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on Specialty, Fine Chemicals , Agrochemicals Dyes & Pigments and SME Sector in Gujarat State
2011Gujarat
Knowledge Paper
Theme:
Leveraging Gujarat State Advantage In The Global Chemical Industry
Executive summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Gujarat state advantage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Industry reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1. Agrochemicals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2. Fine chemicals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3. Dyes and pigments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4. Other specialty chemicals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Thought notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
1. Farming solutions - the next frontier for breakthrough growth of Indian
agrochemical companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
2. Contract research - driving strategic value from emerging markets . . . . . . . 69
3. GST: An opportunity to assess your supply chain . . . . . . . . . . . . . . . . . . . . . 75
About Tata Strategic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
CONTENTS
Executive summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Gujarat state advantage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Industry reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1. Agrochemicals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2. Fine chemicals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3. Dyes and pigments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4. Other specialty chemicals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Thought notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
1. Farming solutions - the next frontier for breakthrough growth of Indian
agrochemical companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
2. Contract research - driving strategic value from emerging markets . . . . . . . 69
3. GST: An opportunity to assess your supply chain . . . . . . . . . . . . . . . . . . . . . 75
About Tata Strategic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
CONTENTS
01
T
Agrochemicals
his FICCI report on the specialty chemical industry in India, prepared by Tata
Strategic Management Group, provides an analysis of key industry segments -
agrochemicals, fine chemicals, dyes, pigments and colourants and other specialty
chemicals. The report highlights the current market size, projects future market size and
growth, map demand-supply scenario and outline the demand drivers. It also provide
insights on key market, technology and regulatory trends and conclude with a brief
outlook on the levers for delivering growth - through capitalizing on opportunities and
addressing imminent challenges. The report provides a brief overview of the business
environment in the state of Gujarat, with special emphasis on agrochemicals, fine
chemicals, dyes, pigments and colourants and other specialty chemicals. It describes
salient features and key developments in the investing climate and industrial policy of the
state.
Over the past two decades, Gujarat has become one of the most preferred locations for
industrial investment in India. Gujarat has achieved an annual growth rate of over 10%
p.a. over the past five years and is one of the most industrialized states of India. It
accounts for 16% of the nation's industrial production and 22% of its exports. Gujarat
possesses several key factors which have enabled it to chart a path of rapid growth and
industrialization - sound infrastructure facilities, availability of skilled and semi-skilled
manpower, excellent domestic and international connectivity and rich natural resources.
But the key differentiating factor has been Gujarat's investor-friendly policy towards
industrial development. These have resulted in Gujarat evolving as the hub of India's
chemical and petrochemical industry - with the state accounting for more than half of
India's total chemical industry and ~63% of total national petrochemical production. The
chemical industry is today the largest and fastest growing component of Gujarat's
manufacturing sector.
The Indian chemical industry forms the backbone of the industrial and agricultural
development of India and provides building blocks for downstream industries. The
industry has registered a growth of ~10% p.a. over the last few years and is currently
estimated to be around $ 80-85 Bn. Specialty and knowledge chemicals together account
for $ 27 Bn and could grow at a higher rate of ~15-17% over the next few years, outpacing
the overall GDP growth rate.
As an allied industry of agriculture, which accounts for about one fifth of India's GDP, the
agrochemicals industry is a significant industry for the Indian economy. The Indian
agrochemicals market grew at around 10%-11% over the last five years to reach ~$ 3.4 Bn
in FY10. With 125 technical grade manufacturers and 800 formulators, India is the fourth
Executive Summary
01
T
Agrochemicals
his FICCI report on the specialty chemical industry in India, prepared by Tata
Strategic Management Group, provides an analysis of key industry segments -
agrochemicals, fine chemicals, dyes, pigments and colourants and other specialty
chemicals. The report highlights the current market size, projects future market size and
growth, map demand-supply scenario and outline the demand drivers. It also provide
insights on key market, technology and regulatory trends and conclude with a brief
outlook on the levers for delivering growth - through capitalizing on opportunities and
addressing imminent challenges. The report provides a brief overview of the business
environment in the state of Gujarat, with special emphasis on agrochemicals, fine
chemicals, dyes, pigments and colourants and other specialty chemicals. It describes
salient features and key developments in the investing climate and industrial policy of the
state.
Over the past two decades, Gujarat has become one of the most preferred locations for
industrial investment in India. Gujarat has achieved an annual growth rate of over 10%
p.a. over the past five years and is one of the most industrialized states of India. It
accounts for 16% of the nation's industrial production and 22% of its exports. Gujarat
possesses several key factors which have enabled it to chart a path of rapid growth and
industrialization - sound infrastructure facilities, availability of skilled and semi-skilled
manpower, excellent domestic and international connectivity and rich natural resources.
But the key differentiating factor has been Gujarat's investor-friendly policy towards
industrial development. These have resulted in Gujarat evolving as the hub of India's
chemical and petrochemical industry - with the state accounting for more than half of
India's total chemical industry and ~63% of total national petrochemical production. The
chemical industry is today the largest and fastest growing component of Gujarat's
manufacturing sector.
The Indian chemical industry forms the backbone of the industrial and agricultural
development of India and provides building blocks for downstream industries. The
industry has registered a growth of ~10% p.a. over the last few years and is currently
estimated to be around $ 80-85 Bn. Specialty and knowledge chemicals together account
for $ 27 Bn and could grow at a higher rate of ~15-17% over the next few years, outpacing
the overall GDP growth rate.
As an allied industry of agriculture, which accounts for about one fifth of India's GDP, the
agrochemicals industry is a significant industry for the Indian economy. The Indian
agrochemicals market grew at around 10%-11% over the last five years to reach ~$ 3.4 Bn
in FY10. With 125 technical grade manufacturers and 800 formulators, India is the fourth
Executive Summary
02 03
largest producer of agrochemicals in the world after USA, Japan and China. Indian
agrochemical exports have shown an impressive growth in the past few years driven by
excess capacity and availability of cheap labor. Exports account for almost 53% of the
industry revenues and manufacturing cost-competitiveness vis-à-vis developed economies
is expected to driver exports growth at around 15% annually in the next decade.
Government focus on achieving food grain self sufficiency coupled with limited farmland
availability is expected to provide a further impetus to the industry.
The Indian pharmaceutical industry size stood at nearly $ 21.4 Bn in 2010, 40% of which
was accounted for by fine chemicals. The fine chemicals market is poised for rapid growth
in the next decade driven by increased focus on contract manufacturing (CRAMS) by
global players to reduce costs and increasing exports to innovators (as opposed to
generics). The market size is expected to exceed $ 45 Bn in 2016.
The Indian colorants industry stood at nearly $ 3.5 Bn in 2010 with exports accounting for
68%. It is expected to grow between 11% and 15% to $ 10 Bn to $ 14 Bn by 2020. The
steep growth is expected to be driven by boom in infrastructure market and consumer
products and India and increasing scope for manufacturing for exports.
Other specialty chemicals primarily consist of paints & coatings chemicals, construction
chemicals, polymer additives, water treatment chemicals and aroma chemicals. Paints &
coatings is the largest segment, with a market size of ~$ 3.4 Bn in 2010. Other key
segments include water treatment chemicals valued at ~$ 540 Mn, construction chemicals
valued at $ 400 Mn, aroma chemicals valued at ~$ 300 Mn, and polymer additives valued
at ~ $ 300 Mn in 2010. All these segments are expected to grow at rates above the
chemical industry average, based on growth in their respective end use industries,
evolving applications and changing regulatory environment.
Additionally, a separate section containing recent Thought Notes published by Tata
Strategic Management Group has been included. This section provides key insights on
contemporary trends and issues related to Indian businesses, especially pertinent to the
chemical industry and small & medium scale industries (SMEs).
Fine chemicals
Dyes and pigments
Specialty chemicals
The Gujarat State Advantage
02 03
largest producer of agrochemicals in the world after USA, Japan and China. Indian
agrochemical exports have shown an impressive growth in the past few years driven by
excess capacity and availability of cheap labor. Exports account for almost 53% of the
industry revenues and manufacturing cost-competitiveness vis-à-vis developed economies
is expected to driver exports growth at around 15% annually in the next decade.
Government focus on achieving food grain self sufficiency coupled with limited farmland
availability is expected to provide a further impetus to the industry.
The Indian pharmaceutical industry size stood at nearly $ 21.4 Bn in 2010, 40% of which
was accounted for by fine chemicals. The fine chemicals market is poised for rapid growth
in the next decade driven by increased focus on contract manufacturing (CRAMS) by
global players to reduce costs and increasing exports to innovators (as opposed to
generics). The market size is expected to exceed $ 45 Bn in 2016.
The Indian colorants industry stood at nearly $ 3.5 Bn in 2010 with exports accounting for
68%. It is expected to grow between 11% and 15% to $ 10 Bn to $ 14 Bn by 2020. The
steep growth is expected to be driven by boom in infrastructure market and consumer
products and India and increasing scope for manufacturing for exports.
Other specialty chemicals primarily consist of paints & coatings chemicals, construction
chemicals, polymer additives, water treatment chemicals and aroma chemicals. Paints &
coatings is the largest segment, with a market size of ~$ 3.4 Bn in 2010. Other key
segments include water treatment chemicals valued at ~$ 540 Mn, construction chemicals
valued at $ 400 Mn, aroma chemicals valued at ~$ 300 Mn, and polymer additives valued
at ~ $ 300 Mn in 2010. All these segments are expected to grow at rates above the
chemical industry average, based on growth in their respective end use industries,
evolving applications and changing regulatory environment.
Additionally, a separate section containing recent Thought Notes published by Tata
Strategic Management Group has been included. This section provides key insights on
contemporary trends and issues related to Indian businesses, especially pertinent to the
chemical industry and small & medium scale industries (SMEs).
Fine chemicals
Dyes and pigments
Specialty chemicals
The Gujarat State Advantage
04 05
India is one of the fastest growing large economies of the world, having a track record of
sustained high growth over a prolonged period of time, and a positive growth outlook
driven by strong macroeconomic, demographic and consumption fundamentals. Two
decades of the post-reforms period have ushered in intense economic activity, driving
India's GDP growth rate to 7.7% over the previous decade.
India growth story and the chemicals industry
Real GDP Growth Rate (%)
3%
4%
5%
6%
7%
8%
9%
10%
'93 '95 '97 '99 '01 '03 '05 '07 '09 11
7.7%
Source: RBI Handbook of Statistics, Analysis by Tata Strategic
Availability of skilled manpower, access to local and international markets and strong
market fundamentals backed by rising per capita income have propelled India to become
a leading economy by 2010 (ninth-largest in nominal terms, fourth largest in Purchasing
Power Parity (PPP) terms). This growth story is driven by manufacturing and service
sectors, which cumulatively account for more than 85% of current GDP.
Composition of GDP (%)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
'90 '94 '98 '02 '06 '10
Services: 65.6%
Industry: 20.0%
Agriculture: 14.4%
Source: RBI Handbook of Statistics, Analysis by Tata Strategic
04 05
India is one of the fastest growing large economies of the world, having a track record of
sustained high growth over a prolonged period of time, and a positive growth outlook
driven by strong macroeconomic, demographic and consumption fundamentals. Two
decades of the post-reforms period have ushered in intense economic activity, driving
India's GDP growth rate to 7.7% over the previous decade.
India growth story and the chemicals industry
Real GDP Growth Rate (%)
3%
4%
5%
6%
7%
8%
9%
10%
'93 '95 '97 '99 '01 '03 '05 '07 '09 11
7.7%
Source: RBI Handbook of Statistics, Analysis by Tata Strategic
Availability of skilled manpower, access to local and international markets and strong
market fundamentals backed by rising per capita income have propelled India to become
a leading economy by 2010 (ninth-largest in nominal terms, fourth largest in Purchasing
Power Parity (PPP) terms). This growth story is driven by manufacturing and service
sectors, which cumulatively account for more than 85% of current GDP.
Composition of GDP (%)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
'90 '94 '98 '02 '06 '10
Services: 65.6%
Industry: 20.0%
Agriculture: 14.4%
Source: RBI Handbook of Statistics, Analysis by Tata Strategic
06 07
Chemical industry is a significant contributor to the Indian economy, accounting for 11%
of total industry output and 13% of Gross Value Added by the manufacturing sector in
FY10. The industry contributes to 10% of India's total exports and is a net earner of
foreign exchange. It is also a significant employment generator and participation field for
small and medium scale industries (SMEs). The size of India's chemical industry was
approximately $ 83 Bn in FY10, and could grow at 15% annually to $ 330 Bn in 2020 in the
most likely scenario, outpacing the GDP growth rate. The growth is expected to be driven
by rising demand in end-use segments and rising exports fuelled by increasing export
competitiveness.
Other basechemicals,27, 33%
Biotech, 3,3%
Agrochem,2, 2%
Specialtychemicals,15, 18%
Petrochem, 16, 20%
Pharma,20,24%
India’s chemical industry, FY10 (% of total)
Source: Tata Strategic estimates
Total: $ 83 Bn
Annual FDI inflows to India
exceeded $ 30 Bn for the first
time in 2007, and India became
the second largest FDI
destination globally. Though FDI
inflows have dipped to $ 23 Bn in
FY11 due to the combined effect
of aftershocks of global
recession and bunching effect of
FDI, it is expected to re-touch
pre-recession levels by 2012.
6 5 46
9
23
34 3533
23
35
0
5
10
15
20
25
30
35
40
Source: Economic Advisory Council to the Prime Minister, Department of Industrial Promotion and Policy
Foreign Direct Investments ($ Bn)
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11E
2011-12P
198
390
205 229
749
362398
FY05 FY06 FY07 FY08 FY09 FY10 FY11
FDI in chemicals industry ($ Mn)
Source: Department of Industrial and Policy & Promotion,Industry Reports
Major FDI deals in FY11
Source: Industry Reports, Analysis by Tata Strategic
Acquisition0.11Fumakilla India Private Ltd
Fumakilla Ltd
Strategic StakeN.A.
Cindu Chemicals (held by Corus, the British -Dutch
subsidiary of Tata Steel)
Koppers International
AcquisitionN.A.
Shreeji Pesticides Pvt LtdWillowood Chemicals
Majority Stake100RFCL Ltd.Avantor Performance
Materials Holdings
AcquisitionN.A.Laffans Petrochemicals
LtdHuntsman Corporation
Acquisition
Increasing stake to
100%
17.5PI Industries LtdRhodia SA
50.6Indo -Jordan Chemicals
(subsidiary of SPIC)
Jordan Phosphates Mines
Company
Acquisition price
($ Mn)
Koppers
Deal TypeTargetAcquirer
Source: Gujarat Socio-Economic Review,2009-10
17%
16%
12%
10%
6%
5%
22%Exports
Fixed capital investment
Value of output
Net mfg. value
No. of factories
Area
Population
Gujarat’ s share in India,FY10
22%22%
Gujarat: The chemical hub of India
Over the years, Gujarat has become one of the most preferred locations for industrial
investment in India. Apart from having sound infrastructure facilities, skilled manpower,
excellent domestic and international connectivity and rich raw materials, a key
differentiating factor for Gujarat is its focus on industrial development in the state. Gujarat
has achieved an annual growth rate of 10.5% p.a. over the past five years and contributes
~16% to the industrial production of the country.
The chemical and petrochemical industry in Gujarat is the fastest growing sector in the
state's economy. Gujarat has truly emerged as the hub of chemical manufacturing in
India, accounting for more than 62% of national petrochemicals and 51% of national
chemical sector output in 2007. It leads all states in MoU formation and committed
investments in the sector. 30% of total fixed capital investments in the state are allocated
to manufacturing of chemicals and chemical products, and the sector employs about 20%
of the workforce of the state.
06 07
Chemical industry is a significant contributor to the Indian economy, accounting for 11%
of total industry output and 13% of Gross Value Added by the manufacturing sector in
FY10. The industry contributes to 10% of India's total exports and is a net earner of
foreign exchange. It is also a significant employment generator and participation field for
small and medium scale industries (SMEs). The size of India's chemical industry was
approximately $ 83 Bn in FY10, and could grow at 15% annually to $ 330 Bn in 2020 in the
most likely scenario, outpacing the GDP growth rate. The growth is expected to be driven
by rising demand in end-use segments and rising exports fuelled by increasing export
competitiveness.
Other basechemicals,27, 33%
Biotech, 3,3%
Agrochem,2, 2%
Specialtychemicals,15, 18%
Petrochem, 16, 20%
Pharma,20,24%
India’s chemical industry, FY10 (% of total)
Source: Tata Strategic estimates
Total: $ 83 Bn
Annual FDI inflows to India
exceeded $ 30 Bn for the first
time in 2007, and India became
the second largest FDI
destination globally. Though FDI
inflows have dipped to $ 23 Bn in
FY11 due to the combined effect
of aftershocks of global
recession and bunching effect of
FDI, it is expected to re-touch
pre-recession levels by 2012.
6 5 46
9
23
34 3533
23
35
0
5
10
15
20
25
30
35
40
Source: Economic Advisory Council to the Prime Minister, Department of Industrial Promotion and Policy
Foreign Direct Investments ($ Bn)
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11E
2011-12P
198
390
205 229
749
362398
FY05 FY06 FY07 FY08 FY09 FY10 FY11
FDI in chemicals industry ($ Mn)
Source: Department of Industrial and Policy & Promotion,Industry Reports
Major FDI deals in FY11
Source: Industry Reports, Analysis by Tata Strategic
Acquisition0.11Fumakilla India Private Ltd
Fumakilla Ltd
Strategic StakeN.A.
Cindu Chemicals (held by Corus, the British -Dutch
subsidiary of Tata Steel)
Koppers International
AcquisitionN.A.
Shreeji Pesticides Pvt LtdWillowood Chemicals
Majority Stake100RFCL Ltd.Avantor Performance
Materials Holdings
AcquisitionN.A.Laffans Petrochemicals
LtdHuntsman Corporation
Acquisition
Increasing stake to
100%
17.5PI Industries LtdRhodia SA
50.6Indo -Jordan Chemicals
(subsidiary of SPIC)
Jordan Phosphates Mines
Company
Acquisition price
($ Mn)
Koppers
Deal TypeTargetAcquirer
Source: Gujarat Socio-Economic Review,2009-10
17%
16%
12%
10%
6%
5%
22%Exports
Fixed capital investment
Value of output
Net mfg. value
No. of factories
Area
Population
Gujarat’ s share in India,FY10
22%22%
Gujarat: The chemical hub of India
Over the years, Gujarat has become one of the most preferred locations for industrial
investment in India. Apart from having sound infrastructure facilities, skilled manpower,
excellent domestic and international connectivity and rich raw materials, a key
differentiating factor for Gujarat is its focus on industrial development in the state. Gujarat
has achieved an annual growth rate of 10.5% p.a. over the past five years and contributes
~16% to the industrial production of the country.
The chemical and petrochemical industry in Gujarat is the fastest growing sector in the
state's economy. Gujarat has truly emerged as the hub of chemical manufacturing in
India, accounting for more than 62% of national petrochemicals and 51% of national
chemical sector output in 2007. It leads all states in MoU formation and committed
investments in the sector. 30% of total fixed capital investments in the state are allocated
to manufacturing of chemicals and chemical products, and the sector employs about 20%
of the workforce of the state.
08 09
Gujarat houses production facilities for some of the largest global and Indian chemical and
petrochemicals manufacturers. Gujarat State Fertilizers & Chemicals Ltd. (GSFC), Gujarat
Alkalis & Chemicals Ltd. (GACL) and Gujarat Narmada Valley Fertilizers Company Ltd.
(GNFC) are the largest public sector units located in Gujarat. GSFC is the only producer of
melamine and largest producer of caprolactum in India. GACL is the market leader in
caustic soda whereas GNFC is one of the leading fertilizers company in the country. Apart
from these 3 PSUs, a large number of domestic and multinational companies across
various chemical segments have presence in the state. Leading Indian and multinational
private organizations which have a footprint in Gujarat are Reliance, ONGC, Dow
Chemicals, Cheminova, Lanxess, India Oil (IOCL), Indian Petrochemical Corporation
Limited, Nirma, Essar, BASF, Bayer, Rallis, Novartis, Cadila, Aarti Group and Deepak Nitrite.
Gujarat accounts for ~40% of India's pharmaceutical output with more than 3200
pharmaceutical companies located in the state
Investment climate in Gujarat
A key indicator of investor and industry confidence in Gujarat is the number and scale of
investments and business ventures committed to the state. More than 80 MoUs and
announcements were signed in the Vibrant Gujarat summit 2009 for projects to be
executed and established in the chemical and petrochemical sector. The cumulative
proposed investment in the sector stood at more than INR 56,000 crore. Most projects are
for establishing industrial parks and production plants for base chemicals, specialty
chemicals and dyes and intermediaries.
The sustained economic success and rapid industrial growth have been made possible by
an unambiguous pro-industry approach by the State. Several policy decisions, execution
of key projects and geographic and demographic factors have helped increase the ease of
doing business in Gujarat, specifically in the chemicals industry.
Infrastructure and strategic location
Gujarat is well connected by the Indian Railways network and has built one of the best
road networks in India. It's a power-sufficient state with a low cost of utilities and one of
the highest per capita power consumption levels. It has the highest number of airports
and second highest number of ports. It's the only state with an integrated state-wise gas
grid and has a very high tele-density. Also, the Sardar Sarovar Narmada project, once
completed, is expected to create continuous water supply throughout the state. Gujarat is
favourably located midway on the highly industrialized Delhi-Mumbai corridor, giving it
ease of access to high-growth states in North and West. The state has the longest
coastline in the country (1,600 kms) and is well-connected to major trade routes to
Europe, Middle-East, East Asia and Australia though a large number of ports. 38% of the
proposed Delhi Mumbai Industrial Corridor will pass through Gujarat, thereby providing
the opportunity for chemical companies to base their production in Gujarat and serve the
Indian market.
Raw material availability
Rich availability of natural resources and basic feedstock facilitate production of a large
number of downstream chemical products. Wide availability of limestone, salt, petroleum
Industry composition: Gujarat, FY09
Source: Gujarat Socio-Economic Review,2009-10
Textiles,6%
Energy,26%
Others,19%
Non-metallic
products, 5%
Chemicals, 42%
0
10
20
30
40
50
60
70
80
90
2003 2005 2007 2009 2011
0
10000
20000
30000
40000
50000
60000
Proposed investments1 in Gujarat (Rs Cr)
Source: Vibrant Gujarat, 2011Note: 1) In chemical & petrochemical sector
# of MoUs Investments
08 09
Gujarat houses production facilities for some of the largest global and Indian chemical and
petrochemicals manufacturers. Gujarat State Fertilizers & Chemicals Ltd. (GSFC), Gujarat
Alkalis & Chemicals Ltd. (GACL) and Gujarat Narmada Valley Fertilizers Company Ltd.
(GNFC) are the largest public sector units located in Gujarat. GSFC is the only producer of
melamine and largest producer of caprolactum in India. GACL is the market leader in
caustic soda whereas GNFC is one of the leading fertilizers company in the country. Apart
from these 3 PSUs, a large number of domestic and multinational companies across
various chemical segments have presence in the state. Leading Indian and multinational
private organizations which have a footprint in Gujarat are Reliance, ONGC, Dow
Chemicals, Cheminova, Lanxess, India Oil (IOCL), Indian Petrochemical Corporation
Limited, Nirma, Essar, BASF, Bayer, Rallis, Novartis, Cadila, Aarti Group and Deepak Nitrite.
Gujarat accounts for ~40% of India's pharmaceutical output with more than 3200
pharmaceutical companies located in the state
Investment climate in Gujarat
A key indicator of investor and industry confidence in Gujarat is the number and scale of
investments and business ventures committed to the state. More than 80 MoUs and
announcements were signed in the Vibrant Gujarat summit 2009 for projects to be
executed and established in the chemical and petrochemical sector. The cumulative
proposed investment in the sector stood at more than INR 56,000 crore. Most projects are
for establishing industrial parks and production plants for base chemicals, specialty
chemicals and dyes and intermediaries.
The sustained economic success and rapid industrial growth have been made possible by
an unambiguous pro-industry approach by the State. Several policy decisions, execution
of key projects and geographic and demographic factors have helped increase the ease of
doing business in Gujarat, specifically in the chemicals industry.
Infrastructure and strategic location
Gujarat is well connected by the Indian Railways network and has built one of the best
road networks in India. It's a power-sufficient state with a low cost of utilities and one of
the highest per capita power consumption levels. It has the highest number of airports
and second highest number of ports. It's the only state with an integrated state-wise gas
grid and has a very high tele-density. Also, the Sardar Sarovar Narmada project, once
completed, is expected to create continuous water supply throughout the state. Gujarat is
favourably located midway on the highly industrialized Delhi-Mumbai corridor, giving it
ease of access to high-growth states in North and West. The state has the longest
coastline in the country (1,600 kms) and is well-connected to major trade routes to
Europe, Middle-East, East Asia and Australia though a large number of ports. 38% of the
proposed Delhi Mumbai Industrial Corridor will pass through Gujarat, thereby providing
the opportunity for chemical companies to base their production in Gujarat and serve the
Indian market.
