Chemical Industries Analysis

What are chemical industries?

The Indian chemical industry mostly creates fundamental sorts of synthetics just as information type synthetics and forte sort synthetics as of 2018. In India, Gujarat was the biggest state supporter of the substance business of India in 2018. India additionally delivers items identified with petrochemicals, manures, paints, stains, glass, scents, toiletries, drugs, and so forth. Chemicals industry in India is highly diversified, covering more than 80,000 commercial products

The India compound industry is isolated into six sub-sections. These sub-portions are Basic Organic Chemicals, Specialty Chemicals, Chlor-antacid, Pesticides, Dyestuff, and liquor based synthetic substances. India is a significant maker of essential natural synthetics.

India is a solid worldwide color provider, representing roughly 16% of the world creation of dyestuff and color intermediates. Synthetic compounds industry in India has been de-authorized with the exception of few dangerous synthetic substances. Forthcoming Petroleum, Chemicals and Petrochemicals Investment Regions (PCPIRs) and Plastic parks will give cutting edge foundation for Chemicals and Petrochemicals area.

Fundamentals

  • The Chemicals and Petrochemicals market is projected to reach $300 bn by 2025

  • Indian ranks 9th in export and 6th in import of chemicals (Excluding Pharmaceuticals products) globally

  • Export of Organic and Inorganic Chemicals was valued at $2230.15 bn in August 2021 with a growth of 35.75% over exports of $1642.82 bn in August 2020.

  • Demand for chemical products is expected to grow at approximately 9% p.a. during 2020-25

  • Indian chemical industry employs more than 2 million people

  • Fertilizer’s production (weight: 2.63%) increased by 0.5% in July 2021 over July 2020

100% FDI is allowed under the automatic route in the chemicals sector (except in the case of certain hazardous chemicals)



Economy

The chemical business of India is a significant supporter of the Indian economy, contributing 7% of the nation's Gross Domestic Product (GDP) India's substance industry positions as 6th biggest in world, and third in Asia. The worth of the substance business in India was assessed at 100 billion dollars in 2019.[1] The synthetic business of India produces work for 5,000,000 people.[2]

It added around 1.4% to the national gross where 11.3% chemicals exported by India. It contributed around 2.5% to the global chemical sales.


Market size:

The market size of Chemicals & Petrochemicals sector in India is around $178 bn; expected to grow to $300 bn by 2025.

The creation of Total Major Chemicals and Petrochemicals in 2021-22 (upto May 2021) was 92.8 lakh MT. CAGR underway of Total Chemicals and Petrochemicals during the period 2015-16 to 2019-20 is 5.74%. Antacid Chemicals represents around 72% of the absolute creation of Major Chemicals for the year 2021-22 (up to May 2021).

The petrochemical request is relied upon to develop at 7.5% CAGR from FY 2019-23, with polymer request developing at 8%

The agrochemicals market in India is relied upon to develop at 8% CAGR coming to $3.7 bn by FY22 and $4.7 bn by FY25.

The forte synthetic compounds establish 18% of absolute synthetic compounds and petrochemicals market in India. As of FY19, the absolute market size is around $32 bn. The interest for forte synthetics is relied upon to develop at 12% CAGR from FY19-22.

Product of Plastic and Linoleum was esteemed at $753.30 bn in August 2021 with a positive development of 16.16% more than commodities of $648.49 bn in August 2020.


Specialty Chemical Sector (Numbers are less but very promising)

Covering 80,000+ products, this industry services a large number of end-use application industries. The industry is estimated to employ more than 2million people in India. Top speciality chemical companies are engaged in sustainability and green chemistry, such as reduced carbon footprint and improved raw material supply. 

The speciality chemicals market has been on the increase in various applications, and this has helped in boosting the total market in multiple regions. The major driving factors for the market growth are growing demand from the end-user industries such as food, textiles and automobiles.

The speciality chemical market is complex and each specialty chemicals business segment comprises many sub-segments, each with individualized product, market and competitive profiles. 

The size of the Indian speciality chemicals sector is expected to double from $30 billion to $60 billion over the next five years. And Speciality Chemical contributes approx. 20% of it.

Most speciality chemicals are organic chemical that are used in a wide range of everyday products used by consumers and industry. It is a consumer driven sector and as such the specialty chemical industry has to be innovative, entrepreneurial and consumer-driven. 

