meghmani organics ltd share price Management discussions

Global Economic Overview

After clocking consecutive growth of 3.6% and 2.9% in calendar years (CY) 2018 and 2019, the COVID-19 pandemic halted the global growth momentum in 2020. According to World Economic Outlook April 2020, the worlds output contracted by 3.3% in CY2020. However, thanks to the prompt policy adopted by major countries, additional fiscal support and vaccine driven recovery in the second half of CY2020 to overcome the COVID-19 setback averted the 2008 global financial crisis. On the other hand, tourism and commodity export economies have been hardly hit in CY2020.

WEO, April 2021 report states that the Advanced Economies growth contracted by 4.7% in CY2020 while Emerging Market and Developing Economies slipped by 2.2% in CY2020. However, Advanced Economies recovery are expected to out-pace Emerging Market and Developing Economies from the COVID-19 aftereffects due to earlier access to vaccinations and conducive macroeconomic policies. The United States and Japan announced significant fiscal support. The European Union has signalled to distribute the Next Generation EU Fund. The Bidens administration $1.9 trillion rescue package is expected to boost the US economy, also benefiting key US trading allies.

Outlook

According to WEO, April 2021 estimates the global growth is pegged at 6% in 2021 and 4.4% in 2022 backed by fiscal support in key economies, projected vaccine-powered recovery in the latter part of 2021 and evolving economic activity to subdued mobility. Advanced Economies is expected to clock 5.1% and 3.6% growth in CY2021 and CY2022, respectively due to manageable debt service costs as majority debt is serviced by long-term and at times negative-yielding bonds. Emerging Market and Developing Economies is projected to register 6.7% and 5.0% growth in CY2021 and CY2022, respectively. China is estimated to grow by 8.4% and 5.6% in CY2021 and CY2022, respectively led by effective containment measures, spur in public investment activities and central bank aided liquidity support.

Indian Economic Overview

According to National Statistics Office (NSO) estimates, COVID-19 pandemic and several containment measures are expected to cause Indias Gross Domestic Product (GDP) growth contraction by 7.7% in FY2021 as against 4.2% growth in FY2020. As per the Government Response Stringency Index measured by Oxford University, the contraction mirrored Indias stringent lockdown measures enforced by the Government. The contraction indicated a once in a century crisis hit by the pandemic and associated public health measures. GDP at Current Prices or Nominal GDP in FY2021 is estimated to be pegged at . 195.86 trillion vis-a-vis . 203.51 trillion in FY2020, contracting by 3.8%.

Agriculture, Forest & Fisheries and Electricity, Gas, Water Supply & Other Utility services are the only two sectors projected to register positive growth of 3.4% and 2.7%, respectively. On the other hand, Trade, Hotels, Transport, Communication & Services related to Broadcasting, Construction, Mining & Quarrying and Manufacturing sector are estimated to degrow by 21.4%, 12.6%, 12.4% and 9.4%, respectively. Indias per capita income is estimated at . 85,929 in FY2021 as compared to . 94,566 in FY2020.

India adopted a four-pillar strategy of containment, fiscal, financial and long-term structural reforms to overcome the COVID-19 led economic setback. The governments calibrated fiscal and monetary support gave a fillip to consumption and unlocked investment opportunities. Additionally, a favourable monetary policy provided adequate liquidity and immediate aid to debtors, thereby smoothening the monetary policy transmission. Despite global adversities, India continued to be a preferred investment destination in FY2021. The Foreign Portfolio Investment (FPI) inflows pumped . 2.74 trillion into the Indian equity markets during FY2021, reflecting the confidence of foreign investors in the sound fundamentals of the Indian Economy. Indias Consumer Price Index (CPI) inflation rate stood at 6.2% in FY2021. The Indian Rupee surged by 4% to . 73.1 per US Dollar thanks to the sustained foreign fund inflows into Indian equities, despite higher interest rates and inflation than the US.

