Ion Exchange (India) Ltd
NSE:IONEXCHANG
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Ladies and gentlemen, good day, and welcome to Ion Exchange India Limited Q4 FY '23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Anuj Sonpal from Valorem Advisors. Thank you, and over to you.
Thank you. Good afternoon, everyone, and a very warm welcome to you all. My name is Anuj Sonpal from Valorem Advisors. We represent the Investor Relations of Ion Exchange India Limited. On behalf of the company, I'd like to thank you all for participating in the company's earnings call for the fourth quarter and financial year ending 2023. 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 beliefs as well as assumptions made by and information currently available to management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decisions. The purpose of today's earnings call is purely to educate and bring awareness about the company's fundamental business and financial quarter under review.
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, Executive Director; Mr. Vasant Naik, Group Chief Financial Officer; and Mr. N. M. Ranadive, Group Head of Financial Planning and Risk Management; and Mr. Milind Puranik, Company Secretary.
Without any further delay, I request Mr. Vasant Naik to start with his opening remarks. Thank you, and over to you, sir.
Thank you, Anuj. Good afternoon, everybody. It is a pleasure to welcome you to the earnings conference call for the fourth quarter and the financial year ended 2023. For the fourth quarter under review, on a consolidated basis, the company reported operating income of INR 6,475 million, an increase of around 30% year-on-year and 26% quarter-on-quarter. EBITDA reported was INR 1,064 million, representing an increase of around 12% year-on-year and 70% quarter-on-quarter.
EBITDA margin stood at 16.43% and net profit was INR 812 million, a decrease of around 2% year-on-year, but an increase of 70% quarter-on-quarter, while the PAT margin was in the region of around 12.5%. For the financial year 2023, on a consolidated basis, the operating income stood at INR 19,896 million, an increase of around 26% year-on-year. The EBITDA stood at INR 2,550 million, an increase of around 20% year-on-year, and the EBITDA margin was reported at 12.82%. Profit after tax stood at INR 1,950 million, an increase of around 21% on a year-on-year basis and the PAT margin was reported at 9.8%.
Let me now take you through the quarterly segmental performance on a consolidated basis. In the Engineering division, the revenue for the quarter was INR 4,526 million, an increase of 41% year-on-year. The EBIT for this segment was INR 560 crores, a decrease of -- INR 560 million, a decrease of [ 26.5% ] year-on-year. While the execution of the Sri Lanka order remains significantly affected, the company's discussion among all the stakeholders are moving in a positive direction, and we are hopeful of the project closure in FY '24.
The execution of the UP Jal Nigam project is progressing satisfactorily and revenue has been recognized based on the work completion. The execution of the other engineering orders picked up pace during the quarter on the back of the increased order flows and the high order backlog. The company continues to invest in engineering infrastructure, including manpower to enhance its execution capabilities for handling the increased order backlog. The company during the quarter also increased -- witnessed steady order flows both in the domestic and the international market.
Moving to the Chemical division, the revenue for the quarter was INR 1,640 million, which increased by 8.25% year-on-year. The EBIT was INR 482 million, an increase of 40% year-on-year. The sales in the domestic segment continued to record steady growth while the export volumes remained muted. The segment witnessed improved margins aided by stability to input costs and improved volumes of higher-margin product lines. The third segment, the Consumer Division segment, the revenue for the quarter was INR 515 million, an increase of 21% year-on-year. The loss for the quarter was INR 7 million versus INR 16 million loss in the same period of the previous year. This segment continues to record healthy top line growth.
With this, we can now open the floor for the question-and-answer session.
[Operator Instructions] The first question comes from the line of Samir Palod from AUM Fund Advisors LLP.
Yes. Am I audible? Hello?
Yes, you are. Please go ahead.
Yes. If you can just tell us a little bit about what is going on in the Engineering business, which has seen very good sales growth during the quarter compared to the same quarter last year, but the EBIT margins have gone down by more than 10 percentage points. So a little bit of color on what is going on in that business, what kind of work you've executed, and why the margins have dipped so dramatically during the quarter?