Raw material availability
Rich availability of natural resources and basic feedstock facilitate production of a large
number of downstream chemical products. Wide availability of limestone, salt, petroleum
Industry composition: Gujarat, FY09
Source: Gujarat Socio-Economic Review,2009-10
Textiles,6%
Energy,26%
Others,19%
Non-metallic
products, 5%
Chemicals, 42%
0
10
20
30
40
50
60
70
80
90
2003 2005 2007 2009 2011
0
10000
20000
30000
40000
50000
60000
Proposed investments1 in Gujarat (Rs Cr)
Source: Vibrant Gujarat, 2011Note: 1) In chemical & petrochemical sector
# of MoUs Investments
10 11
and natural gas make Gujarat a leading manufacturer of basic chemicals (e.g. caustic soda,
caustic potash), petrochemicals (e.g. polymers, PE/PP/PVC) and fertilizers (e.g. urea, bio-
fertilizers).
Availability of talent
Gujarat has always been well known for its entrepreneurial talent who have spread their
footprint nationally and across the globe. Additionally, over 45 government and private
management institutes provide a pool of business administration talent. Moreover, there
are ~40 engineering colleges teaching chemical engineering and ~50 polytechnic institutes
offering courses focussed towards the chemicals sector. Overall, Gujarat offers a world-
class pool for talent in entrepreneurship, business administration and engineering, which
could be easily tapped by the industry.
Impetus for growth: Integrated development and PCPIR
The presence of mega-estates in chemical manufacturing at several industrial clusters in
the state has helped growth and expansion of the industry by providing an appropriate
business ecosystem. Chemical clusters especially at Ankleshwar, Panola, Vapi, Vatva,
Jhagadia, Vilayat and Dahej facilitate rapid development and growth.
Chemical centres in GujaratChemical manufacturers in Gujarat
Jamnagar
Chemicals & petrochemicals Hazira
Chemicals & petrochemicals
Valsad
Chemicals
Baroda
Chemicals & petrochemicals
Ahmedabad
Chemicals
Bharuch
Chemicals
Dahej
PCPIR
Chemical centres in GujaratChemical manufacturers in Gujarat
Jamnagar
Chemicals & petrochemicals Hazira
Chemicals & petrochemicals
Valsad
Chemicals
Baroda
Chemicals & petrochemicals
Ahmedabad
Chemicals
Bharuch
Chemicals
Dahej
PCPIR
Source: Secondary research, Analysis by Tata Strategic
DAHEJ PCPIR:
The PCPIR at Dahej, southern Gujarat is spread across a notified area is 453 sq km and it
has received formal approval from DoC&PC in March 2009.
Existing infrastructure
The Dahej PCPIR enjoys proximity to Gujarat Chemical Port Terminal Company Limited
(GCPTCL) and LNG port and access to Delhi - Mumbai Broad Gauge railway line at
Bharuch. A 50-km of four-lane Dahej-Bharuch State Highway connects six lane Delhi-
Mumbai National Highway & Expressway.
Investments - Planned and realized
As of June 2011 ~80% of the planned investments in Dahej PCPIR have been realized and
accounting for $ 16 Bn out of a total committed investment of ~$ 20 Bn. Approximately
70% of the land development is complete and an infrastructure investment of $ 1.7 Bn is
proposed. Also, Dahej PCPIR is notified under the rules for special investment zones with
several tax-related advantages extended to incoming investors.
Major players at Dahej PCPIR
Greenfield
Existing
Major players at Dahej PCPIR
Greenfield
Existing
Upcoming external infrastructure
External infrastructure is being developed to ensure excellent connectivity (sea, road, rail
and air) to Dahej PCPIR:
Ports: 40 MnTPA Solid & Liquid Cargo and Container Port with investment of $300 Mn;
Container Feeder Terminal (10000 TEU) to Pipavav and Marine Shipbuilding Park by
GMB
Roads: Ahmedabad-Baroda National Expressway to be extended to Mumbai (PCPIR
loop planned); six-laning of Dahej-Bharuch road; upgradation of 8 km of port linkage
& four-laning of 42 km of State Highways within PCPIR; construction of 25 km of
coastal roads
Air: Greenfield airport for PCPIR ; airstrip at Ankleshwar
Rail: Broad gauge conversion of Bharuch-Dahej rail line (62 km); connection with
Delhi-Mumbai Dedicated Freight Corridor (DFC)
v
v
v
v
10 11
and natural gas make Gujarat a leading manufacturer of basic chemicals (e.g. caustic soda,
caustic potash), petrochemicals (e.g. polymers, PE/PP/PVC) and fertilizers (e.g. urea, bio-
fertilizers).
Availability of talent
Gujarat has always been well known for its entrepreneurial talent who have spread their
footprint nationally and across the globe. Additionally, over 45 government and private
management institutes provide a pool of business administration talent. Moreover, there
are ~40 engineering colleges teaching chemical engineering and ~50 polytechnic institutes
offering courses focussed towards the chemicals sector. Overall, Gujarat offers a world-
class pool for talent in entrepreneurship, business administration and engineering, which
could be easily tapped by the industry.
Impetus for growth: Integrated development and PCPIR
The presence of mega-estates in chemical manufacturing at several industrial clusters in
the state has helped growth and expansion of the industry by providing an appropriate
business ecosystem. Chemical clusters especially at Ankleshwar, Panola, Vapi, Vatva,
Jhagadia, Vilayat and Dahej facilitate rapid development and growth.
Chemical centres in GujaratChemical manufacturers in Gujarat
Jamnagar
Chemicals & petrochemicals Hazira
Chemicals & petrochemicals
Valsad
Chemicals
Baroda
Chemicals & petrochemicals
Ahmedabad
Chemicals
Bharuch
Chemicals
Dahej
PCPIR
Chemical centres in GujaratChemical manufacturers in Gujarat
Jamnagar
Chemicals & petrochemicals Hazira
Chemicals & petrochemicals
Valsad
Chemicals
Baroda
Chemicals & petrochemicals
Ahmedabad
Chemicals
Bharuch
Chemicals
Dahej
PCPIR
Source: Secondary research, Analysis by Tata Strategic
DAHEJ PCPIR:
The PCPIR at Dahej, southern Gujarat is spread across a notified area is 453 sq km and it
has received formal approval from DoC&PC in March 2009.
Existing infrastructure
The Dahej PCPIR enjoys proximity to Gujarat Chemical Port Terminal Company Limited
(GCPTCL) and LNG port and access to Delhi - Mumbai Broad Gauge railway line at
Bharuch. A 50-km of four-lane Dahej-Bharuch State Highway connects six lane Delhi-
Mumbai National Highway & Expressway.
Investments - Planned and realized
As of June 2011 ~80% of the planned investments in Dahej PCPIR have been realized and
accounting for $ 16 Bn out of a total committed investment of ~$ 20 Bn. Approximately
70% of the land development is complete and an infrastructure investment of $ 1.7 Bn is
proposed. Also, Dahej PCPIR is notified under the rules for special investment zones with
several tax-related advantages extended to incoming investors.
Major players at Dahej PCPIR
Greenfield
Existing
Major players at Dahej PCPIR
Greenfield
Existing
Upcoming external infrastructure
External infrastructure is being developed to ensure excellent connectivity (sea, road, rail
and air) to Dahej PCPIR:
Ports: 40 MnTPA Solid & Liquid Cargo and Container Port with investment of $300 Mn;
Container Feeder Terminal (10000 TEU) to Pipavav and Marine Shipbuilding Park by
GMB
Roads: Ahmedabad-Baroda National Expressway to be extended to Mumbai (PCPIR
loop planned); six-laning of Dahej-Bharuch road; upgradation of 8 km of port linkage
& four-laning of 42 km of State Highways within PCPIR; construction of 25 km of
coastal roads
Air: Greenfield airport for PCPIR ; airstrip at Ankleshwar
Rail: Broad gauge conversion of Bharuch-Dahej rail line (62 km); connection with
Delhi-Mumbai Dedicated Freight Corridor (DFC)
v
v
v
v
12 13
Support for micro, small and medium enterprises
Gujarat state government, since 2000, has adopted a policy of supporting SMEs. Some of
the features mentioned could be favorably capitalized by existing companies and new
entrants in the chemical industry:
5% interest subsidy on loans for modernization programmes
Interest subsidy on eligible parameters, e.g. sector, size, etc.
Venture capital and patent monetization assistance
Technology acquisition fund
Support for vendor development
Support for auxiliary industries for value-addition
Cluster development in PPP mode
Rehabilitation of sick units
With the existence of conducive business environment, presence of leading companies,
availability of a strong talent pool, entrepreneurial culture and strong policy support by
the State Government, Gujarat is poised to retain and further build on its leadership
position in India's chemical industry going forward.
v
v
v
v
v
v
v
v
INDUSTRY REPORTS
12 13
Support for micro, small and medium enterprises
Gujarat state government, since 2000, has adopted a policy of supporting SMEs. Some of
the features mentioned could be favorably capitalized by existing companies and new
entrants in the chemical industry:
5% interest subsidy on loans for modernization programmes
Interest subsidy on eligible parameters, e.g. sector, size, etc.
Venture capital and patent monetization assistance
Technology acquisition fund
Support for vendor development
Support for auxiliary industries for value-addition
Cluster development in PPP mode
Rehabilitation of sick units
With the existence of conducive business environment, presence of leading companies,
availability of a strong talent pool, entrepreneurial culture and strong policy support by
the State Government, Gujarat is poised to retain and further build on its leadership
position in India's chemical industry going forward.
v
v
v
v
v
v
v
v
INDUSTRY REPORTS
14 15
AgrochemicalsIntroduction
Agrochemicals or pesticides are chemical substances used to control or kill pests,
unwanted plants or animals that may harm or damage the crops. Agrochemicals can be
classified into the following key segments: 1. Insecticides2. Herbicides/ Weedicides3. Fungicides4. Bio-pesticides5. Others (Nematocides, Rodenticides etc.)
Global agrochemicals industry
The global agrochemicals industry grew at over 6% annually since 2005 to reach $ 43.7 Bn
in 2009. However, the growth in 2009-2010 tapered off at 1.1% and the market grow to $
44.2 Bn due to major adverse weather phenomenon globally, including flooding in Canada
and Central Europe, record drought in Vietnam and heat waves in Russia. The medium-
term demand outlook remains upbeat, with an expected growth of 4% annually till 2015.
Source: Industry report; Tata Strategic estimates
33.5
43.7 44.2
53
2005 2009 2010 2015E
Global agchem market (USD Bn)
4.0%
5.7%5.7%
4.0%
14 15
AgrochemicalsIntroduction
Agrochemicals or pesticides are chemical substances used to control or kill pests,
unwanted plants or animals that may harm or damage the crops. Agrochemicals can be
classified into the following key segments: 1. Insecticides2. Herbicides/ Weedicides3. Fungicides4. Bio-pesticides5. Others (Nematocides, Rodenticides etc.)
Global agrochemicals industry
The global agrochemicals industry grew at over 6% annually since 2005 to reach $ 43.7 Bn
in 2009. However, the growth in 2009-2010 tapered off at 1.1% and the market grow to $
44.2 Bn due to major adverse weather phenomenon globally, including flooding in Canada
and Central Europe, record drought in Vietnam and heat waves in Russia. The medium-
term demand outlook remains upbeat, with an expected growth of 4% annually till 2015.
Source: Industry report; Tata Strategic estimates
33.5
43.7 44.2
53
2005 2009 2010 2015E
Global agchem market (USD Bn)
4.0%
5.7%5.7%
4.0%
16 17
The crop protection chemicals market is mainly concentrated in the major developed
countries such as United States and Western European nations. Europe has the largest
share in the agrochemical market followed by Asia, Latin America and North America.
There is an increased usage of products in Europe due to high commodity prices and in
order to boost yield and quality. Increased demand for palm oil has led to increasing usage
of herbicides in Japan, Malaysia and Indonesia. Strong rice prices and other food grains
are driving the agrochemical consumption in India. In Latin America, increased production
of soybean and sugarcane for animal feed as well as for bio-fuels is the driving the growth
of agrochemical consumption. The top 6 crop protection companies cumulatively account
for approximately 70% of the market by revenues.
Indian agrochemicals industryOverview and outlook
India is the fourth largest producer of agrochemicals globally, after United States, Japan
and China. The agrochemicals industry is a significant industry for the Indian economy.
The total size of the agrochemicals industry stood at $ 3.4 Bn in FY10, of which 53% was
exports. Imports to India are minimal and mainly limited to next-generation pesticides
and patented molecules.
The current domestic consumption of $ 1.4 Bn is expected to grow at 8% annually, driven
by rising population, decreasing per capita availability of arable land and focus on
increasing agricultural yield. In the same period, exports are also expected to grow at a
rapid pace (15% annually), driving the total agrochemicals market size to almost $ 11 Bn
by 2020.
India's agrochemicals consumption is one of the lowest in the world with per hectare
consumption of just 0.58 Kg compared to US (4.5 Kg/ha) and Japan (11 Kg/ha). The key
reasons for low usage are low purchasing power of farmers, lack of awareness about crop
protection benefits and poor reach and accessibility of crop protection chemicals. Annual
crop losses due to pests are estimated at $ 17 Bn for FY09.
Europe,32%
Asia,23%
Lat Am,21%
NorthAmerica,
21%
Middle-East &Africa,
4%
Source: BCC Research, Tata Strategic analysis
Global demand share, 2008
1.83.5
1.6
7.3
2010 2020
Domestic Exports
Demand outlook (USD Bn)
8%
Source: PMFAI and government data, Meeting of the GOI Chemicals Task Force
15%
3.4
10.8
12%
Average crop protection consumption, 2009 (kg/ ha)
Source: Industry reports, Meeting of the GOI Chemicals Task Force - Crop protection sub sector discussions, Tata Strategic Analysis
0.58 1
5 5
7 7
12
14
17
India Pakistan UK France Korea USA Japan China Taiwan
16 17
The crop protection chemicals market is mainly concentrated in the major developed
countries such as United States and Western European nations. Europe has the largest
share in the agrochemical market followed by Asia, Latin America and North America.
There is an increased usage of products in Europe due to high commodity prices and in
order to boost yield and quality. Increased demand for palm oil has led to increasing usage
of herbicides in Japan, Malaysia and Indonesia. Strong rice prices and other food grains
are driving the agrochemical consumption in India. In Latin America, increased production
of soybean and sugarcane for animal feed as well as for bio-fuels is the driving the growth
of agrochemical consumption. The top 6 crop protection companies cumulatively account
for approximately 70% of the market by revenues.
Indian agrochemicals industryOverview and outlook
India is the fourth largest producer of agrochemicals globally, after United States, Japan
and China. The agrochemicals industry is a significant industry for the Indian economy.
The total size of the agrochemicals industry stood at $ 3.4 Bn in FY10, of which 53% was
exports. Imports to India are minimal and mainly limited to next-generation pesticides
and patented molecules.
The current domestic consumption of $ 1.4 Bn is expected to grow at 8% annually, driven
by rising population, decreasing per capita availability of arable land and focus on
increasing agricultural yield. In the same period, exports are also expected to grow at a
rapid pace (15% annually), driving the total agrochemicals market size to almost $ 11 Bn
by 2020.
India's agrochemicals consumption is one of the lowest in the world with per hectare
consumption of just 0.58 Kg compared to US (4.5 Kg/ha) and Japan (11 Kg/ha). The key
reasons for low usage are low purchasing power of farmers, lack of awareness about crop
protection benefits and poor reach and accessibility of crop protection chemicals. Annual
crop losses due to pests are estimated at $ 17 Bn for FY09.
Europe,32%
Asia,23%
Lat Am,21%
NorthAmerica,
21%
Middle-East &Africa,
4%
Source: BCC Research, Tata Strategic analysis
Global demand share, 2008
1.83.5
1.6
7.3
2010 2020
Domestic Exports
Demand outlook (USD Bn)
8%
Source: PMFAI and government data, Meeting of the GOI Chemicals Task Force
15%
3.4
10.8
12%
Average crop protection consumption, 2009 (kg/ ha)
Source: Industry reports, Meeting of the GOI Chemicals Task Force - Crop protection sub sector discussions, Tata Strategic Analysis
0.58 1
5 5
7 7
12
14
17
India Pakistan UK France Korea USA Japan China Taiwan
18 19
The top three states Andhra Pradesh, Maharashtra and Punjab account for ~50% of the
total pesticide consumption in India. Andhra Pradesh is the largest consumer of pesticides
with a market share of 24%.
Industry structure
The agrochemicals/ crop protection market in India is characterized by a high degree of
fragmentation. In India, there are about 125 technical grade manufacturers (10
multinationals), 800 formulators, over 145,000 distributors. 60 technical grade pesticides
are being manufactured indigenously. Technical grade manufacturers sell high purity
chemicals in bulk (generally in drums of 200-250 Kg) to formulators. Formulators, in turn,
prepare formulations by adding inert carriers, solvents, surface active agents, deodorants
etc.
The total installed capacity in FY09 was 146,000 tons and total production was 85,000
tons leading to an average capacity utilization of 58%. The industry suffers from high
inventory (owing to seasonal & irregular demand on account of monsoons) and long
credit periods to farmers, thus making operations 'working capital' intensive. India due to
its inherent strength of low-cost manufacturing and qualified low-cost manpower is a net
exporter of pesticides to countries such as USA and some European & African countries.
Exports formed ~50% of total industry turnover in FY08 with 29% CAGR from FY04 to
FY08.
Key Segments
Insecticides: Insecticides are used to ward off or kill insects. Consumption of insecticides
for cotton has come down to 50% from 63% of total volume after introduction of BT
cotton.
Fungicides: Fungicides are used to control disease attacks on crops. The growing
horticulture market in India owing to the government support has given a boost to
fungicide usage. The market share of fungicides has increased from 16% in 2004 to 20% in
2009.
Herbicides: Herbicides are the fastest growing segment of agrochemicals. Their main
competition is cheap labor which is employed to manually pull out weeds. Sales are
seasonal, owing to the fact that weeds flourish in damp, warm weather and die in cold
spells.
Bio-pesticides: Bio-pesticides are pesticides derived from natural substances like animals,
plants, bacteria and certain minerals. Currently a small segment, bio-pesticides market is
expected to grow in the future owing to government support and increasing awareness
about use of non-toxic, environment friendly pesticides.
Others: Plant growth regulators, Nematocides, Rodenticides, Fumigants etc. Rodenticides
and plant growth regulators are the stars of this segment.
Stored produceZinc Phosphide , AluminiumPhosphideOthers
Rice, Maize, Tobacco
Spinosyns , neem -based Bio-pesticides
Rice, Wheat Glyphosate , Isoproturon , 2,4-D Herbicides
Fruits, Vegetables, Rice
Mancozeb , Copper OxychlorideZiram
Fungicides
Cotton, Rice Acephate , MonocrotophosCypermethrin
Insecticides
Main ApplicationsMajor ProductsSegment
--
Maharashtra, 13%
Others, 23%
WestBengal, 5%
Punjab,11%
MP &Chattisgarh,
8% Gujarat,7%
Tamil Nadu,5%
Haryana,5%
Karnataka,7%
AP, 24%
State-wise pesticides consumption, FY09 (% of total value)
Source: Industry reports, Tata Strategic analysis
Technical grademanufacturers
Formulators Distributors End usecustomers
148 145 146 146
82 85 83 85
FY06 FY07 FY08 FY09
Capacity Production
Installed capacity & production (‘000 TPA)
Source: Ministry of Chemicals & Fertilizers
18 19
The top three states Andhra Pradesh, Maharashtra and Punjab account for ~50% of the
total pesticide consumption in India. Andhra Pradesh is the largest consumer of pesticides
with a market share of 24%.
Industry structure
The agrochemicals/ crop protection market in India is characterized by a high degree of
fragmentation. In India, there are about 125 technical grade manufacturers (10
multinationals), 800 formulators, over 145,000 distributors. 60 technical grade pesticides
are being manufactured indigenously. Technical grade manufacturers sell high purity
chemicals in bulk (generally in drums of 200-250 Kg) to formulators. Formulators, in turn,
prepare formulations by adding inert carriers, solvents, surface active agents, deodorants
etc.
The total installed capacity in FY09 was 146,000 tons and total production was 85,000
tons leading to an average capacity utilization of 58%. The industry suffers from high
inventory (owing to seasonal & irregular demand on account of monsoons) and long
credit periods to farmers, thus making operations 'working capital' intensive. India due to
its inherent strength of low-cost manufacturing and qualified low-cost manpower is a net
exporter of pesticides to countries such as USA and some European & African countries.
Exports formed ~50% of total industry turnover in FY08 with 29% CAGR from FY04 to
FY08.
Key Segments
Insecticides: Insecticides are used to ward off or kill insects. Consumption of insecticides
for cotton has come down to 50% from 63% of total volume after introduction of BT
cotton.
Fungicides: Fungicides are used to control disease attacks on crops. The growing
horticulture market in India owing to the government support has given a boost to
fungicide usage. The market share of fungicides has increased from 16% in 2004 to 20% in
2009.
Herbicides: Herbicides are the fastest growing segment of agrochemicals. Their main
competition is cheap labor which is employed to manually pull out weeds. Sales are
seasonal, owing to the fact that weeds flourish in damp, warm weather and die in cold
spells.
Bio-pesticides: Bio-pesticides are pesticides derived from natural substances like animals,
plants, bacteria and certain minerals. Currently a small segment, bio-pesticides market is
expected to grow in the future owing to government support and increasing awareness
about use of non-toxic, environment friendly pesticides.
Others: Plant growth regulators, Nematocides, Rodenticides, Fumigants etc. Rodenticides
and plant growth regulators are the stars of this segment.
Stored produceZinc Phosphide , AluminiumPhosphideOthers
Rice, Maize, Tobacco
Spinosyns , neem -based Bio-pesticides
Rice, Wheat Glyphosate , Isoproturon , 2,4-D Herbicides
Fruits, Vegetables, Rice
Mancozeb , Copper OxychlorideZiram
Fungicides
Cotton, Rice Acephate , MonocrotophosCypermethrin
Insecticides
Main ApplicationsMajor ProductsSegment
--
Maharashtra, 13%
Others, 23%
WestBengal, 5%
Punjab,11%
MP &Chattisgarh,
8% Gujarat,7%
Tamil Nadu,5%
Haryana,5%
Karnataka,7%
AP, 24%
State-wise pesticides consumption, FY09 (% of total value)
Source: Industry reports, Tata Strategic analysis
Technical grademanufacturers
Formulators Distributors End usecustomers
148 145 146 146
82 85 83 85
FY06 FY07 FY08 FY09
Capacity Production
Installed capacity & production (‘000 TPA)
Source: Ministry of Chemicals & Fertilizers
20 21
Competitive landscape
The Indian agrochemicals market is highly fragmented in nature with over 800
formulators. The competition is fierce with large number of organized sector players and
significant share of spurious pesticides. The market has been witnessing mergers and
acquisitions with large players buying out small manufacturers.
Key market participants include United Phosphorus Ltd, Bayer Cropscience Ltd, Rallis
India Ltd, Gharda Chemicals Ltd, Syngenta India Ltd, BASF India Ltd, etc. Top ten
companies account for 75%-80% of the market share. The market share of large players
depends primarily on product portfolio and introduction of new molecules. Strategic
alliances with competitors are common to reduce portfolio risks and get access to a wider
customer base.
Market trends
Focus on developing environmentally safe pesticides by the industry as well as the
Government. The Department of Chemicals has initiated a nationwide programme
for "Development and production of neem products as Environment Friendly
Pesticides" with financial assistance from United Nations Development Programme
(UNDP).
Focus by larger companies on brand building by conducting awareness camps for
farmers and providing complete solutions.
Increase in strategic alliances among large players for greater market reach and
acquisitions of smaller companies globally to diversify product portfolio. For
example: Rallis has a marketing alliance for key products with FMC, Dupont,
Syngenta, Bayer and Nihon Nohayaku. In addition, UPL has had a series of small
acquisitions globally to enter new geographies and gain product expertise.
Increasing scope for contract manufacturing in India, consistent with the trend of
international companies looking eastwards for contract manufacturing partners.
v
v
v
v
Technology trends
Increased R&D expected for development of new molecules and low dosage, high
potency molecules
Focus on R&D in bio-pesticides segment with increasing preference for
environmentally safe products in the market
Growth drivers
Growth in demand for food-grains: India has 16% of the world's population and less
than 2% of the total landmass. Increasing population and high emphasis on achieving
food grain self-sufficiency as highlighted in the FY10 budget, is expected to drive
growth.
Limited farmland availability and growing exports: India has ~190 Mn hectares of
gross cultivated area and the scope for bringing new areas under cultivation is
severely limited. Available arable land per capita has been reducing globally and is
expected to reduce further. The pressure is therefore to increase yield per hectare
which can be achieved through increased usage of agrochemicals. Indian
agrochemical exports accounted for ~50% of total industry size in 2009.
v
v
v
v
v
v
Growth of horticulture & floriculture: Buoyed by 50% growth experienced by Indian
floriculture industry in last 3 years, Government of India has launched a national
horticulture mission to double production by 2012. Growing horticulture and
floriculture industries will result in increasing demand for agrochemicals, especially
fungicides.
