India’s chemical sector is extremely diverse, covering more than 80,000 commercial products and can be widely categorized into bulk chemicals, speciality chemicals, agricultural chemicals, petroleum products, polymers, and fertilisers.
India is the world’s fourth-largest manufacturer of agrochemicals, trailing only the United States, Japan, and China. Accounting for 16% of global dyestuff and dye intermediate manufacturing. With a 15% worldwide market share, the Indian colourants sector has established itself as a major player.
Small and medium-sized enterprises in the domestic chemicals industry are expected to increase by 18-23% in FY22, owing to increased domestic demand and greater realisation due to rising chemical prices.
Due to its closeness to the Middle East, the world’s source of petroleum products, India can profit from scale economies.
Global trends: Volatility for the rest of the world, but opportunities for India
- Several worldwide oil and gas companies are focusing on downstream chemical opportunities. This may significantly raise India’s concentrate on petrochemicals, and increased investment in the industry may alleviate raw material difficulties and boost self-sufficiency.
- Due to various tougher environmental regulations, tighter funding, and centralisation, the structure of China’s chemical industry is evolving. While these changes may support a few big players in the longterm, they may cause confusion for foreign players who rely on Chinese chemicals. This could open up opportunities for Indian chemical firms in specific value chains and sections, particularly in the short term.
- Economic sanctions have emerged all over the world, most notably between China, the United States, and Western Europe. These have resulted in changes in global distribution networks, impacting trade relations between China and the United States and potentially harming other economies. Major chemical markets that remain available in this situation may present an opportunity for Indian chemical firms.
- Sustainable development is becoming a necessity rather than a buzz phrase, with multiple parties emphasising it. Chemical firms could prioritise sustainable development in order to safeguard long-term value for shareholders while still complying with local rules.
- Across the sector, there appears to be a shift toward prioritisation of business units and larger-scale consolidation, often through large-ticket mergers and acquisitions. Scale will be even more important for Indian players, as it may help to strengthen their competitive edge.
- Digital technology has proven to be an effective tool for boosting productivity and efficiency. Many businesses around the world are recognising the possibility of digital; Indian businesses could benefit from this chance to enhance their profitability.
Indian chemicals industry Market Size
The Indian chemicals industry was worth US$ 178 billion in 2019 and is projected to be worth US$ 304 billion by 2025, growing at a 9.3% CAGR. Chemical market is anticipated to grow at a 9% annual rate by 2025. By 2025, the industrial sector is predicted to contribute $300 billion to India’s GDP.
According to the Crisil report, Indian manufacturers increased their income by 11% between FY15 and FY21, growing India’s share of the global specialty chemicals market to 4% from 3%. Domestic economic recovery and robust export markets will drive a 50% YoY increase in global specialty manufacturers’ CAPEX in FY22 to Rs. 6,000-6,200 crore.
Sales revenue in FY22 is expected to be 19-20% YoY, up from 9-10% in FY21, driven by a recovering in domestic demand and increased realisations as crude oil prices rise and exports improve.
- Chemical annual production was 918,629 MT in April 2022, while petrochemical production reached 1,564,215 MT. The level of specialty chemicals was as follows: Soda Ash was 263,867 MT, Caustic Soda was 282,716 MT, Liquid Chlorine was 205,786 MT, Formaldehyde was 23,233 MT, and Pesticides and Insecticides were 22,668 MT.
- NTPC Renewable Energy Limited (NTPC REL) and Gujarat Alkalies and Chemicals Limited (GACL) signed an agreement in July 2022 to collaborate on the construction of India’s first commercial-scale Green Ammonia and Green Methanol plants.
- In November 2021, Indian Oil Corporation (IOCL) plans to invest Rs. 3,681 crore (US$ 495.22 million) to build India’s first mega-scale maleic anhydride unit at its Panipat Refinery in Haryana.
- Strategic buyers led by Japan, Korea, and Thailand are getting interested in Indian companies in November 2020, as they seek to expand distribution networks from China. This includes two large acquisitions in fiscal 2020: KKR’s $414 million purchase of JB Chemicals and Pharmaceuticals Ltd. and Carlyle’s $210 million purchase of SeQuent Scientific Ltd.