We've broadly done significantly larger amount of business during the quarter. However, there were a few factors which have contributed to this despite a dip in the overall margin percentages. The key reason is that we've had a typical way in which the orders get executed. We tend to be a little bit cautious towards the way the margins are recognized, and as the contract progresses, our estimates for the cost to completion of a project is getting revised. So there would be some contracts, which would have been in a initial period of execution, and we would hope to see slightly better margins as we go forward. That's one thing.
The second aspect is that we -- we have a lot of infrastructure and capabilities, which we are building up on our Engineering businesses to build up for the upcoming invoicing, which is going to be a substantial increase over what we have managed to do in the past. So there is a little expenditure on that front, which has got accounted. And there would always be some variation because of the composition of projects or the project mix which gets executed during the particular quarter. So there is no -- no real cause of worry there. We should be able to keep delivering good growth and reasonably good margin in the period coming forward.
Sir, I asked this question because same quarter last year, the EBIT margins were almost 22%, in this quarter, it is down to 12%. So if you were to look at this business on a slightly longer-term basis, what is a reasonable EBIT margin to assume for the Engineering business on a more sort of steady-state basis ignoring the quarter-to-quarter variations?
If we look at the kind of order book that we carry today and also the scale at which we hope to be executing orders in future, we should be seeing an improvement over what we have achieved in the current year.
Okay. And this -- and would you say that even in your bid pipeline of about INR 8,000-odd crores, you're bidding with those sorts of EBIT margins, which are -- which will be higher than what you achieved in the current year?
Yes, the EBIT margins are also a function of the scale at which we operate. And that is why we see quarter-to-quarter variations because the scale of operation in different quarters tends to be different. But if you look at margins on individual contracts, they tend to be slightly better, and we do expect that as these inquiries, of course, mature into orders, we should be able to maintain or better the EBIT margins which we are currently reporting.
And the bid pipeline, sir, would consist mostly of projects like the Jal Nigam of the various states, like the one that you have for UP and Delhi, would it be a similar types of bids that you are making?
No, it's a good mix of industrial ESG projects and the municipal or infrastructure projects would be relatively lesser.
Next question comes from the line of Akshat Mehta from Sameeksha Capital.
Yes. Can you hear me?
Yes, we can hear you.
Sir, my question was on the working capital side. What is the reason that our receivables have gone up and our payables have gone down sharply during the year?
Your question is on working capital, did I understand it right?
Yes. So I was asking the reason why our receivables have gone up and payables have gone down more sharply during the year?
Well, I'll ask Vasant to respond to that.
We had a disproportionate high invoicing in the month of March, that was the reason why the receivables have gone up sharply in that period as of March '23.
Okay. And payables?
Payables also, I mean the overall levels of payables have gone up if you really see. I mean...
Yes, but as a percentage of sales if you see even number of days, I mean the payables have gone down sharply by around 20 days. So why is that, because that is affecting your working capital efficiency overall?
No, I think we were also carrying a large amount of inventory during the quarter, and many of -- much of the invoicing happened during the quarter end. So that has slightly distorted the working capital position. But if you see in the first quarter of 2023, 2024, the working capital position should get normalized because then the financial indicators in the current assets and liabilities would have got evened out. So we don't foresee much of a issue in the working capital cycle.
So you were saying that we can maintain the cycle that we had in FY '22, correct? [ FY '23 ] is a bit of a year and optical abnormality, but FY '22 we can maintain, right?
Yes, we should be able to normalize the working capital cycle in FY '23-'24.
Okay. Secondly, if you can give a number on what is the kind of advance that we have received during the year from our customers? And any color on order inflows that you're seeing coming in for next year?
The total advances which are outstanding in the books as of March end are in the region of around INR 200 crores.
INR 200 crores.
Yes.
And any color on order inflows for the next year that you're seeing?
Hello?
Hello?
Can you please come again on the second part of the question?
I was asking if you can give some color on the order inflows that you're seeing for the next year?
As we discussed in the first part of the -- first question in the con call, the total inquiry bank, it is around INR 8,124 crores. So I mean it is a very healthy order of a bank, and we are hopeful that we should be in a position to have the same level of order inflow what we have seen in the current year of '22-'23.
Mr. Mehta, we request that you return to the question queue for follow-up questions. Next question comes from the line of Pratik Kothari from Unique Portfolio Managers. And also please restrict yourself to two questions.