Increasing awareness: As per Government of India estimates, total value of crops lost
due to non-use of pesticides is around $ 17 Bn every year. Companies are increasingly
training farmers regarding the right use of agrochemicals in terms of quantity to be
used, the right application methodology and appropriate chemicals to be used for
identified pest problems. With increasing awareness, the use of agrochemicals is
expected to increase.
Source: Industry reports; Analysis by Tata Strategic
FOODGRAINS DEMAND & SUPPLY, INDIA (MT)
80
FY10Production
Gap FY20 Demand
220300
Yield for select major crops (Tons/ Hectare)
World India Yield gap
Rice 4.2 2.3 1.9
Wheat 3.0 2.8 0.2
Corn 5.0 2.2 2.8
Sugarcane 74.0 67.0 7.0
Soybean 2.2 0.9 1.3
Rapeseed 1.9 1.1 0.8
Product share, FY09 (% of total)
Source: Ministry of Chemicals & Fertilizers, Industry reports, Tata Strategic analysis
Herbicides 20%
Fungicides20%
Biopesticides &Others, 5%
Insecticide55%
s,
20 21
Competitive landscape
The Indian agrochemicals market is highly fragmented in nature with over 800
formulators. The competition is fierce with large number of organized sector players and
significant share of spurious pesticides. The market has been witnessing mergers and
acquisitions with large players buying out small manufacturers.
Key market participants include United Phosphorus Ltd, Bayer Cropscience Ltd, Rallis
India Ltd, Gharda Chemicals Ltd, Syngenta India Ltd, BASF India Ltd, etc. Top ten
companies account for 75%-80% of the market share. The market share of large players
depends primarily on product portfolio and introduction of new molecules. Strategic
alliances with competitors are common to reduce portfolio risks and get access to a wider
customer base.
Market trends
Focus on developing environmentally safe pesticides by the industry as well as the
Government. The Department of Chemicals has initiated a nationwide programme
for "Development and production of neem products as Environment Friendly
Pesticides" with financial assistance from United Nations Development Programme
(UNDP).
Focus by larger companies on brand building by conducting awareness camps for
farmers and providing complete solutions.
Increase in strategic alliances among large players for greater market reach and
acquisitions of smaller companies globally to diversify product portfolio. For
example: Rallis has a marketing alliance for key products with FMC, Dupont,
Syngenta, Bayer and Nihon Nohayaku. In addition, UPL has had a series of small
acquisitions globally to enter new geographies and gain product expertise.
Increasing scope for contract manufacturing in India, consistent with the trend of
international companies looking eastwards for contract manufacturing partners.
v
v
v
v
Technology trends
Increased R&D expected for development of new molecules and low dosage, high
potency molecules
Focus on R&D in bio-pesticides segment with increasing preference for
environmentally safe products in the market
Growth drivers
Growth in demand for food-grains: India has 16% of the world's population and less
than 2% of the total landmass. Increasing population and high emphasis on achieving
food grain self-sufficiency as highlighted in the FY10 budget, is expected to drive
growth.
Limited farmland availability and growing exports: India has ~190 Mn hectares of
gross cultivated area and the scope for bringing new areas under cultivation is
severely limited. Available arable land per capita has been reducing globally and is
expected to reduce further. The pressure is therefore to increase yield per hectare
which can be achieved through increased usage of agrochemicals. Indian
agrochemical exports accounted for ~50% of total industry size in 2009.
v
v
v
v
v
v
Growth of horticulture & floriculture: Buoyed by 50% growth experienced by Indian
floriculture industry in last 3 years, Government of India has launched a national
horticulture mission to double production by 2012. Growing horticulture and
floriculture industries will result in increasing demand for agrochemicals, especially
fungicides.
Increasing awareness: As per Government of India estimates, total value of crops lost
due to non-use of pesticides is around $ 17 Bn every year. Companies are increasingly
training farmers regarding the right use of agrochemicals in terms of quantity to be
used, the right application methodology and appropriate chemicals to be used for
identified pest problems. With increasing awareness, the use of agrochemicals is
expected to increase.
Source: Industry reports; Analysis by Tata Strategic
FOODGRAINS DEMAND & SUPPLY, INDIA (MT)
80
FY10Production
Gap FY20 Demand
220300
Yield for select major crops (Tons/ Hectare)
World India Yield gap
Rice 4.2 2.3 1.9
Wheat 3.0 2.8 0.2
Corn 5.0 2.2 2.8
Sugarcane 74.0 67.0 7.0
Soybean 2.2 0.9 1.3
Rapeseed 1.9 1.1 0.8
Product share, FY09 (% of total)
Source: Ministry of Chemicals & Fertilizers, Industry reports, Tata Strategic analysis
Herbicides 20%
Fungicides20%
Biopesticides &Others, 5%
Insecticide55%
s,
22 23
Potential opportunities
Scope for increase in usage: With only 35-40% of the total farmland under crop
protection, there is a significant unserved market to tap into. By educating farmers
and conducting special training programmes regarding the need to use
agrochemicals, Indian companies can hope to increase pesticide consumption.
v
v
v
v
v
v
v
Huge export potential: The excess production capacity is a perfect opportunity to
increase exports by utilizing India's low cost producer status.
Patent expiry: Between 2009 and 2014 many molecules are likely to go off patent,
throwing the market open for generic players. The total viable opportunity through
patent expiry is estimated at over $ 3 Bn.
Product portfolio expansion: New developments including genetically modified
seeds, Integrated Pest Management and organic farming can be turned into
opportunities if the industry re-orients itself to better address the needs of its
consumers and broadens its product offering to include a range of agro-inputs
instead of only agrochemicals.
Key challenges
High R&D costs: R&D to develop agrochemical molecule takes an average of 9 years
and ~ $ 180 Mn Indian companies typically have not focused on developing newer
molecules and will face challenges in building these capabilities, while continuing to
remain cost competitive.
Threat from Genetically Modified (GM) seeds: Genetically modified seeds possess
self-immunity towards natural adversaries which have the potential to negatively
impact the business of agrochemicals.
Support for Integrated Pest Management (IPM) & rising demand for organic
farming: Promotion of IPM, zero budget farming and usage of bio-pesticides by
Indian Government and NGOs is gaining momentum. With increasing demand for
organic food, farmers in certain states like Karnataka have reduced chemical usage
and have adopted organic farming. Agrochemical companies will have to tackle the
rising environmental awareness and address concerns on negative impact of
pesticide usage.
Counterfeit Products: The spurious pesticides market size in India is estimated to be
$ 233 Mn in 2009. This negatively impacts the revenues of the organized sector.
Need for efficient distribution systems: Since, the number of end users is large and
widespread, effective distribution via retailers is essential to ensure product
availability. Lately, companies have been directly dealing with retailers by cutting the
distributor from the value chain thereby reducing distribution costs, educating
retailers on product usage and offering competitive prices to farmers.
v
v
Bayer CropScience India
www.bayergroupindia.com
Company overview · Bayer CropScien ce is one of the world’s leading crop science
companies in the world with presence in 122 countries
Sales Revenue in
FY2011 · Rs. 2,127 Cr (includes revenue from other product
segments), 88% of revenue through domestic sales
Key brands
· Insecticides: Confid or, Calypso
· Fungicides: Antracol, Baycor
· Herbicides: Atlantis, Basta
· Seed treatment: Gaucho, Raxil
Manufacturing
locations
· Three manufacturing locations at Thane , Himmatnagar &
Ankleshwar
· Total production capacity of 5770 MT of active ingredients
and form ulation capacity of 10,025 KL & 3650 Mt for liquids &
solids respectively
Key Mergers/
Acquisitions
· Merger with Aventis Cropscience Limited worldwide, 2002
· Acquisition of Biotech company Athenix Corp., 2009
Profile of select playersBrief profile: Bayer CropScience
30%
58%
100%
130%
Yield withoutprotection
Actual yieldwith cropprotection
Attainableyield without
pests
Additionalpotentialwithout
abiotic stress
28% prevented losses
Due to pests, weeds & diseases
42% actual losses
Due to pests, weeds & diseases
30% further losses
Due to drought, heat, cold, salinity
Yield improvement potential (%)
22 23
Potential opportunities
Scope for increase in usage: With only 35-40% of the total farmland under crop
protection, there is a significant unserved market to tap into. By educating farmers
and conducting special training programmes regarding the need to use
agrochemicals, Indian companies can hope to increase pesticide consumption.
v
v
v
v
v
v
v
Huge export potential: The excess production capacity is a perfect opportunity to
increase exports by utilizing India's low cost producer status.
Patent expiry: Between 2009 and 2014 many molecules are likely to go off patent,
throwing the market open for generic players. The total viable opportunity through
patent expiry is estimated at over $ 3 Bn.
Product portfolio expansion: New developments including genetically modified
seeds, Integrated Pest Management and organic farming can be turned into
opportunities if the industry re-orients itself to better address the needs of its
consumers and broadens its product offering to include a range of agro-inputs
instead of only agrochemicals.
Key challenges
High R&D costs: R&D to develop agrochemical molecule takes an average of 9 years
and ~ $ 180 Mn Indian companies typically have not focused on developing newer
molecules and will face challenges in building these capabilities, while continuing to
remain cost competitive.
Threat from Genetically Modified (GM) seeds: Genetically modified seeds possess
self-immunity towards natural adversaries which have the potential to negatively
impact the business of agrochemicals.
Support for Integrated Pest Management (IPM) & rising demand for organic
farming: Promotion of IPM, zero budget farming and usage of bio-pesticides by
Indian Government and NGOs is gaining momentum. With increasing demand for
organic food, farmers in certain states like Karnataka have reduced chemical usage
and have adopted organic farming. Agrochemical companies will have to tackle the
rising environmental awareness and address concerns on negative impact of
pesticide usage.
Counterfeit Products: The spurious pesticides market size in India is estimated to be
$ 233 Mn in 2009. This negatively impacts the revenues of the organized sector.
Need for efficient distribution systems: Since, the number of end users is large and
widespread, effective distribution via retailers is essential to ensure product
availability. Lately, companies have been directly dealing with retailers by cutting the
distributor from the value chain thereby reducing distribution costs, educating
retailers on product usage and offering competitive prices to farmers.
v
v
Bayer CropScience India
www.bayergroupindia.com
Company overview · Bayer CropScien ce is one of the world’s leading crop science
companies in the world with presence in 122 countries
Sales Revenue in
FY2011 · Rs. 2,127 Cr (includes revenue from other product
segments), 88% of revenue through domestic sales
Key brands
· Insecticides: Confid or, Calypso
· Fungicides: Antracol, Baycor
· Herbicides: Atlantis, Basta
· Seed treatment: Gaucho, Raxil
Manufacturing
locations
· Three manufacturing locations at Thane , Himmatnagar &
Ankleshwar
· Total production capacity of 5770 MT of active ingredients
and form ulation capacity of 10,025 KL & 3650 Mt for liquids &
solids respectively
Key Mergers/
Acquisitions
· Merger with Aventis Cropscience Limited worldwide, 2002
· Acquisition of Biotech company Athenix Corp., 2009
Profile of select playersBrief profile: Bayer CropScience
30%
58%
100%
130%
Yield withoutprotection
Actual yieldwith cropprotection
Attainableyield without
pests
Additionalpotentialwithout
abiotic stress
28% prevented losses
Due to pests, weeds & diseases
42% actual losses
Due to pests, weeds & diseases
30% further losses
Due to drought, heat, cold, salinity
Yield improvement potential (%)
24 25
Brief profile: Rallis India
Company overview · Rallis is one of the leading Indian agrochemical companies
Sales Revenue in
FY2011 · Rs. 1,127 Cr (includes revenue from other product segments)
with 22% from outside India
Key brands
· Insecticides: Asataf, Koranda
· Herbicides: Dhar, Fateh
· Fungicides: Blitof, Contaf
Manufacturing
locations
· Five manufacturing plants at Turbhe, Akola, Ankleshwar, Lote
& Patancheru
· Total installed capacity of pesticides is 16,720 MT for solids
&12,500 MT for liquids
Key Mergers/
Acquisitions
· Acquired majority stake in Metahelix Life, 2010
· Co-marketing alliances with several companies such as
DuPont, Syngenta, Bayer, FMC, Makhteshim Chemical works,
Ghrada Chemicals, etc
Rallis India
www.rallis.co.in
Brief profile: United Phosphorus Limited
Company overview
· Established in 1969 and has its presence in all value -added
agricultural inputs ranging from seeds to crop protection & post
harvest activity
· Has its own subsidiary offices wor ldwide
· Global player with customer base in 86 countries
Sales Revenue in
FY2011 · Rs. 3,133 Cr (includes revenue from other product segments)
Key brands · Chlroban, Copter, Flora, Magnaphos, Oorja, Tiktok, Zoom
Manufacturing
locations
· 21 manufacturing locat ion across the globe with 9 in India
· Production capacity of 98,264 MT of pesticides & 42,631 MT of
pesticides intermediates
Key Mergers/
Acquisitions
· Product acquisitions from DuPont and Bayer
· Company acquisitions of Metahelix Life, Evofarms, AG,
Cequisa and ICONA
United Phosphorus Limited
www.uplonline.com
Brief profile: Syngenta India Limited
Company overview · 84% subsidiary of Syngenta Global
· Formed by merging agri -businesses of Novartis & Astra
Sales Revenue in
FY2011 · Rs. 2,147 Cr. (includes revenue from other product segments)
Key brands
· Fungicides: Amistar, Ridonil, Kavach
· Herbicides: Rifit, Gramoxone, Topik
· Insecticides: Actara, Proclaim,Pegasus
Manufacturing
locations · Manufacturing plant at Santa Monica, Goa
Key Mergers/
Acquisitions
· Co-marketing alliance with Rallis India
· Crop protection technology exchange with DuPont, partnership
on improving crop quality with Embrapa – the Brazilian
Agricultural Research Corporation, R&D agreement with Dow
AgroScience
· Product license from Sumitomo
Syngenta India Limited
www.syngenta.co.in
24 25
Brief profile: Rallis India
Company overview · Rallis is one of the leading Indian agrochemical companies
Sales Revenue in
FY2011 · Rs. 1,127 Cr (includes revenue from other product segments)
with 22% from outside India
Key brands
· Insecticides: Asataf, Koranda
· Herbicides: Dhar, Fateh
· Fungicides: Blitof, Contaf
Manufacturing
locations
· Five manufacturing plants at Turbhe, Akola, Ankleshwar, Lote
& Patancheru
· Total installed capacity of pesticides is 16,720 MT for solids
&12,500 MT for liquids
Key Mergers/
Acquisitions
· Acquired majority stake in Metahelix Life, 2010
· Co-marketing alliances with several companies such as
DuPont, Syngenta, Bayer, FMC, Makhteshim Chemical works,
Ghrada Chemicals, etc
Rallis India
www.rallis.co.in
Brief profile: United Phosphorus Limited
Company overview
· Established in 1969 and has its presence in all value -added
agricultural inputs ranging from seeds to crop protection & post
harvest activity
· Has its own subsidiary offices wor ldwide
· Global player with customer base in 86 countries
Sales Revenue in
FY2011 · Rs. 3,133 Cr (includes revenue from other product segments)
Key brands · Chlroban, Copter, Flora, Magnaphos, Oorja, Tiktok, Zoom
Manufacturing
locations
· 21 manufacturing locat ion across the globe with 9 in India
· Production capacity of 98,264 MT of pesticides & 42,631 MT of
pesticides intermediates
Key Mergers/
Acquisitions
· Product acquisitions from DuPont and Bayer
· Company acquisitions of Metahelix Life, Evofarms, AG,
Cequisa and ICONA
United Phosphorus Limited
www.uplonline.com
Brief profile: Syngenta India Limited
Company overview · 84% subsidiary of Syngenta Global
· Formed by merging agri -businesses of Novartis & Astra
Sales Revenue in
FY2011 · Rs. 2,147 Cr. (includes revenue from other product segments)
Key brands
· Fungicides: Amistar, Ridonil, Kavach
· Herbicides: Rifit, Gramoxone, Topik
· Insecticides: Actara, Proclaim,Pegasus
Manufacturing
locations · Manufacturing plant at Santa Monica, Goa
Key Mergers/
Acquisitions
· Co-marketing alliance with Rallis India
· Crop protection technology exchange with DuPont, partnership
on improving crop quality with Embrapa – the Brazilian
Agricultural Research Corporation, R&D agreement with Dow
AgroScience
· Product license from Sumitomo
Syngenta India Limited
www.syngenta.co.in
26 27
Fine ChemicalsFine chemicals refer to chemicals prepared to a very high degree of purity for specific
applications, and generally cover agrochemicals and active pharmaceutical ingredients.
Since agrochemicals are being discussed separately in this report, this section shall only
refer to APIs.The global pharmaceutical market was estimated at ~ $ 880 Bn in 2011 with
7% annual growth since 2004. The developed markets, which have been the traditional
stronghold of innovator companies, are expected to witness lower than historical growth
going forward. Higher R&D costs, relatively dry pipeline for new drugs, increasing
penetration of generics and pressure from governments for reduced healthcare costs are
putting a lot of pressure on global pharmaceutical companies, Future growth is expected
to be primarily driven by generics and emerging markets. The global pharmaceutical
market is expected to grow at 6% CAGR to reach $ 1,100 Bn in 2014.
Source: Industry reports, CRISIL, GoI Task Force, Tata Strategic estimates
Global pharmaceuticals market ($ Bn)
605649
712773
837 856 880
2005 2006 2007 2008 2009 2010 2011E
The top 10 players account for over 42% of total global sales. Pfizer is the market leader,
followed by GSK and Novartis AG. Lipitor is the largest selling drug followed by Plavix and
Nexium. Oncology continues to be the leading therapy class globally followed by lipid
regulators.
Domestic Market Overview
The Indian pharmaceutical industry is ranked 3rd in the world in terms of production
volume and 14th in terms of domestic consumption value. The Indian pharmaceutical
industry is estimated at $ 21.4 Bn in FY11. Formulations account for ~65% and bulk drugs
for the balance 35% in value terms. The industry is expected to reach $ 46 Bn in FY15.
Bulk drug exports are expected to grow the fastest at ~35% followed by formulation
exports at ~25%. The domestic formulation market is expected to grow at ~11% with key
growth drivers being increased per capita spend on pharmaceuticals, improved medical
infrastructure, greater health insurance penetration and increasing prevalence of lifestyle
diseases. Today the Indian pharmaceutical sector meets 95% of the country's medical
needs. The Indian pharmaceutical industry consists of both domestic companies and
subsidiaries of multinational corporations. Indian companies manufacture a wide range of
generic drugs (branded and non-branded), intermediates and bulk drugs/Active
Pharmaceutical Ingredients (API).
Among the product segments, anti-infectives is the largest segment, accounting for 17%
of the domestic formulations market. The other large segments are cardio-vascular and
gastro-intestinal.
Leading segments- domestic formulations, India, FY10
Dermatology
Central Nervous System
Anti-diabetic
Gynaecological
Vitamins/ Nutrients
Pain/ Analgesics
Respiratory
Gastrointestinal
Cardio Vascular
Anti-infectives 1,602
1,053
1,000
838
804
711
533
516
516
509
% share
17%
11%
11%
9%
9%
8%
6%
6%
6%
5%
Source: IMS Health, Crisil Research, Analysis by Tata Strategic
26 27
Fine ChemicalsFine chemicals refer to chemicals prepared to a very high degree of purity for specific
applications, and generally cover agrochemicals and active pharmaceutical ingredients.
Since agrochemicals are being discussed separately in this report, this section shall only
refer to APIs.The global pharmaceutical market was estimated at ~ $ 880 Bn in 2011 with
7% annual growth since 2004. The developed markets, which have been the traditional
stronghold of innovator companies, are expected to witness lower than historical growth
going forward. Higher R&D costs, relatively dry pipeline for new drugs, increasing
penetration of generics and pressure from governments for reduced healthcare costs are
putting a lot of pressure on global pharmaceutical companies, Future growth is expected
to be primarily driven by generics and emerging markets. The global pharmaceutical
market is expected to grow at 6% CAGR to reach $ 1,100 Bn in 2014.
Source: Industry reports, CRISIL, GoI Task Force, Tata Strategic estimates
Global pharmaceuticals market ($ Bn)
605649
712773
837 856 880
2005 2006 2007 2008 2009 2010 2011E
The top 10 players account for over 42% of total global sales. Pfizer is the market leader,
followed by GSK and Novartis AG. Lipitor is the largest selling drug followed by Plavix and
Nexium. Oncology continues to be the leading therapy class globally followed by lipid
regulators.
Domestic Market Overview
The Indian pharmaceutical industry is ranked 3rd in the world in terms of production
volume and 14th in terms of domestic consumption value. The Indian pharmaceutical
industry is estimated at $ 21.4 Bn in FY11. Formulations account for ~65% and bulk drugs
for the balance 35% in value terms. The industry is expected to reach $ 46 Bn in FY15.
Bulk drug exports are expected to grow the fastest at ~35% followed by formulation
exports at ~25%. The domestic formulation market is expected to grow at ~11% with key
growth drivers being increased per capita spend on pharmaceuticals, improved medical
infrastructure, greater health insurance penetration and increasing prevalence of lifestyle
diseases. Today the Indian pharmaceutical sector meets 95% of the country's medical
needs. The Indian pharmaceutical industry consists of both domestic companies and
subsidiaries of multinational corporations. Indian companies manufacture a wide range of
generic drugs (branded and non-branded), intermediates and bulk drugs/Active
Pharmaceutical Ingredients (API).
Among the product segments, anti-infectives is the largest segment, accounting for 17%
of the domestic formulations market. The other large segments are cardio-vascular and
gastro-intestinal.
Leading segments- domestic formulations, India, FY10
Dermatology
Central Nervous System
Anti-diabetic
Gynaecological
Vitamins/ Nutrients
Pain/ Analgesics
Respiratory
Gastrointestinal
Cardio Vascular
Anti-infectives 1,602
1,053
1,000
838
804
711
533
516
516
509
% share
17%
11%
11%
9%
9%
8%
6%
6%
6%
5%
Source: IMS Health, Crisil Research, Analysis by Tata Strategic
28 29
Formulation Exports
Pharmaceuticals market, India ($ Bn)
Domestic Formulation Consumption API Exports
Source: IMS Health, Crisil Research, Analysis by Tata Strategic
4.5 7.51.6
5.2
8.7
FY04 FY10E FY15P
7.6
21.4
46.0
23%
17%
4.5 7.51.6
5.21.5
8.7
18.0
11.5
16.5
18.0
11.5
16.517%
Fine chemicals manufacturing companies can be categorized into 2 broad segments:
Generic drug companies with predominant focus on export of APIs and bulk drugs
CRAMS specialized companies
Both the segments have established players but contract manufacturers enjoy better
margins than generic API exporters. Major players in the contract manufacturing segment
include Dishman, Divis, Jubilant, NPIL and Shasun. Lupin, Aurbindo Pharma, Ranbaxy, Dr.
Reddy's and Matrix Laboratories are the major generic API exporters. Indian players have
used acquisitions to build capabilities in the high value segments. Nicholas Piramal's
acquisition of UK based Avecia, Dishman's acquisition of Switzerland based Carbogen
Amcis and Jubilant's acquisition of US based Hollister Stier are some of the noteworthy
acquisitions made by domestic companies in the recent past.
The demand growth drivers are as follows:
Margin pressures of global players leading to increased outsourcing and focus on
contract manufacturing
Supply base of APIs shifting from Europe to emerging countries like India and China
due to low cost advantage
Export to generic players constitute the biggest segment but export to Innovators is
expected to grow at a faster rate
Market, technology and regulatory trends
The market is characterized by high buyer power and limited supply power due to buyer's
focus on lowest possible costs and presence of more than 1000 Indian companies
competing in manufacturing. This is further augmented by intense competition from
Chinese manufacturers. Barriers to entry in generics are insufficient whereas barriers to
entry are tough in innovator drugs. The underlying reasons are adherence to strict and
costly international certification norms, strong chemistry & process knowledge and
v
v
v
v
v
presence of numerous IPR norms. However increasing number of Indian companies are
focusing on IP creation and protection and setting up world class manufacturing facilities
to meet innovators demand. Divestment by European companies has resulted in
significant number of acquisitions by Indian companies in the recent past. Lower market
valuations together with exchange rate fluctuations pose considerable threat to Indian API
manufacturers.
Profile of select players
Brief profile: Dr. Reddy’s Laboratories
Dr. Reddy’s Laboratories Ltd.
www.drreddys.com
Company overview ·Integrated global phamra company, established 1984
·Three businesses: Pharmaceutical Services & Active
Ingredients, Global Generis and Propreitory Products
Sales Revenue
in
FY2011 ·Rs. 1,965 crore (Pharma Services & APIs SBU)
Key API lines ·Cardiovascular, oncology, Anti -diabetic, gastro -intestinal,
ophthalmic, expectorant, steroids, anti -allergic, etc.
