Meghmani Organics to enter capital market

The Gujarat-based Meghmani Organics Ltd, the Rs 500 crore pigment and agro-chemical manufacturer, is likely to enter the capital market in the first week of June with an initial public offerings of about 5.5 lakh equity shares of Re 1 each with a price band issue aggregating Rs 102 crore.

The company is in the process of filing red herring prospectus (RHP) with the SEBI and is hopeful to obtain permission to hit the capital market in time.

The company is presently engaged in the manufacture of blue and green colourants with a capacity of 15,000 tonnes and 1,800 tonnes respectively. It wants to double the production capacity post IPO.

The fund is earmarked to be partly utilised for company's greenfield expansion plan for the manufacture of yellow, red and blue colourants with a capacity of 500 tonnes per annum, enough to begin with. Additionally, it is also planning to set up a 3 MW captive power plant with an expenditure of Rs 14 crore.

Orders for plants and machinery for all these plants are in various stages of placement and commercial production is likely to commence by the end of this year.

"Yellow, red and orange are very high end products which require stringent quality norms to pass through especially in Europe and the US. Therefore, it took three years from planning to execution to enter into manufacturing these products on continued demand from our overseas customers," said Natu M Patel, managing director.

The company currently exports about 85 per cent of its products to 55 countries which it estimates to continue even after the expansion. But, looking at the next growth prospects in Asia and Middle East, the company would not hesitate to divert its sales more towards domestic market.

"In fact, our exports have slightly declined over the years as some of our customers have opened shops in India and have started sourcing directly through local branch. We do not deny it to continue and would further reduce our export proportion in the years ahead," Patel said.

In the last three years, the company's exports contribution to its turnover has declined to roughly 85 per cent from 93 per cent.

Meghmani Organics reported a turnover of Rs 389 crore and a net profit of Rs 38.3 crore in the financial year 2005-06 witnessing a CAGR of 17.03 per cent and 10.26 per cent respectively.