ION Exchange (India) (NSE:IONEXCHANG) Q1 2026 Earnings Call

0:02 Ladies and gentlemen, good day, and welcome to the ION Exchange (India Ltd. Q1 FY 'twenty seven Earnings Conference Call. As a reminder, all participant lines will be in a listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Ms. Purwangy Chen from Valorum Advisors. Thank you, and over to you. Thank you. Good afternoon, everyone, and a very warm welcome to you all. My name is Purvangvi Jain from Valorum Advisors. We represent the Investor Relations of ION Exchange (India Limited. On behalf of the company and Valorum Advisors, I would like to thank you all for participating in the company's special conference call on reclassification of reporting segments.

0:58 Please note that the management would take questions on the reclassification of reporting segments from two p. M. To three p. M. And then the Q1 FY 'twenty seven earnings call will start at three p. M. To four p. M. In case the question and answer session on the declassification of reporting segment concludes earlier, we will subsequently move into quarterly earnings. Before we begin, let me mention a short cautionary statement. Some of the statements made in today's call may be forward looking in nature. Such forward looking statements are subject to risk and uncertainty, which could cause actual results to differ from those anticipated. Such statements are based on management's belief as well as assumptions made by and information currently available to the management.

1:45 Audiences are cautioned not to place any undue reliance on these forward looking statements in making any investment decision. The purpose of today's reclassification of reporting segments and 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 call and hand it over to them for their opening remarks. We have with us Mr. Ankur Patni, Vice Chairman Mr. Inderin Dutt, Managing Director and CEO Mr. Vasan Nai, Group Chief Financial Officer and Ms. Nikesha Sulanki, Company Secretary. Without any delay, I request Mr. Indermil Dutt to start with his remarks on classification of segments.

2:32 Thank you, and over to you, sir. Thank you, ma'am. Good afternoon, everyone and thank you for joining us today. On behalf of our Vice Chairman, Mr. Ankur Patni and the entire management team on the call, I extend a warm welcome to everyone participating today. As was mentioned, today's introduction has been structured into two parts. Because of the reclassification that has happened, which is an extraordinary event. The first question for the first one are, we would like to talk about the rationale and the strategic imperative behind the reclassification. And we already have uploaded a presentation for the reclassification, which I'm sure all of you would have got a chance to take a look at.

3:29 And we will spend one hour from two to three to take you through some of the pages of this presentation that has been uploaded. And then we will be happy to take any questions that you may have regarding that presentation. And that hopefully will conclude the first segment of our conversation. From 03:00, we will follow it up with a regular 1Q 'twenty seven earnings conference call, where we'll discuss our operational and financial performance under the revised reporting framework for the quarter just concluded, which is first quarter of fiscal 'twenty seven. So that's the broad direction in which we will follow. So I will request each one of you to refer to the presentation that has been uploaded.

4:27 And I will kind of cover it very briefly, giving an overview. And once that is done, and that itself will explain a lot of the questions that you may have. Any further follow-up questions, we'll be very happy to take an answer for you, okay? So I refer to the overview first page, where we've given the company snapshot where the company is into sixty two years of operation in 50 plus countries. We have one of the largest service networks in Asia Pacific region, about 200,000 plus worldwide installations, including 3,000 plus core industry projects with world class manufacturing facilities and assembly hubs in many parts of the world, totally committed to sustainability across continents.

5:26 The company's vision is to be the leader in our business, which is so vital to people's lives and the environment. As the next page will show our total portfolio of water and environment management solutions cuts across the entire water cycle, right from pretreatment to water treatment, which is both ION Exchange as well as membrane technology based. We also are into industrial wastewater treatment, recycle and zero liquid discharge. We also have applications for our products like special resins, absorbents, membranes, chemicals for various applications. We also are into sewage treatment, tertiary treatment, lush treatment. And we also have our offerings on the drinking water side with our zero B consumer products portfolio.

6:21 The next page captures the core offerings of the company, which is broadly categorized into 12 parts. This is, again, I think, one of the first times we are showing our company in this way. This is also very unique because we believe that we are one of the very few companies, if not the only one in the world who has under their umbrella, ion exchange resins, membranes as well as specialty chemicals. We also offer standard systems and plants, home water solutions and digital solutions, and we are applying those products and offerings into water treatment, ultra pure high purity water, wastewater treatment as well as zero liquid discharging services.

7:12 The next page, we've covered our capabilities. We talked about all of them. So across the product offerings, we are pretty much presenting every aspect of water and wastewater treatment and solutions. And then the next three pages of the presentation covers our solutions offerings. And again, I would say, in our solutions, we span across one of the widest portfolio of offerings across our original core solutions, which cover our pretreatment, water treatment technologies, condenser polishing, wastewater recycle, reuse, seized treatment, liquid discharge and home water, which typically has been the base and the core foundations of solutions that the company has been offering for the last sixty plus years.

8:05 Over the last few years, the company has moved into the advanced solution portfolio, where we offered our solutions in seawater desalination. We have seen those projects we have done in various parts of the world, including in Morocco in the last couple of years. We've also got into ultra pure water. A lot of questions have been asked in the past on our ultra pure water solution that we've offered in solar and also in semiconductor, Mohali quite some time back. And then our solutions on the fiber side in high purity water. We've also got into technologies on advanced oxidation for wastewater treatment, for produced water treatment and our new applications in applied ion exchange and wellness solutions of hydrogen water and alkaline water on the wellness range for the zero B product line.

8:56 In addition to that, the company is currently working on emerging solutions, which are the latest areas of focus on water, wastewater treatment and resource recovery across the world, whether it comes in brine valorization, in lithium extraction, in destroying whatever chemicals are PFAS, not only in terms of PFAS treatment, plus also absorption and destruction using various technologies, including form fractionation. The company is also going into new energy solutions, which is into high purity water for electrolyzers for green hydrogen applications and also offering integrated electrolyzer and BOP solutions.

9:42 The company is also geared up to offer solutions in semiconductor as well as for data centers with cooling water treatment solutions, high efficiency auto and softening systems and also looking at technologies like direct liquid cooling. And then the all encompassing area that the company is working on is a digital solutions and portfolio, where we are trying to offer IoT enabled smart products and offerings and allowing our customers and our access to both be monitored, connected, analyzed as well as optimized for predictive future monitoring. In terms of our global presence, we are present in certain 50 plus countries.

10:29 30% of the company's revenue come from our international markets. We have 14 global manufacturing assembly and assembly facilities with 200,000 plus installations. The next page talks about all our project locations. So it just shows that apart from India, the company is present in many markets across Middle East, Asia Pacific and in various parts of Africa. We've also given a quick glimpse of our manufacturing facilities. You could see all our facilities, both in India as well as overseas in those subsequent slides, it is our resin manufacturing plant in Angleshwar.

11:14 The new plant, this is our first visual. So the new plant we talked about Roha quite a bit, but this shows the a glimpse of the resin plant that has come up in Roha in Maharashtra. It also shows our membrane manufacturing center of excellence in Goa, our specialty chemicals plant in Patanjiru in Hyderabad, which is our mother facility for specialty chemicals. And then we also have our blending facilities in Saudi Arabia in Zama, which is operational as well as in MAPFRIL in Portugal. Our standard plants are there in Hosur, in Varnagoa, in Wada, Maharashtra, and we have large assembly centers.

12:01 One of them is in Palasti in Maharashtra and smaller assembly centers in Sharjah, in South Africa, in Indonesia and Bangladesh. Innovation is core of the company. The R and D facility of the company was founded in 1965 with 50 plus patents till date and 100 plus products launched. This is India's one of the oldest water focused research center and working across all technologies of water treatment and wastewater treatment, including resins, chemicals, membranes and focus on offering sustainable solutions for industries and communities.

