In Conversation with Maulik Patel CMD, Meghmani Finechem Ltd
Maulik Patel CMD, Meghmani Finechem Ltd
Our Focus is to Enter into Downstream Chemistries
What is your outlook on the global and Indian ChlorAlkali industry?
What are the key demand drivers and emerging opportunities you are focusing on? The demand for Caustic Soda has been steady both in the global and Indian markets as it goes into various industries. In the current looming slowdown, there has been a marginal impact on the demand globally and in India. However, since Caustic Soda is utilised in various industries such as textile, paper and pulp, chemicals, alumina, agrochemicals, pharmaceuticals, and other sectors, we believe there will not be a substantial fall in its demand. Once the slowdown phase is over and governments globally start spending on infrastructure to boost the economy, it will be back to normal or even on a higher side. In the case of India, demand for Caustic Soda has remained in line with GDP growth.
Considering the various initiatives taken by the government to boost the manufacturing sector, we expect the demand for Caustic Soda to increase much faster. Also, as there is a supply issue in Europe and USA for Caustic Soda, it has opened doors for India to export this product. In the last two years, India has become a net exporter of Caustic Soda. Thus, for India in the long term, we believe the domestic demand for Caustic Soda will be robust, and export opportunities will be an added benefit. So we are optimistic about this segment. Our focus is to enter into downstream chemistries where we can strengthen our fully integrated complex and increase the pie of the derivatives and specialty chemical segment as a percentage of our total revenue to diversify our business model further.
Meghmani Finechem Limited (MFL) posted an almost two-fold jump in its consolidated net profit at ₹91.56 crore for the second quarter of 2022-23 on robust income. Can you elucidate the factors that helped you perform in line with your commitment to growth?
Our revenue in Q2FY23 has been the highest ever so far. PAT increased by 95 per cent to ₹92 crore in Q2FY23 compared to ₹47crore in Q2FY22. This performance is an account of high realisations from most of our products. In H1FY23, we commissioned India’s first Epichlorohydrin plant, India’s largest CPVC resin plant and additional Caustic Soda capacity. We expect volume pick-up from these new projects from Q4FY23 onwards. Hence, we will have volume growth and value growth for the year as a whole. FY 2024 will be a year where we expect all our plants to run at their optimum capacity utilisation and this will drive growth for FY 2024. In the coming times, we will continue to add downstream chemistries where Chlorine, Hydrogen and other chemicals will be used as raw material, bringing growth beyond FY 2024 and strengthening our fully integrated complex.
Can you shed some light on your current geography-wise revenue mix?
Do you have a target diversified mix you plan to achieve over the next three years? As on September 30, 2022, around 6 per cent of our revenue came from exports and the balance from the domestic market. We at MFL select products to cater to India’s demand. We believe that by considering India’s population and demand for quality products, we will have good scope for growth within India itself. Also, China Plus One and Europe Plus One will add further opportunities for exports. Our new product, Epichlorohydrin, has good demand in the global market. We have therefore started exporting it and expect that exports should be around 10 per cent of our total revenue by the end of FY23. Meanwhile, diversification has always been a core part of our strategy.
Our significant diversification is in the industries we cater to by being present in various products. Today, we cater to more than 15 industries and so we are not highly dependent on any single customer or industry. As of FY22, around 25 per cent of our revenue came from the derivatives segment but once we reach optimum capacity utilisation of new products that we commissioned in H1FY23 (Epichlorohydrin and CPVC Resin), more than 40 per cent of the revenue will be coming from the derivatives and specialty chemical segment and then onwards that percentage will move in an upward direction. So we are diversifying at that level also.
Presently, what are the company’s top three strategic priorities?
These are:
• Identifying and entering into high-value products that will consume Chlorine, Hydrogen and other chemicals as raw materials and strengthen our fully integrated complex. Our target is that in the next 3–4 years, around 85 per cent of the Chlorine would be consumed in-house.
• To strengthen our research and development team and focus on research that will translate into identifying specialty chemical molecules launched for the first time in India with high ROCE and brief payback period. Ultimately, we would like to increase the percentage of revenue from the derivatives and specialty chemical segment.
• To strengthen knowledge capital through selective recruitment across senior management and the departments to take the company to the next level.