Management Replies To Online Q&A With Investors
The Management of Meghmani Organics Limited has conducted an online Q&A forum at Shareinvestor.com and is pleased to announce that the replies to the questions raised through the management online Q&A forum have been posted.
Completed Q&A with the Management of Meghmani Organics Limited
Dec 06, 2006
Management Q&A
Dear Investors,
Thank you very much for the questions and the opportunity for us to respond. We hope you have a better understanding of our business through this online exchange. Your questions will be reposted in blue followed by our replies in black.
Kind regards,
The Management Team
Meghmani Organics Limited
Dear Marcus, you wrote:
1H FY06 earnings has been affected by rising raw materials costs and pricing pressures in Meghmani’s agrochemical division.
Does Meghmani uses financial instruments to hedge against rising material costs?
Is it difficult for Meghmani to pass on the incremental rise in raw material cost to its customers? Is it because of intense pricing competition in the industry?
Thank you for your question Marcus.
No, Meghmani does not use financial instruments to hedge against rises in raw materials costs. We have instead, since July 2005, invested in an ERP system which helps us to manage our cash flow and raw material planning cycle.
No we have been successful in passing on the raw material prices to customers so far. It is a continuous negotiating process for us and our success is due primarily to our strong relationships with customers.
Dear Serene Lim , you wrote:
Congrats on your IPO in India!
How’s the progress of the IPO so far?
Given the larger shareholder base after the India IPO, how does Meghmani ensure that shareholders in Singapore are not neglected?
Are there plans to delist Meghmani after the IPO given the low liquidity of the counter in SGX and the fact that Meghmani would have to pay NSE, BSE and SGX to maintain its listing status in the 3 bourses?
Thank you for your question Serene.
Meghmani has made significant progress in its India IPO since our last on-line management Q&A. On 26 October, we filed our Draft Red Herring Prospectus (“DRHP”) to the Securities and Exchange Board of India (“SEBI”) and also applied to the National Stock Exchange (“NSE”) of India and the Bombay Stock Exchange (“BSE”) to list our equity shares. Meghmani will be offering an issue of Rs 1020 million (approximately S$35.4 million). Rest assured that we will provide updates on the progress of our IPO listing to our stakeholders in Singapore when appropriate.
As articulated by our management many times, Meghmani remains fully committed to our listing in Singapore and have no plans to delist. Costs aside, we believe that our listing on the SGX, which is known as a world-class bourse in a financial hub, has many benefits such as a wider combined investor base, enhanced liquidity, greater corporate transparency and global recognition.
Dear Gerald Tan , you wrote:
I’ve noticed that Meghmani reports its earnings and pay out its dividend in Rupees.
Are there plans to translate the earnings into SGD or USD so the financials are more relevant to Singapore and International investors?
Are there plans to pay out dividend in SGD or USD instead of Rupees as the currency can only be used in India. Currency conversion cost will eat into dividend yield for the retail investor.
For all statutory purpose, Meghmani’s financial reporting in in Rupees as the Company is registered in India. For now, we have no plans to translate earnings into SGD.
However, at our quarterly investors’ briefings in Singapore, we do translate the base figures to SGD for the benefit of Singapore investors.
As Meghmani is an Indian company, the dividend is first declared in Rupee. Thereafter, as per the terms of issue of Singapore Depository Shares, Meghmani remits the Rupee dividend to Depository Bank (DBS Bank) by converting them to equivalent Singapore Dollars. Meghmani bears the foreign exchange conversion cost. DBS then transfers the dividend to CDP which in turn credits the individual account in Singapore Dollar. At the end of the day, shareholders of Meghmani are paid the dividend in Singapore Dollar without any conversion cost.
Dear Tan Kim Wee, you wrote:
Besides the India market, which other foreign markets does Meghmani sees good growth potential for its products in the next 2-3 years?
What is the outlook for the industry Meghmani is operating in? Is it in the up or down cycle?
Any M&A activities in the pipeline given the fresh fund injection from the Indian IPO proceeds?
Thank you for your question Kim Wee.
The outlook for Meghmani remains positive. We continue to healthy demand for both our pigments and agrochemicals products in India and globally as seen from the increases in our revenue quarter-to-quarter in the current financial year.
We are focusing on expanding our range of pigments products into high-performance pigments (HPP) and Pigments Yellow, Orange and Red which will be launched in India and our global markets in the near future. For this segment, we have seen and continue to see robust demand from India and markets such as USA, Europe, Central and South America and Japan.
For agrochemicals, we are focused on all-round growth in both our domestic and global markets. We already hold 61 registrations in key countries in the world and have a further 394 registrations pending is 56 countries. Amongst others, USA, Central and South America and China are regions which has positive growth potential for us.
For both our pigments and agrochemicals business, we intend to focus on further growing our North America, Europe, Central and Latin America, Africa and Asia-Pacific markets. We export to 58 countries worldwide and as such, we are strongly focused on the export market. To date we have 7 warehouses and 3 overseas offices in China, India and USA.
As stated in the past, we welcome both organic and inorganic growth. We have achieved organic growth successfully and are open to strategic investments or partnerships with other business that are synergistic to Meghmani’s core businesses. We will update investors accordingly at an appropriate time.
Dear Christine Tan, you wrote:
Does Meghmani has a share buy-back mandate? Does Meghmani intend to buy back its shares in Singapore to reduce the effect of dilution in the Indian bourses?