12:48 We've also given a glimpse of some of our marquee clients. Most of them are India focused. We have another similar page for outside India, which is typically not put up in this deck. And then given a glimpse in the presentation about our human capital, we are a team of over 3,500 plus professionals with competencies and capabilities across 15 plus countries with competencies in EPC and projects, over six fifty plus people in products and manufacturing, over 600 plus people in consumer and retail, which is our delivery product line, we have over 1,400 plus people and then services and chemicals and corporate functions make up the rest. In the next section, we have tried to talk about some of the investments that the company has been doing over the past six to seven years.

13:42 And that is one of the rationale, which has led to this reclassification of our reporting numbers. We've all been talking about the Roja facility, which where we've shown a picture earlier in some other part of the plant, where the capacity expansion for our flagship business, the ION Exchange has increased by 5x to the setting up of the Roja plant, which is currently commissioned and going to stabilization and ongoing production increase. It expands our conventional resin capacity to support future growth. It will help us increase our share of the global market from current to at least by 4x to get to double digit numbers.

14:28 This also establishes India's first non solvent resin manufacturing facility, which is again doing solvent based resin manufacturing, again, a first of its kind in India and one of the more sought after product lines globally. And it also is working towards establishing an integrated spent asset recovery plan, which will be a global first and will help us become a more circular driven sustainable company. So clearly, Roha gives us technology leadership, circular manufacturing, 5x capacity expansion and future radio operations. This along with our existing plant in our Glacier positions the company greatly. And this is some is I think one of the biggest investments that the company has made.

15:20 And we are going to very soon see the full results of Roha shaping up over the next few years as we have been talking about in past investor calls. The second area where we are building scale is on pharma resins. This is again happening in our. Our pharma resins factory is FDA approved and the capacity expansion plan is 6x. And there also, it will help us expand our product portfolio with the new uric acid cation and the acrylic anion resin grades. We enhanced every approved manufacturing facility helps us deliver products globally to our customers for the pharma customers. And also, this improves and gives us a much more repeatable, strengthened response future ready process and product line with pharma resins, which is currently within our resin product line overall.

16:20 This helps us expand our portfolio of offerings, increases the capacity by 6x, helps in import substitution in India, where we can supply to many of the Indian pharma customers and also allows us to be the third player only in the world who can enter to this kind of resin applications in the global market. The other area that the company has been expanding significantly is on building scale in membrane manufacturing in Goa, where we are putting the entire comprehensive range of membranes, right, from reverse osmosis, ultrafiltration, nanofiltration and MBR membranes in production.

17:06 The company also got into a tie up to get this full range with man and human for our ultrafiltration PVDF technology. And overall, the plan is to have a 3x business growth over the years. And this kind of a range that we are building in membranes in facilities, our second plant is coming up, will be the only manufacturer in India to have the full range of integrated membrane facilities in the country with our own casting and coating lines, with our hollow fiber technologies on U. S. And with our strategic partnerships with man and human. The company is also building scale on the standard systems portfolio.

17:55 And all the three factories across Osoor, Goa and Wada have investments being made, where capacities have been expanded multiple times. Both our membrane business and our standard plants business is a part of the industrial products portfolio. So that shows that the on the industrial product side, apart from consumer products, the company has been slowly increasing scale and building capacity and expanding the portfolio. And we believe that both the center systems business as well as the membranes entire product portfolio will help us significantly ramp up our industrial products range, which has so far been clubbed within the engineering segment of the company.

18:44 The other area that the company has been working on is on building skills and services, where we having had already 200 plus operation maintenance contracts, we have a significant reach. As I said in the beginning, we have one of the largest service network in the Asia Pacific region. We have 30,000 served, the Pan India presence. And also, we are moving towards more of boot, rental and water as a service solutions. So all of this will help us offer a comprehensive ring to ring service offerings in the water and the wastewater segment, both in India and overseas. Case in point was the order that the company won in Oman with Petroleum Development Oman, which was a comprehensive twenty year O and M contract concession that the company will be executing.

19:41 And that is how we are trying to build this service portfolio significantly across geographies, across the offerings and across the solutions given. The last part of building scale, we have witnessed that is through our below the home water solutions range, where we have been growing at a significant rate of 30 odd percent, 30% plus. We have been expanding with our product portfolios from filters to purifiers, to lab water purifiers, to water softeners, to on the go purifiers, heat pumps. So the range keeps on growing across 700 plus cities being covered, 2,000 plus Indian engineers and a Pan India presence. And we are also expanding into the adjacent markets like Nepal.

20:36 We also are exploring how we can expand into neighboring markets like Sri Lanka and Bangladesh. So with all of this, our current reporting was into engineering, chemicals and consumer products. And in the past, we have talked mostly about our engineering business. But what you'll find is in the new reporting system, the engineering segment has been broken up into treatment solutions, industrial products and life cycle services. All of these three are very important for us. In the presentation, you saw that across the treatment solutions range, right from core solutions, they moved on to advanced solutions and also getting the emerging solutions of resource recovery, lithium extraction, new energy, all of these are very important.

21:27 And the company is already positioning itself to be able to get a significant share of those business from both Indian as well as global markets. We talked about how we are expanding and how we've invested in our product portfolio across membranes and standard plants, and that is where we'll be able to show you progress for the Industrial Products segment going forward, the stand alone segment. We also talked about how we are building our scale in services across geographies, across the portfolio, across technologies. And that is why we wanted to share our Life Cycle Services business segment and report that separately for you. Our chemicals segment continues the specialty chemicals.

22:15 The composition remains the same of industrial resins, pharma resins and specialty chemicals water treatment specialty chemicals and also process chemicals. And the consumer product segment remains the same. Only the institutional product line has moved out of the consumer segment towards industrial products. So that's the classification we have done. Again, emphasizing the fact that the company is much more beyond chemicals, consumer products and engineering that beyond EPC and projects, the company is moving pivoting more towards treatment solutions, advanced treatment solutions, emerging treatment solutions into membranes, standard plants and products and also into life cycle services, offering the most comprehensive range of life cycle services. So this is how the current and the new reporting segments are structured.

23:12 This page, for those of you who can refer to our presentation, will give you a very good clarity of how we were reporting the businesses earlier and how we are starting to report the company from this financial quarter. And the next page covers a little bit more of the reporting segment. It's again a classification of what we've talked about in the past few pages. So it just again shows all of the readers and those on the call how the treatment solutions, industrial products, life cycle services, specialty chemicals and the consumer products offerings are stacked up. The next few pages just talk about how the breakup of the businesses has been.

24:00 And again, some of this, we can even cover as part of the Q and A. But you will see that our Treatment Solutions business has grown significantly year over year. If you look at the CAGR over the last four years, the Treatment Solutions business has grown at a rate of 23%. This just shows our continued focus on this segment, that kind of our mothership. That's the strategy for us to get into projects. And then we execute through services. We execute through specialty chemicals, which are all required to run those plants. We execute through membranes. Here, the EBIT has gone the other way, and we have discussed about this at length in many of our investor calls where, as we have talked about some legacy projects, we talked about UP project where the profitability has taken a hit, which is what you typically see in this patient treatment solutions.

25:07 On the industrial products, again, you'll see it's a 9% CAGR, a little bit of softening in the last year. Otherwise, the numbers would have looked far better. There were some impact because of West Asia crisis. We could not keep up on the same rate of growth. And again, a little bit of softening due to some investments in the last year, but there also the CAGR had grown for the last four years, slightly in the current year, which we expect to overcome in the current financial year. On life cycle services, I think a good story. 10% growth in revenue over the last few years, now that we're reporting these, the number segments separately, but a very, very positive healthy 21% growth in CAGR over the year over the last four years. Specialty Chemicals and the consumer products, those two segments are the same as we reported in the past. So nothing new to talk about, except the fact that both specialty chemicals has recorded double digit growth in both of their top line revenue as well as on the profitability EBIT. While consumer products has been a very strong growth story.