Indias trade deficit trimmed to USD 98.6 billion in FY2021 from USD 161.4 billion in FY2020. Indias exports contracted by 7.3% to USD 290.6 billion in FY2021. On the other hand, Indias import declined by 18% to USD 389.2 billion in FY2021. According to Doing Business Report (DBR), Indias Ease of Doing Business rankings improved to 63^rd position in 2020 from 77^th in 2018. India entered into the list of top 50 innovative countries and stood at 48^th rank on the Global Innovation Index 2020. India was placed at 52^nd position in 2019.

ACCORDING TO A MORGAN STANLEY RESEARCH PAPER PUBLISHED IN DECEMBER 2021, THE CROP SCIENCE MARKET IS ESTIMATED TO GROW AT A 3.0% CAGR FROM 2018 TO 2023.

Outlook

According to the Economic Survey 2021-21, Indias GDP growth is estimated to bounce back at 11% in FY2022 led to the governments Atma Nirbhar Bharat Abhiyaan resulting in a stimulus package of . 29.87 trillion translating to 15% of Indias GDP. Indias V-shaped recovery is augmented by a robust rise in consumption and investment coupled with a mega vaccination drive and bounce-back in the services sector. The reinstatement of inter and intra state movement and record-high monthly GST collections resonate with the unlocking of industrial and commercial activities. Additionally, a surge in commercial paper issuances, easing yields and steady credit growth to Micro, Small and Medium Enterprises (MSMEs) has renewed Governments focus on MSMEs to survive and grow. However, the second wave of COVID-19 infections coupled with reimpositions of lockdown might pose a threat to the sustaining V-shaped recovery dampening market and consumer sentiment. According to the Centre for Economics and Business Research forecasts, India will be the fifth largest economy in 2025 overtaking the United Kingdom.

Global Crop Protection Industry Overview

Crop protection chemicals control pests that compete with crops for nutrients or consume the crop itself. Government-approved and highly regulated chemicals improve the financial returns of growers (farmers) by increasing the value of the crop for a given chemicals cost.

Pests come in many forms: weeds, insects (both visible and microscopic), and diseases. The tools supplied by chemical producers include herbicides (weed killer), insecticides (bug killers), and fungicides (disease killers). While pesticides are toxic to bugs and must be applied safely because they can be toxic to humans, they have increased the affordability of food and the quality of life.

Figure 7: Crop Chemical 2020 Sales Forecast by Region

Region	2020E ($bil)
Asia Pacific	19.1
Latin America	17.3
Europe	12.2
North America	11.4
Middle East Africa	2.4
World	62.4

Source: IHSM UBS

Source: UBS Report North American Chemicals 15 Dec 2020 Page 6

According to a Morgan Stanley Research paper published in December 2021, the crop science market is estimated to grow at a 3.0% CAGR from 2018 to 2023. Globally, herbicides and insecticides are expected to record the strongest growth at a 3.1% CAGR, followed by fungicides at 2.7% and other crop protection products at 2.6%. By region, Asia is expected to grow at a 2.3% CAGR, North America and Europe at ~2.7%, and Latin America and the Middle East/Africa at 4.1% and 4.5%, respectively

ACCORDING TO MAGNA INFORMATION CENTRES REPORT ON GLOBAL CROP PROTECTION CHEMICALS MARKET, THE CROP PROTECTION CHEMICALS MARKET WAS VALUED AT $59,800.0 MILLION IN 2021 AND IS PROJECTED TO REACH $76,979.6 MILLION BY 2030.

Sustainability

The global Agri-Food System is transforming itself to meet world demand that is asking for ~50%1 more food commodities by 2050 due to population growth and increased wealth. 20 food, cut malnutrition for 2.5 billion people and cut ~13Gt of greenhouse gas emissions by 2050. From a sustainability perspective, fertilisers increase yields, thus reducing the need to cultivate new land, which may include deforestation. However, application rates have already plateaued in the US and Europe, with limited upside in other regions too. In addition, there is a regulatory headwind, with the EU aiming to reduce fertiliser consumption by 20% by 2030, Organic food is steadily gaining popularity, and is grown without the use of synthetic fertilisers, pesticides, herbicides or fungicides. As such, it helps to protect biodiversity, reduces greenhouse gas emissions and enhances soil quality and growth is only expected to be 1 -2% for nitrogen and ~2% for potash. Two new areas to watch will be green ammonia and biofertilisers.

