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Our focus is on high return on capital employed (ROCE) driven products for growth: Maulik Patel, CMD of Meghmani Finechem Ltd

Petrochemical industry | 03 Feb 2022 13:05 IST | Polymerupdate.com

To encourage domestic manufacturing and make India self-reliant (atmanirbhar), India’s finance minister Nirmala Sitharaman announced a cut in customs duty on select chemicals in the Union Budget 2022-23. The reduction in customs duty would boost investment in India’s chemical sector and reduce dependence on their imports, says Maulik Patel, chairman and managing director of Meghmani Finechem Ltd, in an interview with Dilip Kumar Jha of Polymerupdate. Edited excerpts:

In the Union Budget 2022-23, India’s finance minister Nirmala Sitharaman announced customs duty reduction on select chemicals, including methanol, to promote domestic manufacturing. How do you perceive this change?
The entire manufacturing in the general and chemical sector, in particular, have been at the forefront of the government’s ‘Make in India’ initiative in the past two years when there was high volatility and uncertainty due to the Covid-19 pandemic and anti-China sentiments. We are quite happy with the Union Budget 2022, as it culls out quite a few strong highlights, especially for the manufacturing in general and chemicals sector in particular that will further drive the country's economic growth. The manufacturing and specialty chemicals sectors form the building blocks of many industries. Therefore, the government’s proposal to reduce customs duties on certain key chemicals, including methanol, will be a huge relief for the sector

Do you see the customs duty reduction as a move to make India ‘Atmanirbhar’?
The Union Budget goes a long way into making ‘Atmanirbhar Bharat’ an achievable goal. The current budget has been very positive and focused on inclusive growth keeping today and tomorrow in perspective. The duty reduction on methanol and other chemicals is likely to boost the profitability of manufacturers dependent on their imports.

How has the pandemic affected the chemical sector?
For a company like ourselves and the sector that we come from, a major challenge is initiating a new product line, acquiring relevant technology, successful and timely completion of new plants, and thereafter implementation of operations in improving efficiency to gain better margins.

Unexpected events such as Covid-19, which can delay the completion of the plant and impact demand from the customers due to intermittent periodic Covid-induced lockdowns, also have to be considered. However, our approach is to play upon our strengths to tackle a different range of challenges. Having technocrats coupled with professional management, a well-invested plant in a strategic location, and a fully automated manufacturing facility has helped us weather difficult situations. Even in the current unprecedented times, Meghmani Finechem has performed better compared to its peers and has also completed expansion plans on time. Further expansion plans are moving as per the schedule and will be commissioned on time.

Multinational upstream companies in oil and gas are looking aggressive with investment in India. How will this benefit the Indian chemical producers?
The chemical industry has been the building block for several industries including manufacturing, textiles, pulp & paper, oil & natural gas, dyes, pharmaceuticals, agrochemicals, etc. Oil and natural gas companies are showing an acute interest in the Indian sub-continent, which will result in a huge boost for the chemical sector.

India is growing in terms of consumption, as the government is spending immensely on infrastructure and also announcing various production-linked incentive (PLI) schemes for several industries. All these will boost the demand for the chemicals, as to whether it is the automobile industry, pharmaceutical industry, or any other industry for that matter, the chemical is the basic feedstock. So we expect a good scope for the chemical industry in India.

Multinational companies are looking at China + 1 policy and because of the Indian government’s ‘Make in India’ concept and support for manufacturing facilities, we are very well placed to grab this opportunity and grow. So, we see huge potential and government support through this Budget and various other initiatives that will encourage entrepreneurs for extensive capital expenditure (capex) for growth.

How is Meghmani Finechem preparing for India’s future growth story?
Meghmani Finechem is getting into Epichlorohydrin (ECH) and CPVC resin. ECH is the chemical that goes majorly into the manufacturing of epoxy resin and also in pharmaceutical intermediate and water treatment resin. We will be the first in India to manufacture ECH and the raw material required to manufacture the same will be based on 100 percent renewable resources. There is good demand for ECH and it is further expected to grow by around 15 percent compounded annual growth rate (CAGR) for the next 5 - 7 years. We are coming up with an ECH capacity of 50,000 tonnes per annum (TPA) which is expected to get commissioned in Q1FY23. CPVC Resin is used to manufacture CPVC pipes, as of today 95 percent of CPVC resin demand is met through import. On commissioning of this plant of 30,000 TPA capacity, we will be the largest manufacturer of CPVC resin in India. The demand for CPVC resin is expected to grow at around 13 percent CAGR for the next 5 – 7 years. Our CPVC resin plant is expected to get a commission in Q2FY23. Further, we are increasing our capacity of caustic soda and power plants to strengthen our fully integrated complex. So, the capex we have been entailing for the last two years will start yielding results in the coming years.

By FY2024, we estimate more than 50 percent revenue to come from derivative and specialty chemical segments. Similarly, for growth post FY2024, we have announced to get into chlorotoluene and its value chain; and also we are setting up a research and development (R&D) facility. These both will strengthen our position in the specialty chemical segment and bring growth for the company. The focus of the company is to add high return on capital employed (ROCE) driven products in our basket and improve overall profitability.
 

DILIP KUMAR JHA
Editor
dilip.jha@polymerupdate.com

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