26:20 However, the profitability has been down, and we have talked about how our plan is to come back and breakeven in this financial year. So with that, I come to the end of the overall presentation. I wanted to give a voice over to the pages that you would have seen, and we'll be happy to take any questions that you may have around the reclassification beyond what I talked about just now on the call. Thank you, sir. We will now begin the question and answer session. The first question comes from the line of Subhi Gupta with Greenlane Asset Manager.

27:35 So my first question is regarding the Portugal market. After our acquisition there, how is that market sort of progressing? And what is the market scope that we see? Also, you could just comment on the margins that we would be getting from those market, that specific market? Thank you. Sorry, if you could repeat, ma'am, which particular market segment you're talking about? Portugal. Spain and Portugal, we had this acquisition. So we were going to expand in Europe. So just wanted to understand margins and scope of expansion there. So that business was acquired about three years back, and I think we have completed the integration of that product line.

28:31 And I think we have got teams well trained on ION Exchange products and solutions offering. We see good potential of growth for all our resins, chemicals, membranes portfolio. We also have participated in pursuits on the on the solution side of the business, and we have got also a project that we are executing right now. Clearly, there is more potential than what we have in mind so far, and the team continues to work to see that the full potential of growth and opportunity that exists in the South Europe, Iberian market as well as in the North African market can be catered to also from that entity are fully leveraged. The company continues to see significant upside opportunities from that acquisition for ION Exchange, and we continue to work towards that. And we believe that the success from those countries, those geographies in the next two to three years will be significantly more.

29:44 Sir, if you could just quantify the margins in terms of like what is the incremental margin that we would get from there? Is it similar to our profile here? Or will there be a difference? So we typically, ma'am, don't talk about specific margins for particular geography. But I would say that, again, various segment to segment. We talked about the five segments. The four of the five segments are present there, they're not the consumer products business. That varies segment to segment. But overall, the margins will be similar, if not better than what we see in India. The next question comes from the line of Prateek Hothari with Unique BMS.

30:40 So my first question regarding this reclassification. If you can just go through what led to this? I mean why this reclassification? Any corporate action per se that you expect on this? Just thoughts behind doing this. Look, it's just that the engineering segment was not reporting the full giving the full color of what was inside engineering. And it was, to a certain extent, construed as projects business, but we had a very robust products business within it. We had a very growing services business within it. And then our pivot towards more solutions and advanced emerging solutions offerings.

31:26 So that is what we wanted to show separately because at a console level, what we were able to share with you was a combination of these three segments that were reported as engineering. Now I think our those interested in the company will be able to see all these three aspects of the company in terms of the growth of life cycle services as repeatable revenues, life cycle revenues, the growth of our industrial products portfolio beyond the consumer products that we have been reporting and then the growth and performance of our treatment solutions business. Correct. Any thoughts on kind of listing this separately, I mean, three different divisions that we have or any activity in there? I mean, any such thought?

32:17 Right now, there is none. Right now, I think the objective is only to offer more transparency to share with you the investments because we've only talked about investments largely made in Roha, but there have been investments made in other parts of the company. And we want to share with you very openly and transparently the growth that we anticipate and expect to see in these segments that we have not talked about. We believe that with this reclassification, about 60% of the company will comprise of products, chemicals and services. And the treatment solutions will be about approximately about 40% of the company. So a lot of work, a lot of investment, a lot of management bandwidth has been spent over the last five to six years in growing the products, the specialty chemicals and the services portfolio of the company.

33:12 That we feel are now substantive enough to stand on their own seat and be reported separately as individual segments to our investors, while continuing to maintain our focus on treatment solutions as new technologies emerge, we want to be on the forefront of frequent solutions as well. But right now, to answer your question, there's no separate corporate action plan. It is more at offering more transparency and more perspective and color of how the company is performing across these segments. Thank you for that. That's highly appreciated. Sir, one clarification on this RoHAB slide, which is, I think, Slide 23. We have said 5x capacity expansion. So is this for one specific product? Because our understanding was we are doubling the regions capacity.

34:03 So this if you can clarify this 5x number. So this is a global number. Okay. So we are talking about actually becoming a bigger global player in the market. I just say in our broader numbers, could look at based on how you define the global resin market. But what we're trying to say is we expect through the Roha plant and the ongoing Ankleshwar plant that we are aspiring to take 10% of the global resin volume, which I think is a fairly big aspiration from that perspective. No, the point again, sorry, but coming back on this. So last year, we had called out about INR 500 crores of resin revenue in our chemical business, roughly give or take.

34:57 So when we say 5x capacity expansion, what does that mean? No, sir. That means when I said that this is not just for Roha, this is for Roha and Glacier together for the entire resin business. We believe that with all debottlenecking done and the final capacity that we may get, we will end up with the total resin capacity across both the plants will be 5x together of what we had in the early in the past. Just to reconfirm, so INR 500 crores of revenue that we did last year, what we are seeing is post this debottlenecking Rova, we can do INR 2,500 crores? No, no. So that was for the entire Chemicals segment. Our Chemicals segment includes the Specialty Chemicals business also.

35:46 Correct. Last year, Specialty Chemicals, we reported about INR 900 crores of revenue, give or take. INR 500 crores of that was resins, 400 crores was water chemicals. What is the... We have not given a segment breakup like that, But what we are saying is that this together, this gives us a significant capacity expansion post debottlenecking to be able to go after that market. I'll take this offline if required. And second on this quarterly results, do we come back on that year? Should I ask that now for the... We'll come back. That will be at once this particular segment is over, then we will start that segment. The next question comes from the line of Rahul with Stratham Oakmont.

36:44 Hi. My question is more regarding the rebranding of the chemicals division of Specialty Chemicals. So with this Roha plant targeting utilization ramp up, are the resins produced here moving up the value chain? And like are they pharmaceutical grade resins or the ultra pure water resins for the semiconductor and EMS sectors? And what would be the ballpark margin profile for them? And what's the time line for securing this high margin certifications required for these new lines? That will be all. Yes. So in a way, I think your assessment is correct at a broad level. As you all know that the reason for the Roha plant was that we were capacity constrained in the first existing plant, Madhya Prada, Mangkhleshwar.

37:35 And as a result of which, now with Roha coming in, that gives us a lot of additional volume by which we can not only take care of our core bread and butter business that we have a significant high global demand, But this will also allow us to delve into more specialty resins for special purpose applications. You mentioned a few of them. There are other applications as well that the company would like to go after, which are typically more higher margin and coming out with higher quality and higher specification grade product lines. Also, at the same time, this will allow us to the expansion in the pharma product line also will give us more specialty grade resin product lines on the from pharma application standpoint.

38:32 So across the board, we are moving more towards higher specialty application grade while continuing to keep the bread and butter core volume intact. And that is why we felt that it was possibly time that we classify our chemicals away from commodities to more specialized application offerings. So what's the ballpark margin number that we can expect in the medium term from this business? And how much revenue as a percentage of the consolidated revenue can we expect in the next two to three years from this segment? Right now, we are not in a position to give you a breakup.

39:18 I think those will become evident as the quarters unfold, and you will see the performance and the percentages as the Roja plant comes up, as we move more standard volume to Roja, as we move more specialty volume to Uncle Shepherd, those will become evident. And at that time, we can cover it with more specifics. Right now, it's a bit premature to talk about those percentages at this point in time. Right. And we've also separated our industrial products from our treatment solutions. So does that mean that the Industrial Products segment will scale independently like do we expect to become an OEM supplier to other EPC contractors who might be competing with our Treatment Solutions division?

