Meghmani Organics: 'We plan to double our pigment making capacity'

Date:12-23-2011

Having announced their joint venture with Japanese firms, Kaneka Corporation and Mitsui and Co Ltd for setting up a chlorinated polyvinyl chloride (CPVC) plant at Dahej, Jayantibhai Patel, chairman and managing director of Meghmani Organics Ltd discussed about company's future plans and current economic challenges during an interview. Edited excerpts:

You have recently announced a joint venture with Japanese companies for a CPVC project at Dahej. Does it mean a shift of focus from agrochemicals to specialty chemicals for Meghmani Group?

It's not like that. Our agrochemicals division has been growing at a steady pace and we continue to focus on that. Currently, about 60 per cent of our total revenues come from agrochemicals division, while 40 per cent comes from our pigments operations. The new venture makes a sensible business proposition for us as we have existing backward integration of raw material, chlorine, from our own subsidiary, Meghmani Finechem Ltd (MFL). Agrochemical is a business of all times, even in the slowdown the agriculture sector of the country would need their share of inputs. India's agrochemical consumption on farms is very low at about 500 grams per hectare against about 18 kilograms per hectare in Japan and 9 kg in the US. We see the demand for agrochemicals rising several folds in India over the next 5-10 years.

Currently, your Sanand facility is not into commercial operations. What is your future strategy for the unit?

Since the state government has announced Sanand to be developed as an automobiles hub, we have decided to discontinue our agrochemicals manufacturing at the Sanand facility. This may affect our sales earnings as this unit contributed about Rs 250 crore annually to our total turnover. We will relocate our production of agrochemicals to places like Ankleshwar and Dahej. Going forward, we are planning to develop our Sanand unit as a research and development center of the company. We are not going to use this location for any different purpose.

You are setting up a manufacturing facility at Dahej SEZ for pigments manufacturing. How is the progress on that front?

The project is on track and we expect it to get commissioned by April 2012. This will add 10,000 tonnes per annum (TPA) of pigments manufacturing capacity to the existing 10,000 TPA at our facility in Panoli. Currently, we export about 55 per cent of the total pigments production to overseas countries mostly in US, Europe and Brazil. At Panoli we produce copper phthalocyanine crude (CPC) blue and beta blue pigments, which are used as colouring agents mainly in printing inks, plastics, paints, textiles and papers. For the CPC Blue pigment, we command over 10 per cent market share globally. The Dahej facility will produce CPC Green pigment besides others.

Does the recent currency fluctuation make you upset? Any impact on business strategy due to sustained low levels of rupee?

Well, currency fluctuations has hit badly. However, rupee depreciation could have helped our exports, but the benefit are set-off against the costly raw material imports due to fall in rupee. We import roughly 30 per cent of our total raw material requirements of pigments. We are also trying to reduce the impact by using instruments like currency hedging, but grossly, things are not favourable at present. However, despite adversities in currency market, we are confident of maintaining our top line for the financial year 2011-12. Meghmani's total turnover stood at about Rs 1000 crore, with MOL having about Rs 850 crore and MFL's roughly Rs 200 crore.

What has been the impact of commodity price fluctuation on the company?

Actually, commodity futures seem to have worked against the consumer industries like us. The price volatility is huge and thereby affects our costing. In the current year itself, the copper prices hit peak of US $ 10,000 per tonne and slipped below US $ 7,000 per tonne on LME. We import nearly 200 tonnes of copper every month, which will double post commissioning of our pigment plant in Dahej SEZ. Copper in the liquified form has application in our pigments and agrochemicals verticals.