Expect EBITDA margin to sustain at 25-30% in FY24, says Meghmani Finechem CMD Maulik Patel

Meghmani Finechem's Chairman and Managing Director Maulik Patel

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26 Aug, 2025 12:21

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Following erosion in EBITDA (earnings before interest, depreciation, taxes and amortisation) margin over the quarters in FY23, Meghmani Finechem's Chairman and Managing Director (CMD) Maulik Patel clears the air on what to expect in FY24.

"We had conveyed that the record high EBITDA margin seen at the start of FY23 due to peak realisations was not sustainable in the long run. In line with that, we expect to see EBITDA margin sustaining somewhere around 25-30 percent in FY24 and beyond," Maulik said in an interview with Moneycontrol. Edited excerpts:

Margins have consistently declined over the quarters in FY23. Along with that, the company has a pipeline of capacity expansions lined up. Factoring in these developments, what kind of margin performance do you anticipate in FY24?

In the first half there will definitely be more pressure on margins in terms of a high base, but we believe that will normalise in the second half due to strong consumption in the domestic market. In the first half of FY24, we might face more challenges due to oversupply in the market, but we expect it to pick up pace from the second half. The demand trends are weak for exports, but domestic demand is increasing by the day, which will lift volumes and should support our margins.

If you also see the margins that we had enjoyed in the first half of FY23, it was something exceptional because realisations had dramatically risen. Since the first quarter of FY23, we had been clear that it was not possible to sustain EBITDA margins at those levels. Reasonably, from a long-term business perspective, about 25 to 30 percent EBITDA margin is something that’s sustainable for FY24 and beyond.

There is a lot of talk in the market about specialty chemical makers benefitting from the China+1 theme. Do you concur with this view? Are you seeing demand trends changing?

The China +1 sentiment definitely has lent greater focus on the Indian manufacturing companies. But along with that was the import tariffs on goods manufactured in China, imposed in the US during Donald Trump's presidency. This was another major outlier that helped boost manufacturing in India with focus on the US market. So, China faces the risk of anti-China sentiment from the global markets and that definitely helps India. A lot of investments are coming as everybody needs additional supply now, but I would still say that the major supplier to the world market continues to be China. We are still the second option, as we can't compete with China due to lack of infrastructure. We are making strides in this area, but there is a lot (of distance) to be covered by us in order to make this a level playing field with China.

The company has invested heavily in derivatives and specialty chemicals, which made up around 38 percent of your total revenues in the fourth quarter. The company has guided of taking this number higher. So, what share of total revenue are you aiming to extract from the segment?

Looking at the current market, there is a bit of a downtrend in terms of pricing, as interest rates have risen in export markets. Despite that, we have been continuously expanding our capacities in the derivatives and specialty chemicals segment. So, we expect to see volume growth as the projects commissioned last year will start contributing majorly in the current financial year. We expect volume growth of 20-25 percent year-on-year (YoY), hoping that demand will pick up in the second half of FY24. Since a lot more capital expenditure is slated for the segment, pegging a contribution figure for FY24 won't be possible. However, with the capex, we are hoping to derive 45-50 percent of our total revenue from derivative and specialty chemicals by FY27.

FY23 has been a stellar year for Meghmani Finechem. But as you are now struggling with weak demand, do you anticipate a YoY growth in FY24, especially on such a high base?

Yes, demand is weak right now, but we expect the new products that we had commissioned earlier to start contributing in terms of volumes. These new products are high-value compared to our earlier products. So even though realisations for chlor-alkali have cooled down, these new products will offset it. Hence, even if sluggish demand continues for the full fiscal, we will still be able to deliver growth in the range of 15-20 percent. However, if it improves in the second half of the fiscal, then growth for FY24 can be better than earlier.

Lastly, the company has big expansion plans. On that account, are you looking at inorganic growth options or is it just organic growth that you're focused on?

For the next three years, our focus will be on organic growth, but we are open to looking at opportunities in terms of inorganic expansion as well. We are not restricting ourselves to any set possibility. We may even take the inorganic route if we get the right opportunity, which has strengths to complement our existing products, customers or segments.

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