40:08 We already are, but we believe that it can be more. As I said, we have significant investments made on the standard plants and systems. We today have four manufacturing locations of scale, and they are small assembly locations. As I said, our second membrane expansion plant is coming up in our adjacent plot in Goa that will manufacture the UF range of products, the MDR range of products. So clearly, we see that this segment, this enough traction, enough activity, enough revenues, which is kind of now helping us set this up in a separate stand alone segment vertical. And we definitely believe that this has a very, very high promising future.

41:00 We believe that the products portfolio will grow in revenues, both in India and outside. Our overseas teams are significantly getting strengthened to take these product lines outside India as well. And that is where the company continues to focus on building a strong industrial products portfolio, a strong specialty chemicals portfolio and a strong services portfolio, while continuing to look for higher end advanced and emerging solutions in wastewater and water treatment. The next question comes from the line of Costa Gupta with Kamana Please go ahead.

41:47 Yeah, hi. Thanks for taking my question. So it kind of ties up with your non solvent capacity increase in your Specialty Chemicals business, but I'll just frame it in another way. A lot of companies are coming up who are trying to create resins for water treatment, which does not which are not polymer based. They're more carbon based than other material based because they say that the polymer based resins pollute the worsen the water in other aspects. And they say that the countries like Europe are thinking of banning these type of resins in a whole.

42:33 So what is your I mean, given that ION Exchange has a large exposure to polymer based resins, What's your response to that? And is this company also diversifying out into other based resins? So ION Exchange is, as I said, is one of our first businesses. We continue to see a significant amount of demand and requirement for those regions in the market. What you're referring to is the overall concern globally, especially more in developed markets like The U. S. And Europe around how to deal with residual chemicals, especially very tough to treat chemicals, which refuse to go away and don't get destroyed.

43:32 And that's why they kind of get into this forever chemicals or PFAS category. There are companies already working. I had talked about this in our emerging solutions portfolio, where in terms of both absorption through resins and also destruction of those chemicals, we are coming out with technologies which will help us do that. And there are very few companies in the world who can offer that in the market, and we would like to be one of them. Apart from that, we don't right now see a significant threat to our polymer based resin business. Having said that, we continue to look at various basic chemistry of seeing how these applications can be made.

44:20 But we believe that with the focus that we are putting in on destroying, absorbing and destroying assurance, we'll be able to cater to a lot of the concerns that today developed markets in U. S. And Europe have around this polymer chemicals. Okay. So what you're saying is that you are the company is actively also working towards creating a portfolio of nonpolymer base on a portfolio that tackles this issue of creating residual impact? Yes. I would say the second. I would say that we are working to solve that problem of forever chemicals, which is extremely big if you look at markets and just Google PFAS and look at markets in Europe and USA.

45:14 It's an extremely big problem. And we believe we have some part of the solution. We are putting the rest of the solution in place so that we can offer this to our customers. So that I think the second way you frame my response is aligned to our thinking. Okay. And just last question. So on your Treatment Solution business, your profitability even in this presentation you put out, your profitability CAGR over five years has been pretty discouraging. Your EBIT has fallen from INR60 crores to INR27 crores. I agree you've grown top line at a healthy double digit revenue. But I'm just trying to understand what are the what's the landscape now? As in what's happening?

46:01 Why is this performance been so bad on the profitability front for five years now? And how do we plan to move this back towards higher profitability? Is that the plan even? Or are we focusing on other areas in this segment will continue to show weak profitability? So it's a mix of both. And we have always called out in past meets and calls that this segment is currently facing headwinds due to some large value legacy projects that we are continuing to execute and finish. I think we have borne a brunt of that pain of those projects as is evident in these numbers. But they will they are kind of in the final stages.

46:48 I would not say final, but they are, I think, a significant part of the work already done. And so some of the numbers that you see are reflective of those. Having said that, we continue to look at ways of how we can improve the solutions business profitability, a, in terms of picking being selective and picking up projects, which are definitely much better risk profile, much better execution predictability in terms of improving and strengthening our solutions business from a further from a competency standpoint in walking away from difficult projects being a lot more selective.

47:36 And that's what the experience has taught us. You have seen us pick up projects of different nature, whether it is the Oman concession of interior, the fixed up or the recently announced win that we had from multinational customer for a project in The Middle East. So those are the profile of projects that we would like to get. So that is what we're trying to work on to improve the overall while continuing to maintain the growth trajectory. The focus on the treatment solutions business will not go away. We are working towards finding the right suits for our projects. What you also see us doing this presentation is to see how we try to move away from commoditized solutions towards more advanced and emerging solutions where there is value for technology, there is a need in the market, unmet need in the market is how, as a technology company, we want to offer solutions that are not available across the board and hence will come with a little bit of that much of premium.

48:36 At the same time, we continue to build on our other portfolio of products, chemicals and services. So that's the broad company response in terms of the headwind that we currently see on the solutions business, but a lot of work is happening. Unfortunately, some of these projects are large projects. You can't step away from it like you typically do on maybe a products deal. And that is where we have to grind it out, which we are currently doing. But as you see our growth happening on our industrial products portfolio, our consumer products portfolio, our services portfolio, our specialty chemicals portfolio, those are a lot less risky part of the company. And that's what we want to double down.

49:22 At the same time, work towards more higher end emerging advanced solutions that the world needs on water and wastewater solutions. The next question comes from the line of with IMS. My question today is, just wanted to ask about the North America business, the Americas and North America business and especially with the recent appointment of the CEO, Mr. Sanjay Sappra.

50:10 And also on the Water Quality Association certification. So just wanted my question specifically is, has this certification already started contributing to the revenue in the current quarter? And if so, if the management could kindly quantify this revenue contribution? And also looking ahead, how do we see the certification driving incremental revenue over the next two and three quarters? So good observation and good question. And while this discussion is primarily on the segment classification, but it's kind of related to one of the segments, so we'll try to give a perspective.

50:59 So the appointment that you talked about, referred to, is a part of our ongoing strategy to become more local in global markets. We've already while we kind of highlighted the appointment of our North America's leader, we've also our Americas leader rather, we also appointed a leader for our Asia Pacific business. We've appointed a leader for our Middle East Africa business, and we are in the process of appointing leader for our Europe business. So it's not an Americas effort alone. It's part of a very conservative effort to take the company global. And below these leaders have country leaders so that we can go after the potential market opportunities in the respective countries.

51:50 This plays well with the investments that the company has planned and has made, specifically with respect to the investments in our resins business, in Roja with the Roja plant, with our membranes business that is being made and also with our standard plant business because all of these product lines and offerings will be sold in most of these markets across the world, including the Americas market. These markets also require our products. We have local certifications to be able to meet the requirements of customers in those local market as per local stat regulations and the WQA certification in that regard for our business. For us to be able to sell in the Americas market, the WQA certification is a must, and that is what the company has gone and done. So yes, with the WQA certification, with our Roja plant commission, with our leadership team in places among these global markets, we will see an uptick on the businesses.

52:59 Based on which premise, the investment was approved. So this is as per the norms agreed and the progressive growth that we've already given in past calls. So we expect the growth to happen on those lines in those markets for the businesses that we are investing Right. I highly appreciate the detailed answer, but just if you could just give a quantification in terms of has the WQA certification contributed to the current quarter revenue? And if so, is the contribution? And also the growth you see with the WQA certification on and how aggressively are we targeting North America and sorry, The Americas and what is the growth in the quarters to come?

53:47 So the question on this current quarter will take in the call for the quarter. As I said, we would not be in a position to give a quantification, but we expect a significant part of our RoHA plant capacity utilization to come from overseas markets and specifically the North American market. So it's a significant assumption that a not a majority, but a significant part of the RoHA volume will be used to cater to the North American market growth. Thank you.