Sure. Sir, my first question is on the Engineering side. We -- for the last 2 quarters, 3 quarters, we have been speaking about that we are kind of investing in our infra, in our manpower to execute much larger orders or much larger pace of execution going forward. And this is quite reflected in our numbers, like 3 years back, our order book used to be INR 1,000 crores, it's at [ INR 3,400 ] crores right now, but the execution is not up to the mark. So if you may just talk about what kind of preparations have we made, what can this lead to maybe 2 years, 3 years out?
Well, in terms of the capability enhancement, there has been significant investments in our ability to execute projects but also on the manpower and other related infrastructure. So our ability to manage a project or ability to execute in terms of equipments, machineries, fabrications et cetera. So everything needs to go hand in hand. And it's very much now geared to handle the level of invoicing that we expect in the coming period.
As you rightly pointed out INR 3,400-odd crores of order book, which -- of which a good portion will get executed during FY '23-'24. And therefore, the level of execution capabilities needed to be much higher. In fact, when I answered the first question as to the impact of these costs on our margins, so it has had a bearing on the way our margins have got reflected also.
Fair enough. Sure. And sir, a couple of clarifications. One, what would be our UP execution for this year? And second, just to clarify to your earlier comment, you did say that in quarter 4, we completed a few orders and we have not recognized the margins to which we should be conservative, et cetera, and hence the lower margins?
No, that's not what I meant. See, customarily, we -- when we look at forecasting the cost of -- the cost to completion for major projects, it always tends to be conservative towards the beginning of the contract. And then these gets revived as the contract progresses. So there would be a few contracts, which -- few large contracts, which are still at a relatively early stage of execution, and hence we would tend to be conservative when we estimate the cost of completion.
Fair enough. Sir, my last question is on the chemicals. One, we announced that we have started this exhibition at Roha. Just wanted to clarify, this is the same that we were waiting an environment clearance on? And also, there were some articles which spoke about we putting our chemical facility in Odisha. If you can just clarify regarding the same?
Yes, Roha is the one for which we were waiting for the environmental clearance. We have received that in the last quarter. And the construction work has commenced on the plant. We expect that the plant will be operational by FY '25-'26. Regarding the investment in Odisha, yes, there is another backward integration project which is planned there.
Any more color on what kind of CapEx, what products, what would you be doing there?
Still at a relatively early stage. I will certainly give more information in the next call.
Next question comes from the line of Dhruv Rathod from Solidarity Investment Managers.
So my first question was related to your Engineering division. I just wanted to understand what is the red line while looking out for EPC contracts as there have been instances where players have burned money hereby taking the wrong projects?
That's right. The EPC business tends to be a little bit tricky because it gives a large quantum of revenue, but it does come up with risks which needs to be managed. In terms of the type of risks, one is to do with how aggressively that you would bid for the contract and we tend to be relatively conservative. We don't want to put our balance sheet and the bottom line at risk. So that's one area, where we are very careful.
The other, of course, is an execution risk, where we see that there are challenges, whether it is geopolitical or anything else, which we expect to face when we are executing the contract. We are also very careful about the payment terms that we get, careful about the kind of customers that we're talking about, whether we will get paid in time. I mean there are numerous parameters which we take into account when we consider which contracts to bid and which not to and this is what has led to a slightly conservative focus towards higher numbers because we would rather be safe than sorry, and that's sort of been the defining line for us.
Got it. In your Chemical business, what is the expectation for growth, like what is exactly changing in that particular business? So initially, your growth was not that strong, but now the expectation for growth is increasing. So how is it changing a lot?
You're saying expectation of growth?
No. So the performance in the Chemical business has been improving. So what is changing exactly in your Chemical business?
Well, the Chemical business has been progressing quite nicely over the last few years. The top line growth has been fueled both by improvements in the domestic market and in the international market, as also our continuous effort to improve the product mix, we keep striving to weed out underperforming product lines and to add more and more of value-added products to our portfolio. That has helped in not just keeping the top line growth in sales but also to provide additional lift to the bottom line.
