At a Glance
Ion Exchange (India) Ltd, the water-treatment pioneer, posted Q1 FY26 numbers that were more “filtered tap water” than “premium mineral.” Revenue dipped to ₹583 Cr (-12% QoQ), yet PAT managed ₹48 Cr (flat-ish). EBIT growth stalled, debtors are sipping company cash for 151 days, and to spice things up – an ongoing SEBI case on a subsidiary looms like a storm cloud. At ₹477, the stock trades at a P/E of 33 – expensive for a business stuck in EPC delays.
Introduction
In a world screaming for clean water, Ion Exchange should be swimming in cash. Instead, it’s navigating through a maze of slow project execution, long receivable cycles, and regulatory clouds. The company, with over 100,000 installations worldwide, thrives on engineering contracts (desalination, ZLD, recycling plants). But investors? They’re thirsty for growth that doesn’t evaporate.
Q1 FY26 results show resilience but not excitement. Revenues slid, margins held at 11%, and profit stayed modest. The market’s patience is as thin as Mumbai’s monsoon puddles.
Business Model (WTF Do They Even Do?)
Ion Exchange is in water management solutions:
- Engineering Division (58% revenue): EPC for water/wastewater, desalination, and zero liquid discharge plants.
- Chemicals Division: Water treatment chemicals, resins.
- Consumer Products: Packaged water (Zero B), domestic purifiers.
Its core revenue depends on large EPC orders from industries and municipalities. Execution delays = revenue drought. International contracts help diversify, but working capital pressure is real.
Financials Overview
Q1 FY26 snapshot:
- Revenue: ₹583 Cr (-12% QoQ, -2% YoY)
- Operating Profit: ₹63 Cr (OPM 11%)
- PAT: ₹48 Cr (+8% YoY)
- EPS: ₹3.3
For FY25:
- Revenue: ₹2,753 Cr (+2%)
- PAT: ₹208 Cr (+6%)
- OPM: 11%
ROE at 18.7%, ROCE at 22.1% show decent returns, but debtor days at 151 is a financial desert.
Valuation
1. P/E Method
Industry P/E ~30x
TTM EPS ₹14.4
Fair Value = 30 × 14.4 = ₹432
2. EV/EBITDA
EV/EBITDA multiple ~14x
EBITDA FY25 ₹292 Cr
EV ≈ ₹4,088 Cr
Equity value ≈ ₹3,800 Cr
Fair Value per share ≈ ₹430
3. DCF
Assume 8% FCF growth, discount 12%.
Intrinsic Value ≈ ₹450
Fair Value Range: ₹430 – ₹450
(Current price ₹477 is slightly above comfort zone.)
What’s Cooking – News, Triggers, Drama
- Large EPC order execution expected in H2 FY26.
- SEBI investigation on subsidiary – outcome uncertain.
- International project wins in Middle East & Africa.
- High receivables remain a red flag.
- Promoter stake creeping down to 25.7%.
Balance Sheet
| (₹ Cr) | Mar 2025 |
|---|---|
| Assets | 2,987 |
| Liabilities | 1,793 |
| Net Worth | 1,194 |
| Borrowings | 323 |
Auditor’s Punchline: Balance sheet is okay, but debtor management? Like lending water bottles to strangers at a festival – good luck collecting.
Cash Flow – Sab Number Game Hai
| (₹ Cr) | FY23 | FY24 | FY25 |
|---|---|---|---|
| Ops CF | 63 | 130 | 32 |
| Investing CF | -41 | -160 | -165 |
| Financing CF | -15 | 8 | 128 |
Comment: Ops cash drying up while borrowings quench thirst – not sustainable.
Ratios – Sexy or Stressy?
| Ratio | Value |
|---|---|
| ROE | 18.7% |
| ROCE | 22.1% |
| P/E | 33 |
| PAT Margin | 7.5% |
| D/E | 0.27 |
Verdict: Returns look healthy, but valuation is stretching like a water pipe under pressure.
P&L Breakdown – Show Me the Money
| (₹ Cr) | FY23 | FY24 | FY25 |
|---|---|---|---|
| Revenue | 1,990 | 2,348 | 2,737 |
| EBITDA | 258 | 275 | 294 |
| PAT | 195 | 195 | 208 |
Comment: Slow revenue growth + flat profits = stock needs a catalyst.
Peer Comparison
| Company | Rev (₹ Cr) | PAT (₹ Cr) | P/E |
|---|---|---|---|
| Va Tech Wabag | 3,294 | 288 | 34.8 |
| Enviro Infra | 1,066 | 176 | 25.5 |
| Ion Exchange | 2,753 | 208 | 33.2 |
Roast: Trading like a premium water stock but delivering mineral-lite growth.
Miscellaneous – Shareholding, Promoters
- Promoters: 25.7% (declining)
- FIIs: 5.3% (increasing)
- DIIs: 14% (steady)
- Public: 38.7%
Promoter holding is barely above SEBI’s minimum – not a great confidence booster.
EduInvesting Verdict™
Ion Exchange is a leader in water treatment with global reach, strong margins, and a promising long-term industry outlook. But the company’s cash flow leaks, high receivables, and ongoing SEBI case dilute the investment thesis.
SWOT Analysis
- Strengths: Market leader, strong engineering capability, global presence.
- Weaknesses: High debtor days, execution delays, low promoter skin.
- Opportunities: Water scarcity tailwinds, international EPC orders.
- Threats: Regulatory probes, rising competition, capex strain.
Final Word: Great company in a growing sector, but Q1 FY26 shows no acceleration. Until cash flows improve, this stock may tread water rather than make waves.
Written by EduInvesting Team | 30 July 2025
SEO Tags: Ion Exchange, Water Treatment, Q1 FY26 Results, SEBI Investigation, EPC Projects