54:39 The next question comes from the line of Deepak with Sundaram Mutual Funds. Please go ahead. Yes. Thank you for the opportunity. Am I audible? Sir. Sir, I just want to double click on that pharma resin, which we spoke about at that Ankurishwar location. So when we talk about 6x capacity expansion, is this the expansion which has already taken place? Or you mean to say that from here on, we'll be expanding 6x in the next couple of years? So it's in the process. It is not as big as the Roha plant that we had to set up. It's in the process. The former resins are not measured by volume but value. And we believe that we have the necessary actions in being put in place to get this up and done in the next twelve months.

55:39 Okay. Sir, would it be possible to quantify like what we quantify in terms of Roha plant in maybe in cubic meter, what is it currently for this pharma resin and what it will be? And how much CapEx will be incurring in the next twelve months to expand this capacity by 6x? So we typically have not given a breakup. If you look at our past commentaries around the breakup of the industrial and the farmer regions, It's an FDA approved plant, but it is the capacity we are trying to grow. The CapEx is manageable. It's not so much the CapEx CapEx as to the knowledge and the technical know how that helps us unlock that potential and the value. And we believe that we are on course to get that done in the next twelve months.

56:33 And so the asset turn would be hello? Sorry? And sir, the asset turn would be similar to what we see in the Roha plant at around, I think, two to 2.5x? It will be quite more than that because it's a little bit of asset light investment more on technology know how and IP. Okay. Okay. And sir, would it be possible to call out as of FY 'twenty six, what was our revenue contribution from this Pharma regimes? No, we don't do that. As and when the segment grows, as you see, our entire effort of the reclassification is to become more transparent and we share more insights of the company to you. As and when we find that this segment becomes big enough to be able to stand on its own and report, we will do that. But right now, this still continue to be classified as the Specialty Chemicals segment.

57:26 Okay. And sir, one last point. So I noticed in your presentation, you had given a breakup of all the three segment, but somehow I'm not able to reconcile that with the actual reported number, which was earlier. So it would be helpful if you can provide actual number plus the interest segment, which could be related to all three segments so that at least I'm able match with the past number as provided? We will provide that to Valoraim. Yes, through Valoraim, we will be able to take. Sure. Thank you so much, sir. Thank you. The next question comes from the line of Sagar Parekh with Renaissance Asset Managers. Please go ahead. Yes. Hi, sir, and good afternoon.

58:12 My question was on this water treatment solution, basically. So I was just looking at your presentation, and I'm new to this company. So maybe my questions will be basic. But I wanted to understand on you have written ultra pure water and high purity water as your like as your solution that you offer. So do you all also have the capability to service the semiconductor industry, which is upcoming in India for the ultra pure and high purity water? Yes, yes. So ultra pure is more for solar and semiconductor and batteries and high purity water is a term that we associate more with pharma, biopharma, life sciences biotech companies. And yes, we have the capability to offer ultra pure water solutions to semiconductor companies. We have participated in some of the bids that have happened in the projects in the past couple of past, I would say, year plus.

59:12 And we continue to pursue. We have got good strength. In fact, we have picked up a small project of semiconductor application. It's still not in the public domain where we picked up a small project with a partner. So we're very much in that space. And this is our new space for the company. The company had done an ultra pure water project for Semiconductor Limited Mojali, SCL Mojali quite about thirty years back. So a lot of that knowledge decided in the company. But however, with the advancements in chip manufacturing, we've had to upgrade the technology of ours, work with a partner, and I believe we have the best technology to offer for our customers in India and abroad.

1:00:00 So in terms of size, for example, let's say, the start up plant is something which is INR 90,000 crore kind of CapEx. So within that, what would be the opportunity size for us that we can cater to? Yes. It's a very specific one. I wouldn't want to. And again, that varies plant to plant. All I can tell you is that the semiconductor fabs are extremely dirty industries. So either require very, very high quality source water. That, again, depends on the kind of water you get. If you get municipality water, that will be one investment requirement. If you get sewage water as, again, of the industries have been talked about to get, then to treat that and to make it ultra pure water will be another investment level.

1:00:48 And then the wastewater that comes from these bags also we need to get treated. And even those require very large treatment facilities. In fact, the investments required to treat process water from these fans is bigger than what you need for our setting of ultra pure water plants. So significantly, water gathers, significant water degraders and all these spares will require a significant amount of their plant CapEx to go into water and wastewater treatment. And this business would be order book driven, this entire treatment solutions business? Yes. And these are all customized plans. So unless and until it's like our large projects depending on the size of the plant.

1:01:37 So yes, you'll have to it's like any other project pursuit that we do. So just my last question on this entire Treatment Solutions business piece. So you have about INR 1,100 crores kind of revenue last year with INR 27 crores of EBIT, right? And their margins have been coming up. And you have alluded to the fact that there were some large legacy projects that are getting over now. But if I look at FY 'twenty one, 'twenty two, you did about 11%, 12% kind of EBIT margins on a 500 crores kind of top line, right? And now our top line has more than doubled, but our margins have come off. Now with this entire new space, which is coming up, which is semiconductor and solar, where we have our capability, do you think we can go back to like 10%, 11% margins with significant scale up in terms of top line?

1:02:23 Or do you think the top line will remain more or less in this range with some margin improvement? How should we look at this business overall? I think the business will see, first of all, I'll qualify your comment around the legacy projects that we have been seeing that while a substantive part of the project has been done yet, we don't quantify percentages, but yet a part of the a fair bit of the project is still left out, okay? So we should not I don't want to give a kind of a feeling that we are kind of out of the woods, we are not. But we grind through, and we should be out of the woods soon.

1:03:08 But the immediate short term, I think we still have to execute our commitments on this project. Having said that, the effort of the company, as I said, has been on three, four areas. One, we're very selective in what we pick up. And we have been very selective over the last couple of years. Other jobs that we have won also reflect a much better profitability profile that we have picked up, which we announced as well. Number three is to look towards areas which are more high-tech, more where there are challenges, where there are two technology providers and which is where the entire segments of advanced technical solutions and emerging solutions come into play. These are not easy, not too many companies in the world can offer on the emerging solutions side. We'll be one of the very few companies in the world who can offer resource recovery, brine mineralization, electrolysis, water electrolysis, polyethylene extraction, these are high-tech spaces.

1:04:09 And that is where we believe if you move towards that, polyethylene is the profile mix, while not reducing the focus on the treatment solutions portfolio, we should be able to improve the overall mix of the particular segment. Got it. Got it. Perfect. That's it from my side. Thank you. Thank you. Ladies and gentlemen, that was the last question. Now I would hand the conference over to the management for their Q1 earnings results. Hello?

1:05:23 Yes? Oh, yes, ma'am. So what is it? Sir, now I hand the conference over to the management for their Q1 earnings results. Good afternoon, everybody. This is Vasanth Naik. It is a pleasure to welcome you all to the earnings conference call for the first quarter of financial year twenty twenty seven. For the first quarter, under review on a consolidated basis, the company reported an operating income of INR $70.01 crores, increase of 20% year on year. The EBITDA stood at INR 32 crores, a decline of 49% year on year. The EBITDA margin stood at 4.54% and net profit was INR 3 crores, while the PAT margin was 0.44%.

1:06:18 Now let me take you through the quarterly segmental performance on a consolidated basis. Within our engineering division, we have now introduced a more granular reporting structure to provide investors with better visibility into the underlying business mix and growth drivers. Going forward, the Engineering segment will now be reported under three distinct subsegments, Treatment Solutions, Industrial Products and Life Cycle Services. The Treatment Solutions segment reported a revenue of INR $2.10 crores, increase of 14% year on year with an EBIT level loss of INR 17 crores. The profitability continues to be impacted by certain legacy projects. On the operational front, despite it to the GCC regions have resumed and are expected to progressively gain momentum.