About a couple of years back, we faced quite a bit of a challenge when there were sudden spikes in commodity prices across the globe and there were also supply chain challenges of various nature, which fortunately we have not encountered during the last year, and we had stability in commodity prices as well as relatively certain supply chain and exchange rate scenario. The challenge continues to be the geopolitical situation, which we know in some parts of the globe still affects the market. If all things remain as they are, and we continue to have a stable scenario on all these fronts, we should be able to maintain the margins that we have seen.
Got it. And just a final question. So you are still actually making losses on the Consumer business. So what are your plans exactly and what needs to change in this particular business for it to improve?
Yes, we have not turned around in the Consumer business as we continue to invest for future growth. We could potentially have reported just about a breakeven that we have incurred a good amount of expenditure during the last few quarters as we ramp up the capabilities of this segment for future growth. There have also been significant expenditures for marketing, which has gone up during the year. All of this has contributed to bottom line which is slightly shy of breakeven, but we will continue to see good growth in this segment, and hopefully, we would be much better off as far as the bottom line is concerned in the next year.
Next question comes from the line of Mahesh Bendre from LIC Mutual Funds.
Sir, given the current order book and the business outlook you mentioned, I mean what kind of growth we are possibly looking for our Water business and Chemical business in the current year?
Our order book is extremely strong. And I would say that a good portion of that order book would need to get executed in the current year. And therefore, the prospects for the current year are quite good. I would desist from giving out exact number guidance as of now. I will certainly give it after the first quarter is over. But as of now, I would just say that we expect significant growth in the current year as far as our Engineering business is concerned. On the Chemical segment, we should continue to grow at a reasonable pace.
Last year, we've done roughly around 11-odd percent growth. We should be able to deliver a better number if the geopolitical situation in Europe and the Americas improves further, and we do hope that the export numbers would start ramping up again. If those things fall in, in line, our Chemicals segment should also grow at a good pace.
Okay. Sure. And sir, what is the capital expenditure plan for next 2 years?
We have the Roha project, which is the resin manufacturing expansion. That project would have roughly around INR 400 crores of investments. And apart from the Roha project, we should be looking at around INR 60 crores in FY '23-'24.
So cumulative will be some INR 500 crores plus over next 2 years?
Over the next 2 years, yes, more than INR 500 crores.
Next question comes from the line of [ Srishti Jain ] from [ Nivesh ].
Hello? Hello?
Yes, go ahead, please.
Sir, we have seen huge desalination plants coming from countries like Saudi Arabia, Egypt or Africa. Are we looking for some opportunities there? And sir, this quarter, like our export as a percentage of sales has also decreased. So what can be the expected run rate moving forward in that?
Sorry, your voice was not very clear to me. I understood that you are asking about potential of getting engineering contract, including desalination from the export market. Is that right?
Right.
Yes, we are actively working on a few projects, which we are executing a few projects of the [ nature ] in Africa and in the Middle East. And we continue to look at more and more prospects and certainly of a larger size.
Sir, exports has decreased significantly as of this quarter, so if you can give any number to that?
You're saying exports has decreased over the year?
For this quarter as a percentage of revenue.
As a percentage of revenue you're saying?
Yes.
I think for the year as a whole, our engineering exports have done quite well. If I exclude the Sri Lanka project, which you all know is for the moment growing at a very slow pace. If I exclude the impact of the Sri Lanka project, exports have grown by a very healthy margin, I think it would have more than doubled, Vasant, engineering exports?
Yes, excluding Sri Lanka, yes.
So we are doing pretty well on engineering exports and we should continue to do well. The next year should also see a further growth on top of this number.
And sir, for the current order book and bid pipeline, can you give breakup between municipal and industrial orders?
Industrial and municipal?
Yes.
For the order book you said, right?
Yes.
Industrial would be roughly around 65%-odd.
Next question comes from the line of [ Rahil Shah ] from Crown Capital.
My -- yes. My question was again on the -- so you said you're not giving exact guidance, but I just wanted to ask, do you see an improvement in FY '24 from here on in terms of top line and EBITDA margins, especially the EBITDA margins which have dropped on a consol level?