Industry Drivers

According to Morgan Stanleys Research report, the following key factors are driving the crop protection industry:

1. A growing population: the global population is set to increase by 1.2 billion by 2030 and 2 billion by 2050, while the middle class will more than double to 4.9 billion by 2030.

2. A growing middle class fuels demand for increased food and protein production, which in turn drives demand for grain to support growth.

3. Fewer arable acres per capita means that products need to continue to maximise farmer yields; arable land is expected to decrease from half an acre per person today to less than one-third of an acre per person by 2050.

4. Estimated 17% of harvest losses from climate change through to 2050.

5. Ongoing disruption from biotech traits

Outlook

Crop protection products such as fungicides, herbicides and insecticides improve agricultural yields, thus helping with the need to produce more food for a growing and increasingly wealthy population. However, as with fertilisers, the EU wants to reduce the use of chemical pesticides. Annual growth for the crop protection market is expected to be ~3%4, and companies that focus on building bio-based products would be at a relative advantage.

In recent years, low crop prices and adverse weather conditions have had a negative impact on market development. Price improvement was limited, primarily due to elevated levels of distributor inventory in many markets, as well as oversupply. Looking forward, the global crop protection market is set to move into more positive territory, since firm and steady commodity prices and inventories that are not too high look set to lay a solid path ahead.

According to Magna Information Centres report on Global Crop Protection Chemicals Market, the Crop Protection Chemicals market was valued at $59,800.0 Million in 2021 and is projected to reach $76,979.6 Million by 2030 growing at a CAGR of 3.53% from 2021 to 2030. Herbicide segment is expected to be the highest contributor to this market, with $42,004.0 Million in 2021, and is anticipated to reach $52,926.7 Million by 2030, registering a CAGR of 3.31%. Insecticide segment is anticipated to reach $7,650.4 Million by 2030 with the highest CAGR of 4.80%. Herbicide and Fungicide segments collectively expected to account for about 83.7% share of the Crop Protection Chemicals market in 2021, with the former constituting around 70.2% share. Insecticide and Molluscicide segments are expected to witness significant growth rates at a CAGR of 4.80% and 4.59% respectively, during the forecast period. Presently, the share of these two segments is estimated to be around 9.7% in the overall Crop Protection Chemicals market in 2021, and is anticipated to reach 11.0% by 2030.

Crop protection market by region

North America

According to Magna Information Centres report on Global Crop Protection Chemicals Market, the North American Crop Protection Chemicals market was valued at $15,667.6 Million in 2021 and is projected to reach $17,866.7 Million by 2030 growing at a CAGR of 2.28% from 2021 to 2030. Herbicide segment is expected to be the highest contributor to this market, with $10,905.5 Million in 2021, and is expected to reach $12,074.1 by 2030, registering a CAGR of 1.97%. Molluscicide segment is expected to reach $506.5 Million by 2030 with the highest CAGR of 5.34%. Herbicide and Fungicide segments collectively expected to account for about 82.9% share of the North America Crop Protection Chemicals market in 2021, with the former constituting around 69.6% share. Molluscicide and Insecticide segments are expected to see significant growth rates at a CAGR of 5.34% and 3.51% respectively, during the forecast period. Presently, share of these two segments is estimated to be around 10.7% in the overall North America Crop Protection Chemicals market in 2021, and is anticipated to reach 12.6% by 2030.

Europe

As per Magna Information Centres report on Global Crop Protection Chemicals Market, the Europe Crop Protection Chemicals market was valued at $8,730.8 Million in 2021 and is projected to reach $9,891.2 Million by 2030 growing at a CAGR of 2.21% from 2021 to 2030. Herbicide segment is expected to be the highest contributor to this market, with $6,150.7 Million in 2021, and is expected to reach $6,852.7 by 2030, registering a CAGR of 2.04%. Insecticide segment is expected to reach $987.1 Million by 2030 with the highest CAGR of 3.43%. Herbicide and Fungicide segments collectively expected to account for about 84.0% share of the Europe Crop Protection Chemicals market in 2021, with the former constituting around 70.4% share. Insecticide and Nematicide segments are expected to see significant growth rates at a CAGR of 3.43% and 2.97% respectively, during the forecast period. Presently, share of these two segments is estimated to be around 15.4% in the overall Europe Crop Protection Chemicals market in 2021, and is expected to reach 17.0% by 2030.

