IFC picks up 25% stake in MFL project

Moving away from its own conventional norms, World Bank-affiliate International Finance Corporation (IFC) will pick up around 25 per cent equity stake for Rs 46.1 crore in Ahmedabad-based Meghmani Finechem (MFL)'s upcoming chlor-alkali project. Under normal circumstances, IFC does not pick up more than 20 per cent stake in any project.

A subsidiary of Ahmedabad-based Meghmani Organics, MFL has roped in IFC as a strategic investor in its proposed Rs 554.2 crore investment for its upcoming chlor-alkali plant in Dahej near Bharuch.

Besides the equity investment, IFC will also provide Rs 80 crore as a long term loan for a maturity period of 10 years at a rate of 11 per cent and will subscribe to warrants of up to Rs 5 crore by March 2010, said Jayantibhai Patel, chairman of Meghmani Group.

As a part of the equity investment, IFC has bought MFL shares for Rs 30 per equity share, including a premium of Rs 20 per share.

"While identifying organisations for funding, IFC considers international standards in environmental and social performances as the basic criteria which Meghmani Finechem has fulfilled. There are roughly around 60,000 companies in the Indian chemical industry which is set to grow to $60 billion by 2010 and Meghmani Group is going to be a formidable player in it," said Lance Crist, senior manager, IFC Oil, Gas and Chemicals.

A pigments and agrochemicals manufacturing company, MFL will commence commercial production of the first phase of the project by January 2009.

Of the total investment earmarked for the project, Rs 370 crore will be raised through debts including loans from banks like State Bank of India (SBI), Bank of India (BoI), Bank of Maharashtra, State Bank of Bikaner and Karur Vysya Bank, said Natu Patel, managing director of Meghmani Organics Ltd.

Apart from setting up a chlor-alkali plant, the company is also mulling of forward integration into speciality chemicals like pharmaceuticals, perfume, composites and resins.

"At least 10 speciality chemicals are under consideration by the company but we will finalise only two of them," added Patel.

The products to be manufactured include 1,13,000 tonnes per annum (TPA) of caustic soda, 9,970 TPA of hydrochloric acid, 1,00,000 TPA of chlorine gas, 2,600 TPA of dilute sulphuric acid and 8,300 TPA of sodium hypochlorite.

Meghmani Group, which invests around Rs 15-20 crore for capacity expansion every year, has seen enquiries already pouring in from companies like Birla Cellulose and ONGC for sourcing raw materials from its plant at Dahej.