I do expect significant growth on the top line. We spoke about the order book that we carry and the expectations of further conversions of the inquiry bank that we have. So the prospects for top line growth remains pretty good. We also outlined the various reasons why the bottom line or the margin percentages have behaved in the way that they have. I would expect that if things remain in the channel for stability, we should be seeing an improvement hereafter.
Okay. And you mentioned the INR 500-odd crores of CapEx for the next 2 years, how are you planning to fund it?
How are we planning to fund it?
Yes, the CapEx.
Well, a portion of it would come from internal accruals, and we have already established conversation with the lenders who would be in a position to fund it. And we are pretty confident of getting of getting whatever external funding that is required.
All right, all right. And which division you feel will be a key driver in FY '24? I am sorry if it's a repeated one, but...
You're saying which division would be a key driver for the CapEx?
No, no, no, for the growth in FY '24. So where are you seeing the most promising...
Well, Engineering has by far been the largest segment, and it would continue to be the largest segment in the coming year also.
Next question comes from the line of Sanjay Kumar from ithought Financial Consulting.
First, just a clarification on the resins CapEx. I was going through the EC document, it says CapEx of INR 400 crores, and in today's call, you mentioned CapEx of INR 500 crores in next 2 years. So are we doing both Phase 1 and Phase 2 back to back, if you could give the time line for the resins CapEx?
I said the resins CapEx would be INR 400 crores around, and there are other CapEx which are apart from the resin plant. For the next 2 years, they would add up to more than INR 100 crores. So that's how the figure goes to more than INR 500 crores.
Okay. So we'll be doing both phases in the next 2 years?
No, no.
Can you give...
I'll again repeat my answer. The resin project is INR 400 crores, and there are other CapEx which are planned in other works of the company, other segments of the company, and these CapEx would add up to more than INR 100 crores over the next 2 years. So it is resin project continues to be around INR 400 crores.
Got it, sir. And can you give the realization for the resins on average, sir. In IndiaMART, I'm seeing a range from INR 100 per kg to even INR 250 per kg. And what is the application of these resins for which we are putting up CapEx? The EC report says [ end uses ] water treatment or is it across the board and the capacity is kind of fungible?
So I'll try to repeat your question to make sure that I understood it. You want to know what is the kind of applications that resins are used for and the kind of...
Specifically for this CapEx.
Specifically for this CapEx, right. The resin applications tend to be pretty wide. For the most part, it is used in water treatment, but the resin applications would also be in non-water kind of areas. It is used in purification of various things, including beverages, it's used in pharma, it is used in extraction of chemicals from certain stream of effluents. So the applications of resins tends to be very wide. And depending upon the chemistry and application and the complexity of the specific product involved, the prices of the product and also the margins vary.
Okay. And what would be the realization, sir, per kg realization on average rough figures will help in -- help pick up the potential revenue?
They vary very widely. And if you're trying to assess the kind of revenue that this CapEx is going to bring in, out of this CapEx of INR 400 crores, a little over INR 100 crores and INR 125 crores thereabouts is for the backward integration project, which is integrated with the resin plant. So if I exclude the impact of that, the -- we should get an asset turnover of roughly around 2x.
2x?
Yes, roughly 2x.
Okay.
So excluding the backward integration of INR 125 crores, the project cost for the resin would be roughly around INR 275 crores and we're talking 2x of that.
Got it, sir. And what is driving this CapEx, because Thermax is also talking about the CapEx in 18 months. Is there a ready import substitution opportunity or are we gaining market share from global players in exports? If you could give us a sense of why you are putting up this huge CapEx given the competitor is also putting up CapEx?
Ion Exchange would have roughly a 40% market share in the Indian market and the Indian market continues to grow. Apart from that, the international -- in the international market, our market shares would be a very small number, maybe around the 2% kind of a figure. So the headroom for growth in the international market is phenomenal, and that is what we would tap into. We are -- we have got in the past quite good response from international market. And we are sure that as we bring this capacity on board, we would be able to get more share in international.
It's predominantly for export, sir. Just one final request, sir. I don't know if you have gone through the investor presentation of Wabag. They give very detailed information like breakup of municipal, industrial, breakup of geography segment-wise, not just for revenue, they give for order intake and order book. They also list the key orders received and the order intake figures every quarter. So if you could give that, that will be very helpful? And in terms of our order book and bid pipeline, can you give the breakup in terms of desalination, ETP, STP and drinking water, so that we could judge our forte of -- within these 4 and how do we compete with Wabag?