Asia

According to Magna Information Centres report on Global Crop Protection Chemicals Market, the Asia Crop Protection Chemicals market was valued at $22,903.4 Million in 2021, and is projected to reach $30,491.7 Million by 2030 growing at a CAGR of 3.87% from 2021 to 2030. Herbicide segment is expected to be the highest contributor to this market, with $16,169.2 Million in 2021, and is anticipated to reach $21,089.7 by 2030, registering a CAGR of 3.66%. Insecticide segment is anticipated to reach $3,063.5 Million by 2030 with the highest CAGR of 5.18%. Herbicide and Fungicide segments collectively expected to account for about 84.2% share of the Asia Crop Protection Chemicals market in 2021, with the former constituting around 70.6% share. Insecticide and Nematicide segments are expected to witness significant growth rates at a CAGR of 5.18% and 4.66% respectively, during the forecast period. Presently, share of these two segments is estimated to be around 15.4% in the overall Asia Crop Protection Chemicals market in 2021, and is anticipated to reach 17.1% by 2030.

Brazil

As per Magna Information Centres report on Global Crop Protection Chemicals Market, the Brazil Crop Protection Chemicals market was valued at $3,587.0 Million in 2021 and is projected to reach $4,568.8 Million by 2030 growing at a CAGR of 3.41% from 2021 to 2030. Herbicide segment is expected to be the highest contributor to this market, with $2,529.2 Million in 2021, and is anticipated to reach $3,119.4 Million by 2030, registering a CAGR of 3.08%. Molluscicide segment is anticipated to reach $81.4 Million by 2030 with the highest CAGR of 11.42%. Herbicide and Fungicide segments collectively expected to account for about 84.0% share of the Brazil Crop Protection Chemicals market in 2021, with the former constituting around 70.5% share. Molluscicide and Insecticide segments are expected to witness significant growth rates at a CAGR of 11.42% and 4.69% respectively, during the forecast period. Presently, share of these two segments is estimated to be around 9.5% in the overall Brazil Crop Protection Chemicals market in 2021, and is anticipated to reach 11.6% by 2030.

Indian Agrochemical Industry

According to FICCI 9^th Agrochemical Conference 2020 report, India is the fourth-largest producer of agrochemicals in the world. The Indian agrochemicals industry was valued at around Rs. 42,000 crore in FY20,19 out of which domestic consumption was worth around Rs. 20,000 crore, while exports during the same period were worth around Rs. 22,000 crore. The industry is expected to grow at a CAGR of 8-10% till 2025 and will be driven by several growth levers like increasing population, decreasing arable land, increasing demand for high-value agricultural products and increasing efforts from the industry and the Government to promote awareness and technology penetration.

The industry is represented by large multinational companies, national- and regional-level domestic players, traders and exporters of agrochemicals. Larger firms with strong R&D infrastructure have been the pioneers in bringing better performing and safer molecules to the Indian market. The smaller players in the industry have relied mainly on the manufacturing of off-patented generic molecules.

Major Industry Trends

Agrochemical enterprises are increasingly focusing on digitisation to drive better analytics, decision making and traceability across the value chain. Digital tools such as farmer apps and dealer management systems (DMS) are helping companies in undertaking tailormade approaches for different market segments. The COVID-19 outbreak has further pushed an already growing trend of technology and internet usage in rural areas, thus creating a favourable digital environment.

On the regulatory front, the industry has witnessed some emerging trends such as aerial spraying of agrochemicals being allowed on an interim basis for locust control and a proposed ban on 27 agrochemical molecules, amongst several others.

Some of the evolving go-to-market models are being considered and adopted by the industry. These include directly selling to Farmer Producer Organisations (FPOs) as alternatives to traditional channels and physical/ technology-based direct-to-consumer (D2C) platforms such as organised retail and e-commerce.

Specialty products such as biofertilisers (mycorrhiza, nitrogen fixing bacteria, etc.), micronutrients, biostimulants (humic acid, amino acids, etc.), biopesticides and organic products are being increasingly produced by agrochemical companies to enhance their portfolio-based offerings.