Manufacturing
locations
·India: Six plants
·USA: One plant
·Mexico: One
plant
Brief profile: Lupin
Company overview
· “innovation led transnational pharmaceutical company
producing a wide range of quality, affordable generic and
branded formulations and APIs ”
Sales Revenue in
FY2011 · Rs. 777 crore (API business)
Key API lines · Antibiotics, cardiovascular, central nervous system, anti -TB
Manufacturing
locations
· Aknlweshwar, Baroda (Gujarat)
· Mandideep (Madhya Pradesh)
· Tarapur (Maharashtra)
Lupin
www.lupinworld.com
28 29
Formulation Exports
Pharmaceuticals market, India ($ Bn)
Domestic Formulation Consumption API Exports
Source: IMS Health, Crisil Research, Analysis by Tata Strategic
4.5 7.51.6
5.2
8.7
FY04 FY10E FY15P
7.6
21.4
46.0
23%
17%
4.5 7.51.6
5.21.5
8.7
18.0
11.5
16.5
18.0
11.5
16.517%
Fine chemicals manufacturing companies can be categorized into 2 broad segments:
Generic drug companies with predominant focus on export of APIs and bulk drugs
CRAMS specialized companies
Both the segments have established players but contract manufacturers enjoy better
margins than generic API exporters. Major players in the contract manufacturing segment
include Dishman, Divis, Jubilant, NPIL and Shasun. Lupin, Aurbindo Pharma, Ranbaxy, Dr.
Reddy's and Matrix Laboratories are the major generic API exporters. Indian players have
used acquisitions to build capabilities in the high value segments. Nicholas Piramal's
acquisition of UK based Avecia, Dishman's acquisition of Switzerland based Carbogen
Amcis and Jubilant's acquisition of US based Hollister Stier are some of the noteworthy
acquisitions made by domestic companies in the recent past.
The demand growth drivers are as follows:
Margin pressures of global players leading to increased outsourcing and focus on
contract manufacturing
Supply base of APIs shifting from Europe to emerging countries like India and China
due to low cost advantage
Export to generic players constitute the biggest segment but export to Innovators is
expected to grow at a faster rate
Market, technology and regulatory trends
The market is characterized by high buyer power and limited supply power due to buyer's
focus on lowest possible costs and presence of more than 1000 Indian companies
competing in manufacturing. This is further augmented by intense competition from
Chinese manufacturers. Barriers to entry in generics are insufficient whereas barriers to
entry are tough in innovator drugs. The underlying reasons are adherence to strict and
costly international certification norms, strong chemistry & process knowledge and
v
v
v
v
v
presence of numerous IPR norms. However increasing number of Indian companies are
focusing on IP creation and protection and setting up world class manufacturing facilities
to meet innovators demand. Divestment by European companies has resulted in
significant number of acquisitions by Indian companies in the recent past. Lower market
valuations together with exchange rate fluctuations pose considerable threat to Indian API
manufacturers.
Profile of select players
Brief profile: Dr. Reddy’s Laboratories
Dr. Reddy’s Laboratories Ltd.
www.drreddys.com
Company overview ·Integrated global phamra company, established 1984
·Three businesses: Pharmaceutical Services & Active
Ingredients, Global Generis and Propreitory Products
Sales Revenue
in
FY2011 ·Rs. 1,965 crore (Pharma Services & APIs SBU)
Key API lines ·Cardiovascular, oncology, Anti -diabetic, gastro -intestinal,
ophthalmic, expectorant, steroids, anti -allergic, etc.
Manufacturing
locations
·India: Six plants
·USA: One plant
·Mexico: One
plant
Brief profile: Lupin
Company overview
· “innovation led transnational pharmaceutical company
producing a wide range of quality, affordable generic and
branded formulations and APIs ”
Sales Revenue in
FY2011 · Rs. 777 crore (API business)
Key API lines · Antibiotics, cardiovascular, central nervous system, anti -TB
Manufacturing
locations
· Aknlweshwar, Baroda (Gujarat)
· Mandideep (Madhya Pradesh)
· Tarapur (Maharashtra)
Lupin
www.lupinworld.com
30 31
Dyes & PigmentsIntroduction
There are two types of colorants - dyes and pigments. Dyes are soluble substances used to
pass color to the substrate and find applications primarily in textiles and leather. There are
several types of dyes, however in India disperse, reactive and direct dyes are most
commonly used. Pigments are insoluble substances and could either be in powdered or
granular form. They impart colour by reflecting only certain light rays. Their major end use
industries are paints and inks. Pigments can be broadly classified as organic and inorganic.
Global industry
The global colorant industry is valued at US$ 27 Bn and has been growing at 2-3% p.a. The
dyestuff industry has seen turbulent times in the past decade. The decline of the
traditional producers in the developed world, particularly in Europe, and the simultaneous
ascent of new ones in Asia, particularly India and China, is arguably one of the most
significant changes ever seen in this industry. The shift has been quite swift and followed
the migration of end-user industries - notably textiles and leather - to low cost economies
of Asia.
Indian industryOverview and outlook
India accounts for 12% of the global colorant industry, out of which nearly 2/3rd is
exported. In 2010, India produced ~200,000 tonnes of dyes. Of this, 50% were reactive
dyes due to the availability of important raw materials like vinyl sulphone, etc. Nearly 70%
of the dyestuff was supplied to the textile industry while leather and paper industries
accounted for the remaining.
The sector is dominated by unorganized players and has ~1000 players in the small scale
category. There are only 50 large organized units. These units are mainly present in
Gujarat and Maharashtra, with the former accounting for almost 80% of capacity. Per
capita consumption of dyestuff is ~50 gms compared to the world average of 300 gms
demonstrating a largely untapped domestic market. India has largely been an exporting
country and has emerged as a global supplier of reactive, acid, vat and direct dyes
accounting for ~10% of world trade. Also, these dyestuffs are exported to Europe, South
East Asia and Taiwan to cater to the textile industries in these countries. However, almost
80% of these are commodities and face intense pricing pressures reducing the margins of
the industry.
Indian Dyes : Capacity (tpa)
Sulphur, 10,000
Disperse, 10,000
Acid, 30,000
Others, 20,000
Basic, 10,000
Direct, 20,000
Reactive, 100,000
The pigment market is estimated at ~7 lakh tons p.a. with a market size of ~$ 970 Mn.
Carbon black and Titanium dioxide (TiO2) account for 90% of the total pigment production.
Pigments(678,000)
Carbon Black &TiO2
(615,000)
Colour & SpecialEffect
(63,000)
Organics(19,500)
Inorganics(44,000)
Chromeoxide Others
Special Effect Others
SyntheticIron Oxide
Source: Industry reports, Tata Strategic analysis
Pigments demand, India: FY10(tons per annum)
30 31
Dyes & PigmentsIntroduction
There are two types of colorants - dyes and pigments. Dyes are soluble substances used to
pass color to the substrate and find applications primarily in textiles and leather. There are
several types of dyes, however in India disperse, reactive and direct dyes are most
commonly used. Pigments are insoluble substances and could either be in powdered or
granular form. They impart colour by reflecting only certain light rays. Their major end use
industries are paints and inks. Pigments can be broadly classified as organic and inorganic.
Global industry
The global colorant industry is valued at US$ 27 Bn and has been growing at 2-3% p.a. The
dyestuff industry has seen turbulent times in the past decade. The decline of the
traditional producers in the developed world, particularly in Europe, and the simultaneous
ascent of new ones in Asia, particularly India and China, is arguably one of the most
significant changes ever seen in this industry. The shift has been quite swift and followed
the migration of end-user industries - notably textiles and leather - to low cost economies
of Asia.
Indian industryOverview and outlook
India accounts for 12% of the global colorant industry, out of which nearly 2/3rd is
exported. In 2010, India produced ~200,000 tonnes of dyes. Of this, 50% were reactive
dyes due to the availability of important raw materials like vinyl sulphone, etc. Nearly 70%
of the dyestuff was supplied to the textile industry while leather and paper industries
accounted for the remaining.
The sector is dominated by unorganized players and has ~1000 players in the small scale
category. There are only 50 large organized units. These units are mainly present in
Gujarat and Maharashtra, with the former accounting for almost 80% of capacity. Per
capita consumption of dyestuff is ~50 gms compared to the world average of 300 gms
demonstrating a largely untapped domestic market. India has largely been an exporting
country and has emerged as a global supplier of reactive, acid, vat and direct dyes
accounting for ~10% of world trade. Also, these dyestuffs are exported to Europe, South
East Asia and Taiwan to cater to the textile industries in these countries. However, almost
80% of these are commodities and face intense pricing pressures reducing the margins of
the industry.
Indian Dyes : Capacity (tpa)
Sulphur, 10,000
Disperse, 10,000
Acid, 30,000
Others, 20,000
Basic, 10,000
Direct, 20,000
Reactive, 100,000
The pigment market is estimated at ~7 lakh tons p.a. with a market size of ~$ 970 Mn.
Carbon black and Titanium dioxide (TiO2) account for 90% of the total pigment production.
Pigments(678,000)
Carbon Black &TiO2
(615,000)
Colour & SpecialEffect
(63,000)
Organics(19,500)
Inorganics(44,000)
Chromeoxide Others
Special Effect Others
SyntheticIron Oxide
Source: Industry reports, Tata Strategic analysis
Pigments demand, India: FY10(tons per annum)
32 33
Printing inks and coatings account for over 70% of consumption of pigments in India.
Titanium dioxide is a major raw material used in the manufacture of paints. The paints
industry is growing at 13.5% p.a. which has been a major demand driver for pigments.
There are also niche markets in India for special effect pigments such as metallic and
pearlescent. These pigments are usually imported into the Indian market, with Sudarshan
chemicals being the only domestic manufacturer. Though the volume for these pigments
would be very small as compared to other pigment segments, they usually command a
premium for the design appeal that they provide to the final product such as automotive
coatings and packaging goods.
India has grown significantly as a producer and exporter of organic pigments, particularly
phthalocyanine blue, green and some high performance pigments. India is amongst the
largest sources of coloured organic pigments, competing with China for a dominant share
of the export market.
Source: Industry reports
Pigments by end use (% volume)
Plastics,10%
Others, 9%
Textiles,10%
Coatings,24%
Inks, 47%
Demand-Supply Scenario
Major players in the pigments industry are Sudarshan Chemicals and Clariant India while
in the dyestuff industry companies such as Atul, Clariant India, Kiri Dyes and IDI are large
players in the organized sector. The organized sector, with a better product range,
technology and marketing reach, has been able to increase market share. Further bans on
certain dyestuffs due to regulatory norms from the European markets and stricter local
pollution norms have forced many in the unorganized sector to exit resulting in increase in
the share of the organized players. Total installed capacity for organic pigment is 80,000
tons p.a., which is way higher than the demand from the Indian market. Large proportion
of the organic pigments produced is exported. Major producers of organic pigments
include Meghmani Organics, Clariant India, Sudarshan Chemicals, Pidilite Industries and
Heubach Colours.
Growth Forecast & Drivers
There has been a strong growth in the dyestuff industry during the last decade. Export
opportunities created by the closure of several units in countries like USA and Europe due
to enforcement of strict pollution control norms, has resulted in a spurt of capacity
building in India. However, the financial crisis in 2008 has resulted in a demand slump,
worldwide over-capacity and has resulted in further margin pressures on the dyestuff
industry.
10.0
3.5
2010 2020
14.5
Base case
Aspirational
11.1%
15.3%
Colorant Industry size ($ Bn)
CAGR
Source : Industry reports, Analysis by Tata Strategic
As per industry reports, demand for dyes and organic pigments is expected to grow at
11% p.a. till 2020 to reach US$ 10 Bn. However, the industry can aim to grow faster at 15%
to reach US$ 14.5 Bn. To achieve its aspirations, the industry needs to focus on the
following:
Innovative products
Increase emphasis on R&D
Optimize the product portfolio
Build better quality and high performance colorants
Green chemistry practices
Improve environment friendliness of products and services
Ensure compliance to international regulations to continue access to the exports
markets
Due to greater use of polyester and cotton-based fabrics, there has been a shift towards
reactive dyes, used in cotton-based fabrics, and disperse dyes, used in polyester. The
demand for reactive and disperse dyes is expected to grow fastest due to this trend. The
textile industry will remain the largest consumer of dyestuffs; however growth will be
driven by markets such as printing inks, paints and plastics. These segments will also
increase the consumption of high performance pigments helping improve profitability.
However, the gains will be restrained due to the commodity nature of the products and
intense competition.
v
v
v
v
v
32 33
Printing inks and coatings account for over 70% of consumption of pigments in India.
Titanium dioxide is a major raw material used in the manufacture of paints. The paints
industry is growing at 13.5% p.a. which has been a major demand driver for pigments.
There are also niche markets in India for special effect pigments such as metallic and
pearlescent. These pigments are usually imported into the Indian market, with Sudarshan
chemicals being the only domestic manufacturer. Though the volume for these pigments
would be very small as compared to other pigment segments, they usually command a
premium for the design appeal that they provide to the final product such as automotive
coatings and packaging goods.
India has grown significantly as a producer and exporter of organic pigments, particularly
phthalocyanine blue, green and some high performance pigments. India is amongst the
largest sources of coloured organic pigments, competing with China for a dominant share
of the export market.
Source: Industry reports
Pigments by end use (% volume)
Plastics,10%
Others, 9%
Textiles,10%
Coatings,24%
Inks, 47%
Demand-Supply Scenario
Major players in the pigments industry are Sudarshan Chemicals and Clariant India while
in the dyestuff industry companies such as Atul, Clariant India, Kiri Dyes and IDI are large
players in the organized sector. The organized sector, with a better product range,
technology and marketing reach, has been able to increase market share. Further bans on
certain dyestuffs due to regulatory norms from the European markets and stricter local
pollution norms have forced many in the unorganized sector to exit resulting in increase in
the share of the organized players. Total installed capacity for organic pigment is 80,000
tons p.a., which is way higher than the demand from the Indian market. Large proportion
of the organic pigments produced is exported. Major producers of organic pigments
include Meghmani Organics, Clariant India, Sudarshan Chemicals, Pidilite Industries and
Heubach Colours.
Growth Forecast & Drivers
There has been a strong growth in the dyestuff industry during the last decade. Export
opportunities created by the closure of several units in countries like USA and Europe due
to enforcement of strict pollution control norms, has resulted in a spurt of capacity
building in India. However, the financial crisis in 2008 has resulted in a demand slump,
worldwide over-capacity and has resulted in further margin pressures on the dyestuff
industry.
10.0
3.5
2010 2020
14.5
Base case
Aspirational
11.1%
15.3%
Colorant Industry size ($ Bn)
CAGR
Source : Industry reports, Analysis by Tata Strategic
As per industry reports, demand for dyes and organic pigments is expected to grow at
11% p.a. till 2020 to reach US$ 10 Bn. However, the industry can aim to grow faster at 15%
to reach US$ 14.5 Bn. To achieve its aspirations, the industry needs to focus on the
following:
Innovative products
Increase emphasis on R&D
Optimize the product portfolio
Build better quality and high performance colorants
Green chemistry practices
Improve environment friendliness of products and services
Ensure compliance to international regulations to continue access to the exports
markets
Due to greater use of polyester and cotton-based fabrics, there has been a shift towards
reactive dyes, used in cotton-based fabrics, and disperse dyes, used in polyester. The
demand for reactive and disperse dyes is expected to grow fastest due to this trend. The
textile industry will remain the largest consumer of dyestuffs; however growth will be
driven by markets such as printing inks, paints and plastics. These segments will also
increase the consumption of high performance pigments helping improve profitability.
However, the gains will be restrained due to the commodity nature of the products and
intense competition.
v
v
v
v
v
34 35
Market
• Global overcapacity• Demand for green & high-
performance products
Technology
Trends in colorants industry
Regulatory
• Colour solution approach to counter commoditization
• Stricter domestic environmental laws
• REACH compliance
Market
•• -
Technology
Trends in colorants industry
Regulatory
• •s
•
Industry Trends
Market Trends
The global capacity of dyestuffs has exceeded demand resulting in an oversupply scenario.
Due to the lack of export demand, the prices of the colorants had dropped by roughly
20%. It is expected that consumer preference for environmentally friendly products and
high performance dyes and organic pigments will help improve overall value of the
market.
Regulatory Trends
Fiscal policies and excise concessions led to a high level of fragmentation in the Indian
dyestuffs market. However, a gradual reduction in the excise duties has resulted in a more
balanced pricing differential between the organized and unorganized sectors. Regulations
such as REACH (Registration, Evaluation, Authorization and Restriction of Chemical
substances), which have been designed with the objective of protecting human health
and environment from the hazards of chemicals, require that apparel and apparel
chemical exporters to EU provide their buyers with information regarding the substance
used in manufacturing. Exporters who are not able to comply will lose their market share,
resulting in closure of small establishments.
Technological Trends
Since majority of dyestuffs are commodities there is not much product differentiation and
duplication of products is easy. To counter the same, global manufacturers are investing in
Research and Development to improve the specialty end of their portfolio. The industry
could leverage technology to come up with newer products to meet the bottom of
pyramid needs with innovative solutions. New technologies such as reduction with
hydrogen & sulphonation with liquid sulphur trioxide could be adopted as they are clean
technologies and give better yields, thereby reducing effluents. There is also a trend
towards providing colour solutions rather than just a colourant. Collaborations with
equipment manufacturers are being undertaken to provide integrated solutions to
customers.
Future Outlook
The financial crisis in 2008 has resulted in a demand slump, worldwide over-capacity and
further margin pressures on the dyestuff industry. The Indian dyestuff industry is facing
challenges due to reduced export demand growth and decreasing profitability. Companies
with greater focus on innovation and R&D will benefit in the long run. Adopting green
chemistry practices and compliance to more stringent export market regulations would
help ensure greater access to export markets. Such a holistic approach could ensure that
the Indian dyes and pigments industry is able to overcome the challenges and convert
them to opportunities, resulting in profitable growth.
Company overview Largest pigment and sole effect pigment manufacturer
Present in business for over 50 years
Sales Revenue in
FY2011 Rs. 747 crore
Key brands Colours: Sudaperm, Sudafast, Sudacolor
Effects: Sumica, Sumicos
Manufacturing
locations Roha and Mahad (Mahasrashtra)
Sudarshan India
www.sudarshan.com
Profile of select playersBrief profile: Sudarshan India
Atul Industries
www.atul.co.in
Company overview Diversified company with presence in colours, aromatics,
agrochemicals, polymers and pharma intermediaries
Sales Revenue in
FY2011 Rs. 1,600 crore
Key brands
Vat dyes: Novatic Acid dyes: Tulacid Direct dyes: Tuladir
Manufacturing
locations Atul and Ankleshwar (Gujarat)
Brief profile: Atul Industries
34 35
Market
• Global overcapacity• Demand for green & high-
performance products
Technology
Trends in colorants industry
Regulatory
• Colour solution approach to counter commoditization
• Stricter domestic environmental laws
• REACH compliance
Market
•• -
Technology
Trends in colorants industry
Regulatory
• •s
•
Industry Trends
Market Trends
The global capacity of dyestuffs has exceeded demand resulting in an oversupply scenario.
Due to the lack of export demand, the prices of the colorants had dropped by roughly
20%. It is expected that consumer preference for environmentally friendly products and
high performance dyes and organic pigments will help improve overall value of the
market.
Regulatory Trends
Fiscal policies and excise concessions led to a high level of fragmentation in the Indian
dyestuffs market. However, a gradual reduction in the excise duties has resulted in a more
balanced pricing differential between the organized and unorganized sectors. Regulations
such as REACH (Registration, Evaluation, Authorization and Restriction of Chemical
substances), which have been designed with the objective of protecting human health
and environment from the hazards of chemicals, require that apparel and apparel
chemical exporters to EU provide their buyers with information regarding the substance
used in manufacturing. Exporters who are not able to comply will lose their market share,
resulting in closure of small establishments.
Technological Trends
Since majority of dyestuffs are commodities there is not much product differentiation and
duplication of products is easy. To counter the same, global manufacturers are investing in
Research and Development to improve the specialty end of their portfolio. The industry
could leverage technology to come up with newer products to meet the bottom of
pyramid needs with innovative solutions. New technologies such as reduction with
hydrogen & sulphonation with liquid sulphur trioxide could be adopted as they are clean
technologies and give better yields, thereby reducing effluents. There is also a trend
towards providing colour solutions rather than just a colourant. Collaborations with
equipment manufacturers are being undertaken to provide integrated solutions to
customers.
Future Outlook
The financial crisis in 2008 has resulted in a demand slump, worldwide over-capacity and
further margin pressures on the dyestuff industry. The Indian dyestuff industry is facing
challenges due to reduced export demand growth and decreasing profitability. Companies
with greater focus on innovation and R&D will benefit in the long run. Adopting green
chemistry practices and compliance to more stringent export market regulations would
help ensure greater access to export markets. Such a holistic approach could ensure that
the Indian dyes and pigments industry is able to overcome the challenges and convert
them to opportunities, resulting in profitable growth.
Company overview Largest pigment and sole effect pigment manufacturer
Present in business for over 50 years
Sales Revenue in
FY2011 Rs. 747 crore
Key brands Colours: Sudaperm, Sudafast, Sudacolor
Effects: Sumica, Sumicos
Manufacturing
locations Roha and Mahad (Mahasrashtra)
Sudarshan India
www.sudarshan.com
Profile of select playersBrief profile: Sudarshan India
Atul Industries
www.atul.co.in
Company overview Diversified company with presence in colours, aromatics,
agrochemicals, polymers and pharma intermediaries
Sales Revenue in
FY2011 Rs. 1,600 crore
Key brands
Vat dyes: Novatic Acid dyes: Tulacid Direct dyes: Tuladir
Manufacturing
locations Atul and Ankleshwar (Gujarat)
Brief profile: Atul Industries
36 37
Other Specialty ChemicalsIntroduction
Specialty chemicals are defined as a "group of relatively high value, low volume chemicals
known for their end use applications and/ or performance enhancing properties." In
contrast to base or commodity chemicals, specialty chemicals are recognized for 'what
they do' and not 'what they are'. Specialty chemicals provide the required 'solution' to
meet the customer application needs. It is a highly knowledge driven industry with raw
materials cost (measured as percentage of net sales) much lower than for commodity
chemicals. The critical success factors for the industry include understanding of customer
needs and product/ application development to meet the same at a favorable price-
performance ratio.
Overview of Indian market
The specialty chemicals segment (including the knowledge chemicals) is, currently
estimated at ~$ 27 Bn, The specialty chemicals segment caters to a large number of end
use industries including construction, automotive, polymers, personal care products,
water treatment, textile, paints and coatings, etc. The knowledge chemicals segment
caters to the key end use industries of pharmaceuticals, agrochemicals and bio-
technology.
The specialty and knowledge chemicals industry combined has been growing at rates
higher than the overall chemical industry and is expected to continue to grow at 15%-17%
p.a. to reach $ 80-100 Bn by 2020. Changing income distribution and evolving end use
market are the key growth drivers for specialty chemicals. Rapid rise of the mid income
households is expected to create a larger consumer base for products using specialty
chemicals.
Additionally, high growth in end use markets and evolving customer needs are expected
to drive the growth of specialty chemicals. Major end use industries - textiles (esp.
performance textiles), automotive, glass, construction and paints- are all expected to
register double digit growth rates in the next five years. Also emerging needs in several of
these end use industries is creating demand for high performance specialty chemicals
driving penetration growth.
Generally low to medium volume products with higher price realization
Generally medium to
high volume products with lower price realizations
CSFs: Price/performance ratio for specific application,
technical assistance, channels to market
Seller provides required "solution" to meet customer application needs
Sold by "performance/impact", not composition
CSFs: Access to secure and competitive supply of raw materials, efficient operations and
supply chain
Selection of chemical done by customer
Sold by "specification",defined purity
BASE CHEMICALS SPECIALTY CHEMICALS
18
27
FY06 FY10 FY20
Indiamarket (USD Bn)
’s specialty & knowledge chemicals
11%
15-17%
80-100
Source: Tata Strategic estimates
36 37
Other Specialty ChemicalsIntroduction
Specialty chemicals are defined as a "group of relatively high value, low volume chemicals
known for their end use applications and/ or performance enhancing properties." In
contrast to base or commodity chemicals, specialty chemicals are recognized for 'what
they do' and not 'what they are'. Specialty chemicals provide the required 'solution' to
meet the customer application needs. It is a highly knowledge driven industry with raw
materials cost (measured as percentage of net sales) much lower than for commodity
chemicals. The critical success factors for the industry include understanding of customer
needs and product/ application development to meet the same at a favorable price-
performance ratio.
Overview of Indian market
The specialty chemicals segment (including the knowledge chemicals) is, currently
estimated at ~$ 27 Bn, The specialty chemicals segment caters to a large number of end
use industries including construction, automotive, polymers, personal care products,
water treatment, textile, paints and coatings, etc. The knowledge chemicals segment
caters to the key end use industries of pharmaceuticals, agrochemicals and bio-
technology.
The specialty and knowledge chemicals industry combined has been growing at rates
higher than the overall chemical industry and is expected to continue to grow at 15%-17%
p.a. to reach $ 80-100 Bn by 2020. Changing income distribution and evolving end use
market are the key growth drivers for specialty chemicals. Rapid rise of the mid income
households is expected to create a larger consumer base for products using specialty
chemicals.
