IFC becomes strategic investor in Meghmani FinchemMarch 13th, 2008 - 3:58 pm ICT by admin
Ahmedabad, March 13 (IANS) For the first time while financing a project, World Bank affiliate International Finance Corporation (IFC) has decided to make an equity investment of up to 25 percent in an Indian company, going over the normal norm of 20 percent. The IFC is investing in Meghmani Finechem Limited (MFL), a subsidiary of Ahmedabad-based Meghmani Organics Limited (MOL), a global producer of pigments and agro-chemicals.
Under an agreement inked Thursday with MOL, which is also listed on the Singapore Stock Exchange, IFC will invest Rs.461 million in Meghmani Finchem’s Rs.5.54 billion chlor-alkali project to come up at Dahej in Bharuch district in south Gujarat.
The amount represents 25 percent of the total equity of the project. In addition, IFC will provide Rs.800 million as long term loan. It is also subscribing to warrants of up to Rs.50 million.
MOL officials believe the significant move by the IFC to invest more in equity is a vote of confidence in the potential and viability of the project.
Ashish Soparkar, director of Meghmani Finechem, said: “This IFC investment is a vote of confidence in the potential and viability of this project. They are uniquely positioned also to help us develop environmental, health, social and safety management systems and practices at the new plant”.
By investing in the project, IFC will be supporting a mid-tier Indian company to realize its growth potential and become more competitive in the global and regional markets.
Lance Crist, IFC manager for chemicals, said: “With this funding, IFC will help MOL to achieve international standards in environmental and social performance. We believe our support for the project will also help the company strengthen its technology and environmentally friendly operating standards.”
Sources said IFC’s support to the MFL project is also guided by three other factors. First, IFC is of the view that its global presence and extensive experience in the chemicals industry worldwide, including participation in several chlor-alkali projects, will guide the company through challenges and opportunities as it grows and expands in this competitive sector.
Second, in the opinion of the IFC, MFL’s reliance on membrane cells technology can be expected to have a positive demonstration effect on the competition, thus encouraging other chemical companies to adopt the technology and environment-friendly operating standards.
Last, the project will generate downstream economic impact in the local economy as the company is planning to source its main feedstock of raw salt from local producers in Dahej area.
The environment-friendly membrane cell technology will, however, be supplied by Asahi Kasei Chemicals Corporation of Japan. The products to be manufactured include 113,000 tonnes a year of caustic soda, 9,970 tonnes a year of hydrochloric acid, 100,000 tonnes of chlorine gas, 2,600 tonnes of dilute sulphuric acid and 8300 tonnes of sodium hypochlorite.
The products are used in industries making pigments, pesticides, pulp and paper, organic chemicals, plastics, industrial solvents, water treatment chemicals and pharmaceuticals.
Since the project is power intensive, the company is also setting up a 40-megawatt captive power plant along with the main project.
The project is being implemented in two phases. The commercial production of the first phase is targeted to commence by December 2008/January 2009. The second phase is expected to produce derivative products such as PVC, mono-chloro acetic acid, cyanuric chloride, aluminium chloride, calcium chloride, methyl chloride and hydrogen peroxide.
For the project, MOL has acquired a 161-acre greenfield site. Dahej has a port and is an approved chemical special economic zone (SEZ) with many chemicals companies around. The port has jetties capable of handling gaseous, liquid and solid cargoes and is well connected by rail, road and sea for easy transportation of raw materials and end products.
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