There is an increased focus by major agrochemical players on monetising farming-related services such as spraying agrochemicals and selling agrochemical products on e-commerce platforms. Farmers have shown an increased interest towards solutions such as a product as a service, mobile app-based farming advisory, access to market information and online purchase of agri-input.

Outlook

Indias total exports in FY20 were valued at USD 313.4 billion, contributing around 10.9% to the GDP. The export of agrochemicals during the same period was valued at around USD 3.1 billion, accounting for approximately 1% of the total exports and 0.09% of the GDP. Assuming that total exports grow linearly by 2025, the Indian agrochemical industry should export agrochemicals worth approximately Rs. 38,500 crore by 2025. Although minor in comparison to the quantum of growth expected from the agricultural output, the growth in agrochemical exports would help in positioning India as a global manufacturing hub. Efforts by the Government in promoting R&D, relaxing the registration process for new molecules and promoting the Make in India initiative for the agrochemicals industry will help in significantly improving Indias agrochemicals exports.

Pigment Industry

According to Grand View Research, the global dyes and pigments market size was valued at USD 32.9 billion in 2020 and is expected to grow at a compound annual growth rate (CAGR) of 5.1% from 2021 to 2028. Increasing demand from various application industries, such as textiles, paints & coatings, construction, and plastics, is expected to drive the market growth. Major producers are actively venturing into enhancing their products by utilizing advanced technologies for the efficient removal of hazardous pollutants during the manufacturing process. Manufacturers are likely to experience varied production costs due to volatility in the prices of raw materials, such as benzene. A wide distribution network in the market is achieved through both physical retail stores and online retailing.

Availability of the products on e-commerce platforms has increased the client base of market participants. Rapid growth in the global construction industry has also been a key growth-driving factor for the overall market. Countries, such as the U.S., the U.K., China, Indonesia, India, Saudi Arabia, and UAE, are the major countries exhibiting significant global growth potential in the construction

The rising population coupled with rapid industrialization has encouraged governments to increase their construction spending for infrastructural development. Thus, increasing construction expenditure across the world is expected to create massive product demand in the coming years. However, increasing environmental concerns are resulting in policy changes across the globe, which is anticipated to restraint the market growth over the forecast period.

Factors, such as water pollution during the manufacturing processes, high metal content in pigments, and high-water consumption in the textile industry to rinse dyes, are the major environmental threats. Stringent regulations have been imposed in regions, such as Europe, North America, and China, which may challenge the market growth.

Regional Highlights

Asia Pacific was the dominant regional market and accounted for over 62% of the global revenue share in 2020. The market faces strict regulations that obstruct product usage as well as production in North America and Europe. Thus, the production facilities are being shifted to the Asia Pacific region owing to favourable manufacturing conditions and leniency in regulations. This is supported by the easy availability of raw materials and low-cost & skilled workforce. Europe accounted for over 17% of the overall revenue share in 2020. The increasing production capacities of dyes in Europe is an indication of its increasing demand.

India Pigments Industry

According to Expert Market Research, the Indian dyes and pigments market accounts for nearly 25% of the global market pegged at close to USD 8 billion in 2020. The industry is expected to grow at a CAGR of 11% between 2021 and 2026. The production value of the pigments industry in India reached a volume of nearly 133.52 million tons.

Major Segments

Product Type	Pigment Type	Description
	Phthalocyanine	Phthalocyanine is the most produced organic pigment type in India
Organics Pigments	Azo Pigments	Azo Pigments is mainly used as industry colorant in plastics, building paints and inks
	HPPs	High Performance Pigments (HPPs) as generally used in automotives, plastics and ink-jet printing
	Titanium Oxide	Dyestuff and pigment manufacturers operating within India have started to incorporate the use of natural substance including natural dyes and organic pigments owing to environmentally friendly nature and safe usage of the product
Inorganics Pigments	Iron Oxide Pigments
	Chrome Oxide Pigments
	Others

Organic pigments dominate the industry with a lions share of 58% of the total pigment production in India. The growth of the pigment market is aided by the cosmetics industry growth. Due to improving living standards and evolving lifestyles, the demand for cosmetic products such as skincare, haircare, and perfume is growing rapidly, giving the Indian cosmetics industry a high boost. The cosmetic industry is a major application sector for the pigments market.