Additionally, high growth in end use markets and evolving customer needs are expected
to drive the growth of specialty chemicals. Major end use industries - textiles (esp.
performance textiles), automotive, glass, construction and paints- are all expected to
register double digit growth rates in the next five years. Also emerging needs in several of
these end use industries is creating demand for high performance specialty chemicals
driving penetration growth.
Generally low to medium volume products with higher price realization
Generally medium to
high volume products with lower price realizations
CSFs: Price/performance ratio for specific application,
technical assistance, channels to market
Seller provides required "solution" to meet customer application needs
Sold by "performance/impact", not composition
CSFs: Access to secure and competitive supply of raw materials, efficient operations and
supply chain
Selection of chemical done by customer
Sold by "specification",defined purity
BASE CHEMICALS SPECIALTY CHEMICALS
18
27
FY06 FY10 FY20
Indiamarket (USD Bn)
’s specialty & knowledge chemicals
11%
15-17%
80-100
Source: Tata Strategic estimates
38 39
• EU has “E numbers” for food additives that have been assessed for use (positive list)
• Majority of the developed world (US, UK, EU) follow IFRA guidelines
• Moving from a negative list (of banned chemicals) to a positive list of (acceptable chemicals) in flavors
• Mandating the usage norms by IFRA (International Fragrance Association)
Flavours and fragrances
• Germany’s EnEV is one of the most stringent energy conservation codes
• China has banned site mixing of concrete in 240 major states
• Mandating energy conservation and building code (2007) guidelines
• Banning mixing and production of concrete at sites in urban areas
Construction
• US has set 250 g/ litre as the limit for VOC in paints
• US has a norm of maximum 90 ppm of lead in paints
• Industries are incentivised to use Singapore’s NEWater (recycled water)
• US EPA sets effluent emission guidelines for each industry
• Entire EU has specific targets for CO2 emissions for cars (120 g/ km by 2012)
• US CAFÉ standards specify minimum fuel efficiency at 36 MPG by 2016
Comparable standards in other countries
• Nationwide implementation of stricter emission norms (Bharat IV/ V)
• Fuel efficiency standards to improve average fuel economy of vehicles
Automotive
• Tighter emission norms for VOCs in line with the developed world
• Mandatory use of lead-free pigments and coatings in all applications
Paints and coatings
• Re-usability norms for all types of waste water
• Shifting to pollution load-based norms from concentration-based norms
Water treatment
Potential customer standards in IndiaINDUSTRY
• EU has “E numbers” for food additives that have been assessed for use (positive list)
• Majority of the developed world (US, UK, EU) follow IFRA guidelines
• Moving from a negative list (of banned chemicals) to a positive list of (acceptable chemicals) in flavors
• Mandating the usage norms by IFRA (International Fragrance Association)
Flavours and fragrances
• Germany’s EnEV is one of the most stringent energy conservation codes
• China has banned site mixing of concrete in 240 major states
• Mandating energy conservation and building code (2007) guidelines
• Banning mixing and production of concrete at sites in urban areas
Construction
• US has set 250 g/ litre as the limit for VOC in paints
• US has a norm of maximum 90 ppm of lead in paints
• Industries are incentivised to use Singapore’s NEWater (recycled water)
• US EPA sets effluent emission guidelines for each industry
• Entire EU has specific targets for CO2 emissions for cars (120 g/ km by 2012)
• US CAFÉ standards specify minimum fuel efficiency at 36 MPG by 2016
Comparable standards in other countries
• Nationwide implementation of stricter emission norms (Bharat IV/ V)
• Fuel efficiency standards to improve average fuel economy of vehicles
Automotive
• Tighter emission norms for VOCs in line with the developed world
• Mandatory use of lead-free pigments and coatings in all applications
Paints and coatings
• Re-usability norms for all types of waste water
• Shifting to pollution load-based norms from concentration-based norms
Water treatment
Potential customer standards in IndiaINDUSTRY
• EU has “E numbers” for food additives that have been assessed for use (positive list)
• Majority of the developed world (US, UK, EU) follow IFRA guidelines
• Moving from a negative list (of banned chemicals) to a positive list of (acceptable chemicals) in flavors
• Mandating the usage norms by IFRA (International Fragrance Association)
Flavours and fragrances
• Germany’s EnEV is one of the most stringent energy conservation codes
• China has banned site mixing of concrete in 240 major states
• Mandating energy conservation and building code (2007) guidelines
• Banning mixing and production of concrete at sites in urban areas
Construction
• US has set 250 g/ litre as the limit for VOC in paints
• US has a norm of maximum 90 ppm of lead in paints
• Industries are incentivised to use Singapore’s NEWater (recycled water)
• US EPA sets effluent emission guidelines for each industry
• Entire EU has specific targets for CO2 emissions for cars (120 g/ km by 2012)
• US CAFÉ standards specify minimum fuel efficiency at 36 MPG by 2016
Comparable standards in other countries
• Nationwide implementation of stricter emission norms (Bharat IV/ V)
• Fuel efficiency standards to improve average fuel economy of vehicles
Automotive
• Tighter emission norms for VOCs in line with the developed world
• Mandatory use of lead-free pigments and coatings in all applications
Paints and coatings
• Re-usability norms for all types of waste water
• Shifting to pollution load-based norms from concentration-based norms
Water treatment
Potential customer standards in IndiaINDUSTRY
• EU has “E numbers” for food additives that have been assessed for use (positive list)
• Majority of the developed world (US, UK, EU) follow IFRA guidelines
• Moving from a negative list (of banned chemicals) to a positive list of (acceptable chemicals) in flavors
• Mandating the usage norms by IFRA (International Fragrance Association)
Flavours and fragrances
• Germany’s EnEV is one of the most stringent energy conservation codes
• China has banned site mixing of concrete in 240 major states
• Mandating energy conservation and building code (2007) guidelines
• Banning mixing and production of concrete at sites in urban areas
Construction
• US has set 250 g/ litre as the limit for VOC in paints
• US has a norm of maximum 90 ppm of lead in paints
• Industries are incentivised to use Singapore’s NEWater (recycled water)
• US EPA sets effluent emission guidelines for each industry
• Entire EU has specific targets for CO2 emissions for cars (120 g/ km by 2012)
• US CAFÉ standards specify minimum fuel efficiency at 36 MPG by 2016
Comparable standards in other countries
• Nationwide implementation of stricter emission norms (Bharat IV/ V)
• Fuel efficiency standards to improve average fuel economy of vehicles
Automotive
• Tighter emission norms for VOCs in line with the developed world
• Mandatory use of lead-free pigments and coatings in all applications
Paints and coatings
• Re-usability norms for all types of waste water
• Shifting to pollution load-based norms from concentration-based norms
Water treatment
Potential customer standards in IndiaINDUSTRY
Source: CII, McKinsey report in Specialty chemicals
Current & potential regulatory changes in end-use industries
A brief overview of some of the key segments of specialty chemicals is covered in this report, focusing on the demand and supply scenario, projected growth & drivers and key trends & future outlook in each segment.
1. Construction Chemicals
Other Specialty Chemicals
Introduction
The Indian construction chemicals market, valued at ~$ 400 Mn in 2010, consists of a
variety of products ranging from admixtures to sealants to flooring chemicals. However,
the market is still very small when compared to other global markets like the United
States which is estimated at ~$ 7.7 Bn. Admixtures form the biggest segment with 35%
share followed by flooring chemicals and water proofing chemicals.
Demand-supply scenario
The demand for construction chemicals, boosted by investment in the construction sector,
has been growing at 16% p.a. from $ 180 Mn in 2005 to reach $ 400 Mn in 2010. With the
economic crisis, the growth slowed down in 2009, but has gained momentum thereafter.
Flooring,15
Misc., 31
Waterproofing,
10
Repair &rehabilitati
on, 9
Admixtures35
Product share FY10
(% of total value)
Source: Industry reports, Tata Strategic analysis
180
400
2005 2010
Construction chemicals market, India ($ Mn)
16%
Source: Industry reports; Tata Strategic estimates
38 39
• EU has “E numbers” for food additives that have been assessed for use (positive list)
• Majority of the developed world (US, UK, EU) follow IFRA guidelines
• Moving from a negative list (of banned chemicals) to a positive list of (acceptable chemicals) in flavors
• Mandating the usage norms by IFRA (International Fragrance Association)
Flavours and fragrances
• Germany’s EnEV is one of the most stringent energy conservation codes
• China has banned site mixing of concrete in 240 major states
• Mandating energy conservation and building code (2007) guidelines
• Banning mixing and production of concrete at sites in urban areas
Construction
• US has set 250 g/ litre as the limit for VOC in paints
• US has a norm of maximum 90 ppm of lead in paints
• Industries are incentivised to use Singapore’s NEWater (recycled water)
• US EPA sets effluent emission guidelines for each industry
• Entire EU has specific targets for CO2 emissions for cars (120 g/ km by 2012)
• US CAFÉ standards specify minimum fuel efficiency at 36 MPG by 2016
Comparable standards in other countries
• Nationwide implementation of stricter emission norms (Bharat IV/ V)
• Fuel efficiency standards to improve average fuel economy of vehicles
Automotive
• Tighter emission norms for VOCs in line with the developed world
• Mandatory use of lead-free pigments and coatings in all applications
Paints and coatings
• Re-usability norms for all types of waste water
• Shifting to pollution load-based norms from concentration-based norms
Water treatment
Potential customer standards in IndiaINDUSTRY
• EU has “E numbers” for food additives that have been assessed for use (positive list)
• Majority of the developed world (US, UK, EU) follow IFRA guidelines
• Moving from a negative list (of banned chemicals) to a positive list of (acceptable chemicals) in flavors
• Mandating the usage norms by IFRA (International Fragrance Association)
Flavours and fragrances
• Germany’s EnEV is one of the most stringent energy conservation codes
• China has banned site mixing of concrete in 240 major states
• Mandating energy conservation and building code (2007) guidelines
• Banning mixing and production of concrete at sites in urban areas
Construction
• US has set 250 g/ litre as the limit for VOC in paints
• US has a norm of maximum 90 ppm of lead in paints
• Industries are incentivised to use Singapore’s NEWater (recycled water)
• US EPA sets effluent emission guidelines for each industry
• Entire EU has specific targets for CO2 emissions for cars (120 g/ km by 2012)
• US CAFÉ standards specify minimum fuel efficiency at 36 MPG by 2016
Comparable standards in other countries
• Nationwide implementation of stricter emission norms (Bharat IV/ V)
• Fuel efficiency standards to improve average fuel economy of vehicles
Automotive
• Tighter emission norms for VOCs in line with the developed world
• Mandatory use of lead-free pigments and coatings in all applications
Paints and coatings
• Re-usability norms for all types of waste water
• Shifting to pollution load-based norms from concentration-based norms
Water treatment
Potential customer standards in IndiaINDUSTRY
• EU has “E numbers” for food additives that have been assessed for use (positive list)
• Majority of the developed world (US, UK, EU) follow IFRA guidelines
• Moving from a negative list (of banned chemicals) to a positive list of (acceptable chemicals) in flavors
• Mandating the usage norms by IFRA (International Fragrance Association)
Flavours and fragrances
• Germany’s EnEV is one of the most stringent energy conservation codes
• China has banned site mixing of concrete in 240 major states
• Mandating energy conservation and building code (2007) guidelines
• Banning mixing and production of concrete at sites in urban areas
Construction
• US has set 250 g/ litre as the limit for VOC in paints
• US has a norm of maximum 90 ppm of lead in paints
• Industries are incentivised to use Singapore’s NEWater (recycled water)
• US EPA sets effluent emission guidelines for each industry
• Entire EU has specific targets for CO2 emissions for cars (120 g/ km by 2012)
• US CAFÉ standards specify minimum fuel efficiency at 36 MPG by 2016
Comparable standards in other countries
• Nationwide implementation of stricter emission norms (Bharat IV/ V)
• Fuel efficiency standards to improve average fuel economy of vehicles
Automotive
• Tighter emission norms for VOCs in line with the developed world
• Mandatory use of lead-free pigments and coatings in all applications
Paints and coatings
• Re-usability norms for all types of waste water
• Shifting to pollution load-based norms from concentration-based norms
Water treatment
Potential customer standards in IndiaINDUSTRY
• EU has “E numbers” for food additives that have been assessed for use (positive list)
• Majority of the developed world (US, UK, EU) follow IFRA guidelines
• Moving from a negative list (of banned chemicals) to a positive list of (acceptable chemicals) in flavors
• Mandating the usage norms by IFRA (International Fragrance Association)
Flavours and fragrances
• Germany’s EnEV is one of the most stringent energy conservation codes
• China has banned site mixing of concrete in 240 major states
• Mandating energy conservation and building code (2007) guidelines
• Banning mixing and production of concrete at sites in urban areas
Construction
• US has set 250 g/ litre as the limit for VOC in paints
• US has a norm of maximum 90 ppm of lead in paints
• Industries are incentivised to use Singapore’s NEWater (recycled water)
• US EPA sets effluent emission guidelines for each industry
• Entire EU has specific targets for CO2 emissions for cars (120 g/ km by 2012)
• US CAFÉ standards specify minimum fuel efficiency at 36 MPG by 2016
Comparable standards in other countries
• Nationwide implementation of stricter emission norms (Bharat IV/ V)
• Fuel efficiency standards to improve average fuel economy of vehicles
Automotive
• Tighter emission norms for VOCs in line with the developed world
• Mandatory use of lead-free pigments and coatings in all applications
Paints and coatings
• Re-usability norms for all types of waste water
• Shifting to pollution load-based norms from concentration-based norms
Water treatment
Potential customer standards in IndiaINDUSTRY
Source: CII, McKinsey report in Specialty chemicals
Current & potential regulatory changes in end-use industries
A brief overview of some of the key segments of specialty chemicals is covered in this report, focusing on the demand and supply scenario, projected growth & drivers and key trends & future outlook in each segment.
1. Construction Chemicals
Other Specialty Chemicals
Introduction
The Indian construction chemicals market, valued at ~$ 400 Mn in 2010, consists of a
variety of products ranging from admixtures to sealants to flooring chemicals. However,
the market is still very small when compared to other global markets like the United
States which is estimated at ~$ 7.7 Bn. Admixtures form the biggest segment with 35%
share followed by flooring chemicals and water proofing chemicals.
Demand-supply scenario
The demand for construction chemicals, boosted by investment in the construction sector,
has been growing at 16% p.a. from $ 180 Mn in 2005 to reach $ 400 Mn in 2010. With the
economic crisis, the growth slowed down in 2009, but has gained momentum thereafter.
Flooring,15
Misc., 31
Waterproofing,
10
Repair &rehabilitati
on, 9
Admixtures35
Product share FY10
(% of total value)
Source: Industry reports, Tata Strategic analysis
180
400
2005 2010
Construction chemicals market, India ($ Mn)
16%
Source: Industry reports; Tata Strategic estimates
40 41
The overall market is fairly consolidated but there is considerable fragmentation of
individual products and application areas. The top 5 players account for ~50% of the
market; the rest being accounted by small and unorganized players. Fosroc, SIKA India &
BASF SE are the leading players in the Indian construction chemicals market.
Projected growth and demand drivers
The market for construction chemicals is expected to grow at a CAGR of 14% to reach ~$
800 Mn in 2015 and $ 1.6 Bn in 2020. Key growth drivers include:
Growth in end-use market: Indian construction industry is expected to growth at 11%
annually over the next decade
o Rising disposable incomes and changing demographics driving demand for
residential real estate
o Growth in construction activities due to increased investments in
infrastructure, backed by Government of India's commitment to increase
spend in infrastructure to 10% of GDP in the 12th Five-Year Plan
o 100% Foreign Direct Investment (FDI) in real estate to boost construction
activities
Increasing penetration of construction chemical products
o Better awareness about performance-enhancing products among
consumers and builders, leading to increasing usage of newer products like
ready-mix concrete, etc.
o Increased construction activities triggered by urbanization and
development of rural areas
Changing regulatory environment
o Current and prospective regulatory guidelines incentivizing/ driving
v
v
v
energy-efficient and green buildings to drive demand for suitable,
innovative protective coatings and safe chemicals
Future outlook and levers for growth
Construction chemicals market has a huge growth potential due to the construction and
manufacturing boom in India. However, competition is high and several low value
products are being sold in the market. Margins are lower because most contractors prefer
low cost chemicals to reduce the construction cost. High value products have limited
demand from premium construction houses. Product innovation and diversification,
producing low cost-high value products and creating product awareness among end users
are the key success factors.
Construction chemical manufacturers could address these challenges primarily by
focussing on development and marketing of high-end products (e.g. silicone-based
sealants) which are expected to outgrow traditional products. They could also consider
investing in programmes to educate construction benefits of using superior construction
chemicals in terms of lower project completion time and ease of use could accelerate
adoption of new-age products.
Profiles of key playersBrief profile: Fosroc India
Company overview · Wholly owned subsidiary of Fosroc International
Key products ·Admixtures, joint sealants, surface treatments
Manufacturing
locations
· Bangalore
·
Ankleshwar
·
Rudrapur
Fosroc India
www.fosroc.com
Brief profile: SIKA India
Company overview · Convened India operations in 1987
· Subsidiary of Switzerland -based parent company
Key products
· Waterproofing: Sikacim
· Tiling: Sika Tilofix
· Sealing: SikaBoom
Manufacturing
locations
· Kalyani, West Bengal
· Goa
· Jaipur
· Blending units in Mumbai and Chennai
SIKA India
www.sika.in
BASF,12%
Others,50%
SIKA India, 13%
SWC, 5%Pidilite,
6%
FOSROC,14%
Market share by revenue: 2009
Source: Industry reports, Tata Strategic analysis
40 41
The overall market is fairly consolidated but there is considerable fragmentation of
individual products and application areas. The top 5 players account for ~50% of the
market; the rest being accounted by small and unorganized players. Fosroc, SIKA India &
BASF SE are the leading players in the Indian construction chemicals market.
Projected growth and demand drivers
The market for construction chemicals is expected to grow at a CAGR of 14% to reach ~$
800 Mn in 2015 and $ 1.6 Bn in 2020. Key growth drivers include:
Growth in end-use market: Indian construction industry is expected to growth at 11%
annually over the next decade
o Rising disposable incomes and changing demographics driving demand for
residential real estate
o Growth in construction activities due to increased investments in
infrastructure, backed by Government of India's commitment to increase
spend in infrastructure to 10% of GDP in the 12th Five-Year Plan
o 100% Foreign Direct Investment (FDI) in real estate to boost construction
activities
Increasing penetration of construction chemical products
o Better awareness about performance-enhancing products among
consumers and builders, leading to increasing usage of newer products like
ready-mix concrete, etc.
o Increased construction activities triggered by urbanization and
development of rural areas
Changing regulatory environment
o Current and prospective regulatory guidelines incentivizing/ driving
v
v
v
energy-efficient and green buildings to drive demand for suitable,
innovative protective coatings and safe chemicals
Future outlook and levers for growth
Construction chemicals market has a huge growth potential due to the construction and
manufacturing boom in India. However, competition is high and several low value
products are being sold in the market. Margins are lower because most contractors prefer
low cost chemicals to reduce the construction cost. High value products have limited
demand from premium construction houses. Product innovation and diversification,
producing low cost-high value products and creating product awareness among end users
are the key success factors.
Construction chemical manufacturers could address these challenges primarily by
focussing on development and marketing of high-end products (e.g. silicone-based
sealants) which are expected to outgrow traditional products. They could also consider
investing in programmes to educate construction benefits of using superior construction
chemicals in terms of lower project completion time and ease of use could accelerate
adoption of new-age products.
Profiles of key playersBrief profile: Fosroc India
Company overview · Wholly owned subsidiary of Fosroc International
Key products ·Admixtures, joint sealants, surface treatments
Manufacturing
locations
· Bangalore
·
Ankleshwar
·
Rudrapur
Fosroc India
www.fosroc.com
Brief profile: SIKA India
Company overview · Convened India operations in 1987
· Subsidiary of Switzerland -based parent company
Key products
· Waterproofing: Sikacim
· Tiling: Sika Tilofix
· Sealing: SikaBoom
Manufacturing
locations
· Kalyani, West Bengal
· Goa
· Jaipur
· Blending units in Mumbai and Chennai
SIKA India
www.sika.in
BASF,12%
Others,50%
SIKA India, 13%
SWC, 5%Pidilite,
6%
FOSROC,14%
Market share by revenue: 2009
Source: Industry reports, Tata Strategic analysis
42 43
2. Water Treatment Chemicals
Introduction
Water treatment chemicals are used for a wide range of industrial and in-process
applications such as reducing effluent toxicity, controlling Biological Oxygen Demand
(BOD) & Chemical Oxygen Demand (COD) and disinfecting water for potable purpose. The
Indian water treatment chemicals market is estimated at ~$ 560 Mn in 2010. Coagulants
and flocculants form the largest segment with ~40% market share followed by biocides
and disinfectants with ~17% market share. Apart from use in potable water, the customer
base is widespread across diverse industries ranging from large power plants, refineries
and fertilizer factories to pharmaceuticals, food and beverages, electronic and automobile
companies.
Demand-supply scenario
The Indian water treatment chemicals market experienced an 8% CAGR in the period from
2005-10 to reach ~$ 560 Mn in 2010. Certain segments like the industrial and drinking
water segments have witnessed higher growth rates.
The market is highly competitive, and participants include private companies, MNCs, as
well as joint ventures. Around 60% of the market is dominated by the organized sector,
largely multinationals and large-scale domestic companies like Nalco Chemicals India Ltd.,
Thermax Ltd. and Ion Exchange (India) Ltd. These companies have a diverse product
portfolio and a strong distribution network to cater to the Indian market.
Projected growth and demand drivers
The market for water treatment chemicals is expected to grow at a CAGR of 10% to
exceed ~$ 870 Mn in 2015. Key market drivers include:
Growth in end-use market
o Rise in population and increasing urbanization leading to increased per capita
and overall water consumption
o Rapid industrialization leading to increasing water demand for running
manufacturing plants and their corresponding effluent treatment facilities
Changing demographics and lifestyle
o Higher awareness about impact of quality of drinking water on health to drive
household consumption of water treatment chemicals
o Rising income levels and better living standards to increase demand for
cleaner, safer potable water
Changes in regulatory environment
o Stricter effluent norms to create significant scope for demand from industries
as they adopt effluent treatment practices
v
v
v
Product share (% of total) Fy09
Source: Industry reports, Tata Strategic analysis
Biocides & disinfectan
ts, 18%
Others,30%
Defoaminggents, 7%
a
Coagulants &
flocculants,40%
pH adjusters,
5%
Water treatment chemicals market ($ Mn)
Source: Industry reports, Tata Strategic analysis
380
560
2005 2010
8%
42 43
2. Water Treatment Chemicals
Introduction
Water treatment chemicals are used for a wide range of industrial and in-process
applications such as reducing effluent toxicity, controlling Biological Oxygen Demand
(BOD) & Chemical Oxygen Demand (COD) and disinfecting water for potable purpose. The
Indian water treatment chemicals market is estimated at ~$ 560 Mn in 2010. Coagulants
and flocculants form the largest segment with ~40% market share followed by biocides
and disinfectants with ~17% market share. Apart from use in potable water, the customer
base is widespread across diverse industries ranging from large power plants, refineries
and fertilizer factories to pharmaceuticals, food and beverages, electronic and automobile
companies.
Demand-supply scenario
The Indian water treatment chemicals market experienced an 8% CAGR in the period from
2005-10 to reach ~$ 560 Mn in 2010. Certain segments like the industrial and drinking
water segments have witnessed higher growth rates.
The market is highly competitive, and participants include private companies, MNCs, as
well as joint ventures. Around 60% of the market is dominated by the organized sector,
largely multinationals and large-scale domestic companies like Nalco Chemicals India Ltd.,
Thermax Ltd. and Ion Exchange (India) Ltd. These companies have a diverse product
portfolio and a strong distribution network to cater to the Indian market.
Projected growth and demand drivers
The market for water treatment chemicals is expected to grow at a CAGR of 10% to
exceed ~$ 870 Mn in 2015. Key market drivers include:
Growth in end-use market
o Rise in population and increasing urbanization leading to increased per capita
and overall water consumption
o Rapid industrialization leading to increasing water demand for running
manufacturing plants and their corresponding effluent treatment facilities
Changing demographics and lifestyle
o Higher awareness about impact of quality of drinking water on health to drive
household consumption of water treatment chemicals
o Rising income levels and better living standards to increase demand for
cleaner, safer potable water
Changes in regulatory environment
o Stricter effluent norms to create significant scope for demand from industries
as they adopt effluent treatment practices
v
v
v
Product share (% of total) Fy09
Source: Industry reports, Tata Strategic analysis
Biocides & disinfectan
ts, 18%
Others,30%
Defoaminggents, 7%
a
Coagulants &
flocculants,40%
pH adjusters,
5%
Water treatment chemicals market ($ Mn)
Source: Industry reports, Tata Strategic analysis
380
560
2005 2010
8%
44 45
Water treatment chemicals market growth($ Mn)
Source: Industry reports, Tata Strategic estimates
560
872
2010 2015
10%
Future outlook and levers for growth
The market for water treatment chemicals has seen a shift from the traditional products
to technically more advanced products. For example, traditional products like alum are
being replaced by coagulants and flocculants. In the corrosion and scale inhibitor market,
there is an ongoing shift from the traditionally used heavy metal based products to the
ones which have better environmental profiles. Manufacturers are increasingly producing
patented formulations with exclusive rights that offer customized solutions in a particular
market. The market is expected to grow in light of stricter Government regulations in
industrial and institutional domains. Innovative products catering to niche applications are
likely to help market participants build/ sustain their competitive edge.