Well, that's not a breakup that we typically provide. I can tell you that as far as industrial versus municipal is concerned, the -- our order book would be roughly 65% in favor of industrial. And as far as domestic versus international is concerned, we would be roughly around 85% domestic.
Okay. And the -- in terms of water versus desal or ETP, do we have an upper hand in any of these segments or does Wabag have upper hand in desal, for example?
I'm not getting into a competitive analysis, I'm sorry, at this time. But I can tell you that we continue to do well on all product lines. We do not have a very strong presence and somewhat by choice in the municipal segment, and that is where some of our competitors really showing higher numbers.
Next question comes from the line of [ Mahesh Agarwal ] from [ Agarwal ] Family Office.
Hi. Am I audible? Hello?
Hello.
Aankur, congratulations on a good set of numbers to you and the team. I wanted to take a step back and understand something at a bit more high level. So if you look at the Ion Exchange resins product that we have, I wanted to understand how our prices compare to Chinese manufacturers, who sort of dominate I think around close to 40% of the market share? And then vis-a-vis that what is the risk of dumping by these players ever in India? And if there's any import duties in place of that sort to protect against any kind of actions by Chinese players?
Well, to -- in order to answer that question, let me give you a perspective of how a typical large users of resins would know about selecting the right product. He would not just look at price, he would also look at the quality of the products, the kind of support and service that one would provide. And also the extent to which our products have been proven for the application that he is using it for. So in a typical scenario, where resins are used for critical or semi-critical operation, they would not go for something which is not very well proven. So that's one.
I think these Chinese manufacturers of resins have been in the market for now a lot of years, a long number of years, and they have tried to position themselves not just in the international market, but also in the Indian market. We managed through that scenario reasonably well till now, and we hope that we would be able to continue with our strategy and be able to retain market share in the domestic market. As far as the international market is concerned, the Chinese have been in a way cost leaders for some time, but their costs have undergone an increase over the last few years because of increased degree of compliance with regard to laws and other such concerns which has been thrown up by a lot of customers.
So their costs are now at a much more higher level compared to what they were earlier. We managed to compete quite well with them on all fronts, including quality, cost and otherwise. So we hope that we would be able to scale our market shares in the international market also.
Understood. And sorry, just to understand a bit more on that. Would we be within, say 10% or so broadly of prices of the Chinese guys, just to understand where we as a country stand today relative to their kind of cost curve?
It depends upon product to product. There would always be differences and they would position themselves at a higher or lower level as far as cost is concerned depending upon the customer, the geography which they are addressing et cetera. In some cases, they may be higher price levels. In some cases, they could be marginally lower, and the price difference could be 10%-odd in some circumstances, but it's not always true.
Got it. And then are there any import duties in place on our key products to protect from any kind of dumping scenario?
Yes. The government does protect us through various means and measures, not -- I don't say that they completely put an embargo on them, but it does provide a reasonable degree of protection. But I would ask Vasant to clarify on the exact import duty which is there on resin specifically.
Aankur, I need to check quite frankly, but to my mind, there is no sort of protectionist import duty on the import of resins.
There is no dumping -- anti-dumping kind of provision?
No.
Understood. Got it. That could be something worth exploring and just keeping back of our mind in case that scenario ever pops up. And then Aankur, if you could just share the same kind of understanding for our wastewater treatment chemicals and the membrane aspect as well, how we kind of stack up there vis-a-vis Chinese or other global players?
Well, I would say that the same summary applies very much to almost all the product lines, both with respect to the domestic consumers and the international consumers. Membranes, of course, we have just started. We are quite new in the field. And we're already running at more than 90% capacity utilization for our membrane plant. We have just expanded capacity, which is double our capacity. And I'm expecting that we will use up this additional capacity within the next couple of years. We've already got our plans ready for further expansion. So membrane growth should happen at a very, very rapid pace for us. We should be able to garner further market share in India as well as abroad.