The dyes industry in India is expected to witness steady growth in the coming years due to environmental crackdowns in China, resulting in a shutdown of several domestic dye companies. India is better placed due to the availability of the ecosystem, feedstock, technology, and compliance required for the industry. Thus, the consumer base of China is likely to shift to India due to these reasons in the coming years.

Another major factor driving the growth of the industry is the increasing demand from the paints and coatings industries. Paints and coatings account for a significant share of the market and are estimated to be one of the fastest-growing application sectors. Architectural and decorative coatings account for major consumption of pigments. Thus, the rising construction and infrastructure activities in the country act as a significant driver for the market. Then there are advanced ink-based liquids that are being extensively employed in 3D printing operations. Many companies are using these liquids on a small and medium scale to manufacture customized spare parts for machines, gourmet food products, and prosthetics.

Thus, widening the applicability of inks and ink-based liquids and pastes is expected to lead the Dyes and Pigments market trends in the future. Given all its uses, the sector also falls under the purview of petroleum-based products, attracting scrutiny due to the increasing effort to reduce carbon footprint. These concerns have encouraged the emergence of bio-based solvents and pigments for exceptional bio-degradable properties.

The Second Generation in Charge of Business Operations

Mr. Ankit Patel CEO (MOL)	Mr. Darshan Patel COO (Pigments) MOL	Mr. Karana Patel COO (Agrochemicals) MOL
More than 12 years of experience	More than 10 years of experience	More than 12 years of experience
Executive Director at MFL	Executive Director at MFL	Executive Director at MFL
M.S. (Engg Management) from Australia & MBA from Singapore	Heads Pigments	Heads Operations, Projects & procurement
	M.S. (Engg Management) from Australia and MBA from USA	Diploma (Chemical), B.E. (Chemical) from USA

Company Overview

Meghmanis is a leading diversified chemical company poised for growth across its two (Pigment and Agro Chemicals) high potential businesses. Across the two sectors, the Company is one of the leading global pigment players along with a vertically integrated Agro Chemical player. The Company operates 6 facilities in Gujarat, 3 major facilities for Pigments and Agro Chemicals each. Over the years, the Company has built an extensive pan-India and global footprint with a presence in over 75 countries and a portfolio of over 400 marquee clients. The Company continues to strengthen its stance to become one of the leading diversified chemical companies in Organic Chemistry aiming for worldwide presence and product acceptability. The Company has set up world class development centre to facilitate upgrading technical capabilities and cost-effective measures.

The Company is committed to stick to its core businesses in organic chemistry offering innumerable growth opportunities, create and build a high standard manufacturing base, adhere to prescribed Environmental & Safety Standards and strive continuously to upgrade them, respect minority shareholders and their trust in management and create sustainable Value for all the stakeholders.

The Company has a sustainable business model, well-integrated manufacturing base and plants located in the chemical hub of Gujarat, a relatively most stable and peaceful state with a robust infrastructure. The Company has well-balanced plant capacities and layouts with multiple locations that support the economy of scale. Meghmani constantly explores more possibilities for backward integration and try to implement them.

This helps sizably in eliminating the dependency on input supplies and the Company can convert effluents into valuable by-products.

The Company has a strong pool of product basket. The product reach and distribution too, are well diversified geographically with a presence in almost every continent, empowering consistency in products off-take all throughout the year.

Covid-19 Update

Meghmanis plants and offices are currently operational and functional under strict compliance with the Governments safety and security norms for COVID-19. The Company is ensuring the implementation of government directed measures like wearing masks and gloves, proper sanitization, social distancing, etc. for combating COVID-19. The Companys capacity utilisation during FY21 was pegged at above 75%, despite the challenging pandemic financial year.