Water treatment chemicals companies could look at transforming from pure-play
chemical manufacturers to end-to-end service providers. They could capitalize on the
opportunity offered by urban bodies in India who are moving to the "Build-Own-Operate-
Transfer" model for water treatment management, either through building capabilities or
through partnerships. Another critical success factor could be working closely with
regulatory bodies like pollution control boards to understand and implement evolving
environmental norms governing water safety.
Company overview· Formed in 1964 as a subsidiary of Permutit, UK
· Became independent in 1985
Sales Revenue in
FY2011 · Rs. 590 crore
Key product lines
· Industrial: Arsenic removal units, cooling water chemicals,
dealkalisers, filters, nitrate removal units
· Home: Zero -B range of water purifiers
Manufacturing
locations
· Ankleshwar, Gujarat
· Hosur, Tamil Nadu
· Patancheru, Andhra Pradesh
· Rabale, Maharashtra
· Goa
Ion Exchange (India) Ltd.
www.ionindia.com
Profiles of key playersBrief profile: Ion Exchange (India) Ltd.
Brief profile: Nalco Chemicals
Company overview· Formed in 1964 as a subsidiary of Permutit, UK
· Became independent in 1985
Sales Revenue
in FY2009
·
Rs. 195 crore
Key product lines·
Treatment solutions for boiler water, cooling water,
wastewater, pollutant con trol
Manufacturing
locations·Konnagar, West Bengal
Nalco
www.nalco.com
44 45
Water treatment chemicals market growth($ Mn)
Source: Industry reports, Tata Strategic estimates
560
872
2010 2015
10%
Future outlook and levers for growth
The market for water treatment chemicals has seen a shift from the traditional products
to technically more advanced products. For example, traditional products like alum are
being replaced by coagulants and flocculants. In the corrosion and scale inhibitor market,
there is an ongoing shift from the traditionally used heavy metal based products to the
ones which have better environmental profiles. Manufacturers are increasingly producing
patented formulations with exclusive rights that offer customized solutions in a particular
market. The market is expected to grow in light of stricter Government regulations in
industrial and institutional domains. Innovative products catering to niche applications are
likely to help market participants build/ sustain their competitive edge.
Water treatment chemicals companies could look at transforming from pure-play
chemical manufacturers to end-to-end service providers. They could capitalize on the
opportunity offered by urban bodies in India who are moving to the "Build-Own-Operate-
Transfer" model for water treatment management, either through building capabilities or
through partnerships. Another critical success factor could be working closely with
regulatory bodies like pollution control boards to understand and implement evolving
environmental norms governing water safety.
Company overview· Formed in 1964 as a subsidiary of Permutit, UK
· Became independent in 1985
Sales Revenue in
FY2011 · Rs. 590 crore
Key product lines
· Industrial: Arsenic removal units, cooling water chemicals,
dealkalisers, filters, nitrate removal units
· Home: Zero -B range of water purifiers
Manufacturing
locations
· Ankleshwar, Gujarat
· Hosur, Tamil Nadu
· Patancheru, Andhra Pradesh
· Rabale, Maharashtra
· Goa
Ion Exchange (India) Ltd.
www.ionindia.com
Profiles of key playersBrief profile: Ion Exchange (India) Ltd.
Brief profile: Nalco Chemicals
Company overview· Formed in 1964 as a subsidiary of Permutit, UK
· Became independent in 1985
Sales Revenue
in FY2009
·
Rs. 195 crore
Key product lines·
Treatment solutions for boiler water, cooling water,
wastewater, pollutant con trol
Manufacturing
locations·Konnagar, West Bengal
Nalco
www.nalco.com
46 47
Introduction
The Indian paints and coatings market was estimated to be ~$ 3.4 Bn in 2010. The industry
can be broadly classified into two product segments: decorative paints and industrial
paints.
Decorative Paints: This segment primarily caters to the residential and commercial
buildings and accounts for 70% of the total paint industry. Enamels are the most widely
used followed by distempers and emulsions. Interior and exterior paints account for 75%
and 25% of the decorative paints respectively. On the basis of product composition,
decorative paints are of two kinds - water based and solvent based.
3. Paints and coatings chemicals
Decorative paints segments(% of total volume)
Source: Industry reports, Tata Strategic analysis
Distemper19%
Emulsions17%
Woodfinishes
2%
Ext.coatings
12%
Enamels50%
Industrial paints: This segment includes paints used in automobiles, auto ancillaries,
consumer durables, containers, etc. This segment requires technological expertise and
therefore it is largely served by the organized sector. It accounts for 30% of the overall
market.
Paints and coatings chemicals market size in India is estimated at ~ $ 1.5 Bn in 2010. The
segments comprise three main types of additives:
Binders like epoxy and polyurethane (for durability, adhesion and finish)
Pigments (add desired colours to paints)
Other additives, including emulsifiers, mould releasing agents and stabilizers
Demand-supply scenario
The Indian paint industry, valued at ~$ 3.4 Bn in 2010, has been outpacing the GDP
growth rate by about 1.5 times, having experienced a CAGR of 13.5% over the last five
years. The key growth driver has been rapid growth in end-use segments like
automobiles and textiles. Owing to the economic downturn, the growth slowed down in
the last 2 years. However the growth is reported to have picked up with the resurgence
of the construction industry.
v
v
v
Paints & coatings market, India ($ Bn)
Source: Industry reports, Tata Strategic analysis
1.8
3.4
2005 2010
13.5%
In s(% of total volume)
dustrial paints segment
Source: Industry reports, Tata Strategic analysis
Powder,13%
Protective,24%
Marine,10%
Others, 5%
Refinish,12%
Auto OEM,36%
46 47
Introduction
The Indian paints and coatings market was estimated to be ~$ 3.4 Bn in 2010. The industry
can be broadly classified into two product segments: decorative paints and industrial
paints.
Decorative Paints: This segment primarily caters to the residential and commercial
buildings and accounts for 70% of the total paint industry. Enamels are the most widely
used followed by distempers and emulsions. Interior and exterior paints account for 75%
and 25% of the decorative paints respectively. On the basis of product composition,
decorative paints are of two kinds - water based and solvent based.
3. Paints and coatings chemicals
Decorative paints segments(% of total volume)
Source: Industry reports, Tata Strategic analysis
Distemper19%
Emulsions17%
Woodfinishes
2%
Ext.coatings
12%
Enamels50%
Industrial paints: This segment includes paints used in automobiles, auto ancillaries,
consumer durables, containers, etc. This segment requires technological expertise and
therefore it is largely served by the organized sector. It accounts for 30% of the overall
market.
Paints and coatings chemicals market size in India is estimated at ~ $ 1.5 Bn in 2010. The
segments comprise three main types of additives:
Binders like epoxy and polyurethane (for durability, adhesion and finish)
Pigments (add desired colours to paints)
Other additives, including emulsifiers, mould releasing agents and stabilizers
Demand-supply scenario
The Indian paint industry, valued at ~$ 3.4 Bn in 2010, has been outpacing the GDP
growth rate by about 1.5 times, having experienced a CAGR of 13.5% over the last five
years. The key growth driver has been rapid growth in end-use segments like
automobiles and textiles. Owing to the economic downturn, the growth slowed down in
the last 2 years. However the growth is reported to have picked up with the resurgence
of the construction industry.
v
v
v
Paints & coatings market, India ($ Bn)
Source: Industry reports, Tata Strategic analysis
1.8
3.4
2005 2010
13.5%
In s(% of total volume)
dustrial paints segment
Source: Industry reports, Tata Strategic analysis
Powder,13%
Protective,24%
Marine,10%
Others, 5%
Refinish,12%
Auto OEM,36%
48 49
The paint industry is highly consolidated with the organized sector accounting for ~80%of
the market. The major players in the paint industry are Asian Paints, Kansai Nerolac,
Berger Paints and ICI. In the decorative segment, Asian Paints is the market leader
followed by Berger and Kansai Nerolac. Kansai Nerolac is the market leader in industrial
paints followed by Berger and Asian Paints.
Source: Industry Reports, Tata strategic analysis
Berger,12%
AsianPPG, 12%
Others,36%
Shalimar,4%
BASF, 7%
KansaiNerolac,
29%
Industrial paints market share, Fy09
On the other hand, the paints and coatings chemicals industry is comparatively more
fragmented with significant participation from unorganized players, in addition to major
manufacturers like Rhodia Chemicals India, BASF Coatings India and DuPont India.
Projected growth and demand drivers
With the market recovering from the economic downturn, the paint & coatings chemicals
industry is expected to grow at a CAGR of 14-15% in the next five years. In the decorative
paints segment, water based paints are expected to drive growth with a CAGR of 15%. The
key growth drivers are going to be the growth in paints demand, which in turn are
expected to be influenced by:
Growth in end-use industries
o Growth in industrial paints to be primarily driven by demand from automotive
manufacturing, expected to grow at 15% annually
o Growth in decorative paints to increase due to rapid growth in residential and
commercial real estate, in turn driven by rising disposable incomes and
regulations permitting 100% FDI inflow in real estate
Increasing penetration
o Increase in current low per capita paints consumption to move closer to global
levels (The per capita consumption of paints in India is very low at 1.25 Kg against
38 Kg in Singapore, 25.8 Kg in the U.S or 2.5 Kg in China)
o Marked shift in rural demand- moving from cement paints to higher quality paints
Changes in regulatory environment
o Framing of tighter emission and effluent norms to increase demand for water-
soluble paints
v
v
v
Source: Industry reports, Tata Strategic analysis
3.4
6.5
2010 2015
14%
Growth outlook, India ($ Bn)
Future outlook and levers for growth
There is a shift in market share in favour of organized companies at the expense of
unorganized segment due to entry of organized players into low cost distempers
and enamels. While solvent-based enamels are still popular in India, a shift is
being seen from solvent to water based paints. Keeping the environment concerns
in mind, companies are coming up with new lead free and low Volatile Organic
Compound (VOC) products. There is also a perceptible shift towards usage of
Decorative paints segments(% of total volume)
Source: Industry reports, Tata Strategic analysis
Distemper19%
Emulsions17%
Woodfinishes
2%
Ext.coatings
12%
Enamels50%
48 49
The paint industry is highly consolidated with the organized sector accounting for ~80%of
the market. The major players in the paint industry are Asian Paints, Kansai Nerolac,
Berger Paints and ICI. In the decorative segment, Asian Paints is the market leader
followed by Berger and Kansai Nerolac. Kansai Nerolac is the market leader in industrial
paints followed by Berger and Asian Paints.
Source: Industry Reports, Tata strategic analysis
Berger,12%
AsianPPG, 12%
Others,36%
Shalimar,4%
BASF, 7%
KansaiNerolac,
29%
Industrial paints market share, Fy09
On the other hand, the paints and coatings chemicals industry is comparatively more
fragmented with significant participation from unorganized players, in addition to major
manufacturers like Rhodia Chemicals India, BASF Coatings India and DuPont India.
Projected growth and demand drivers
With the market recovering from the economic downturn, the paint & coatings chemicals
industry is expected to grow at a CAGR of 14-15% in the next five years. In the decorative
paints segment, water based paints are expected to drive growth with a CAGR of 15%. The
key growth drivers are going to be the growth in paints demand, which in turn are
expected to be influenced by:
Growth in end-use industries
o Growth in industrial paints to be primarily driven by demand from automotive
manufacturing, expected to grow at 15% annually
o Growth in decorative paints to increase due to rapid growth in residential and
commercial real estate, in turn driven by rising disposable incomes and
regulations permitting 100% FDI inflow in real estate
Increasing penetration
o Increase in current low per capita paints consumption to move closer to global
levels (The per capita consumption of paints in India is very low at 1.25 Kg against
38 Kg in Singapore, 25.8 Kg in the U.S or 2.5 Kg in China)
o Marked shift in rural demand- moving from cement paints to higher quality paints
Changes in regulatory environment
o Framing of tighter emission and effluent norms to increase demand for water-
soluble paints
v
v
v
Source: Industry reports, Tata Strategic analysis
3.4
6.5
2010 2015
14%
Growth outlook, India ($ Bn)
Future outlook and levers for growth
There is a shift in market share in favour of organized companies at the expense of
unorganized segment due to entry of organized players into low cost distempers
and enamels. While solvent-based enamels are still popular in India, a shift is
being seen from solvent to water based paints. Keeping the environment concerns
in mind, companies are coming up with new lead free and low Volatile Organic
Compound (VOC) products. There is also a perceptible shift towards usage of
Decorative paints segments(% of total volume)
Source: Industry reports, Tata Strategic analysis
Distemper19%
Emulsions17%
Woodfinishes
2%
Ext.coatings
12%
Enamels50%
5150
organic pigments in premium paints with heavy metal pigments being phased out.
Companies which adapt to these trends could grow successfully in the paints
market.
Players could capitalize on the opportunities presented by changing trends in the
paints and coatings market. One effective lever could be marketing high-margin,
high-end decorative paint products which offer end customers longer replacement
cycles. Besides, customizing paint products to meet changing regulations
(environment-friendly, green, water-soluble paints) could help sustain profitable
growth.
Company overview · Formerly Albright & Wilson Chemicals India Ltd. (acquired in
2000 by Rhodia)
Sales Revenue in
CY2010· Rs. 174 crore
Key products · Alkamuls OR 36, Igepal BC/4, Rhodafac
Manufacturing
locations·Roha, Maharashtra
Rhodia Specialty Chemicals India Ltd.
www.rhodia.com
Profiles of key playersBrief profile: Rhodia India
Brief profile: BASF Coatings India Ltd.
Company overview· Independent division of BASF India
· Prominent in automotive c oatings
Sales Revenue in
FY2011 · Rs. 3,229 crore (BASF India)
Key product lines· Electrodeposition coatings, primer surfacer, top coats, base
coats, paint system for plastic components
Manufacturing
locations · Dadra & Nagar Haveli
BASF Coatings India
www.basf -india.com
4. Polymer additives
Introduction
Polymer additives are specialty chemicals added to the base polymer to enhance certain
properties or improve processing. The Indian polymer additives market is estimated at ~ $
300 Mn in 2010. Plasticizers form the largest segment with 43% market share followed by
heat stabilizers with 21% market share. From the applications perspective, PVC consumes
the maximum amount of additives accounting for 40% of the total market followed by
poly-olefins with 20%. However, this does not include the master batches segment, which
separately accounted for a market of approximately $ 400 Mn in 2010.
Others, 19%
Heatstablizers,
21%
Lightstablizers,
4%
Antioxidant8%
s,
Flameretardents,
5%
Plasticizer43%
s,
Source: Industry reports, Tata Strategic analysis
Product share: 2008 (%)
Demand-supply scenario
Indian polymer additives market has been growing at a CAGR of 10.5% in the last five
years and is estimated to be ~$ 300 Mn in 2010. The organized segment has ~35 players
and is dominated by multinational companies like Clariant Chemicals India Ltd., BASF,
Lanxess India Pvt. Ltd., Baerlocher India Ltd., Akzo Nobel Chemicals (India) Limited and
Dow Chemical International Pvt. Ltd. Major domestic players include KLJ Group, Fine
Organics and Vision Organics Limited. KLJ Group and Baerlocher India are the market
leaders in plasticizers and heat stabilizers, respectively. BASF, after its acquisition of Ciba,
is the market leader in flame retardants, light stabilizers, and antioxidants.
5150
organic pigments in premium paints with heavy metal pigments being phased out.
Companies which adapt to these trends could grow successfully in the paints
market.
Players could capitalize on the opportunities presented by changing trends in the
paints and coatings market. One effective lever could be marketing high-margin,
high-end decorative paint products which offer end customers longer replacement
cycles. Besides, customizing paint products to meet changing regulations
(environment-friendly, green, water-soluble paints) could help sustain profitable
growth.
Company overview · Formerly Albright & Wilson Chemicals India Ltd. (acquired in
2000 by Rhodia)
Sales Revenue in
CY2010· Rs. 174 crore
Key products · Alkamuls OR 36, Igepal BC/4, Rhodafac
Manufacturing
locations·Roha, Maharashtra
Rhodia Specialty Chemicals India Ltd.
www.rhodia.com
Profiles of key playersBrief profile: Rhodia India
Brief profile: BASF Coatings India Ltd.
Company overview· Independent division of BASF India
· Prominent in automotive c oatings
Sales Revenue in
FY2011 · Rs. 3,229 crore (BASF India)
Key product lines· Electrodeposition coatings, primer surfacer, top coats, base
coats, paint system for plastic components
Manufacturing
locations · Dadra & Nagar Haveli
BASF Coatings India
www.basf -india.com
4. Polymer additives
Introduction
Polymer additives are specialty chemicals added to the base polymer to enhance certain
properties or improve processing. The Indian polymer additives market is estimated at ~ $
300 Mn in 2010. Plasticizers form the largest segment with 43% market share followed by
heat stabilizers with 21% market share. From the applications perspective, PVC consumes
the maximum amount of additives accounting for 40% of the total market followed by
poly-olefins with 20%. However, this does not include the master batches segment, which
separately accounted for a market of approximately $ 400 Mn in 2010.
Others, 19%
Heatstablizers,
21%
Lightstablizers,
4%
Antioxidant8%
s,
Flameretardents,
5%
Plasticizer43%
s,
Source: Industry reports, Tata Strategic analysis
Product share: 2008 (%)
Demand-supply scenario
Indian polymer additives market has been growing at a CAGR of 10.5% in the last five
years and is estimated to be ~$ 300 Mn in 2010. The organized segment has ~35 players
and is dominated by multinational companies like Clariant Chemicals India Ltd., BASF,
Lanxess India Pvt. Ltd., Baerlocher India Ltd., Akzo Nobel Chemicals (India) Limited and
Dow Chemical International Pvt. Ltd. Major domestic players include KLJ Group, Fine
Organics and Vision Organics Limited. KLJ Group and Baerlocher India are the market
leaders in plasticizers and heat stabilizers, respectively. BASF, after its acquisition of Ciba,
is the market leader in flame retardants, light stabilizers, and antioxidants.
52 53
165
300
2005 2010
Polymer additives market ($ Mn)
10.5%
Source: Industry reports, Tata Strategic estimates
Projected growth and demand drivers
The market for polymer additives is expected to grow at a CAGR of 10% to reach ~$ 500
Mn in 2015. Key demand drivers include:
Growth in end-use industries:
o Increasing growth in plastic demand due to higher usage in packaging,
construction and automotive sectors
New applications:
o Increasing environmental concerns and cost considerations leading to
replacement of wood, metals and glass by plastic in various applications
v
v
300
500
2010 2015
Market outlook ($ Mn)
10%
Source: Industry reports, Tata Strategic estimates
Future outlook and levers for growth
Development of environment friendly additives is a major challenge being faced by the
industry. Increasing demand for environment friendly additives by domestic market
together with regulations such as REACH is forcing companies to adopt environment
friendly products. With rising consumer awareness, players switching to oleo-chemical
route could have a competitive advantage over others. Strict regulation on additive use in
plastics is expected to drive demand and increase sales.
The market has recently witnessed falling prices and low profit margins due to
overcapacity of major manufacturers and reduction in import tariffs. The problem of
overcapacity could be addressed by consolidation in the industry resulting in entities with
better economies of scale. Also, manufacturers able to rapidly develop and customize
products in line with customer requirements are more likely to succeed. Additionally, a
focus on developing products that can be used after recycling of plastics (many current
plastic additives lose their usability post-recycle) could help attain competitive advantage.
Company overview
· India subsidiary of Lanxess GmbH
· 13 Business Units in the fields of Performance Polymers,
Advanced Intermediates and Performance Chemicals
Sales Revenue in
CY2010 · Rs. 816 crore
Key products lines · Antioxidants for polymers, blowing agents, polymer
auxiliaries, plasticizers for polymers
Manufacturing
locations
· Jhagadia, Gujarat
· Nagda, Madhya Pradesh
Lanxess India
www.lanxess.in
Profiles of key playersBrief profile: Lanxess India
Brief profile: Baerlocher India
Company overview· Entered India through acquiring Dewas polymer additive unit
of National Peroxide Ltd.
Key products lines· PVC plasticizers: Baeropan, Baerostab, Baerolub
· Non-PVC plasticizers
Manufacturing
locations · Dewas, Madhya Pradesh
Baerlocher India
www.baerlocher.com
52 53
165
300
2005 2010
Polymer additives market ($ Mn)
10.5%
Source: Industry reports, Tata Strategic estimates
Projected growth and demand drivers
The market for polymer additives is expected to grow at a CAGR of 10% to reach ~$ 500
Mn in 2015. Key demand drivers include:
Growth in end-use industries:
o Increasing growth in plastic demand due to higher usage in packaging,
construction and automotive sectors
New applications:
o Increasing environmental concerns and cost considerations leading to
replacement of wood, metals and glass by plastic in various applications
v
v
300
500
2010 2015
Market outlook ($ Mn)
10%
Source: Industry reports, Tata Strategic estimates
Future outlook and levers for growth
Development of environment friendly additives is a major challenge being faced by the
industry. Increasing demand for environment friendly additives by domestic market
together with regulations such as REACH is forcing companies to adopt environment
friendly products. With rising consumer awareness, players switching to oleo-chemical
route could have a competitive advantage over others. Strict regulation on additive use in
plastics is expected to drive demand and increase sales.
The market has recently witnessed falling prices and low profit margins due to
overcapacity of major manufacturers and reduction in import tariffs. The problem of
overcapacity could be addressed by consolidation in the industry resulting in entities with
better economies of scale. Also, manufacturers able to rapidly develop and customize
products in line with customer requirements are more likely to succeed. Additionally, a
focus on developing products that can be used after recycling of plastics (many current
plastic additives lose their usability post-recycle) could help attain competitive advantage.
Company overview
· India subsidiary of Lanxess GmbH
· 13 Business Units in the fields of Performance Polymers,
Advanced Intermediates and Performance Chemicals
Sales Revenue in
CY2010 · Rs. 816 crore
Key products lines · Antioxidants for polymers, blowing agents, polymer
auxiliaries, plasticizers for polymers
Manufacturing
locations
· Jhagadia, Gujarat
· Nagda, Madhya Pradesh
Lanxess India
www.lanxess.in
Profiles of key playersBrief profile: Lanxess India
Brief profile: Baerlocher India
Company overview· Entered India through acquiring Dewas polymer additive unit
of National Peroxide Ltd.
Key products lines· PVC plasticizers: Baeropan, Baerostab, Baerolub
· Non-PVC plasticizers
Manufacturing
locations · Dewas, Madhya Pradesh
Baerlocher India
www.baerlocher.com
5554
5. Aroma chemicals
Introduction
Aroma chemicals, also commonly called flavours & fragrances are the essential
ingredients used as additives in a variety of food, personal and home care products for
adding taste and smell. Globally, the aroma chemicals industry size stood at $ 19.8 Bn in
2010, roughly equally split between flavours and fragrances. The five largest global
manufacturers of aroma chemicals are Givaudan, International Flavors & Fragrances (IFF),
Firmenich, Symrise and Quest International.
The Indian aroma chemicals market size is of $ 300 Mn, with fragrances accounting for
~55% of the market. The Indian aroma chemicals industry can be segmented based on the
end-use application, as follows:
Flavours
o Bakery
o Confectionary
o Dairy and frozen foods
o Savory food items
o Beverages
o Pharmaceuticals
o Meat, poultry and seafood
o Tobacco
o Toothpaste
Fragrances
o Detergents and fabric care products
o Wash products
o Talcum powders
o Skin care products
o Deodorants and sprays
o Air fresheners
o Household cleaners
o Tobacco
v
v
Beverag20%
es,
Toothpa11%
ste,
Others,12%
Pharma,9%
Bakery,14%
Savoryfoods,14%
Tobacco20%
Talc, 3%
Others,38%
Deterge10%
nts,
Skincare,6%
Washproducts,
42%
End-use application: Fragrances
Source: Industry reports; Tata Strategic estimates
End-use application: Flavours
Demand-supply scenario
The demand for aroma chemicals has increased annually at 8%, to grow from $ 225 Mn in
2006 to ~ $ 300 Mn in 2010. Demand has been driven by growth in consumption of FMCG
products (both food and non-food), which in turn has been increasing on the back of
rising population and growing per capita income.
225
300
FY06 FY10
Aroma chemicals market, India ($ Mn
8%
Flavours,45%
Fragranc55%
es,
Key segments, 2010
Source: Industry reports; Tata Strategic estimates
The top five global companies have a significant presence in India's aroma chemicals
market, cumulatively accounting for ~55% of the market. Beyond the five players, the
supply side is heavily fragmented and is characterized by the presence of numerous
privately-owned manufacturers, including SH Kelkar, Sachee Aromatics and Oriental
Flavors & Fragrances, Ultra International, Gupta & Company.
