It was a momentous occasion for Meghmani Finechem Limited yesterday as the company got listed both at BSE and NSE. The company is set to become India’s first manufacturer of Epichlorohydrin (ECH), so far imported entirely for domestic consumption. The company is also setting up a Chlorinated Polyvinyl Chloride (CPVC) manufacturing plant in India.
Despite his busy schedule, Maulik Patel, Chairman & Managing Director, Meghmani Finechem Limited spoke exclusively to Pravin Prashant, Editor, Indian Chemical News about the company's revenue target of Rs. 2,000 crore by FY2024, profitability numbers, mega expansion plans, capex plans, plant automation, achieving net carbon zero, and others. Excerpts of the interview:
Meghmani Finechem is looking at expanding the caustic soda plant and is planning new facilities for epichlorohydrin and chlorinated polyvinyl chloride? What's your expansion plans?
As per our big capex plan, we have just completed the commissioning of products like caustic soda, hydrogen peroxide and captive power plant in the last financial year. In this financial year, we are going to get the result of all the capex invested in the last few years. The epichlorohydrin project with capacity of 50,000 tonnes per annum, will be manufactured for the first time in India, was initiated in the last fiscal and is going to be completed in the first quarter of FY23. It is a basic building block of epoxy resin. With regard to CPVC, we have also started the capex from the second half of last fiscal and it is going to get completed by the second quarter of FY23.
Both the capex plans are on the stream and even though after the second wave, we faced manpower shortage and we have managed to cover all such delays in the last 3-4 months. Therefore, the commissioning of both ECH and CPVC are on time in the first and second quarters of FY23 respectively.
Capex breakup with respect to caustic soda, ECH, and CPVC?
In the last phase of caustic soda expansion, we have done the majority of the things required for Chlor-Alkali and the captive power plant. So we are doing only Rs. 250 crore capex for the chlor-alkali for the power plant expansion for plants with 300 TPD capacity. For ECH, we are doing Rs. 275 crore capex for expansion upto 50,000 tonnes capacity plant and we are investing Rs. 190 crore capex on the 30,000 tonnes capacity plant of CPVC.
You seem to be staggering your capex for the next three years - FY 21, FY 22, and FY23. Can you give a Capex breakup for three years?
As I mentioned, we are moving from just chlor-alkali to the derivatives segment. As a result, the first phase of expansion of caustic soda, captive power plant and hydrogen peroxide was completed last fiscal. So, we are going to get full results in the current fiscal and the results of ECH and CPVC in the next fiscal. As far as capex is concerned, we have spent Rs. 150 crore in the last fiscal on our three projects. We are going to spend Rs. 350 crore in the current fiscal and Rs. 100 crore in the next financial year.
In the next three years, Meghmani Finechem is planning to increase its revenue from Rs. 829 crore to Rs. 2,000 crore. How easy or difficult this challenge would be and revenue breakup with respect to caustic soda, ECH, and CPVC in FY24?
As a part of our long-term vision, we decided in 2019 to work towards achieving Rs. 2,000 crore revenue by FY24. Because of the great team effort, we are hopeful to achieve the revenue target probably a little early and that is our aim. Currently, 70% is coming from chlor-alkali and the remaining 30% from derivatives of chloromethanes and hydrogen peroxide. In the current financial year, the share of Derivatives is likely to increase to 35% and 65% share will remain for chlor-alkali.
In the coming years, it will be more than 50% from the derivatives segment as ECH and CPVC will start commissioning and generating revenue. Less than 50% will be from chlor-alkali itself.
In FY24, will it be equal revenue share for ECH and CPVC or will it be different?
ECH will be the number one contributor in the derivatives segment but at the same time, the exact bifurcations keep changing in the derivatives because of the dynamic raw material scenario. It is difficult to predict the exact revenue but a major chunk is going to be from ECH among all derivatives.
What about the profitability numbers in FY24?
Going by our track record, we were able to maintain profitability irrespective of whether we had started the derivatives or not. Even in the chlor-alkali segment itself, our profitability is going to be 28-30%. Down the line, even if we reach the Rs. 2000 crore topline, we will certainly be able to sustain the kind of profitability in chloro-alkali as well as the derivatives segment together.
Both ECH and CPVC will be manufactured for the first time in India. Being the first to manufacture these two products in India, how does it feel?
It feels great that as a domestic manufacturer, we are moving towards achieving the dream of our Prime Minister, which is Atmanirbhar Bharat or self-reliant India. ECH will be the first of its kind manufacturing in India for the 50,000 tonnes plant and that will reduce the import bill. For CPVC, the market is huge, around 135 KTPA per annum and only 10,000 tonnes manufacturing capacity in India. We are coming with 30,000 tonnes and it is the second manufacturing plant in India. I think till there is a huge demand-supply gap in all the products, there is always an opportunity. And the way India is growing, infrastructure, automobile, renewable energy, and composites industry segments are growing, the demand for ECH and CPVC will register double digit growth in the coming years.
Which sector will benefit most from these derivatives - ECH and CPVC? Are you also looking at the export market?
Currently, our focus is only on the domestic market and in case it is required we will take a call based on realization of price in the future. It will be 80:20 ratio, out of which 80% will be for domestic and 20% for export.
How are you moving towards automated plants?
At Meghmani, whatever we are manufacturing are all continuous plants, starting from chloro-alkali to captive power plant and chloromethane to hydrogen peroxide and now two new product lines that we are coming with. We are going for 100% automation irrespective of the quantity. We believe that in the coming times there will be less manpower required for certain operations and automation will be better for the quality of the product itself.
Wouldn't complete automation lead to an increase in capex?
Initially, we were going for an 80:20 kind of arrangement where it would be automation for 80% of higher volume products and manual for the remaining 20% small volume ones. However, now we are going for fully automated ones and yes, we are well aware about the increase in the cost. We believe that given the increasing cost and dependency on manpower and the situation like COVID-19, it is better for productivity of plants in coming times.
With respect to ECH with 100% renewable energy, are you going for the same for caustic soda and others?
As of now we don't have plans for renewable energy as we are waiting for the policies in this direction. However, as we are dependent on electricity power, we would like to go for green sources of energy. In ECH, our technology is based on glycerine as a feedstock, which is completely a renewable source as it comes from a byproduct of a biodiesel plant. Therefore, we are reducing the carbon footprint in India as compared to western companies that normally use Propylene.
Are you looking at achieving net carbon zero in the coming times?
Currently, for the next 2-3 years, we don't have a plan but like every other company, we too are determined to go completely renewable in the near future. While we don’t have it in our strategy right now, we will start investing in it during the coming times.
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