Financial Performance

Pursuant to the Composite Scheme of Arrangement, approved by Honble NCLT Ahmedabad Bench, vide an order dated May 3, 2021, the Agrochemical and Pigment business operated by Meghmanis Limited has been demerged into Meghmani Organochem Limited and therefore the Audited Consolidated Financial Statement for the FY 2020 ( comparative period) have been restated to provide the requisite impact of the Scheme as required under Ind AS. The FY 2020 refers to the period from October 15, 2019 i.e. date of incorporation to March 31, 2020. Resultantly, Companys financials of FY 2021 are not strictly comparable with the FY 2020.

Meghmanis top-line stood at Rs. 16,367 million in FY21.

The revenues of agro-chemicals division stood at Rs. 10,451million in FY2021 with Exports accounting for 79% of sales. The revenues for Pigment Division were at Rs. 5,784 millon in FY2021 with exports at 78%.

The Companys EBIDTA surged to Rs. 2,825 million and EBITDA margin at 17.3% in FY21. Meghmanis PAT for the year was Rs. 1,865 million. The Company continues to deliver a strong return ratio, with a Return on Equity of 17.2% and a Return on Capital Employed of 17.1% in FY21.

The Company has a strong net cash and liquid investments of Rs. 1229 million as of March 2021.

Agrochemical Business

Meghmanis has established itself as one of Indias leading vertically integrated Agro Chemicals player with a presence in the entire value chain — Intermediate, Technical grade and Formulations (bulk and branded). The Company effectively manages its raw material costs and ensures a constant supply of consistent quality due to its integrated vertical business integration.

Meghmanis enjoys a competitive advantage via its presence in the entire value chain (less dependent on raw material) in the highly regulated Agrochemicals industry. The Company has a strong portfolio of 310 export registrations, 370 CIB registrations in FY21. Meghmanis diverse global client base accounts 79% of its Agro Chemical export sales. The Company exports Technical as well as Formulation (bulk and branded) products to Africa, Brazil, LATAM, US and European countries.

Meghmanis major products include 2,4D, Cypermethrin, Bifenthrin, Permethrin, Chlorpyrifos and Profenophos.

In branded formulations, the Company has established a strong pan India presence with about 3000 channel partners. Megastar, Megacyper, Megaban, Synergy, Courage, Correct and Mega Claim are its key agrochemical brands.

The Company has three state-of-the-art manufacturing facilities located at:

GIDC Ankleshwar, (6,840 MTPA)

GIDC Panoli, (13,500 MTPA)

GIDC Dahej, (29,040 MTPA)

Agrochemical - Highlights

Meghmanis agrochemical segment achieved net sales of Rs. 10,451 million in FY21. Exports accounted for 79% of the revenue during FY21. EBITDA during the year was Rs. 2,344 million and EBITDA margin for the period stood at 22.4% in FY21.

Outlook and Strategy

Meghmaniss backward integrated facilities put it in an advantageous position, given the current rising raw material prices from China. The Company has doubled its 2,4-D Capacity by 10,800 MTPA and commissioned a new formulation plant by FY21. Meghmanis is planning a New Multipurpose plant (MPP) at Dahej with backward integration with capex of Rs. 3.10 billion which will be spent in next 2 years.The Company is geared to expand its branded products portfolio by the addition of new molecules.

Pigment Segment

Meghmanis is amongst the top 3 pigment manufacturers of Phthalocyanine-based Pigments with 14% global market share. The Company has vertically integrated facilities manufacturing CPC Blue (an upstream product sold to other Pigments manufacturers) and end products — Pigment Green and Pigment Blue. These Pigments products are used in multiple applications, including paints, plastics and printing inks.

The Companys Pigments business enjoys a strong global presence with exports accounting for 78% of net sales. The Company has forged a deep relationship with its clients resulting in 90% business from its repeat customers. The Company has a global presence in more than 70 countries with a subsidiary in the US which helps in maintaining a front-end presence along with the ability to work closely with end-user customers.

Meghmanis has three dedicated manufacturing facilities for Pigments products at:

GIDC Vatva, Ahmedabad, (3,180 MTPA) manufacturing Pigment Green and AZO Pigments GIDC Panoli, near Ankleshwar, (17,400 MTPA) producing CPC Blue, Alpha and Beta Blue

Dahej SEZ Ltd, (12,600 MTPA) manufacturing CPC Blue, Alpha and Beta Blue

MEGHMANI ORGANICS IS AMONGST THE TOP 3 PIGMENT MANUFACTURERS OF PHTHALOCYANINE-BASED PIGMENTS WITH 14% GLOBAL MARKET SHARE.