Projected growth and demand drivers
The demand for aroma chemicals is expected to grow between 11%-14%, p.a. over the
next decade. The total industry in India could potentially grow to nearly $ 1 Bn in 2020.
5554
5. Aroma chemicals
Introduction
Aroma chemicals, also commonly called flavours & fragrances are the essential
ingredients used as additives in a variety of food, personal and home care products for
adding taste and smell. Globally, the aroma chemicals industry size stood at $ 19.8 Bn in
2010, roughly equally split between flavours and fragrances. The five largest global
manufacturers of aroma chemicals are Givaudan, International Flavors & Fragrances (IFF),
Firmenich, Symrise and Quest International.
The Indian aroma chemicals market size is of $ 300 Mn, with fragrances accounting for
~55% of the market. The Indian aroma chemicals industry can be segmented based on the
end-use application, as follows:
Flavours
o Bakery
o Confectionary
o Dairy and frozen foods
o Savory food items
o Beverages
o Pharmaceuticals
o Meat, poultry and seafood
o Tobacco
o Toothpaste
Fragrances
o Detergents and fabric care products
o Wash products
o Talcum powders
o Skin care products
o Deodorants and sprays
o Air fresheners
o Household cleaners
o Tobacco
v
v
Beverag20%
es,
Toothpa11%
ste,
Others,12%
Pharma,9%
Bakery,14%
Savoryfoods,14%
Tobacco20%
Talc, 3%
Others,38%
Deterge10%
nts,
Skincare,6%
Washproducts,
42%
End-use application: Fragrances
Source: Industry reports; Tata Strategic estimates
End-use application: Flavours
Demand-supply scenario
The demand for aroma chemicals has increased annually at 8%, to grow from $ 225 Mn in
2006 to ~ $ 300 Mn in 2010. Demand has been driven by growth in consumption of FMCG
products (both food and non-food), which in turn has been increasing on the back of
rising population and growing per capita income.
225
300
FY06 FY10
Aroma chemicals market, India ($ Mn
8%
Flavours,45%
Fragranc55%
es,
Key segments, 2010
Source: Industry reports; Tata Strategic estimates
The top five global companies have a significant presence in India's aroma chemicals
market, cumulatively accounting for ~55% of the market. Beyond the five players, the
supply side is heavily fragmented and is characterized by the presence of numerous
privately-owned manufacturers, including SH Kelkar, Sachee Aromatics and Oriental
Flavors & Fragrances, Ultra International, Gupta & Company.
Projected growth and demand drivers
The demand for aroma chemicals is expected to grow between 11%-14%, p.a. over the
next decade. The total industry in India could potentially grow to nearly $ 1 Bn in 2020.
56 57
300
970
2010 2020
Projected demand, India ($ Mn)
12.5%
Source: Industry reports; Tata Strategic estimates
The demand growth in aroma chemicals has a positive outlook, and would be growing at
1.5 times the GDP growth rate, driven primarily by three levers:
Growth in demand for end-use products: Driven by rising disposable incomes, leading
to increased consumption of processed foods and non-food FMCG including personal
care and detergents
Changing lifestyles: Demand for high-end aroma chemicals is set to increase driven by
increasing demand for higher-end personal care products
Regulatory environments: Regulations mandating stringent consumer products quality
standards will lead to substitution of low-end chemicals with high-end, safe
replacement formulations
Future outlook and levers for growth
Though traditionally aroma chemicals commanded high prices due to the nature of
customization involved, the prices have fallen over the last decade due to increasing price
pressures from customers (mainly FMCG manufacturers), who are finding it difficult to
pass on input price increases to the end customers. This, combined with the increasing
price of petrochemicals (feedstock for manufacture of numerous aroma chemicals), has
led to consolidation among large players in the industry and this trend is expected to
continue. Globally, aroma chemical manufacturers are moving towards long-term supply
contracts and joint product development with its customers. This has given them the
freedom to invest in product innovation and customization and charge higher margins in
return. Thirdly, owing to implementation of stringent quality norms in FMCG products
many downstream companies globally are now reverting to captive R&D for manufacture
of certain aroma chemicals, especially in flavours. This would pose to be a threat to
specialty chemical manufacturers and can only be countered by implementing the
stringent quality and safety norms as well as focusing on product innovation themselves.
Indian aroma chemical manufacturers could address these challenges through three key
strategic levers. Firstly, they could enter long term supply contracts with organized FMCG
v
v
v
(food and non-food) players, allowing them stability of business and the flexibility to
invest in customization of products. Secondly, they should increasingly focus on
development of formulations which would meet changing environment and safety
standards. Lastly, acting closely in association with regulatory authorities could help
develop quick and accurate understanding of global food standards. This would facilitate
implementation of such standards locally and significantly enhance access to export
markets, especially to developed economies.
Profiles of key playersBrief profile: S H Kelkar & Co.
Company overview·Largest Indian flavours and fragrances manufacturer
·In business for over nine decades
Sales revenue in FY2009
·Rs. 228 crore
Key end -use customer
segments
·Flavours: Dairy products, bakery, savouries, pharma
·Fragrances: Personal care, hair care, fabric care
Manufacturing ·Patalganga, Maharashtra
S H Kelkar
www.kelkargroup.com
Brief profile: Sachee Aromatics
Company overview· Started by Mr. Manoj Arora, a leading aroma chemical
manufacture r for five decades
Key end -use customer
segments
· Personal wash, personal care, fabric care, incense sticks,
aerosols, candles, tobacco products
Manufacturing
locations
· Delhi
· Paris
Sachee Aromatics
www.sachee.com
56 57
300
970
2010 2020
Projected demand, India ($ Mn)
12.5%
Source: Industry reports; Tata Strategic estimates
The demand growth in aroma chemicals has a positive outlook, and would be growing at
1.5 times the GDP growth rate, driven primarily by three levers:
Growth in demand for end-use products: Driven by rising disposable incomes, leading
to increased consumption of processed foods and non-food FMCG including personal
care and detergents
Changing lifestyles: Demand for high-end aroma chemicals is set to increase driven by
increasing demand for higher-end personal care products
Regulatory environments: Regulations mandating stringent consumer products quality
standards will lead to substitution of low-end chemicals with high-end, safe
replacement formulations
Future outlook and levers for growth
Though traditionally aroma chemicals commanded high prices due to the nature of
customization involved, the prices have fallen over the last decade due to increasing price
pressures from customers (mainly FMCG manufacturers), who are finding it difficult to
pass on input price increases to the end customers. This, combined with the increasing
price of petrochemicals (feedstock for manufacture of numerous aroma chemicals), has
led to consolidation among large players in the industry and this trend is expected to
continue. Globally, aroma chemical manufacturers are moving towards long-term supply
contracts and joint product development with its customers. This has given them the
freedom to invest in product innovation and customization and charge higher margins in
return. Thirdly, owing to implementation of stringent quality norms in FMCG products
many downstream companies globally are now reverting to captive R&D for manufacture
of certain aroma chemicals, especially in flavours. This would pose to be a threat to
specialty chemical manufacturers and can only be countered by implementing the
stringent quality and safety norms as well as focusing on product innovation themselves.
Indian aroma chemical manufacturers could address these challenges through three key
strategic levers. Firstly, they could enter long term supply contracts with organized FMCG
v
v
v
(food and non-food) players, allowing them stability of business and the flexibility to
invest in customization of products. Secondly, they should increasingly focus on
development of formulations which would meet changing environment and safety
standards. Lastly, acting closely in association with regulatory authorities could help
develop quick and accurate understanding of global food standards. This would facilitate
implementation of such standards locally and significantly enhance access to export
markets, especially to developed economies.
Profiles of key playersBrief profile: S H Kelkar & Co.
Company overview·Largest Indian flavours and fragrances manufacturer
·In business for over nine decades
Sales revenue in FY2009
·Rs. 228 crore
Key end -use customer
segments
·Flavours: Dairy products, bakery, savouries, pharma
·Fragrances: Personal care, hair care, fabric care
Manufacturing ·Patalganga, Maharashtra
S H Kelkar
www.kelkargroup.com
Brief profile: Sachee Aromatics
Company overview· Started by Mr. Manoj Arora, a leading aroma chemical
manufacture r for five decades
Key end -use customer
segments
· Personal wash, personal care, fabric care, incense sticks,
aerosols, candles, tobacco products
Manufacturing
locations
· Delhi
· Paris
Sachee Aromatics
www.sachee.com
58 59
6.Personal care ingredients
Introduction
The Indian personal care industry is estimated to be ~$ 6 Bn in 2010. It can be categorized
into distinct product segments such as bath & shower products, hair care, skin care, oral
care, fragrances etc. The bath and shower products segment is the largest one.
The Indian personal care ingredients market stood at ~$ 400 Mn in 2010 and can be
divided into active and inactive ingredients. Actives and inactives account for 40% and
60% by value of the total personal care ingredients market respectively.
UV ingredientsPolymer ingredients
Conditioning agentsPreservatives
ExfoliantsSurfactants
Anti - ageingColorants
Active ingredientsInactive ingredients
Surfactants25%
Conditioning agents,
14%
Others,17%
UVingredients
10%
Polymer
ingredients
33%
Major sub-segments, 2010 (% of total)
Source: Industry reports; Tata Strategic estimates
Demand-supply scenario
Personal care ingredients market has grown at 12% p.a. in the period from FY05 to FY10
to reach ~$ 400 Mn. Rising income, increased availability and wider product portfolio of
companies has led to growth in personal care products and thereby personal care
ingredients.
The market is extremely competitive with more than 1,500 manufacturers of personal
care ingredients in India. The market is dominated by small and medium scale domestic
companies which account for more than 50% of the market. Major domestic players
include Vivimed Laboratories and Sami Labs. On the other hand, multi-national companies
currently account for about 35% of the market. BASF India Ltd. and Clariant Chemicals are
the leading multinational players in India.
400
220
2005 2010
Personal care ingredients market ($ Mn)
12%
Source: Industry reports; Tata Strategic estimates
Projected growth and demand drivers
Personal Care Ingredients market in India is expected to grow at 14% to reach ~$ 770 Mn
by 2015 and has the potential to grow to ~$ 1.5 Bn by 2020.
400
770
1500
2010 2015E 2020E
Projected demand growth ($ Mn)
14%
Source: Industry reports; Tata Strategic estimates
The demand for personal care ingredients is expected to be driven by two major factors:
Growth in end-use industry
o Rising demand for personal care products due to growing population and
increasing per capita income
v
58 59
6.Personal care ingredients
Introduction
The Indian personal care industry is estimated to be ~$ 6 Bn in 2010. It can be categorized
into distinct product segments such as bath & shower products, hair care, skin care, oral
care, fragrances etc. The bath and shower products segment is the largest one.
The Indian personal care ingredients market stood at ~$ 400 Mn in 2010 and can be
divided into active and inactive ingredients. Actives and inactives account for 40% and
60% by value of the total personal care ingredients market respectively.
UV ingredientsPolymer ingredients
Conditioning agentsPreservatives
ExfoliantsSurfactants
Anti - ageingColorants
Active ingredientsInactive ingredients
Surfactants25%
Conditioning agents,
14%
Others,17%
UVingredients
10%
Polymer
ingredients
33%
Major sub-segments, 2010 (% of total)
Source: Industry reports; Tata Strategic estimates
Demand-supply scenario
Personal care ingredients market has grown at 12% p.a. in the period from FY05 to FY10
to reach ~$ 400 Mn. Rising income, increased availability and wider product portfolio of
companies has led to growth in personal care products and thereby personal care
ingredients.
The market is extremely competitive with more than 1,500 manufacturers of personal
care ingredients in India. The market is dominated by small and medium scale domestic
companies which account for more than 50% of the market. Major domestic players
include Vivimed Laboratories and Sami Labs. On the other hand, multi-national companies
currently account for about 35% of the market. BASF India Ltd. and Clariant Chemicals are
the leading multinational players in India.
400
220
2005 2010
Personal care ingredients market ($ Mn)
12%
Source: Industry reports; Tata Strategic estimates
Projected growth and demand drivers
Personal Care Ingredients market in India is expected to grow at 14% to reach ~$ 770 Mn
by 2015 and has the potential to grow to ~$ 1.5 Bn by 2020.
400
770
1500
2010 2015E 2020E
Projected demand growth ($ Mn)
14%
Source: Industry reports; Tata Strategic estimates
The demand for personal care ingredients is expected to be driven by two major factors:
Growth in end-use industry
o Rising demand for personal care products due to growing population and
increasing per capita income
v
60 61
o Increasing personal care ingredient usage in formulation: Demand for products
with higher/ better performance
Changing lifestyle
o Increasing demand for multi-functional personal-care products
o Growing global demand for green products giving rise to huge exports
potential
Future outlook and levers for growth
The industry is highly competitive with large number of domestic and international
players. Domestic companies are registering good growth due to their meeting the market
need for cost effective products. Indian personal care industry is highly cost sensitive and
companies develop domestic substitutes for ingredients used globally. Indian market for
personal care products like anti-ageing creams, sunscreen lotions etc. is very nascent and
is developing at a fast pace leading to increasing requirement for investments in research
and development of personal care ingredients. The growing awareness amongst the
consumers is increasing the market for natural personal care products and in turn for
natural ingredients. The rich heritage of Ayurveda is expected to make India a hub for
natural ingredients.
Manufacturers of personal care ingredients could explore capitalizing on this opportunity
by collaborating with personal care FMCG companies to jointly develop customizable,
localized ingredients - offering opportunities for higher margins and stable demand for
the manufacturers. Also, companies which are able to innovate and come out with value
offerings to meet unique needs of the Indian consumers could have a competitive edge in
the market. Finally, they could explore working together with regulatory agencies to
develop a quick and accurate understanding of global regulations and ensure domestic
manufacturing quality meets exports requirements, thereby opening up access to
overseas opportunities.
v
Company overview·Sales footprint across 50 geographies with SBUs in USA,
Europe and a marketing office in China
Sales Revenue in
FY2011·Rs. 211 crore
Key product lines
·Oral care: Anti -bacterial, enamel protection
·Skin care: Anti -ageing, skin lightening
·Hair care: Jarocol, dyes, anti -dandruff, UV filters
Manufacturing
locations
·Bonthapally, Bidar, Jeedimetla (Andhra Pradesh)
·Haridwar, Kashipur (Uttarakhand)
Vivimed Labs
www.vivimedlabs.com
Profiles of key playersBrief profile: Vivimed Labs
Brief profile: Sami Labs
Company o verview
·Established 1991 in Bangalore
·Sales footprint and s trategic alliances in USA, Europe, Japan,
Australia, Middle East, South Africa, China,
Key products
·Alpha lipolic acid
·Cococin
·Ellagic acid
Manufacturing
locations
·Bangalore (4 plants)
·Hyderabad
·Utah, USA
Sami Labs Ltd.
www.samilabs.com
Conclusion
Given India's potential to emerge as a global specialty chemicals destination, both in
terms of domestic demand and as a global manufacturing hub. Companies could explore
how best they could participate in this growth story. A detailed growth strategy
formulation would need to be based on each company's respective strengths and focus
areas. Emerging trends in consumer industries call for innovation and development of
local products/ solutions based on understanding of the unique needs of the Indian
consumer. Secondly, the development of strong channels to reach out effectively to
customers is of immense strategic significance. Establishing leadership position in
sustainable growth through an integrated approach across the value chain could help
create positive differentiation. This would not only help companies create value through
green product/ process innovation but also generate end consumer pull through
60 61
o Increasing personal care ingredient usage in formulation: Demand for products
with higher/ better performance
Changing lifestyle
o Increasing demand for multi-functional personal-care products
o Growing global demand for green products giving rise to huge exports
potential
Future outlook and levers for growth
The industry is highly competitive with large number of domestic and international
players. Domestic companies are registering good growth due to their meeting the market
need for cost effective products. Indian personal care industry is highly cost sensitive and
companies develop domestic substitutes for ingredients used globally. Indian market for
personal care products like anti-ageing creams, sunscreen lotions etc. is very nascent and
is developing at a fast pace leading to increasing requirement for investments in research
and development of personal care ingredients. The growing awareness amongst the
consumers is increasing the market for natural personal care products and in turn for
natural ingredients. The rich heritage of Ayurveda is expected to make India a hub for
natural ingredients.
Manufacturers of personal care ingredients could explore capitalizing on this opportunity
by collaborating with personal care FMCG companies to jointly develop customizable,
localized ingredients - offering opportunities for higher margins and stable demand for
the manufacturers. Also, companies which are able to innovate and come out with value
offerings to meet unique needs of the Indian consumers could have a competitive edge in
the market. Finally, they could explore working together with regulatory agencies to
develop a quick and accurate understanding of global regulations and ensure domestic
manufacturing quality meets exports requirements, thereby opening up access to
overseas opportunities.
v
Company overview·Sales footprint across 50 geographies with SBUs in USA,
Europe and a marketing office in China
Sales Revenue in
FY2011·Rs. 211 crore
Key product lines
·Oral care: Anti -bacterial, enamel protection
·Skin care: Anti -ageing, skin lightening
·Hair care: Jarocol, dyes, anti -dandruff, UV filters
Manufacturing
locations
·Bonthapally, Bidar, Jeedimetla (Andhra Pradesh)
·Haridwar, Kashipur (Uttarakhand)
Vivimed Labs
www.vivimedlabs.com
Profiles of key playersBrief profile: Vivimed Labs
Brief profile: Sami Labs
Company o verview
·Established 1991 in Bangalore
·Sales footprint and s trategic alliances in USA, Europe, Japan,
Australia, Middle East, South Africa, China,
Key products
·Alpha lipolic acid
·Cococin
·Ellagic acid
Manufacturing
locations
·Bangalore (4 plants)
·Hyderabad
·Utah, USA
Sami Labs Ltd.
www.samilabs.com
Conclusion
Given India's potential to emerge as a global specialty chemicals destination, both in
terms of domestic demand and as a global manufacturing hub. Companies could explore
how best they could participate in this growth story. A detailed growth strategy
formulation would need to be based on each company's respective strengths and focus
areas. Emerging trends in consumer industries call for innovation and development of
local products/ solutions based on understanding of the unique needs of the Indian
consumer. Secondly, the development of strong channels to reach out effectively to
customers is of immense strategic significance. Establishing leadership position in
sustainable growth through an integrated approach across the value chain could help
create positive differentiation. This would not only help companies create value through
green product/ process innovation but also generate end consumer pull through
62 10
ingredient branding in "green products". The development of chemical/ petrochemical
infrastructure/ clusters through PCPIRs (Petroleum, Chemicals and Petrochemicals
Investment Regions) could enable companies to establish effective upstream linkages for
increased cost effectiveness. Finally, the chemical industry in the coming decades has to
promote sustainable development by investing in technology that protects environment
and stimulates growth while balancing economic needs and financial constraints.
References
1. RBI Handbook of Statistics
2. Economic Advisory Council to the Prime Minister
3. Department of Industrial Policy and Promotion
4. Gujarat Socio-Economic Review, 2009-2010
5. Vibrant Gujarat summit, 2011
6. Company websites
7. Annual reports
8. IndiaChem 2010 handbook on Indian chemical industry, FICCI and Tata Strategic
9. Conference on Agrochemicals, 2011, FICCI and Tata Strategic
10. Chemical Task Force, Government of India
11. Meetings with senior officials of Government of India
12. Department of Chemicals & Petrochemicals
13. Indian Chemical Council
14. Chemical Weekly magazine
15. Farm chemicals international
16. Phillips McDougall report on agrochemicals
17. Crop protection business in the new decade, Cheminova
18. Global Market for agrochemicals,BCC Research
19. Crisil research
20. IMS Health
21. Frost & Sullivan industry report
22. CMIE report
23. European Federation of Admixtures Association
24. Business press
THOUGHT NOTES
62 10
ingredient branding in "green products". The development of chemical/ petrochemical
infrastructure/ clusters through PCPIRs (Petroleum, Chemicals and Petrochemicals
Investment Regions) could enable companies to establish effective upstream linkages for
increased cost effectiveness. Finally, the chemical industry in the coming decades has to
promote sustainable development by investing in technology that protects environment
and stimulates growth while balancing economic needs and financial constraints.
References
1. RBI Handbook of Statistics
2. Economic Advisory Council to the Prime Minister
3. Department of Industrial Policy and Promotion
4. Gujarat Socio-Economic Review, 2009-2010
5. Vibrant Gujarat summit, 2011
6. Company websites
7. Annual reports
8. IndiaChem 2010 handbook on Indian chemical industry, FICCI and Tata Strategic
9. Conference on Agrochemicals, 2011, FICCI and Tata Strategic
10. Chemical Task Force, Government of India
11. Meetings with senior officials of Government of India
12. Department of Chemicals & Petrochemicals
13. Indian Chemical Council
14. Chemical Weekly magazine
15. Farm chemicals international
16. Phillips McDougall report on agrochemicals
17. Crop protection business in the new decade, Cheminova
18. Global Market for agrochemicals,BCC Research
19. Crisil research
20. IMS Health
21. Frost & Sullivan industry report
22. CMIE report
23. European Federation of Admixtures Association
24. Business press
THOUGHT NOTES
64 65
Farming solutions - the next frontier for breakthrough growth of Indian agrochemical companies
India has a population of 1.18 Bn which is expected to reach 1.45 Bn by 2030. This rising
population will lead to increasing demand for food grains. On the other hand, per capita
land available for agriculture has been steadily decreasing. This coupled with rapid
urbanization and non availability of agricultural manpower has had a strong impact on
farm production. Agricultural produce has not been growing in tune with demand.
Currently average crop yields in India are much lower than global benchmarks. For
example, average yield for rice is 3.2 tons/ha in India vis-à-vis 4.2 tons/ha globally.
Similarly, yields for soybean and corn are 1.0 and 2.4 tons/ha domestically compared to
2.5 and 5.0 tons/ha globally. The current price increases of food products reflect the
situation having reached alarming levels and we have to rely on imports to meet our
domestic consumption. This is only expected to worsen further if we do not take
necessary steps to reverse it. Improving crop yields has become very critical and will
become imperative in the future.
India has the resources necessary to meet all its increasing needs and be left with a
handsome surplus if we can use our significantly large area under cultivation effectively.
This would however call for a holistic 'friend of the farmer' approach, offering locally
relevant farming solutions, where agrochemical companies could lead and benefit by
improving yield and productivity. The Indian agrochemical industry, which is Rs. 15,000 Cr
today, could grow well beyond its aspirational target of Rs. 50,000 Cr by 2020. The
opportunity lies in developing and executing innovative farming solutions that address the
needs of the Indian farmer with very low landholding size, resources and knowhow
available to him. Farming solutions would require a collaborative approach together with
seed technology, IT, nutrients and other service providers. For the agrochemical
companies it implies that to achieve such growth, capacity additions of over 100,000 tons
would be required with significant capital investments of over Rs 3,000 Cr. In addition,
substantial investment will be required for R&D and farmer-awareness activities.
Besides effectively creating farming solutions with other partners, the Indian
agrochemical industry itself faces critical challenges which could hinder its growth if not
addressed effectively. The industry is predominantly generic in nature with very little
investment in R&D. Lack of awareness amongst farmers on usage of agrochemicals and
best practices followed globally is a major roadblock for the growth of the industry.
Current per capita consumption of pesticides in India continues to be very low at 0.6
kg/ha compared to 7 kg/ha in USA and 13 kg/ha in China. It is estimated that crop losses
64 65
Farming solutions - the next frontier for breakthrough growth of Indian agrochemical companies
India has a population of 1.18 Bn which is expected to reach 1.45 Bn by 2030. This rising
population will lead to increasing demand for food grains. On the other hand, per capita
land available for agriculture has been steadily decreasing. This coupled with rapid
urbanization and non availability of agricultural manpower has had a strong impact on
farm production. Agricultural produce has not been growing in tune with demand.
Currently average crop yields in India are much lower than global benchmarks. For
example, average yield for rice is 3.2 tons/ha in India vis-à-vis 4.2 tons/ha globally.
Similarly, yields for soybean and corn are 1.0 and 2.4 tons/ha domestically compared to
2.5 and 5.0 tons/ha globally. The current price increases of food products reflect the
situation having reached alarming levels and we have to rely on imports to meet our
domestic consumption. This is only expected to worsen further if we do not take
necessary steps to reverse it. Improving crop yields has become very critical and will
become imperative in the future.
India has the resources necessary to meet all its increasing needs and be left with a
handsome surplus if we can use our significantly large area under cultivation effectively.
This would however call for a holistic 'friend of the farmer' approach, offering locally
relevant farming solutions, where agrochemical companies could lead and benefit by
improving yield and productivity. The Indian agrochemical industry, which is Rs. 15,000 Cr
today, could grow well beyond its aspirational target of Rs. 50,000 Cr by 2020. The
opportunity lies in developing and executing innovative farming solutions that address the
needs of the Indian farmer with very low landholding size, resources and knowhow
available to him. Farming solutions would require a collaborative approach together with
seed technology, IT, nutrients and other service providers. For the agrochemical
companies it implies that to achieve such growth, capacity additions of over 100,000 tons
would be required with significant capital investments of over Rs 3,000 Cr. In addition,
substantial investment will be required for R&D and farmer-awareness activities.