Understood. And just a last final up on this, if you could give us a sense of what percentage of chemicals is export today, and then also what is kind of the right to win or what is driving more export demand for us? Is China Plus One that we see play out in other industries, also playing out for us where there is a move to just procuring from India due to quality, service, price or whatever other reasons?
Share of exports in chemicals would be roughly around 25% this year. As far as what's driving the exports, China Plus One was I think a consideration for a couple of years or slightly more. But once we got our foot in and the customers have experienced our products and our services, especially our ability to look at their issues and their problems and solve it in a meticulous manner, and further to these 2 aspects, the reliability of our company as a supplier, all of these factors have aided in further expansion into the international customer mind space. I would believe that as time goes by, the stickiness of these customers will be quite strong.
Understood. Got it. And good luck on the new Portugal subsidy integration as well. We're looking forward to that.
Yes, we are just going through the final phases of that company. And we do expect that those entities will start showing substantial contributions in the coming years.
Next question comes from the line of [ Saket Kapoor ] from Kapoor & Company.
Yes. Firstly, can you -- yes, sir. Firstly, can you mention about that INR 125 crore backward integration that goes into the INR 400 crore CapEx. So if you could explain much more about what sort of backward integration will come into play, and what will be the exact payback from this INR 125 crores?
What exactly this INR 125 crores backward integration is, as of date, I wouldn't be able to give you too much of detail on that. But it is targeted towards improvement in the cost profile of the product as well as to increasing the plant efficiency. I think overall, we are expecting a payback for this project in space of roughly around 4 years.
Correct, sir. And then you mentioned about INR 500 crore CapEx, that includes also the Odisha one, which is on the drawing board or that would be separate from this?
No, that Odisha project is not included in this INR 500 crores.
Correct, sir. And sir, for the other income part, I think so this year, the other income when compared to last year are on the similar line, but the -- but we have booked it on separate quarters. So that has also resulted in this -- in the reporting numbers being different. So if you could explain the nature of other income appearance in last -- last year fourth quarter, it was INR 21 crores, and this year, it is INR 5.5 crores. So if you could explain the nature and what should be the -- what could be the trajectory going ahead in terms of the other income part? And sir, in the employee benefit expense, you did mention that we are preparing ourselves for execution, higher execution -- scale of execution. So does that commensurate with this increase in the employee cost or is it the higher execution we have done in the Engineering segment because of this, the employee costs have also gone up?
Let me address your question on other income first. During this last quarter, we had some exchange loss as against an exchange gain which happened in the previous year's fourth quarter. So that's a significant swing, which is causing a lot of difference in the overall number. As far as employee cost is concerned, typically, the existing employees would get a pay increase every year. So that's a nominal -- a normal increase, which would in any case happen.
Further to that, we have expanded manpower in various fronts. Engineering is -- has certainly seen a substantial addition to manpower. There has also been addition to manpower in our Engineering segment and other segments. So overall, the company is preparing and getting itself ready for higher scale of operation and ensuring that the growth trajectory is maintained.
Sir, if we look at the -- just continuation to it, if we look at the percentage of employee cost to be sales revenue, is that a correct way to look at it, because that would give an understanding whether -- when we start booking -- executing order in a disproportionate way, then this percentage would look lower. So can you give us some understanding for this quarter, it is closer to 10%, the employee benefit expenses?
Yes. This number would vary depending upon how much of revenue we have been able to capitalize based on additional manpower. If the manpower addition in the revenues would take a little bit time to fructify, the percentages would get skewed a little bit. And that is what would happen in a period where we are adding substantial capabilities, especially for executing larger scale of projects in the coming period, the revenues for which has not yet come.
Correct, sir. And one small point also on the UP Jal Nigam project. Sir, what was the total size of the project? And in percentage terms, sir, what portion of the project will get executed for this year?
So you're asking about the Sri Lanka project?
No, no, I'm asking for the Uttar Pradesh Jal Nigam project, what was the total size of the project when we were awarded? And what portion of it would be executed for this year?
Do you mean the current year?
Yes, the current year, current year execution -- execution one, revenue that we will be garnering from this project?
During the current year, invoicing is a little less than INR 200 crores, I think it's around INR 190 crores. The total value of the contract is INR 1,200 crores, that's the estimated contract value.
