Meghmani Organics JV with Japanese cos to fructify in 2014

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Meghmani Organics JV with Japanese cos to fructify in 2014

Meghmani Organics has announced a joint venture with two Japan-based companies to produce resins for chlorinated polyvinyl chloride (CPVC), which is currently imported from US and Japan.

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Meghmani Organics has announced a joint venture with two Japan-based companies to produce resins for chlorinated polyvinyl chloride (CPVC), which is currently imported from US and Japan. Jayanti Patel, chairman and managing director of Meghmani Organics spoke to CNBC-TV18 about the JV and business prospects going ahead.

He says that though the deal has been signed, production will start only around June of 2014. "The cost of the project is around USD 120 million and the capacity is 20000 tonne. It (capacity) will be increased to 40000 tonne soon," he says.

Below is the edited transcript of the interview. Also watch the accompanying videos.

Q: We understand you have formed a new joint venture (JV) for construction of Chlorinated polyvinyl chloride (CPVC) production facility. Can you tell us what your investment in the JV is?

A: This JV sets up Trience Specialty Chemicals Private Limited, and the partners for Meghmani are Kaneka Corporation from Japan having a revenue of USD 7 billion and Mitsui & Company with USD 55 million revenue. We are going to produce the resin for CPVC, which is today imported from USA and Japan; around 40-50000 tonne of CPVC resin is imported into India now.

Q: Could you tell us what equity contribution of Meghmani Organics will be and when will you have to make this payment towards the JV?

A: Production will start late June in 2014, and it is very premature to comment on the profitability Meghmani will have from it. Our financial team as well as our technical team is working on the cost of the project as well as profitability now. The cost of the project is around USD 120 million and the capacity is 20000 tonne and it will be increased to 40000 tonne.

Q: How much will Meghmani have to contribute to the USD 120 million and when would it come in because the JV is only in 2014?

A: As per the shareholding for Meghmani, it's 39%. 41% is from Kaneka and 21% is for Mitsui. So pro-rata, profit share will increase and go to Meghmani.

Q: Would you require to raise some money for this and if yes when?

A: That is exactly what our financing team is working on, on how debt-equity ratio will be affected. Japan too is working in that field.