Interview with Meghmani Finechem Limited

Interview with Meghmani Finechem Limited

by 5paisa Research Team Last Updated: Feb 03, 2022, 12:42 PM IST

By FY25, more than 55% of revenue will be contributed by the derivative and specialty segment and we will be known as a multiproduct company, estimates Maulik Patel, Chairman & Managing Director, Meghmani Finechem Limited.

Can you shed some light on your plans towards diversifying your product portfolio towards more value-added products?

That has been the focus of the company for a long time. Five years ago, we were just in chlor-alkali but then in the last three years, we have added derivative products in our basket, i.e. chloromethanes and hydrogen peroxide. We have entered into value-added products, where chlorine and hydrogen are the raw materials. This has strengthened our fully integrated complex which ultimately leads to improving our margin and running the plant more efficiently. To further strengthen the  same, we are getting into ECH and CPVC resin where again chlorine, hydrogen and caustic soda are the raw material. We are expecting ECH to commission in Q1FY23 and CPVC resin in Q2FY23.

Further, we have announced to enter into chlorotoluene and its value chain. So basically, we have diversified our self and now we cater to more than 15 industries. Also, in FY2019, 100% of the revenue was contributed from chlor-alkali but in FY21 derivative segment was contributing 26% of the total revenue. We expect that by FY25, more than 55% of revenue will be contributed by derivative and specialty segment and we will be known as a multiproduct company.

What are the biggest challenges you are currently facing?

There are various challenges currently being faced by us and the industry in recent times. Some of them are:

  1. Inflationary input cost – Raw material prices have moved up and that had led to an increase in the cost of manufacturing, but we were able to absorb the same on account of our fully integrated, automate and efficient running of the plant and on account of increase in realization of the products because of robust demand for all the products. We expect this demand to continue for the times to come.

  1. Availability of the raw material – Considering logistic issues globally, there is a supply issue of raw materials but we were able to manage the same on account of a strong procurement team and also because of our strategic location where we are in close proximity of raw material availability.

  1. Timely completion of the capex – Due to covid there was a restriction in movement of people and the logistic issue led to the movement of the machinery from outside India. But I would appreciate our team who managed to get the technology know-how virtually and the procurement team to get the machinery on time, because of that we are confident to commission our expansion plants on schedule.
     
    How much capital expenditure is planned for FY23? Also, what are your debt reduction plans?  
    Capital expenditure that we have planned for FY23 is around Rs 165 crore. Our long-term debt would be at a peak at the end of FY22 and even at that elevated debt our Debt/EBIDTA would be around 2.5 times. We have an annual debt repayment schedule of around Rs 135 crore. Once ECH and CPVC plants commission, our EBITDA and cash flow generation will be huge, so further capital expenditure will be easily funded through internal accruals and for balance fund management, we will take an appropriate call whether to repay debt or reinvest the amount in further capital expenditure for future growth.

  1.  What is your earnings outlook for the upcoming quarter? 
    We are very positive about the Q4FY22 considering the robust demand for all our products and high realizations. We are confident to close Q4FY22 with high double-digit percentage growth compared to Q4FY21.

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