Shares of diversified chemicals company Meghmani Organics Ltd. slumped over seven percent in intraday trade on Monday after it reported weak December quarter earnings led by lower utilisation and production in the pigments division.

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The company also announced the commissioning of phase I Titanium Dioxide (TiO2) plant at Dahej, Gujarat with an installed capacity of 16,500 metric tonnes per annum (MTPA).

Meghmani had acquired Kilburn Chemicals Ltd for Rs 132 crore in December 2021 by making 100 percent upfront payment. Post this, the company incurred total capital expenditure to the tune of Rs 275 crore including the acquisition cost and commissioned the first phase in January 2023.

TiO2 is used to provide whiteness and opacity to products such as paints, coatings, plastics, papers, inks, foods, medicines, toothpastes.

Under Phase II of the expansion plan, the company said it is planning to double its capacity to 33,000 MTPA along with a captive power plant at a capital expenditure of Rs 375 crore which is expected to be commissioned by the third quarter of the next financial year.

Capex commitment for the same is worth Rs 750 crore which will be spread over the next three years until financial year 2025. The capex will be funded through a combination of low-cost debt and internal accruals.

For the December quarter, Meghmani's revenue declined in the low-double digits while margin contracted by 100 basis points compared to the same period last year. Net profit was also down by three quarters from last year.

Pressure came from the pigments segment, where revenue halved year-on-year. CFO GS Chahal told CNBC-TV18 that the pigment segment is facing demand contraction and pressure on prices. However, he hopeful of a revival in demand for the pigment business and that utilisation levels will improve to 55-60 percent from the current 50 percent.

Speaking of the new TiO2 plant, Chahal said that the said plant will contribute anywhere between Rs 200-250 crore to the topline in financial year 2024. Production will begin from the plant in April 2023.

Shares of Meghmani Organics are trading 7 percent lower at Rs 98.40.

(Edited by : Rukmani Krishna)

First Published:Jan 23, 2023 3:14 PM IST