The Indian story

While the sector has grown at 10% for the past decade, the industry in India was overshadowed by China, which sprinted to capture 35% of the global market in production and 25% of the global market in consumption. India is currently sixth largest manufacturer of chemicals and has consistently been the one of the leading global producers in segments like dyes and pigments, polymers and agrochemicals.

Over the last five years, there has been a gradual shift in the underlying business, driven gradually by China further tightening environmental compliance norms and purchase managers feeling uncomfortable with extremely high dependence on a single source.

Investment has grown significantly in this sector from 2016-2020 speciality chemical stocks raised over 2200 Cr.

Opportunity

The industry's growth is mainly driven by consumption growth and export opportunity. Indian speciality chemicals industry has grown with a CAGR of around 11% from 2014-2019 period and is expected to grow with a 12% CAGR in the next 5 years.

It is important to select companies who is market leader in segments and are actively investing in its R&D(because the demand of the customers are changing). Companies need to have a strong book to increase capex.

Government has allowed 100% FDI in this sector and have strict regulations on dumping. It has also made mandatory BIS certificate for foreign companies.

So, going ahead the next 5 years I see good return from stocks like

1)Aarti Industries

2)Fine Organics

3)Navine Fluorine


Stocks

A brief introduction about the company:- Pidilite Industries

Pidilite Industries Limited is a leading manufacturer of adhesives and sealants, construction chemicals, craftsmen products, DIY products and polymer emulsions in India. Most of the products have been developed through strong in-house R&D. Brands name Fevicol has become synonymous with adhesives to millions in India and is ranked amongst the most trusted brands in the country. Some of our other major brands are M-Seal, Fevikwik, Fevistik, Roff, Dr. Fixit, Fevicryl, Motomax, Hobby Ideas, Araldite.


Revenue Breakup

Company earns about 52.5% of its revenues from adhesives & sealants category, followed by Construction & paint chemicals (19%), art& craft materials (8%), industrial adhesives (6%), pigment & preparation (6.2%) & industrial resins & construction chemicals (6%). In total, the company produces ~500 products for its brands.It has its business divided into 2 divisions, consumer & bazaar products which accounts for 80% of revenues, and B2B products segment which accounts for 19% of revenues


Leadership Position

The company's adhesive business in the country of India with a 70% market share. It is an iconic brand in the domestic adhesives segment, where it is synonymous with the product itself.


Brand Building

The company is the owner of some iconic brands like Fevicol, Dr. Fixit, Fevi-Kwik, M-Seal, Roff, Chemifix, etc. engaged in various related activities. The company has rolled out many multimedia campaigns for all its product categories which is one of the key reasons for its leadership in many product categories in the country.


Infrastructure

Company has an established infrastructure and network of 23 manufacturing facilities and 25 co-makers across India. It plans to add ~12 new facilities till 2022. It has strong R&D infrastructure with 3 R&D in-house centres in India & 2 international R&D centres in the country of Singapore. The company saw a 150% increase in R% D spending since 2015.


Distribution Network

The company has an established & extensive pan-India network, comprising over 5,000 distributors, servicing 200,000 dealers, retailers and contractors across India.


Global Presence

It has a global presence with operations in 9 countries and presence in ~80 countries. It also operates about 19 subsidiaries internationally. It has a strong presence in Bangladesh and a presence of 15+ years in its market. Pidilite has a play across major categories in the country & has expanded its distribution network aggressively. It has setup its 2nd manufacturing facility in the country and considers it as a drive market for the business.


A brief introduction about the company:- FINE ORGANICS


Fine Organics is a leading producer of specialty additives for foods, plastics, rubbers, paints, inks, cosmetics, coatings, textile auxiliaries, lubes and several other specialty applications. Through constant innovation and an unwavering focus on our core competencies, Fine Organics has been able to develop a unique range of specialty additives for a wide variety of applications.


A technology and customer-driven company, Fine Organics enjoys a privileged position in the specialty additives industry globally. Fine Organics owes its growth and success to its expertise on oleo chemical, in-house manufacturing technology, customer-centric research and development and a techno-commercial mindset.

Why Fine Organic is the next big thing in the Speciality Chemical sector?

(1) constant focus on R&D

(2) diversified product portfolio

(3) capacity-led expansion growth opportunity and

(4) leadership in oleo-chemical based additives in the domestic and global markets with a loyal customer base.

(5) Joint venture in more than 5 countries and business covering all the