quarter, we did INR 33 crores. And for the 9 months, we did INR 91 crores.

Okay. And the pending portion is how much, sir?

The pending portion is around INR 719 crores.

INR 719 crore. And sir, for this quarter, for March, what is the likelihood taking into account the -- yes, I'm concluding my friend, just a follow-up on that.

This we have addressed. We have qualified by saying that this execution is dependent on the funding which we get from the UP government. So our team is on the ground. So as and when the funding comes through, we do expect the increased traction to take place in the execution.

We cannot have any ballpark number for this quarter. Anyway, sir, all the best to the team, sir. We hope for -- hope to have a good execution quarter, sir. Generally, fourth is the best quarter. And all the best to the team, sir.

We have our next question from the line of Tej Patel from Niveshaay.

Just 2 quick questions. Number one is what portion of our Engineering revenue generally comes from the Industrial segment? And then within Industrial, also how much is ZLD? And a follow-up question would be, if you could just provide a brief outlook on the same on the Industrial segment, especially the ZLD. Has the traction increasing? Has the government taken any step probably which is increasing the adoption in the ZLD? I want this perspective, especially from the domestic point of view.

Let me answer the last bit first. The effort of the government has certainly been to improve the level of effort, which the industry or the government itself is making on the front of environment. ZLD is one of the technologies which government is trying to push, but there are also several other ways in which government is trying to ensure that the environmental consciousness and -- of the industry goes up. And the implementation of that and the monitoring of that has been improving over a period of time. You should expect that in times to come, the technologies, not just ZLD, others, which are focused towards improving the state of the environment, the state of water and wastewater has also the reuse of water from sources which were otherwise untapped. All of these would go up in coming times. In terms of the collective impact of all of this on the ecosystem of companies like ours, we do expect that there is going to be increased flow of opportunities from the government sector, the municipal sector as well as from the residential and commercial sector, which would all be required to go in for more and more stringent practices. So that's as far as that side is concerned. The split of the inquiry book and invoicing between government and the nongovernment, I'll ask Vasant to give it.

In terms of the split of the invoicing from the government orders in the total Engineering segment, it will be in the region of around 10% because as we have mentioned, the execution of the UP contract has been muted in this year. And in terms of the government contracts forming part of the total inquiry bank, it will be less than 5%.

Got it. Got it. And in the nongovernment part, I mean, are our major technology which we are deploying is currently ZLD?

No, ZLD is one of the components which we work on and, obviously, which is prescribed in some areas, but there are several, several more which are worked on. ZLD is one of them.

So is it correct to say, ZLD would be less than 10% for you as of now?

It varies from contract to contract and segment to segment. And it would also vary from period-to-period. So...

We have our next question from the line of [ Omkar Jahagirdar ], an individual investor.

I'm having 3 questions. Let me ask my 2 questions first. My first question is, as we are in the back end of the financial year, what Engineering business orders are we expecting in next 50 to 60 working days? This is the question number one. And question number two, regarding Chemical business. In the Q1 con call also, you said we are operating 65% to 70% of the plant capacity, and there is a headroom for Chemical business. But consistently, we are doing INR 200 crores of revenue consecutive 3 quarters. Why Chemical revenue has stuck at INR 200 crores, because there's still room for the plant capacity? So any specific reason for that? And can -- are we expecting Roha plant from quarter 1 onwards, INR 40 crores to INR 50 crores revenue will come from quarter 1 or it will start from quarter 2 only?

The Roha revenues should start from the second quarter where we still have to go through the final process of commissioning the plant. And once we have most of the things sorted out, we can then release a date. It could very well be the first -- the second part of the first quarter or it could be the second quarter. In terms of the overall -- the Chemical number -- Chemical segment number, I can tell you that we are looking to close the year with roughly around 10% to 15% growth. That's what we are expecting from the Chemical segment.

Sir, growth whenever you say, it's always Y-o-Y growth. I agree with you. Last time also I asked the same question. But overall, that planned capacity as of now, we are utilizing 65% to 70%. Is there a room to increase that capacity? Our capacity utilization will be up to 70% only for the current Chemical plant.

No, capacity utilization can certainly go up. And I have pointed out earlier also that we keep making modular adjustments to our capacities. And that is what gives a slightly different flavor to the mix and capacity each time that we would discuss this number. Therefore, we talk about the overall revenue numbers and growth rather than only look at that capacity number. But yes, there is a headroom available there, and which I have pointed out earlier also. As we expand capacity, we -- of Roha, for example, we would also be repurposing some of the existing facilities to make sure that we get a very good mix of revenues from both the plants as also optimally use the capacities to generate both top line as well as bottom line. So some of the capacities that we have are product centric. So in the entire plant, there will be several reactors, some of whom will be -- some of them would be dedicated to certain types of products. And therefore, the capacity utilization gets dependent on a specific product line rather than of the entire capacity as a whole. So that creates a different mix of capacity rather than an overall number, which is homogenous. So it's not a homogeneous number that we talk about when we say 65% capacity.

Ladies and gentlemen, this is all the time we have for today. I now hand the conference over to the management of Ion Exchange India Limited for closing comments. Over to you, sir.

Thank you all for participating in this earnings conference 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 IR manager at Valorem Advisors. Thank you, and I wish everyone great evening.

Thank you, sir. On behalf of Ion Exchange India Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.