1:07:04 Our focus remains on execution of the existing backlog while continuing to pursue opportunities across emerging segments and international markets. The Industrial Products delivered a strong performance during the quarter with revenue growing 14% year on year to INR105 crore. The segment EBIT margin increased by 145% to INR13 crore and as a percentage to sales to 11.89% from just under 6% in the corresponding quarter of last year. This was supported by a strong performance across the water treatment solutions and the membrane segment. Going forward, the growth will be supported by the expansion of our U. Membrane manufacturing capabilities, enhanced capacity for the standard plants and an increasing overseas presence.

1:07:54 The Life Cycle Services maintained its healthy growth trajectory with revenue increasing 28% year on year to INR 72 crores. The segment EBIT margin stood at INR 7 crores, increase of 22% year on year. The margin percentage was 9.92% as compared to 10.5% in the previous year. We continue to focus on scaling our O and M and consumable business while expanding our offerings across retrofit projects, both good models and digital solutions. Across these three businesses, our order book stood at INR 2,473 crores as of June 26, providing healthy execution visibility. However, this order backlog does not include the recent contract win of Hounde of around $52,000,000 which was announced post the closing of the quarter.

1:08:47 In addition, the build pipeline stood at INR9777 crores, providing a strong opportunity funnel for future order inflows. Moving to the Specialty Chemicals, revenue for the quarter stood at INR230 crores, an increase of 21% year on year. The segment EBIT stood at INR22 crores, reflecting a decline of 52%. Profitability during the quarter was impacted by the geopolitical factors as well as the Roa facility cost. As utilization of the expanded facility improves, we expect increased offtake from the Roa plant to support the business. Pharma resins and a higher contribution from process chemicals remain an important growth area for us.

1:09:34 Lastly, come to the Consumer Products segment. We delivered a strong top line growth with revenue increasing 33% year on year to INR112 crores. The segment reported a loss of approximately INR34 lakhs compared to a loss of INR 45 lakhs in the corresponding quarter last year, reflecting a modest improvement in the financials. Growth during the quarter was broad based across key product lines and going forward, we continue to see opportunities in the water softener market, wellness products and newer product categories such as the OTG. Overall, we saw double digit growth across all the five business segments during the quarter. While profitability was impacted by the pressures in certain businesses, our focus remains on improving execution, scaling our expanded capabilities, capacities and growing our recurring services portfolio and capitalizing on the healthy opportunity pipeline across the domestic and the international markets.

1:10:35 With this, we conclude the opening remarks, and we can now open the floor to the Q and Thank you, sir. We will now begin the question and answer session. The first question comes from the line of Sunil Kothari with Unique BMS. Please go ahead.

1:11:26 Hi. Thanks. Really great to hear a lot about the capability and the reclassification of the businesses. I would like to assume something more from Mr. Patni also, if possible, his comments of this reorganization, reclassification and growth we are planning to do maybe over the next two to three years after completing this challenging legacy projects and challenging time. So some comments from me will be really helpful. Afternoon, Suneja.

1:12:15 You In heard from detail about how we are trying to make sure that the company aligns to lot of the upcoming business opportunities, Sunrise Industries, both in terms of how we are pursuing these opportunities, but also in terms of how we are adding capacities and capabilities within the organization. I look forward to the future with a lot of optimism. Of course, have had not just one, but quite a few challenging quarters. As Inderniel mentioned that legacy project overhang is still not over, but we are definitely trying to make sure that has less of a bearing as we build in order book of more profitable contracts, larger contracts, not just in India, but substantially outside.

1:13:21 The portfolio of products, services, specialty chemicals, all of these are definitely going to be driving a little bit more on the margin side. We will continue to work extensively to increase our order book on the treatment solutions segment also. I think that continues to be will be significant contributor to the top line and I dare say our effort will be to increasingly make it more profitable and be a substantial contributor to the bottom line also. So all in all, looking at the future with a lot of hopes, Suneja.

1:14:10 Thank you, sir. Thanks a lot for the detail. Thanks a lot. You. The next question comes from the line of Kosto Gubna with Kamana Holding. Please go ahead. Yeah, hi. So if you could kind of explain after all the capacity expansions in the Specialty Chemicals business, if you were to theoretically assume that the plants would get fully utilized, what would the maximum revenue potential for the Specialty Chemicals business be versus $8.68 crores in FY 'twenty six? We had said in the past that we expect once the Rova plant achieves full capacity over the next four years, we should have asset turnover just under two times on the manufacturing CapEx, which we are incurring.

1:15:16 So currently, our Specialty Chemicals, as you just mentioned, is just under crores for the year for 'twenty five, 'twenty six. So we expect a substantial increase of at least 50% increase at least in this capacity over the next couple of years. Okay. And sir, how do we see this year going ahead in terms of the company bouncing back on profitability front, should we expect quarter on quarter improvement and still not getting back to those double digit margins? Or would the situation still be tough for the next for this year ahead, given REPRESENTATIVE:] the struggles you're facing in some verticals, expansion in some, etcetera?

1:16:13 Yes. So I think, you're right. I mean, I agree that the performance in the first quarter has been disappointing. And it's a combination, as you said, some of the legacy projects that continue to which continue to grind through. It's a combination of Roha coming up to speed as we go through debottlenecking and stabilizing the plant. It's also a combination of the current geopolitical situation due to which some of our invoicing got impacted. So a lot of this have contributed. So I think across the board, as the geopolitical situation improves, ROIC is stabilizing, and I think there's a lot of work that's happening every day towards that. And as the volumes start picking up in some of these overseas geographies that we talked about, we definitely see the outlook improving.

1:17:14 As we said, as Vasant called out, the order that we got from Hyundai for INR 500 plus crores, it's a very it was something that the team has been working on for quite some time. And I think we're very happy with the close and the overall profile and profitable profile of those projects. So as we get more of such projects coming in, we definitely see the Treatment Solution business profile also improving. As Zoha kicks in a stronger way, as we have projected so far, we see the overall performance of the Specialty Chemicals segment improving as our standard plants and membranes are able expand or post the investments made, we see those segments coming up. So I think across the board, the effort is to see that across these five segments, we improve not only the top line but also the profile of the bottom line of the company. And that is why we voluntarily split up into these five segments to voluntarily be open to showing how we are performing in each of those. So yes, double digit profitability that I think was as the company has had done great at that point in time, it will be a process for us to get there. But I

1:18:45 think we remain fairly confident, though quietly confident that I think we have a path to keep there. But it will take us it is a process for us to go and reach there. Even the focus on products, chemicals, services, while retaining the intent on treatment solutions is a part of that process. Our focus on international growth is a part of that process. Our focus to look at more emerging advanced tech solutions is also part of the process. So a lot of that we are working on to see that we can get back in due course of time to the double digit profitability you referred to. The next question comes from the line of Rahul with Stratham Oakmont. Please go ahead.

1:19:48 Hi. With respect the restructuring of the Life Cycle Services standalone pillar, do we expect improvement in working capital velocity compared to our traditional EPC segment? And as this Life Cycle Services segment grows as a percentage of total revenue, can we expect some free cash flow conversion to structurally detach from this heavy working capital cycles we have historically seen in our government project verticals? So clearly, this is a step partly in the direction that you talked about towards having less capital intensive growth plan.

