Small Cap Coverage – ION EXCHANGE —- Water story


As usual before i start my coverage on a new stock lets look into the previous ones ---

Accentia Tech – 120 to 300 + time to book fully though 350-400 can come.

Surya Pharma 120-130 to 180 + …… Still an add on declines.

Kovai Medi 90-100 to 140.

PTL enterprises funda still good.


The business seems interesting because of the varied businesses related to Water Treatment and Agro etc.

Please check the website and dig more. Will be looking more into it.

The stock is a good bet for next 1-2 yrs given on the scope of the related business. The current market cap at 180 crores with not a huge debt gives a good entry for the long term.

Will be putting more of my views on the stock as and when.

Below is an input on the company by my good friend Rahul Tawde who is also a CFA and almost a CA and lives markets.


They provide  total environment solutions - water treatment, liquid waste treatment & recycle, air pollution control, solid & hazardous waste management and generation of energy from waste( speciality of Ion Exchange )

They have over four decades experience

They serve myriad industries as diverse as power, refinery, fertilizer, food & beverage, automotive, pulp & paper, textile, pharmaceutical and electronics.


According to a recent report by McKinsey, in collaboration with the World Bank affiliate, International Finance Corporation, in the next two decades, global water consumption will increase from the present 4,500 billion cubic meters (bcm) to 6,900 bcm. This will be 40% more than the estimated reliable and sustainable supply today, if no action is taken to conserve water and use it more efficiently.

The situation in India will be dire as water demand will grow annually by 2.8% to reach a whopping 1,500 bcm while supply is projected at only about 744 bcm, that is, just half the demand, according to the
report. This increase will be driven by domestic demand for rice, wheat, and sugar for a growing population, and a growing demand for a better diet. As a result, most of Indias river basins could face
severe deficit by 2030, with some of the most populous, including the Ganga, the Krishna, and the Indian portion of the Indus facing the biggest absolute gap.

Hence there is a need for an integrated approach of Total Water Management. Ion Exchange is a pioneer inthe water management, and also since it is held by ace investor Rakesh Jhunjhunwala in his portfolio.


In the last three years, its revenue has only improved from Rs 405 cr., to Rs 433 cr., on standalone basis. On the consolidated front it recorded net sales of Rs 500 cr. Now, what's been disappointing is the state of margins commanded by the company. They have not been able to move ahead of 2.5% on NPM, while for FY2008-09 they suffered a heavy blow with NPM dropping below 0.5%.

The main concern is the rising cost of raw materials. While the company suffered steep rise in raw material costs in first half of the year, the third and fourth quarter were marked by a slowdown in demand for their products and services.


Looking at the results for half year ending Sep'09, then the company has definitely shown revival with the stabilization of raw material cost. It has already made a net profit of Rs 2.9 cr, almost double of what it made for the entire FY2008-09. The Engineering services segment experienced a rebound.


The water and environment industry, by its very nature of business is highly sustainable. Increasing water scarcity and fresh water contamination due to untreated municipal sewage and industrial waste will require advanced technologies in water and waste water treatment. Recycle of waste water is becoming mandatory for housing complexes and industries.



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