Pigments - Highlights

Meghmanis pigment segment net sales stood at Rs. 5,784 million in FY21. Exports accounted 78% of the revenues during the year. EBITDA during the year was Rs. 1,045 million due to product mix and cost rationalisation. EBITDA margin for the period stood at 18.1% in FY21.

Outlook and Strategy

Meghmanis is amongst the largest producers for the Copper Phthalocyanine Pigment. Company is confident of sustainable growth in Pigment beyond Phthalocyanine Pigment Blue and Green. Management is seriously considering to foray into new and lucrative variant of Pigment to increase the basket of products in Pigments division in the coming years.

Company continues to focus on strengthening its domestic presence, enhance its global market share tapping the prevailing market opportunities in growing end-user industries.

Key Risks and Concerns

Meghmani Organics mitigates its key risks across all levels of business operations by structuring and continuously identifying, assessing, deciding and executing the planned course of action.

Erratic monsoon and Unfavourable weather lowering agrochemical demand

The Indian agrochemical industry is still largely dependent on monsoons. Uneven rainfall affects crop acreages, agrochemical application and overall productivity having a direct impact on the Companys top-line.

Mitigation: The Companys diverse product portfolio backed by established global and national presence can easily navigate through erratic monsoons and unfavourable weather by tapping opportunities in other regions/geographies.

Changes in government policies

The Company exports its products to multiple countries/ geographies. Any adverse changes in the political, economic, regulatory or social conditions of these countries might bump the Companys business prospects.

Mitigation: Meghmani Organics de-risked business model reduces its dependency on any single country for selling its multiple products.

Exchange and Interest Rates Fluctuations

Meghmani Organics presence in multiple countries exposes to foreign currency revenue. The Company realizes foreign currency gain or loss based on depreciation or appreciation of the US Dollar.

Mitigation: Any adverse movement in the foreign exchange rates might impact the results of operation, cash flows, liquidity, and financial condition of the Company.

Fluctuations in Raw Material Prices

Drastic changes and continuous fluctuations in the prices of key raw materials can pose critical challenges to the Companys growth.

Mitigation: Meghmani Organics diversified business verticals follows prudent procurement, backward and forward integration, quality control measures, technical competence, logistics facilities, prompt after-sales service and deep customer relationship. The Companys high degree of product customization, consistent quality coupled with strict compliance adds to client stickiness.

Internal Control System

The Company has a proper and adequate system of Internal Controls commensurate with the size and nature of its operations to ensure that all assets are safeguarded against unauthorized use or disposal, safeguarding true and fair reporting and compliance with all applicable regulatory laws and company policies. Internal Audit Reports are reviewed by the Audit Committee of the Board.

Financial Overview

Particulars	(Rs. in mn)
Net Sales	16,367
EBITDA	2,825
PBT	2,518
PAT	1,865
Key Ratios
EBITDA Margin	17.3%
ROE	17.2%
ROCE	17.1%
D/E Ratio	0.22

Human Capital

The Company considers its employees as the most valuable resource and provides a healthy and competitive work environment to enable the employees to excel and create new benchmarks of quality, productivity, efficiency and customer delight. The Company always believes in maintaining mutually beneficial, healthy and smooth industrial relations with the employees and the Unions which is an essential foundation for achieving collective organisational success. The consistent HR Policies of the company helps in attracting the best talent pool; retention and controlling low attrition rate.

Cautionary Statement

Certain statements contained in the Management Discussion and Analysis may be statements of the Companys beliefs, plans and expectations about the future and other forward-looking statements that are based on managements current expectations or beliefs as well as a number of assumptions about the Companys operations and factors beyond the Companys control or third party sources and involve known and unknown risks and uncertainties that could cause actual results to differ materially from those contemplated by the relevant forward-looking statements. Forward-looking statements contained in the Management Discussion and Analysis regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. There is no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You should not place undue reliance on forward-looking statements, which speak only as of the date of this Annual Report.