And for FY '24, are we going to -- the execution will be done for this financial year or will it roll over to the next year also?
We should be completing major portion of -- or majority of this contract by FY '23-'24, and there will be a small spillover into FY '24-'25.
And does this contract have any O&M part also, sir, wherein we will be garnering post the execution any revenues for an extended period or it is totally executable -- execution based on this?
Yes, O&M is there, it's a 10-year O&M after this.
Mr. Kapoor, we request that you return to the question queue for follow-up questions. Next question comes from the line of Akshat Mehta from Sameeksha Capital Private Limited.
Yes. Sir, I just want to ask you -- if I understand correctly, you said that in the Chemical segment this quarter as we've seen very good margins because there has been on account of the product mix, higher-margin products were sold more during the quarter. Going forward, let's say for the next year, how do you see the margins be in the Chemical segment? Will it be around 24%, 25% itself or it can be higher?
Well, we have seen sequential improvement in the margin, and we're quite hopeful of making the FY levels achieved in '22-'23. However, it is contingent upon continued stability in commodity prices and stability in supply chain, exchange rate, as well as also the geopolitical situation for the European markets. So if it would remain stable, then we should be able to maintain the margins.
So maintaining a full year margin of 26% or quarter 4 margin of 30%, full year margin, right?
Yes, I'm talking about the full year margin.
Okay. And I also wanted to understand in terms of the new Portugal acquisition that you've done for MAPRIL, can you provide some color on what is the kind of synergies that will come in, how do you see the top line and the bottom line growing for that Company in the next couple of years or so in broad terms?
Well, we should be able to look at reasonably good growth coming in from the European market. Still, early days for me to give you a number projection. We have obviously got our numbers internally, but I wouldn't want to yet put it out as a guidance. We would like to give preferably around a quarter or so later. We would -- however, I can give you a broad indication that we should be able to generate significant multiples of our acquisition [ point ].
Next question comes from the line of Pratik Kothari from Unique Portfolio Manager.
Sir, my one question to understand our thinking and our strategy. I mean, earlier for the resins plant, our CapEx outlay of INR 200 crores, INR 250 crores and we are adding about INR 100 crores, INR 125 crores of backward, Odisha, we plan to do some backward integration there. So just why so much focus on backward integration, I mean what are we thinking, how are we thinking?
Well, backward integration does give us significant cost advantage, I think, and we are looking at improving our overall paybacks for the investments which we are making fresh, which is in Roha, as also for the industries, which we already have in the product lines which are already in existence, and they would bring in an extra quantum of margin. As I said that on an overall basis with the advantage or benefit of the integrated projects, we should see a payback of roughly 4 years for our Roha project.
So this -- I mean, so all of this, the material or the base product that we were continuing to manufacture the resins, will this all imported maybe from China and that is why we are doing this?
So the products which we use for manufacturing resins, we do have a significant amount of imported content, but these are more commodity in nature. We have spoken about the key component of resins is styrene, which we can source both internationally as well as in the domestic market. But this particular project that we are talking about is not intended to be for styrene.
Okay. Fair enough. And sir, we consolidated 2 of our subsidiaries this year within ourselves, [ BCSL and IWML ] for this year?
Sorry, Pratik, I couldn't get your question very clearly.
Sorry. So my question was, we consolidated 2 of our wholly-owned subsidiaries within Ion Exchange this year and we were on a path to kind of simplify the corporate structure. So are there more subsidiaries that you plan to consolidate this year?
I think we are looking at a total of 3 subsidiaries getting merged into Ion Exchange during the course of the coming period. And we would look at more possibilities after we complete this particular phase.
Thank you. Ladies and gentlemen, due to time constraints, that was the last question for today. We have reached the end of question-and-answer session. I would now like to hand the conference over to Mr. N. M. Ranadive from Ion Exchange India Limited for closing comments.
Thank you all for participating in this earnings con call. I hope we have been able to answer your queries, questions satisfactorily. If you have any further questions or would like to know more about the company, we would be happy to be of assistance. We are very thankful to all our investors, who stood by us and also had confidence in the company's growth plan and focus. And with this, I wish everyone a great evening. Thank you.
Thank you. On behalf of Ion Exchange India Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.