1:20:34 And also in the course of time, we will see we can use some more specific flavor and color of those segments. We can speak about those segments in particular. But is that the plan? I mean, as I said, we already closed a large deal for twenty year concession in with one of our large industrial existing customers in our petroleum development Oman. And we believe these will give us better revenue profile at a group level because some of the profitability of these O and M contracts also reside in our industrial products business, it will reside in our specialty chemicals business. So overall, a much better profile for the group. It gives us predictability of revenue, repeatability of revenue and we want to do more.

1:21:25 Clearly, one of the areas that we will explore is to also look at boot and book contracts. But again, that will also come with the share of some developmental investments. But overall, whether it is concession based repeatable O and M revenue, whether it's consumables and spares revenue, whether it is rental revenue, these are all service models that we're evaluating. And we have a very senior leader leading our services business for the company globally. And our effort will be to build this vertical substantively to deliver higher turnover, really establish itself as a major service segment of focus for the company and also give a higher wall to wall profitability for the company.

1:22:21 And my second question is more related to the specialty business. So as India incentivizes semiconductor fabrication and green hydrogen electrolyzer manufacturing, do we expect the demand for ultra pure water and special membranes to scale exponentially? And are our current R and D expenses and efforts equipped to produce semiconductor grade resins and the electrolyzer membranes natively? And what is the total addressable size of this in the next few years? So, in all the segments you identified are absolutely correct and spot on. And there is definitely higher potential in growth in these segments. I am not so sure how fast only India alone can be a big enough market for us because we're looking as you're looking at some of these plays, whether it is green hydrogen, whether it is ultra pure water, high purity water, we're looking at India and also beyond as well.

1:23:29 And that is where we are trying to see how we can partner with the right for the right competencies to be able to cater to those markets. So yes, in India, but also beyond, we believe that this will grow. Again, some of the confidences we already have, which is what with which we are playing in the market, some competencies we are in the process of building because these segments, whether it is in India, whether it is in other parts of the world, you will see a lot more investment in semiconductors and data centers, and that is what we are working towards. Not all the solutions are in place, but our teams are working, our technology teams, our leadership are working to see that we become one of the favored players in these spaces.

1:24:17 And what will be the total addressable market for this right now India and outside? I will not be able to comment, but I'm sure these are readily available figures that you can get. As I said, India has been a bit slow post that last project that we had last large project in India, but I think there are, again, other projects in the annual and it's going to only pick up over time. I think it's only how fast it happens is possibly something we need to see. The next question comes from the line of with IONIS. Please go ahead.

1:25:18 Yes. Thank you. Thank you so much. My question is with the softening crude prices from the March and April 26 levels of over $100 a barrel to the current $80 levels that we are having at the moment. And our major inputs, input raw materials for the petrochemical monomers and especially amines, because in the last con call it was mentioned that there was a significant increase in the price of these raw materials. With the crude softening, okay, I just wanted to know how would this impact our input costs for the upcoming quarters? So directionally, what you're saying is correct.

1:26:05 Any hardening impacts us. And right now, while there's been some drop, at the same time, we have seen fluctuations as well. The geopolitical situation, as we all know, has been extremely uncertain. So it's still, I think, extremely fluid and fluctuating. And but over time, yes, I think as things stabilize, as the benchmark crude prices come down and settle down at a much lower level or before the geopolitical crisis level, definitely our input costs will also start improving. And we should be able to come out of the current situation. We definitely see a little bit of softening, but it is still yet to pan out fully and we continue to observe the situation very closely as we speak.

1:27:04 Right. And just on the UP legacy contract in the previous con call, management had indicated that this should be fully resolved by the end of this calendar year. Okay. Could you just give us an update on where we stand currently? And are we, like as you said, out of the woods in the coming quarter or the quarter after that or within this financial year, are we still on track with the earlier guidance? And just a clarification on how many legacy contracts arise? Is just the UP legacy contract? Or is there another legacy contract as well? So first of all, I'd like to correct the understanding. I do not think that we have said that the UP contract will be fully over in this financial year. We've always maintained that we this we have always maintained that our effort, our teams are mobilized across all the locations and our effort remains to close the project as quickly as possible.

1:28:01 Having said that, it is entirely dependent on the fund flow that is coming into these projects, which we are all aware that has been severely constrained and restricted in the whole of the last financial year. We are happy to note that some trickling of funds have started. There's some progress we are making. However, I think it will be far too premature to say that the project will be closed in this financial year. As of now, the way the funds flow are happening, it will spill over to the next year because there's a huge amount of work that is still left to be done. We continue to remain extremely keen to get this work done. We are fully mobilized. Having said that, we do not want to increase our exposure as a company to more receivables unless and until the funds flow happen. Having said that, directionally, the last three months has been positive for us and we hope that if this continues, I think in the next two years, which is this year and the next year, I think we should be able to see a major part of the project done.

1:29:08 With respect to your other question about how many legacy projects, I mean, we typically don't give the number of the such projects, but there's one very large project and then there are a few other smaller ones. But apart from the UP project, there's actually one large project that we continue to work through. And I said, if we continue to grind through, a significant part of that work is done, but we still have a lot of ground still to cover. Right. I just wanted to just elaborate a little bit more on this, if you may. In terms of the quantification of this year, this financial year and the next financial year, What percentage of the legacy contracts overall now that you're saying there's more than one legacy contract, what quantification would you say like would be finished in this year and percentage wise and in the next year?

1:30:07 So from a legacy I'm letting the UP project out because UP project is clearly government fund driven project. There's no other issue apart from the flow of government funds, okay? But having said that, you will all appreciate that keeping a site mobilized, increasing interest costs on outstanding receivables, those also are tailwinds for the solutions business. And those are also reflecting in our performance numbers. But leaving that project out, the other legacy projects, we believe a significant part of the work will be completed in this financial year, especially for the large project. So we ideally want to close everything out, but at this point in time, we are seeing a significant part of that big legacy project should make progress by the end of the financial year. Again, we have to keep in mind, it's Huawei government contract and the progress clearly depends upon how fast the client wants to progress. This plant will be commissioning is linked to the customer readiness to commission the plant. If the customer is ready to commission the plant, we will not be in a position to step out on the project side.

1:31:32 Right, right. And just a final question. Firstly, congratulations on the Hyundai contract. But with the current geopolitical situation going on and the supply being in Iraq and this directly comes under the Strait Of Hormuz exposure, do you see any deferral in the commitments or do you see this being on track? At this point in time, I think we just picked up the contract as we speak, the kickoff meetings are happening. You're not directly supplying to the end customer but to an EPC as we've already spelled out the name. We don't anticipate any delay as of now. However, if the crisis geopolitically continues, then there will be cause for worry. At this point in time, we feel good with the timelines that has been there in the contract.

1:32:26 And I would just like to add the contractual term for ION Exchange, FOB Mumbai. So we have to hand over the goods to at the Mumbai Port. So our contractual this liability ends once we hand over this in Mumbai. We are not responsible for the transportation. The next question comes from the line of Richard Chaudhry with Electrum BMS. Please go ahead. Yes. Hi, sir. Thank you for the opportunity. Sir, my question is specific to the Roha plant. You had previously guided 25% utilization for the first year of operation. Given the current geopolitical situation, do we still have the visibility for the same or how are we seeing that?

1:33:19 So we continue to hold on, ma'am. This is about four months of the year gone. It has been softer than what we expected. But at this point in time, we're not throwing in the towel. We are still holding on and working with our teams in the overseas geographies and with our plans to see that we are able to meet the guidance. So if and when, I think by the end of the second quarter, we'll be in a better position to come back and share with you depending on how we progress in this quarter, ma'am. Okay. And secondly, the consumer segment, now that the consumer segment is INR350 crores, INR400 crores of the scale, at what scale do we expect it to start making profits and what is the optimum profit margins that we expect from this business probably in the next three to four years?