No. Meghmani does not have a share buy-back mandate under the Indian Companies Act. It is an option that we may consider in the future as it requires the outflow of funds. Right now the company is focused on its growth plan. However, Meghmani will provide the mechanism for two-way fungibility after its India Listing.
Dear Investors,
Thank you for all your questions and the interest in Meghmani Organics Limited. We have come to the end of this Q&A session. We have enjoyed and learnt much from your questions and we hope that you have a better insight of our Company and know more about our operations.
Kind regards,
The Management Team
Meghmani Organics Limited
Aug 26, 2006
Dear Investors,
Thank you very much for the questions and the opportunity for us to respond. We hope you have a better understanding of our business through this online exchange. Your questions will be reposted in blue followed by our replies in black.
Kind regards,
The Management Team
Meghmani Organics Limited
Dear Rohit, you wrote:
Can you please update us on the domestic IPO plan in India, and the indicative price range you have received from investment bankers.
Dear Rohit,
thank you for your interest in our impending IPO in India.
The Group is currently doing preparatory work for the IPO and it will be premature at this point in time to provide you with details such as the indicative price range for the shares. Nonetheless, you’d be pleased to note that we will make the necessary announcements and provide updates as soon as practicable.
Dear Sashikanth, you wrote:
Why did you list your stock in the Singapore exchange instead of the local markets in 2004?
Thank you for your question, Sashikanth.
Singapore was chosen for several reasons. Firstly, it is a highly recognized and well regarded financial hub in the region, with a robust corporate disclosure regime and policy guidelines; and these are backed by Singapore’s consistently strong socio-economic climate. Secondly, Meghmani is a well recognised international player in its field of operations and the Group’s business is export-oriented. Hence, the sequence of Meghmani’s listings in the Singapore and India bourses is not of critical importance.
Dear Jayster, you wrote:
The group mentioned implementing an ERP system in its press release. Most companies I know implement ERP system and only uses the financial module but fail to integrate the whole system comprising for example, supply chain management, customer relationship management and human resources management. May I know how the system has benefited the company and how the company had managed to integrate the system so swiftly in a short span of 1 year?
Thank you for your question, Jayster.
Since it went live in July 2005, the ERP platform has contributed significantly towards optimizing the operational efficiency and smoothening out the business processes of the Group. Presently, we have implemented a total of 3 modules in areas of Accounts and Finance, Sales and Distribution as well as Materials Management.
The availability of such real-time data, not only presents us with much improved visibility of our customer groups, stock levels and accounts receivables, but has allowed us to improve our cash flow management and raw material planning cycle significantly. Our monthly closing of accounts has been reduced and we are able to generate sales reports which are invaluable management tools for our sales and distribution functions.
At the end of the day, the Group gains a business edge over the competition as we are able to make rapid decisions based on sound data, and ultimately provide better and faster service to our customers.
Dear Marcus Ng, you wrote:
Raw material cost has gone up eating into your margins due to rising global demand for oil and metals. What strategies do Meghmani have in place to cushion the effect of rising cost and declining margins?
Dear Marcus,
Yes, we are commonly asked this question. To counter the pressures exerted on our margins, we are continuously negotiating with our customers to absorb higher raw material costs. As the products we manufacture are not affected by technological as well as fashion and trend changes, the passing on of price increases is usually a gradual and steady process. We have been successful with this thus far by virtue that we have long and highly established relationships with our clientele base.
Additionally, we continuously strive to more effectively manage our operational costs and inventory levels, amongst others. Our efforts have paid off and is evident in the improvements in margin vis-a-vis increase in raw material prices for the last five quarters.
Dear Serene Lim, you wrote:
Cashflow seems to be pretty tight for the company despite the rising profit. Why is this so?
Hi Serene,
the cashflow for our latest quarterly results was impacted for several reasons. These included the pre-monsoon stocking up of agrochemicals inventories, advance payments for the purchase of raw materials, and a capital investment at Ankleshwar for the Tri Chloro Acid Chloride (TCAC) plant, an intermediate product.
Is this the reason why the company is going for an IPO in India as well?
No. The Ministry of Finance, Government of India and New Delhi passed a legislation on 31 August 2005, amending the “Issue of Foreign Currency Convertible Bonds and Ordinary Shares (through Depository Receipt Mechanism) Scheme, 1993”, requesting all Indian companies listed in the international market to be listed in the domestic market in India as well. Regardless, we would like to clearly state that the proceeds from the Indian listing will further help the Company achieve its organic and inorganic growth plans. And we view this as a very significant milestone for the Company as the Company continuously seeks to maximise shareholder’s value.
Any plans to expand overseas to capture opportunities in emerging China and the Middle east?
For our pigments business, we see strong growth demand in India and overseas markets such as the US, Europe, Central & South America and Japan. For the agrochemicals part of the business, the largest markets in terms of rankings include the US (1st), Brazil (2nd), Argentina (3rd) and China (4th). Interestingly, India continues to export large amounts of insecticides to China, allowing us to make forays into this market with our suite of agrochemicals.
Recently, we have also met with significant success in the African market in terms of agrochemicals and envisage that this trend to continue. So, to your question, we will be channeling our resources to the above mentioned markets. You would be pleased to note that we have already set up warehouses in countries like China, Germany, Columbia and Russia, in addition to Uruguay and Belgium to take advantage of increase in demand from these countries.
Dear Investors,
Thank you for all your questions and the interest in Meghmani Organics Limited. We have come to the end of this Q&A session. We have enjoyed and learnt much from your questions and we hope that you have a better insight of our Company and know more about our operations.
Kind regards,
The Management Team
Meghmani Organics Limited