The Hindu Business Line : Ion Exchange stock gathers steam

THE market seems to be gradually warming up to the growth possibility of Ion Exchange. The stock on Tuesday closed with a gain of around 1 per cent at Rs 121.40, and 1.01 lakh shares were traded on the BSE.

The counter improved by around 9 per cent in the last one week and 13.56 per cent in the last one month. In September, the stock had scaled to Rs 152, but declined in the October market sell-off.

According to a fund manager, the growing developmental accent on clean water has created enormous opportunities for the water treatment business in India and Asia. The order flow for Ion Exchange has been growing steadily and long-term growth prospects appear to be bright, he said.

The stock's price-earning ratio is around 12 on the basis of the 2005-06 expected earnings. Internationally, water treatment companies fetch a P/E of 30 to 40; P/E for the domestic engineering companies in this field is also around the same figure, the fund manager said.

Ion Exchange, a frontrunner in the Indian water treatment sector, provides solutions for total water management for industries, homes and communities.

Recently, the company entered into a joint venture with the Waterleau Group based in Brussels. The joint venture is expected to leverage the strength of both the companies in providing high-tech environmental solutions and services to the growing Asian market, according to Mr Mukesh Modi of Anagram Stockbroking.

The total market in India for sewage, industrial waste and solid waste treatment is Rs 4,500 crore and is growing by 10-12 per cent annually.

The company will benefit as the Government is giving policy emphasis on water management and more incentives and aid to the private sector players.

Ion Exchange is in the process of supplying a 5.8-mgd seawater desalination plant worth Rs 90 crore to Chennai Petroleum Corporation.

The rural market is also a big opportunity as the Government is making huge investments in developing rural infrastructure and the emphasis is on providing safe drinking water, Mr Modi said.

The company's domestic segment branded product Zero-B for drinking water purifiers and water conditioners have also been recording a strong sales growth.

According to an analyst with an institutional brokerage, professional management and ownership of the company leave room for generating additional confidence in the market. The promoters including employees trust hold around 41 per cent stake in the company, while the public holding is around 37 per cent.