1:34:13 So our plan as we have said in past calls, is to see if we can breakeven in this financial year. That's the first target for us. As and when we reach that milestone, we would be in a position to talk about what kind of single digit margins we're talking about. But right now, our first objective for the team and the company is to see if we can breakeven with this level of growth in this financial year. Thank you so much. The next question comes from the line of Prateek Hothari with Unique PMS. Please go ahead. So my first question on the Chemicals.

1:35:02 So last quarter, we had called out the effect of Roha on the profitability, if we can do the same this quarter. So ex of depreciation OpEx, what would margins look like on the Chemical side? The impact of Roa on the Chemical segment margin was approximately 6% at the segment level. Okay. So the 15 percentage points that we see decreased from last year Q1, you said six comes from RoHSL. So there's a material compression in gross margins when it comes to Chemical in general? Yes. Because in the last first quarter of the last year, we also had a foreign exchange gain.

1:35:49 So in the current quarter, there's no foreign exchange gain. So that impact is almost around 3% to 4%. And as we mentioned that because of the input cost increase, we have gone for the price increases across all the customers and the segments, but there is a time lag in passing of the cost increases. So that also has contributed to the overall margin erosion. But as we mentioned, we are experiencing certain moderation in the input costs. So going forward, if the group remains at a softer level, so we do expect some of the input cost increases, which we have seen in the past two quarters, we should see a moderation in that. And hopefully, some amount of margin should be able to we'll be able to claw back in the current year.

1:36:36 Correct. Correct. So second on this BO and Woot projects that we kind of now I mean the Oman 131, have we earmarked what kind of maximum capital of our balance sheet we want to kind of because the capital kind of gets blocked for a longer period of time. I'm sure you get better IRR, etcetera. But any clear marking of how much capital will we spend chasing such kind of orders? Yes. We will not be able to share any specifics with you, but we are aware. I think it's a very valid point that you've mentioned, which is what I called out myself when we talked I was answering another question on Lifecycle Services. So yes, those are better margin profiles, but they kind of put us under pressure in a different way. So we will continue to be very, very selective as we look at those projects.

1:37:30 And all of those considerations, as you said, will be kept in mind as we grow this Board segment. And there are multiple ways of doing it. So we are exploring all possible options. But we would want to remain as asset light as possible. So currently, life cycle would be largely O and M, spares, etcetera. I mean we don't have material BO or BOT project there. So this 1012% margin for O and M and spares seems very low compared to maybe what others reported. Can highlight, I mean, what goes on behind this? Yes. The reason for that is it's not wall to wall. So because a lot of the profits are there in our products segment, a lot of the profits are there in our chemicals segment. The specialty the life cycle services do not report it's not one to one profitability numbers. The one to one profitable numbers of the company is significantly higher and will be comparable, if not better than what you see from other companies.

1:38:28 This is just as a result of what the life cycle services P and L reports, not one to one. Fair enough. And then lastly on this legacy, right, has the cost overrun or the losses that you were reporting one off materially from, say, what it was a year or two back? No, the project continues to progress in execution and as a result of which there is obviously the project progress is dependent on, as I said, how the customer how far the customer is progressing there. There are site conditions that decide how far the project will move. And so obviously, in a project of this nature, because of longer time delay, there will be some element of costs.

1:39:18 We continue to work on that with our project execution teams and keep on track. But clearly, of the headwinds on the Treatment Solution number that you see does come from the impact of on this particular project. It's a large project in the portfolio. So something that does impact if any the segment where you don't make as much profitable margins as you make on our specialty chemicals or our product numbers, right, or our services for this matter. On top of that, there's a large project that's a drag. It doesn't help our cause. So we continue to grind through that and hopefully, while that is over, then the true picture of the treatment solutions performance will be out for everyone to see.

1:40:09 And we don't intend to call that out right now ex of legacy orders treatment? No. I mean, we will not it doesn't help the purpose. The numbers remain the same. All right. Correct. And just to reconfirm this Hyundai order, this is nothing EPC in that. This is just pure supply of products. So it's a solution that we are offering. It's but it's a lot less risky version of a solution, we'd want to put it that way, which is why we feel good about what we picked up. Great. Thank you and all the best. Thank you. Thank you. The next question comes from the line of Saket Kapoor with Kapoor and Co. Please go ahead.

1:40:57 Yes. Hope I'm audible, sir. Yes, Namaskar, you are audible. Sir. Sir, thank you firstly for the elaborate discussion, but I missed a part of your opening remark also, so pardon me for any repetition. But sir, as earlier participant has also outlined about the path to profitability, if you could just explain to us, especially for the category of Treatment Solution, wherein I think so the legacy contract part losses have been booked. How do you see the as we progress through the year, how are things going to shape up firstly? And secondly, for the UP, just given project part, in percentage terms or in value terms, can you quantify what is the unexecutable portion and how much is the receivable from them as on March and as on June 30?

1:42:00 So I will request Vasanth to answer the UP portion, but I'll answer the first part of your question, which is clearly on the treatment solutions business, these are project businesses. So there is no easy fix here. I mean, as an example, it's a little bit of the past in case any of you have been tracking the company. We benefited from that great project in Sri Lanka as the company had done both in terms of top line and bottom line over a very long time. So some of these longer these large projects do take a time to kind of get to the full impact. So we're working through that on that legacy project. We continue to strengthen and improve our effectiveness across all parts of the EP and C value chain for our Treatment Solutions business.

1:42:47 We continue to be very, very selective in what kind of projects we are picking up, and that's evident in a couple of deals we talked about earlier part of the call including this Hyundai contract that we got. We continue to focus on looking for advanced and emerging solutions, high-tech solutions away from commoditized offerings. So all of these are steps that we are taking to fundamentally improve the mix profile of the Treatment Solutions business, move away from commoditized EPC towards more where we can add value, work on areas around resource recovery, around new technologies in hydrogen, ultra pure water, high purity water, all of that is being done to fundamentally improve the profile and the mix of the treatment solutions business, which will play out for us to our advantage in the medium to longer term. Short term, unfortunately, we have to bear the pain and grow through some of these legacy contracts.

1:43:55 So that's unfortunately, I don't have a better answer, a more positive answer for you, but it's a reality. I'll let Vasan answer the question of the two people. If I may just squeeze in, so we can be an investor can conclude that even today also worst is not behind in terms of this translating into the P and L. The P and L flow for this quarter at a revenue of INR 200 crores, the bottom line is depleted by INR 18 crores. So still the worst of the pain behind us? Or at least you can give what path are we going to glide going ahead What for this I said is project is behind us, but also a sizable amount is left.

1:44:44 That is that much quantification or proportion I can share with you. And as I said, we are picking up other projects. The way to kind of moderate the impact of this project is to pick up more profitable projects. So that's what you see us doing in Hyundai. As in that comes into play, it will moderate down the impact of this large project. So we continue to work on finding good opportunities, which will moderate this impact down till we can say we are fully done with their job. That's the effort that we're working on. Okay. And on the UQ and what's the answer? Yes. The unexecuted portion is around 11% of the order backlog as of June. Our order backlog was around 2,477 crores.

1:45:35 And in terms of the exposures on the accounts receivable, we don't call out separately on the contract specific detail. But as we have mentioned in the previous calls, we are moderating and calibrating our execution in proportion to what funding is received from the government on this project. So materially, our exposure has not changed over the past few quarters. Thank you, sir. Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for their closing comments. Thank you all for participating in the earnings call conference call. I hope we have been able to answer your questions satisfactorily. If you have any other further questions or would like to know more about the company, please reach out to our Investor Relations Manager at Veloura Medraiser.

1:46:27 Thank you. Thank you, ma'am. On behalf of ION Exchange (India) Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.