Opportunities in the Indian Chemicals Sector

June 2020

Chemicals Sector – An overview

Third largest manufacturer of chemicals in Asia

Asia Ranking

World Ranking

6 %GlobalEquity Markets

Global Chemical Industry

India Chemical Industry

8 %

18 %Sixth Largest manufacturer of

Chemicals in the World

Production - Overview Growth in return (2006 – 2019)

Highly Diversified

Over 80,000 Chemicals produced in India

Manpower

Availability of Manpower with over 2 million employed

directly

Production

27,858 MT of chemicals produced in 2018 - 19

Proximity to Customers

Provides connectivity to nearby countries

Market Size

The market size of chemicals industry was USD 163 bn in

2018

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Chemicals Sector – Trade FlowIndia has the potential to become the fourth largest chemical producer in the world.

It is expected that the chemicals Industry will grow at a rate of 9% P.A over the next five years

Mineral Fuels and Oils

Precious Stones and

metals

Chemicals

Machinery

India’s Export Sector

33%Mineral Fuels and Oils

Precious Stones and

metals

Chemicals

India’s Export Sector

Electrical Machinery

India’s Export Sector India’s Import Sector

13%

10%

9%

12%

9%

6%

15%Chemicals

Per capita Consumption India’s per capita consumption of chemicals is a tenth of the world average, and similar trend is seen in various sub segments as well.

3rd position in terms of total exports from India 4th position in terms of total imports to India

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Plastics

Segmentation – Indian Chemicals Industry

20% 15%26% 17%

3%9% 7%

Bulk Chemicals Petrochemicals Specialty Chemicals Fertilisers

Pharmaceuticals Biotechnology Agrochemicals

20%

Bulk Chemicals forms most of the Production segment along with petrochemicals and specialty chemicals

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Alkali chemicals has the largest share in the Chemical industry in India with approximately 69% share in the total

production.

Production of polymers accounts for around 61% of the total production of

basic major petrochemicals.

The agrochemicals market in India is expected to grow at 8% CAGR reaching USD 3.7 bn by FY22 and USD 4.7 bn by FY25.

Demand for organic chemicals is expected to grow at 9% CAGR from FY19-23, with phenol demand growing at 11%

India is the fourth largest producer of agrochemicals in the world and export 50% of it.

Industry Clusters & Zones

Excellent connectivity Institutional mechanism for mgmt & implementation.

Opportunities for investmentthrough PPP mode andconsortium with Indianpartners

Deregulated industry and promotion of 100% FDI.

Strategic location at ports for domestic and global

markets

Availability of adequate land with Government

agencies/developers

Ready availability of technical and skilled

manpower.

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Gujarat

Odisha

Andhra Pradesh

TamilNadu

Cluster MapGovernment of India has approved 4 Petroleum, Chemical and Petrochemical Investment Regions(PCPIRs) in the state of Andhra Pradesh (Vishakhapatnam), Gujarat (Dahej), Odisha (Paradeep)and Tamil Nadu (Cuddalore and Naghapattinam)

Each PCPIR is a specifically delineated region having an area of about 250 square km. wherein40% of the area must be for processing activities.

Government has been taking proactive steps to increase investments in the chemicals sector

Specialty ChemicalsThe APAC region, with a share of 45-50%, was the key contributor to the global specialty chemical market in 2017,

followed by North America and Western Europe but India’s share is only 3% in terms of global demand vs export value

~ USD 33 billion

Value

~20% of the whole chemical

industry

Share inIndia

Growth driven by growth of underlying segment

Driver

5.2% per annum from 2012 - 2017

Global Growth Rate

Recent improvements in R&D and thrush

towards more specialty chemicals

Focus Change

Main Feeder

Colorants with a share of 21% of

specialty chemicals

0

20

40

60

80

100

FY07 FY12 FY18 FY25

USD

bill

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Potential Specialty Chemicals Industry Size by FY25

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Specialty Chemicals - Segmentation

13% 12%21% 17%

2%3% 2%

Colorants Paints & Coatings Flavors and Fragrances Surfactants

Personal Care Construction Chemicals Water Treatment

20% 5%

Textile Chemicals

20%

Others

2%

Polymer Additive

11%

12%

14%10%

13% 12%

12%

12%

12%

12%

Sector Grow

th RateSegm

ent Share

Each of the key consumer industries of specialty chemicals grows by over 10% per annum, leading to an upward effect

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Growth DriversStrict Environment Compliance in Asian Peers

Government Initiatives

Low Per capita Consumption

• Increase in GDP • Largest self-consuming economy• Increasing Disposable Income • Key input industries growing at 10 – 12 % per annum

Rising Domestic Demand

Burgeoning Investments

Import Substitution

• India is highly dependent on other countries for imports of petrochemical intermediates

• Better supply chain solutions and technology• Indian as well as foreign companies are setting up

manufacturing plants of petrochemical intermediates

• Current per capita consumption of chemical products in India is one tenth of the world average,

• Untapped demand potential

• Various development initiatives such as Make in India, Smart City Mission

• Require significant demand for chemicals• several structural reforms - GST, land acquisition act

and increased transparency. • Increased EODB ranking - encouraging local

production and openness to foreign companies to produce in India

• India’s chemical sector (other than fertilizer) attracted FDI investment of USD 1.3 bn in FY18

• ~3% of the total FDI inflow• Domestic and overseas companies are investing in

either greenfield or brownfield • Reflect confidence of players in India’s potential.• Occurring across segments, and across the value

chain

• Asian peers have been facing disruptions in their supply chain due to tighter environment norms

• This has led to a lot of uncertainty,• Companies have shifted their sourcing destination to India

Opportunities

Chemical exports grew faster than average exports

Imports more than exports despite growth

Import Vs Export

Specialty chemicals make up to 55% of the chemical export value

India caters only to 3% of the global demand

Specialty Chemicals – Global Demand

Margins getting thinner Indian companies looking to integrate big

data and data analysis technology to improve production

.

New Technology

At scale companies looking to partner up with foreign companies. Helps Ease Pressure

Access to alternative and cheaper feedstock:

Margins running thinner Indian companies looking to acquire or

partner up with Indian or Foreign companies for backward or forward

integration

Value Chain Integration

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Case Examples

Sika Chemicals

StrubLube

Independent manufacturer of lubricants and technical cleaning agents

Foundation of subsidiary STRUB India Pvt. Ltd in 2014

Company has a warehouse of over 5,000 Square feet in Pune along with a manufacturing facility in Mumbai

The company has over 100 active clients in India with one of the biggest being endurance group

Sika AG is a Swiss specialty chemical company that supplies to the building sector and motor vehicle industry

SIKA started India ops. via a partnership in 1985 but later acquired the company to form a Wholly owned subsidiary

Sika India has 8 branch offices along with over 400 personnel taking care of various functions

The company has 5 manufacturing locations in India and exports to Sri Lanka, Nepal, Bhutan, Maldives and Bangladesh

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