Meghmani Organics announces expansion

Meghmani Organics Ltd has informed about the expansion plan of Caustic Chlorine complex in Dahej under SPV Meghmani Finechem Ltd.

"The Company, on October 30, 2007 has unveiled its plans to set up a Caustic Chlorine Complex ("CCP")in Dahej under a special purpose vehicle (SPV), Meghmani Finechem Ltd ("MFL"). The large-scale, integrated complex, when completed, will be used for the production of Caustic Soda Lye / Flakes, Chlorine Gas and Hydrogen Gas in the first phase. MFL plans to set up downstream / derivative projects based on caustic / chlorine in the subsequent phases.

The estimated cost of the proposed CCP project is approximately Rs 503.16 crores through a proposed funding comprising Rs 344.18 crores by debt and Rs 158.98 crores by Equity / Quasi equity. The equity / Quasi equity contribution will be partly made by MOL / promoters and partly by the Private equity / strategic investors.

The proposed complex will utilize latest 4th generation Membrane Cell Technology from Asahi Kasel Chemicals Corporation ("AKCC") Japan, one of the most established technology providers for the manufacture of Chlor-alkaci chemicals in the world.

Meghmani’s move to establish the CCP stems from a number of reasons. For a start, the project presents a sound opportunity for the Group to achieve inorganic growth in a diversified yet chemistry-related business with positive growth potential. With its established track record and R&D capabilities gleaned from its years in the Pigments and Agrochemicars industries, the Group is able to leverage on an excellent infrastructure for MFL such as its integrated manufacturing facilities, R&D laboratories and skilled work force.

Said Mr. Ashish Soparkar, Managing Director of Meghmani, "This exciting business development will be a key force driving future sustainable growth for Meghmani, Caustic Soda and Chlorine Gas are on inseparable part at everyday lives and given their wide ranging applications in major end-consumer markets, demand for these two basic chemicals is steadily on the rise. We are optimistic that our vertical integration into the production of Caustic Soda and Chlorine Gas will yield Sound and viable growth opportunities for us in the future."

He added, "Our revenue generation will be further boosted once we move into the second phase of the complex, which is the production of chlorine derivatives or downstream products. Being high value-add, those products will yield improved profitability for the Group. We will announce our second phase expansion at an appropriate time once its techno-commercial success is finalized;"

The caustic-chlorine chemicals are used in a multitude of industries including Pigments, Pesticides, production of metals and resource materials; pulp and paper; petroleum and natural gas extraction; manufacture of organic chemicals, plastics, industrial solvents, water treatment chemicals and pharmaceuticals. Due to their wide ranging applications across industries, demand for Caustic Soda and Chlorine Gas are increasing.

From Meghmani's perspective, the Group consumes significant quantities of Caustic soda, Chlorine Gas and derivatives of chlorine gas for its Figments and Agrochemicals operations. Hence MFL will provide a ready and captive source of some of the basic chemicals far Meghmani.

Elaborated Mr. Soparkar. "Given the present level of our Pigments and Agrochemicals products production, Meghmani's captive consumption of direct and indirect Chlorine Gas will be approximately 25% of what will be produced at MFL. By the time the complex is completed, our scale to operations, and hence captive consumption of Chlorine Gas, will increase to almost 40%. Taking into account demand and supply fundamentals, we believe that the market can easily absorb the additional capacity from MFL."

The proposed plant will be located at Dahej, district Bharuch. in the state of Gujarat. Meghmani acquired the 161-acre (approximately 650,000 sq m) site in Dahej in December 2006. Dahej is widely considered a strategic location for chemical and related industries as it is an approved Chemical Special Economic Zone ("SEZ") with a high concentration of chemicals Companies. Dahej also has important infrastructure in place such as communications, effluent treatment, power and water / sanitation facilities. In addition, Dahej possesses a Chemical Port, which has jetties capable of handling gaseous, liquid and solid cargoes and is well-connected by rail, road and sea for easy transportation to raw materials and end products. The Dahej port will be vital to the import of coal from countries such as South Africa and Indonesia amongst others tar Meghmani's 40 MW coal based power plant.

Another benefit of Dahej is its easy accessibility to salt, a major raw material for the COP, and other basic chemicals which are important for chemical manufacturing operations.

Mr. Soparkar further commented, "MFL is very strategically located, Apart from the 40MW captive power plant at the complex to supply all of MFL’s power requirements, Dahej status as an SEZ is crucial in the marketing of Chlorine Gas, a chemical that is not easily stored and transported. The up-coming SEZ as well as other near-by industrial estates will enable us to sell MFL’s surplus Chlorine Gas and Caustic Soda to the chemical belt in the periphery of 10 to 15 kilometers."

The commercial production of the first phase is targeted to commence by December 2008 / January 2009. Phase 2 will comprise the production of derivative products with higher
value-add. The annual manufacturing capacity of the complex will be as follows:

• Caustic Soda — 113,000 Ton per Annum (IPA)
• Chlorine Gas — 100,000 TPA
• Hydrogen Gas — 258,000 NM3
• Diluted Sulphuric Acid — 2,600 TPA
• Hydrochloric Acid — 9,970 TPA
• Sodium Hypo Chloride — 8,300 WA

The directors of MFL will be Mr. Jayanti Patel, Mr. Ashish Soparkar, Mr. Natwarlal Patel, Mr. Ramesh Patel and Mr. Anand Patel.

Concluded Mr. Soparkar, "Meghmani is infinitely excited about the potential of the CCP in Dahej. Meghmani's established track record and R&D experience in the chemicals industry, coupled with healthy demand global and domestic For Caustic Soda and Chlorine Gas across industries and the highly strategic location of our complex will position the Group strongly for growth. We firmly believe that will be able to build a stronger and bigger Meghmani for the benefit of all investors. While the promoting Company MOL will continue to grow in the Pigments and Agrochemicals businesses, the proposed CCP in MFL will be another major growth segment in the group."