Epigral To Achieve Double-Digit Volume Growth Over Five-Year Span? CMD Explains How

Chemical manufacturer Epigral's Chairman and Managing Director Maulik Patel is optimistic about the company achieving double-digit volume growth in next five years on the back of enhanced production capacity and strong domestic demand.

According to him, strong domestic demand for two of its major products—CPVC resin and Epichlorohydrin—will help it achieve the goal.

Patel told NDTV Profit that the company will double its CPVC resin production capacity to 1,50,000 tonnes per annum and that of Epichlorohydrin to 1,00,000 tonnes each year.

He reminded that the company had earlier announced that it will increase production of CPVC from 75,000 tonnes to 1,50,000 tonnes, which would make it "the world's largest facility of CPVC".

Patel added, "Epichlorohydrin, we are expanding from 50,000 tonnes to 1 lakh tonnes. Both these products are working very well in terms of domestic demand," he said.

Elaborating on their applicatoins, he said that CPVC was used for plumbing applications. Epichlorohydrin is used in wind energy, automotive and construction sectors. Patel pointed out that as India was expanding the infrastructure, these sectors will benefit and added, "We are expecting double-digit growth in volumes in the next five years.”

On the company's motive of expanding its manufacturing capacity for chlorine derivatives such as CPVC resin and Epichlorohydrin, he said, “We are going into forward integration, where we consume the chlorine derivatives completely."

Stressing that "finance costs are not likely to go up in the next quarter", Patel said that "a mix of internal accruals and debt" will fund the capacity expansion. "We had done a QIP recently and that fund will also be used for capital expenditure. So, our debt is going to be on the minimal side. Most of the expansion will be funded via internal accruals.”

In October, the company had raised Rs 333 crore via QIP by allocating more than 15 lakh shares to the participating investors.

Commenting on the 17% year-on-year volume rise in the September quarter, Patel said that the growth came from the company’s investments in the specialty chemicals and chlorine derivatives business. He added that the two verticals contributed nearly 56% to the company’s revenue.

He expects the third and fourth quarters to be better in terms of both quantity as well as value. “We are continuously investing in derivatives; 56% of our revenue is coming from derivatives and specialty chemicals. We are investing in derivatives every year and that’s why the volume growth is coming and we are expecting Q3 and Q4 to be even better in terms of quantity as well as value,” Patel told NDTV Profit.

Epigral’s Ebitda margin improved 600 bps YoY to 29% in the September quarter. He attributed the margin growth in the September quarter to volume growth and not on account of improvement in operational efficiency. However, he added that the company expects efficiency to improve in the upcoming quarters.

“We are expecting that by investing continuously in derivatives and specialty chemicals, our completely integrated complex will be run on better efficiency going forward compared to Q2. The growth is coming from the volume growth, not from the efficiency. Going forward, we expect our efficiency to be better as our integrated complex performs better,” Patel said.

Shares of Epigral Ltd. were trading 1.23% higher at Rs 1,952.85 apiece on the NSE at 1:36 pm on Friday, compared to benchmark Nifty trading 1.52% higher at 23,705.55.

The stock closed 1.16% higher at Rs Rs 1,951.5 apiece on the NSE, while the benchmark Nifty 50 ended 2.39% higher at 23,907.25.