Chemical Industry in India – What is the Outlook?

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Chemical Industry in India has broadly grown at ~11% CAGR over the last decade. It was valued at $178 billion in FY 2019 & is expected to grow at 9% per annum and reach $304 billion by FY 2025.

In September 2020, the production of key chemicals was 8,36,435 MT and petrochemicals was 17,26,502 MT (Source – IBEF).

Utilization of Chemical Industry in India
Utilization of Chemical Industry in India

(Source – RBSA ADVISORS).

In the infographic below by Mckinsey, you can see that the Indian chemical industry has outperformed the overall market as well as the world chemical industry by a significant margin.

In the article to follow, we will discuss the various segments, key listed players, and the future of the Indian Chemical sector as a whole.

Global Chemical Industry

Segmentation of Chemical Industry in India

Below is a brief breakdown of what all the Indian Chemicals Industry comprise of.

Chemical Industry in India
Segmentation of Indian Chemicals Sector

Basic Chemicals Industries in India

Petro-Chemicals

  • These are the chemicals that are derived from crude oil or natural gas which are used further by other industries as an input to make their final product.
  • It is used in making detergents, synthetic fibers, and rubbers, insulating materials, paints, polyester clothes & others. Petrochemicals constitute Polymers & synthetic fibers account for 40% of the world chemical market.
  • Gujarat and Maharashtra have emerged as the most favored zones for the petrochemical industry in India. Key companies in petrochemicals are – Reliance, GAIL & Haldia Chemicals.

Chlor Alkali chemicals

  • It is derived from passing electricity through salty water used to produce chlorine & caustic soda. Caustic soda is used as bleaching powder, soaps, etc. & chlorine used to treat water majorly.
  • India has 3336MT of caustic soda capacity & 2474MT capacity as of FY2018.
  • Key players in this segment are – tata chemicals, Gujarat alkalies limited, GHCL, DCM Shriram, lords chloro, & others.

Specialty Chemicals Industry in India

These are chemicals that are manufactured for special purposes & are advanced versions of basic chemicals usually.

These companies manufacture in low quantity as they receive higher realizations compared to basic chemicals.

They constitute 22% of the total chemicals and petrochemicals market in India. It was valued at $35 bn in 2018 & is expected to grow at 10% till 2025.

Flavors & Fragrances

Flavors are used to add flavors to food, tobacco & make food tastier to eat. Fragrances are used in soaps, perfumes, candles, etc.

Adhesives & Sealants

Adhesives are used to bind the surface of material together & their application is found in packaging, construction, automobile, laminates, footwear industries.

The major companies include – Pidilite Limited, Henkel AG & Co, Arkema Group, and H B Fuller Company.

Agrochemicals

These chemicals are used to manufacture pesticides, herbicides, fungicides & related products used in the agriculture industry.

The Indian agrochemical industry is expected to reach $3.7 bn FY 2022 and $4.7 bn by FY 2025 & expected to grow at 8% CAGR till FY 2025.

Key players in this segment are – UPL, PI Industries, Rallis, Bayer.

Paints

Paint consists of manufacturers of paints, varnishes, stains, and a variety of other specialty coatings.

The Indian Paint Industry is estimated to be a $660 million industry & Indian paints and coatings are expected to expand at a CAGR of 8.6% during the period of 2019 – 2024.

The industry is raw material intensive, with over 300 raw materials (50% crude-based derivatives) involved in the manufacturing process. The key players include Asian Paints and Berger Paints

Didn’t find your company on the list?

The reason is that the chemical sector can be further sub-segmented in a various manner by various people & companies.

Here, we have tried to bring in an overall brief of the chemical sector as defined by the IBEF.

Other organizations might differentiate by – pharma chemicals, biotechnology, performance plastics, etc.

List of Top 10 Chemical Companies in India

  • Bayer CropScience Ltd.
  • PI Industries Ltd.
  • Atul Ltd.
  • Aarti Industries Ltd.
  • Pidilite Industries Ltd.
  • Tata Chemicals Ltd.
  • Coromandel International Ltd.
  • UPL Limited
  • Vinati Organics
  • Balaji Amines

So, what lies ahead for the Chemical Industry in India as a whole?

The cabinet has cleared PLI (production linked incentive) scheme worth Rs. 15,000 CR which is expected to boost local production in India.

The Chinese government has been focusing on reducing pollution which has lead to the closure of 80,000 Chinese chemical companies (Source – Finception), giving a fillip to Indian chemical manufacturers profitability 7 capacity.

Performance of Chemical Companies in India

Along with the foreign companies trying to de-risk their procurement exclusively from China to China +1 of which India can become major beneficiary if standard & quality is maintained & accepted by buyers.

Impact of China on Chemical Industry in India

Indian has a huge way to go in the chemicals business.

China has a clear advantage over India in the global export of chemicals. China has a 12% share in global agrochemical export and a 12% share in global pigments and dyes exports compared to India’s <5% (source Mckinsey).

Not only can India keep taking away its share from China, but be a significant source of growth and new market development as well.


Stock Returns of Some Chemical Companies in the Last 5 years

Stocks 5-year absolute return
Balaji Amines 700%
Asian Paints 300%
UPL 200%
Pidilite 250%

Most stocks have at least doubled if not more in the last 5 years in the Indian Chemical sector. Happy Investing!

Also Read:

Comparison of Top 5 Agrochemical Stocks in India

Chambal Fertilizers – A Beneficiary of Rural Theme?

Coromandel International – Is it a Good Agrochemical Stock?

Disclaimer: Companies mentioned in the article are not recommendations. Please consult your investment advisor before investing.

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Prateek Goel

Prateek Goel

Co-founder of Investeek, Prateek has been investing in the stock markets since 2006 and has beaten the NSE/BSE on a consistent basis. At the age of 24, he was also featured in India Today for his expert insight on gold trading.
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