Multi Baggers

Ion Exchange (India)

We believe Ion Exchange is a classic case of one of those companies which are leaders in their line of business but have not performed as per investor expectations. We believe Water could be a great opportunity in the coming years and Ion Exchange, a specialist in Water Management solutions operates in a niche space and is probably amongst few listed Water plays - is sitting on a big opportunity that exists not only in India but also globally.

We at Hidden Gems, in our quest for Multibaggers, keenly look at companies which are leaders in their business but have either failed to perform in the past or have been ignored by the markets; and where the potential of business is good; in an endeavour to buy the stocks at reasonable valuations. Infact, the stock of Ion Exchange has been recommended to the subscribers of poweryourtrade on earlier occasion too. Even though the stock has not performed as per our expectations, we believe that given the potential of the business, company's leadership status in the business and potential value unlocking opportunities, the stock may be a Dark Horse.

Now, before I talk more about Ion Exchange, a word of caution here - we are currently in a state of the markets, where most investors have lost interest in small & midcaps; where due to lack of buying, even a small selling in the stock can bring the price of the stock down substantially. So, only those investors who have capacity to see mark to mark losses in their investment and not panic - need buy the stock. This is true not just for the stock of Ion Exchange but for small & midcap sector in general. At the same time, these times could be opportunities to accumulate good small & midcaps if you have patience. In bull markets, the general complaint by most investors is that because of lack of liquidity in small & midcaps, they are unable to buy their desired quantity and the stock price moves up. For those who want to buy, given the prevailing uncertainty, a sensible approach would be to go for staggered buying spread over the next few months.

Background

Ion Exchange India pioneered water treatment in India and is today the country's premier company in water and environment management, with a strong international presence. Formed in 1964, as a subsidiary of the Permutit Company of UK, we became a wholly Indian company in 1985 when Permutit divested their holding. It is one of the very few companies in the world with a range of technologies, products and services that cover the entire spectrum of water and waste-water treatment.

Ion Exchange has four decades of experience in the manufacture of ion exchange resins and in the design and supply of treatment plants for water, process liquid and waste water. The company which concentrated more on Industrial sector occupies top slot in this sector. The company has also entered domestic household segment with its well known Zero-B brand of drinking water purifiers and water conditioners. The company has established a good retail distribution network for selling its products. Further it also entered public health sector, urban and rural, for infrastructural and community level drinking water treatment.

The company has production facilities located at Ankaleshwar, Gujarat; Hosur, Tamil Nadu; Patancheru, Andhra Pradesh; Rabale, Maharashtra and Verna, Goa.

Conclusion

In its 40 years of experience, the company has provided installations for diverse industries in India and abroad, from nuclear and thermal power, fertiliser and refinery, to automobile, electronics and textile.

Water could be a big opportunity of the future.
Ion Exchange has total commitment in water management and is a specialist in water and waste water treatment for over four decades, it is among just a few companies worldwide with a complete range of technologies, products and services. The company has been in the business for over 4 decades and has installations in various industries right from auto to steel and hotels to food and FMCG.

Subsidiary Companies - Move towards establishing a Global Footprint

The company has former various Subsidiaries/ Joint Ventures in the past few years - Ion Exchange Asia Pacific Pte. Ltd., Singapore ; Ion Exchange Enviro Farms Ltd., ; Ion Exchange Waterleau Ltd.; and Ion Exchange Infrastructure Ltd.. Besides, the company has incorporated subsidiaries in Malaysia, Bangladesh, Oman and US to exploit the business opportunities in the Water Treatment space in these countries. The company is thus looking beyond India and wants to establish a global footprints.

Water Treatment Space - Huge Opportunities

As the water crisis deepens globally, the need for water  and  environment management is intensifying, and increasingly water is becoming the focus of government,  municipalities,  industry and consumers.  The huge investment in infrastructure development by government and private sector is another major factor driving this industry's growth. Companies are also increasingly adopting  an  environmentally  sustainable  approach  in  their  production processes  as well as intermediate and end products. All this augurs well for  the  water and environment industry in which the company  is  a leading player.

Renewed Focus on the Home Segment

The company which was focused primarily on the Institutional Segment in the past has renewed its focus on the Home Segment with the launch of various new products. The company sells Water Purifiers, UV Water Purifiers and RO Water Purifiers under Zero B brand.

The Company's business relates to water, a resource essential for all human activity and for life itself. With the Indian economy on the whole remaining fundamentally strong, overall investment climate is favorable.  Company's expertise to cater to water management needs of the domestic, community and industrial segments is expected to result in improved business prospects. Moreover, the company's presence in the global market has been increasing rapidly and the company is expected to show substantial improvement in its international business. Our major concern however is low operating margins of the company.
Ion Exchange operates in a niche space and is amongst a few listed pure water play - which many economists opine could be a big opportunity.

Investors can choose to accumulate the stock at the current levels and on declines.

Disclaimer: Ashish Chugh is an equity analyst and investment consultant based at New Delhi, INDIA. At the time of writing this article, he, his firm or dependent family members have a position in the stocks mentioned above. The author, his firm or any of his dependent family members may make purchases or sale of the securities mentioned in the report while the report is in circulation. The author invites readers to send him email and welcomes comments, feedback & queries at nexgenfin@yahoo.com.

This report has been prepared solely for information purposes and the information contained herein may not be deemed to be an investment advice. Such information is impersonal and not tailored to the investment needs of any specific person. The information contained herein is not a complete analysis of every material fact representing any company, industry or security. The views expressed may change. While the information contained herein has been obtained from sources believed to be reliable, no responsibility (or liability) is accepted for the accuracy of its contents. Investors are advised to satisfy themselves before making any investments and should consult with and rely upon their own advisors whether and how to use such information in making any investment decision. Neither the author nor his firm accepts any liability arising out of use of the above information/ article.