To achieve Rs 750cr rev by FY10: Meghmani Organics

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In an interview with CNBC-TV18, Ashish Soparkar, Managing Director of Meghmani Organics , spoke on the agricultural sector and the company's future targets. 

Here is a verbatim transcript of an exclusive interview with Ashish Soparkar on CNBC-TV18. Also watch the accompanying video.

Q: Have you seen uptick in demand in these past two months? The crop is expected to be better this time?

A: We are exporting our agro chemical products in 70 countries. The crop pattern of India is only 20-25% of our agro business. However, the need for agro crop protection is more than ever. Hence, the demand for our products is definitely very strong.

Q: Could you give us some clarity on the pesticides front with specific reference to Indonesia? What kind of volume growth can you expect this year?
A: Indonesia is a very interesting market. We believe that the total Indonesian market is around USD 400 million and we want to capture at least 10% of the products we are dealing in. The model, which we have adopted, is directly going to the customers in small packing to farmers, the co-operative and agro co-operative by having our own office, people, salesman, and vehicles to promote our products in the regional language.

We have already started getting good amount of orders. In the initial years, we will be able to reach Rs 10 crore. However, we see quite an upside in the coming years. If we are successful with this Indonesian model then we would like to duplicate it into neighbouring countries like Thailand, Malaysia, etc. 

Q: What about the chemical side of the business? You just started off operations in your large Chlor-Alkali plant. Can you take us through what demand situation is in Chlor-Alkali caustic soda?
A: Chlor-Alkali plants have a cyclical demand. Right now, the cycle is not so favourable. However, there is still enough demand for our products because we have around 25-30 years'  relationship with caustic and chlorine consumers. We are using around 10% production for the internal consumption in the chlorine side. We are increasing this to 40% by the end of March 31, 2010. Hence, 40% will be consumed for in-house consumed for products.

We will manufacture herbicide, for which the announcement was made two-three months back. We believe that most of the chlorine, which we produce, will be internally consumed by the customers.

Q: Revenues were down for the second quarter by about 14%. If the volumes and demand are picking up for the second half of this year, what would you do in terms of sales?
A: The sales realization was down by 14% in the first two quarters because most of our chemicals are oil based products. Hence, when oil price went to USD 140 per barrel last year, our raw material prices were high and so was our sale price. Whereas, when the oil prices came down it led to the fall of our raw material prices and sales volume.

If we were dealing in iron or metals, then the sales will definitely come down since the iron prices have gone down. In the same way the chemical prices came down. Due to this, our actual sales went down. However, if one looks at the profits, our bottomline has gone up. This is the most important for investors. In the coming months, we will be able to do sales between Rs 350-400 crore. Our order volumes and profit margins should be similar or even better.

Q: What would you set as a doable sales target for the second half with regard to revenues?

A: With respect to revenues, around Rs 750 crore should be a reasonable target to be achieved by March 31, 2010. It could be above or below 10% depending on raw material prices at that point of time.

Q: You have delivered just over Rs 1.04 earning per share (EPS) in the first half. Will this number go significantly above Rs 2 by the time the year is out?

A: It is difficult to give a profit guideline for the months to come. We are looking at the current circumstances and if it continues then it will definitely be last year's figure, which was around Rs 2 per share.