ION EXCHANGE (INDIA) LTD - REPEAT

ION Exchange is one of my old recommendations @ Rs.135 ,which is now trading almost 5 % lower @ Rs.126/-. In my previous posting I clearly mentioned that ,attitude of its promoters towards this listed entity  is  the major cause of concern for this company even if it is operating in an industry with huge potential.We know ,the potential of water/waste water treatment  business is huge and scope is increasing with decreasing availability and increasing demand of water.Even this company is a pioneer in this sector and one among the few listed players from this segment ,till now investors are not enthused  mainly due to the conflict of interest factor.Promoters of this company having some privately held companies in the same line of business.But now , after a long wait there is some early signs of a change in their attitude.Now they decided to merge one of their biggest privately held company ION Exchange Services(IESL) with the listed entity.IESL is operating  in water/waste water treatment plant construction ,operation  and   allied services.Company having 27 offices across India and 2 abroad with an  employee strength of 1200.Even the current turnover of  of IESL is close to Rs.100 Cr,company having  concrete plans to increase its business by 5 fold mainly through acquisitions and expansions to other territories like South Asia, Middle East and African nations.On merger of this company with ION Exchange , these plans will materialize through the listed entity.This merger will also increase the promoter stake in ION exchange and chances are there for higher promoter commitment. In another important development ,company decided to aggressively concentrate in the Rs.4000 Cr retail water purifier market with its flagship brand ‘Zero-B’. Even if this brand is the pioneer in this segment ,company lost its market share to Aquaguard,Pure it..etc.Now it is planning to revive its marketing network and spend more for advertisement. In the financial front too company is showing better performance in recent times.For the FY2012 ,company posted a turnover of Rs.651 Cr and a net profit of Rs.18 Cr compared with Rs.573 Cr and Rs.12 Cr in previous year. Promoters are currently holding 41% stake (pre-merger) and big investors including  Rakesh Jhunjunwala holding another 12 % in this company .I  believe the management at last realized the potential of the company they are possessing (Listing of VA Tech Wabag may acted as an eye opener) and decided to correct their past mistakes.If it happens so ,ION Exchange which is operating in an industry with huge potential and with  well experienced promoters  may turn as  a multi bagger  even from current level of Rs.126/-


Related Readings :

 1)  Ion Exchange Services Ltd. launches Remote Monitoring of Water Treatment Plants
  2 )  Zero B plans comeback in water purifier market
   3 ) Ion Exchange (India) Limited signs a joint venture with Safic

ION EXCHANGE - CHANCES UNLIMITED ,BUT PROMOTERS ....

ION Exchange is one of the few listed players in water management solutions.Company is offering total water management solutions for home and industry needs.Its water purifiers under the brand name Zero- B is a pioneer product in this category.Due to the scarcity of water ,p otential of this industry is immense. ION is a turnkey supplier of these type solutions for various industrial needs. Company having strong alliances with foreign majors for latest technologies in this sector. This list includes Ireland based Butler Manufacturing Services (BMS), French company Elf Antar SA,Swedish firm Nordic Water Products   ..etc. Company having lot of subsidiaries and associate companies . One among them is ION Exchange enviro farms limited .This company is running bio-intensive organic agri-horticulture farms for producing various agri products using organic inputs.Currently it runs organic farms measuring more than 900 acres at various states in India.
Company also marketing its organic products under the brand names ' Organic World' and 'Organic Fresh'. This industry having huge potential in future.  Even if  ION exchange is a pioneer in water treatment and exists for a long period , its financial performance is telling another story .Promoters inability to encash the available opportunities and implementing successful business plans is a real concern.But after a long time company is now showing some hopes . Management is also taking some steps to give more focus on  each divisions and product segments of the company.There is also opportunities for unlocking value in the form of de-merger of non core businesses like Organic farming to a separate entity.For the financial year ended FY 2011 , company posted a turnover of Rs.501 Cr (433 Cr) and a net profit of Rs.6.6 Cr (1.4 Cr) . Considering the opportunities available in the core business and the chances of the  de merger of organic farming business in future  , risk takers can  take limited exposure @ CMP of Rs.135/-