Besides effectively creating farming solutions with other partners, the Indian
agrochemical industry itself faces critical challenges which could hinder its growth if not
addressed effectively. The industry is predominantly generic in nature with very little
investment in R&D. Lack of awareness amongst farmers on usage of agrochemicals and
best practices followed globally is a major roadblock for the growth of the industry.
Current per capita consumption of pesticides in India continues to be very low at 0.6
kg/ha compared to 7 kg/ha in USA and 13 kg/ha in China. It is estimated that crop losses
66 67
in India due to non usage of agrochemicals amount to Rs. 90,000 Cr p.a. Relatively weak IP
protection regime is another area of concern. A huge parallel market for spurious and
spiked pesticides exists which leads to significant revenue loss for genuine manufacturers.
In addition, long lead times for new product registrations and non-availability of land and
regulatory clearances are hindrances to setting up new investments.
The Indian agricultural landscape is distinct from most other countries of the world and
needs to be well understood to arrive at relevant farming solutions. We have a largely
fragmented land-holding structure (refer fig.1) with subsistence farming in several
regions. Farmers are typically not educated or exposed to modern methods of farming.
The fragmented and small landholdings translate to lesser spending power by individual
farmers for seeds, irrigation, fertilizer or agrochemicals. Deeper understanding of the
market by geography, perhaps even at a district level, becomes critical to success. These
differences need to be clearly understood and call for customized solutions to suit India's
diverse agro-climatic conditions.
Fig. 1: Land ownership pattern by district - rural India
Agrochemical companies can take the lead to look beyond the traditional offerings and
adopt a holistic approach to farm management to enable India to achieve its true
potential in agriculture. These companies have a strong farmer-connect and reach, with
the potential to influence and change the way farming is traditionally done in this country.
If ever there was a burning platform necessitating this, it is now!
The Indian market abounds with such examples where innovative and customized
solutions have grown the market and catapulted the first movers to market leaders. The
automotive industry in India received a strong fillip with India becoming a manufacturing
hub for small cars. A call to develop the low cost car meeting specific needs of the Indian
customer who could not afford it earlier, helped to create and proliferate the low end
'micro' segment. Similarly, the paint industry experienced a huge growth with
introduction of tinting machines which offer customized paint solutions closer to point of
sale, recognizing the Indian consumer's need for tailored shades and 'look and feel' before
deciding. Castrol took the initiative to develop a completely new channel for lubricant
sales. This offset the disadvantage of not being able to utilize traditional sales channels,
which were controlled by PSUs, and created a robust distribution network for Indian
motorists and car owners through other points of sale.
Let us consider the benefits of adopting a holistic and innovative approach with the case
of pulses. A brief study indicated that India could more than double its current production
of pulses if crop nutrients, timely availability and usage of better seed varieties, requisite
irrigation and proper storage were available (refer fig.2). This would improve our yield to
global levels and help us meet our domestic demand. Arriving at the solutions
innovatively recognizing the Indian context is critical. However the real challenge lies in
the execution. First movers will be able to reap the benefits and enjoy sustainable growth.
25% increase inyield due to use ofHYV seeds.(Potential 35-40%)
25% increase dueto pestmanagement.(Potential 30-40%)
20% increase due tosupply of irrigationand nutrients.(Potential 20-25%)
15% increasedue to proper storage.(Potential 20%)
Increase due toadditional area- rice fallows &intercropping
CurrentProduction
HW Seeds PastManagement
Irrigation/Nutrient supply
Storage/Transportation
Increased yield Additional Area Total availability
India could increase production of pulses to 37 Mn tons with an integrated approach
INDIA: LEVERS TO INCREASE PRODUCTION OF PULSES INDICATIVE
28
37
15
32
9
(Mn tons)
Source: Primary interviews with Ministry of Agriculture, Pulses Research Institutes and Associations, Tata Strategic Analysis STRATEGIC MANAGEMENT GROUP
4
4
Fig 2: Realizing India's potential for production of pulses
66 67
in India due to non usage of agrochemicals amount to Rs. 90,000 Cr p.a. Relatively weak IP
protection regime is another area of concern. A huge parallel market for spurious and
spiked pesticides exists which leads to significant revenue loss for genuine manufacturers.
In addition, long lead times for new product registrations and non-availability of land and
regulatory clearances are hindrances to setting up new investments.
The Indian agricultural landscape is distinct from most other countries of the world and
needs to be well understood to arrive at relevant farming solutions. We have a largely
fragmented land-holding structure (refer fig.1) with subsistence farming in several
regions. Farmers are typically not educated or exposed to modern methods of farming.
The fragmented and small landholdings translate to lesser spending power by individual
farmers for seeds, irrigation, fertilizer or agrochemicals. Deeper understanding of the
market by geography, perhaps even at a district level, becomes critical to success. These
differences need to be clearly understood and call for customized solutions to suit India's
diverse agro-climatic conditions.
Fig. 1: Land ownership pattern by district - rural India
Agrochemical companies can take the lead to look beyond the traditional offerings and
adopt a holistic approach to farm management to enable India to achieve its true
potential in agriculture. These companies have a strong farmer-connect and reach, with
the potential to influence and change the way farming is traditionally done in this country.
If ever there was a burning platform necessitating this, it is now!
The Indian market abounds with such examples where innovative and customized
solutions have grown the market and catapulted the first movers to market leaders. The
automotive industry in India received a strong fillip with India becoming a manufacturing
hub for small cars. A call to develop the low cost car meeting specific needs of the Indian
customer who could not afford it earlier, helped to create and proliferate the low end
'micro' segment. Similarly, the paint industry experienced a huge growth with
introduction of tinting machines which offer customized paint solutions closer to point of
sale, recognizing the Indian consumer's need for tailored shades and 'look and feel' before
deciding. Castrol took the initiative to develop a completely new channel for lubricant
sales. This offset the disadvantage of not being able to utilize traditional sales channels,
which were controlled by PSUs, and created a robust distribution network for Indian
motorists and car owners through other points of sale.
Let us consider the benefits of adopting a holistic and innovative approach with the case
of pulses. A brief study indicated that India could more than double its current production
of pulses if crop nutrients, timely availability and usage of better seed varieties, requisite
irrigation and proper storage were available (refer fig.2). This would improve our yield to
global levels and help us meet our domestic demand. Arriving at the solutions
innovatively recognizing the Indian context is critical. However the real challenge lies in
the execution. First movers will be able to reap the benefits and enjoy sustainable growth.
25% increase inyield due to use ofHYV seeds.(Potential 35-40%)
25% increase dueto pestmanagement.(Potential 30-40%)
20% increase due tosupply of irrigationand nutrients.(Potential 20-25%)
15% increasedue to proper storage.(Potential 20%)
Increase due toadditional area- rice fallows &intercropping
CurrentProduction
HW Seeds PastManagement
Irrigation/Nutrient supply
Storage/Transportation
Increased yield Additional Area Total availability
India could increase production of pulses to 37 Mn tons with an integrated approach
INDIA: LEVERS TO INCREASE PRODUCTION OF PULSES INDICATIVE
28
37
15
32
9
(Mn tons)
Source: Primary interviews with Ministry of Agriculture, Pulses Research Institutes and Associations, Tata Strategic Analysis STRATEGIC MANAGEMENT GROUP
4
4
Fig 2: Realizing India's potential for production of pulses
68 69
Agrochemical companies could adopt specific crops or geographies within their sphere of
influence and help farmers increase output. This may mean working with various
stakeholders such as microfinance companies, adopting contract farming, increasing
farmer awareness through demonstrations and extension services, propagating better
farm practices, ensuring right usage of crop protection chemicals, increasing usage of
hybrids/ GM seeds and providing better storage facilities to reduce post harvest losses.
The power of IT can be effectively leveraged to provide farmers with timely advice and
guidance for improving productivity, addressing pest related issues and optimizing the
value chain.
This article has been authored by Pratik Kadakia ([email protected]), Practice
Head- Chemicals & Energy and Jeffry Jacob ([email protected]), Principal -Chemicals
of Tata Strategic Management Group
Contract Research - Deriving Strategic Value from Emerging markets
Global pharmaceutical companies are re-looking at their R&D processes in order to
leverage the opportunity presented by emerging economies, such as India, in contract
research. Besides offering the opportunity to save costs tactically in the short term,
this is also a strategic move to improve productivity and develop further capabilities in
order to compete successfully in the future, while staying close to geographies which
will drive future growth; say Aleksandar Ruzicic of Roland Berger Strategy Consultants
and Jeffry Jacob of Tata Strategic Management Group
Matching R&D footprint with long-term growth in emerging markets
Globally pharmaceutical companies are under immense pressure with existing business
models under threat. The growth is expected to taper off in the US and other developed
countries while emerging economies are expected to drive a large part of the future
growth. Until 2020, pharmerging countries will represent more than a quarter of the
healthcare and pharma market value globally. These markets will contribute almost half
of the absolute growth for both the healthcare and pharmaceutical markets (Refer Figure
1). Hence, it does not come as a surprise that pharmaceutical companies have started to
boost their footprint and presence in these locations and also elevated these regions
organizationally. For example, GlaxoSmithKline has created an Emerging Markets unit in
June 2008 headed by Abbas Hussain and executed numerous acquisitions and direct
investments resulting in a significant part of its workforce being located in emerging
markets.
Declining productivity, relatively dry pipeline for new drugs, increasing penetration of
generics and margin pressures have been leading to lower profitability for global
pharmaceutical companies. This trend is expected to further intensify going forward into
the future. This has forced companies to continuously adapt their cost structures, as
exemplified by major multi-billion cost cutting/restructuring projects in all major
pharmaceutical companies, as announced most recently in September 2010 by the Roche
group that is not affected by imminent significant patent expirations.
68 69
Agrochemical companies could adopt specific crops or geographies within their sphere of
influence and help farmers increase output. This may mean working with various
stakeholders such as microfinance companies, adopting contract farming, increasing
farmer awareness through demonstrations and extension services, propagating better
farm practices, ensuring right usage of crop protection chemicals, increasing usage of
hybrids/ GM seeds and providing better storage facilities to reduce post harvest losses.
The power of IT can be effectively leveraged to provide farmers with timely advice and
guidance for improving productivity, addressing pest related issues and optimizing the
value chain.
This article has been authored by Pratik Kadakia ([email protected]), Practice
Head- Chemicals & Energy and Jeffry Jacob ([email protected]), Principal -Chemicals
of Tata Strategic Management Group
Contract Research - Deriving Strategic Value from Emerging markets
Global pharmaceutical companies are re-looking at their R&D processes in order to
leverage the opportunity presented by emerging economies, such as India, in contract
research. Besides offering the opportunity to save costs tactically in the short term,
this is also a strategic move to improve productivity and develop further capabilities in
order to compete successfully in the future, while staying close to geographies which
will drive future growth; say Aleksandar Ruzicic of Roland Berger Strategy Consultants
and Jeffry Jacob of Tata Strategic Management Group
Matching R&D footprint with long-term growth in emerging markets
Globally pharmaceutical companies are under immense pressure with existing business
models under threat. The growth is expected to taper off in the US and other developed
countries while emerging economies are expected to drive a large part of the future
growth. Until 2020, pharmerging countries will represent more than a quarter of the
healthcare and pharma market value globally. These markets will contribute almost half
of the absolute growth for both the healthcare and pharmaceutical markets (Refer Figure
1). Hence, it does not come as a surprise that pharmaceutical companies have started to
boost their footprint and presence in these locations and also elevated these regions
organizationally. For example, GlaxoSmithKline has created an Emerging Markets unit in
June 2008 headed by Abbas Hussain and executed numerous acquisitions and direct
investments resulting in a significant part of its workforce being located in emerging
markets.
Declining productivity, relatively dry pipeline for new drugs, increasing penetration of
generics and margin pressures have been leading to lower profitability for global
pharmaceutical companies. This trend is expected to further intensify going forward into
the future. This has forced companies to continuously adapt their cost structures, as
exemplified by major multi-billion cost cutting/restructuring projects in all major
pharmaceutical companies, as announced most recently in September 2010 by the Roche
group that is not affected by imminent significant patent expirations.
70 71
• Share of healthcare andpharma market value of pharmerging countriesmore than doublingbetween 2009 and 2020
• Share of absolutehealthcare and pharmamarket value growthbetween 2009 and 2020larger than 40%
Source: EIU; OECD; WHO; IMS; Roland Berger
Healthcare market Pharmaceutical market
7%
6%
43%35%
26%
12%
43%
5%
14%
9,900
14%
26%
19%
Other
Pharmerging
Japan
USA
4,5005,400
16%
12%
22%
11%
8%
38%29%
17%
7%
Other
Pharmerging
Japan
USA
450-700
23%
49%
4%
1,250 -1,500
22%
27%
14%
800
20%
12%
19%EuropeTop 5
EuropeTop 5
Fig. 1: Geographic shift towards pharmerging markets (USD Bn)
Assessment of shift
20202009 20202009
The pharmaceutical industry is fundamentally re-evaluating the make-up of its value
chain, differentiating clearly between core capabilities and those that could be potentially
outsourced. Within R&D, particularly pre-clinical and discovery seem to be representing
potential outsourcing opportunities, also driven by huge cost differences (Refer Figure 2 &
3). In the future, the pharmaceutical industry will be forced to capture the increasing
benefits from emerging countries, particularly given the long-term benefit from matching
better its global work force footprint to the future geographic distribution of revenues.
The initial wave of pharma outsourcing was successfully witnessed for manufacturing of
Active Pharmaceutical Ingredients and off patent drugs. As late as 2006, contract
manufacturing accounted for over 70% of the revenues of the Indian CRAMS market.
However post compliance with WTO norms on intellectual property, there has been a
spurt of off-shoring activities in the areas of clinical development and manufacture of
patented APIs and formulations, as well as discovery and pre-clinical services.
Multitude of key success factors in R&D drive relevance of emerging
countries
Many key success factors for pharmaceutical R&D apply equally to all phases, such as the
availability of highly skilled English speaking staff, adherence to quality and compliance,
flexibility and agility given significant attrition, costs per unit (related for example to
activity, FTEs, patients) and tight project management. In addition, exploratory R&D also
requires IP protection, trained/ experienced scientists/ researchers, speed of learning/
know-how development, access to academia/ basic research labs, as well as access to
funding whether public or private. In case of confirmatory R&D, the key success factors
are driven by fast access to patients, local regulations for animal/ clinical studies, overall
speed for critical path activities, e.g. data analysis upon database lock of clinical trials,
access to product approval regulators and cost/benefit assessment agencies in key
markets as well as strength of relationships with medical opinion leaders driving product
adoption through international and national guidelines.
Pharmaceutical companies need to decide on their geographic footprint by assessing the
various locations rigorously against the suggested key success factors. In addition, we
suggest differentiating outsourcing decisions by activity type (differentiating ongoing/
repetitive tasks from projects) and outsourcing option (off-shoring leading to a strategic
cost advantage vs. outsourcing within US/ EU/ Japan). Near and off-shoring seems to be
equally driven by unit cost advantages, e.g. animal studies, as well as critical resource
access, e.g. patients meeting clinical trial inclusion criteria, experienced medicinal
chemists.
India's strong positioning on the key success factors
India's large population of 1.15 Bn people translates into a vast patient pool and faster
patient recruitment for clinical trials, which go a long way in meeting overall timelines
Quotes from TopExecutive Interviews
•
•
•
QUESTION:
What are the top 3 core competencies of your company concerningthe following steps along the value chain?
Source: Top executive interviews; Roland Berger Survey 2007/2008
Fig. 2: Core competencies across the value chain
"We have paid for the same pre -clinical work USD 120,000 inChina, which would have cost usUSD 5 million in the US"
"Data management can alreadybe outsourced to places likeIndia, for example leveraging ITcompanies such as TataConsultancy Services" "Emerging markets do providecost savings potential for clinicaldevelopment which need to bebalanced with the demand forclinical data generated in theUS/EU"
Research
Discovery
Pre-development
clinical
Clinicaldevelopment
Regulatory
Marketing
Sales
Distribution/ logistics
Active ingredientproduction
Pharmaceuticalproduction
DistributionMarketing and sales
ProductionR&D
1%
22%
24%
9%
12%
6%
3%
16%
6%
1%
Fig. 3: Pharmaceutical Companies R&D Budget Split
Source: Secondary research, Zinnov, Tata Strategic Analysis
R&D Budget break- up (%) Clinical Budget break- up (%)
Phase 1
Phase II and III
Phase IV16
67
18
27
20
11
438
Clinical Development DiscoveryNon-clinical RegulatoryOthers
A study by the Tufts Center for the Study of Drug Development concluded that:Pharma CROs stay closer to schedule than othersCROsexpand the speed and capacity of product development pipeline whilemaintaining high levels of qualityCROs help companies reduce costs
companies with high reliance on •
•
•
ProjectsOngoing/repetitive tasks
Complexity
Activity type
Fig. 4: Selected R&D examples byoutsourcing option and activity type
Outsourcingto US / EU /
Japan
Low costoff-shoring
PivotalTrials
PharmaServices
IT
Drug SafetyReporting
PMS Studies
CMC forOptimization
AnimalStudies
CompetitiveIntelligence
MedicinalChemistry
Ou
tso
urc
ing
op
tio
n
70 71
• Share of healthcare andpharma market value of pharmerging countriesmore than doublingbetween 2009 and 2020
• Share of absolutehealthcare and pharmamarket value growthbetween 2009 and 2020larger than 40%
Source: EIU; OECD; WHO; IMS; Roland Berger
Healthcare market Pharmaceutical market
7%
6%
43%35%
26%
12%
43%
5%
14%
9,900
14%
26%
19%
Other
Pharmerging
Japan
USA
4,5005,400
16%
12%
22%
11%
8%
38%29%
17%
7%
Other
Pharmerging
Japan
USA
450-700
23%
49%
4%
1,250 -1,500
22%
27%
14%
800
20%
12%
19%EuropeTop 5
EuropeTop 5
Fig. 1: Geographic shift towards pharmerging markets (USD Bn)
Assessment of shift
20202009 20202009
The pharmaceutical industry is fundamentally re-evaluating the make-up of its value
chain, differentiating clearly between core capabilities and those that could be potentially
outsourced. Within R&D, particularly pre-clinical and discovery seem to be representing
potential outsourcing opportunities, also driven by huge cost differences (Refer Figure 2 &
3). In the future, the pharmaceutical industry will be forced to capture the increasing
benefits from emerging countries, particularly given the long-term benefit from matching
better its global work force footprint to the future geographic distribution of revenues.
The initial wave of pharma outsourcing was successfully witnessed for manufacturing of
Active Pharmaceutical Ingredients and off patent drugs. As late as 2006, contract
manufacturing accounted for over 70% of the revenues of the Indian CRAMS market.
However post compliance with WTO norms on intellectual property, there has been a
spurt of off-shoring activities in the areas of clinical development and manufacture of
patented APIs and formulations, as well as discovery and pre-clinical services.
Multitude of key success factors in R&D drive relevance of emerging
countries
Many key success factors for pharmaceutical R&D apply equally to all phases, such as the
availability of highly skilled English speaking staff, adherence to quality and compliance,
flexibility and agility given significant attrition, costs per unit (related for example to
activity, FTEs, patients) and tight project management. In addition, exploratory R&D also
requires IP protection, trained/ experienced scientists/ researchers, speed of learning/
know-how development, access to academia/ basic research labs, as well as access to
funding whether public or private. In case of confirmatory R&D, the key success factors
are driven by fast access to patients, local regulations for animal/ clinical studies, overall
speed for critical path activities, e.g. data analysis upon database lock of clinical trials,
access to product approval regulators and cost/benefit assessment agencies in key
markets as well as strength of relationships with medical opinion leaders driving product
adoption through international and national guidelines.
Pharmaceutical companies need to decide on their geographic footprint by assessing the
various locations rigorously against the suggested key success factors. In addition, we
suggest differentiating outsourcing decisions by activity type (differentiating ongoing/
repetitive tasks from projects) and outsourcing option (off-shoring leading to a strategic
cost advantage vs. outsourcing within US/ EU/ Japan). Near and off-shoring seems to be
equally driven by unit cost advantages, e.g. animal studies, as well as critical resource
access, e.g. patients meeting clinical trial inclusion criteria, experienced medicinal
chemists.
India's strong positioning on the key success factors
India's large population of 1.15 Bn people translates into a vast patient pool and faster
patient recruitment for clinical trials, which go a long way in meeting overall timelines
Quotes from TopExecutive Interviews
•
•
•
QUESTION:
What are the top 3 core competencies of your company concerningthe following steps along the value chain?
Source: Top executive interviews; Roland Berger Survey 2007/2008
Fig. 2: Core competencies across the value chain
"We have paid for the same pre -clinical work USD 120,000 inChina, which would have cost usUSD 5 million in the US"
"Data management can alreadybe outsourced to places likeIndia, for example leveraging ITcompanies such as TataConsultancy Services" "Emerging markets do providecost savings potential for clinicaldevelopment which need to bebalanced with the demand forclinical data generated in theUS/EU"
Research
Discovery
Pre-development
clinical
Clinicaldevelopment
Regulatory
Marketing
Sales
Distribution/ logistics
Active ingredientproduction
Pharmaceuticalproduction
DistributionMarketing and sales
ProductionR&D
1%
22%
24%
9%
12%
6%
3%
16%
6%
1%
Fig. 3: Pharmaceutical Companies R&D Budget Split
Source: Secondary research, Zinnov, Tata Strategic Analysis
R&D Budget break- up (%) Clinical Budget break- up (%)
Phase 1
Phase II and III
Phase IV16
67
18
27
20
11
438
Clinical Development DiscoveryNon-clinical RegulatoryOthers
A study by the Tufts Center for the Study of Drug Development concluded that:Pharma CROs stay closer to schedule than othersCROsexpand the speed and capacity of product development pipeline whilemaintaining high levels of qualityCROs help companies reduce costs
companies with high reliance on •
•
•
ProjectsOngoing/repetitive tasks
Complexity
Activity type
Fig. 4: Selected R&D examples byoutsourcing option and activity type
Outsourcingto US / EU /
Japan
Low costoff-shoring
PivotalTrials
PharmaServices
IT
Drug SafetyReporting
PMS Studies
CMC forOptimization
AnimalStudies
CompetitiveIntelligence
MedicinalChemistry
Ou
tso
urc
ing
op
tio
n
72 73
faster. This results in substantial acceleration of the drug development time in addition to
lower costs per patient. In addition, India has a large population of doctors and scientists,
representing the largest English-speaking talent pool in some disciplines. For example,
India produces three times as many master graduates annually in chemistry than the US.
With the large number of DMF filings, technical competency is well established. It has the
largest number of USFDA approved facilities outside US with GMP and GLP certifications.
Intellectual property is respected and the laws are conducive to IP protection. Moreover,
Indian strength in synthetic and medicinal chemistry makes it a lucrative destination for
contract research, even for early research and discovery activities. Given the advantages
of focus, cost and speed, the question is no longer about whether to outsource but rather
of finding the right partners. Overall, clinical development, discovery and non-clinical
services costs account for 85% of R&D budget which can be reduced by using CROs. In
addition to cost advantages, multinational pharmaceutical companies benefit from staying
closer to schedule and their ability to expand speed and capacity of their R&D operations
while maintaining high levels of quality resulting in a much required boost of R&D
productivity (Refer Figure 4).
Moving up the value chain ladder
Contract work in research/ discovery has evolved from low end research activities to more
value added high end research. Reputation for research quality, speed in project
execution, world class infrastructure, quality manpower, patent protection and strong
client relationships are critical for growth of CRAMS. Currently clinical trials account for
the largest share of the Indian CRO market (Refer Figure 5). Increasingly, Indian CRAMS
such as Jubilant Biosys are striving for end-to-end solutions, integrating a large array of
services into a holistic offering, particularly within Discovery/ Pre-clinical. Furthermore,
Indian CRAMS have also started to engage in performance-based contracts enabling them
to retain a larger share of their value-added, as exemplified by the collaboration between
Jubilant Biosys and Endo on the area of oncology.
Outsourcing in drug discovery occurs mainly in the following segments - broad based
screening, genomic targets, chemistry and gene therapy. Therapeutic areas involved
include oncology, infectious diseases, CNS, cardiovascular disorders, autoimmune/
inflammation and metabolic diseases. Currently Phase II-III has emerged as the most
established component of clinical development. The adoption of new tools and
techniques such as biotechnology, bio informatics, genomics etc. along with new IT
solutions has brought about a change in the way new drugs are being developed and
brought to market. This will increasingly drive outsourcing of research and development to
India, also due to its strong IT services sector (Refer Figure 6).
Fig. 6: Indian CRO Industry
22 70202
485
1020
2002 2004 2006 2008 2010e
Indian CRO Revenues, 2002-2010e (USD Mn.)
62% CAGR
Leading Indian CROs
Source: Secondary research, Zinnov, Tata Strategic Analysis
Illustrative list of areas addressed eg. GVK Bio:Medicinal chemistry InformaticsBiology Process R&DClinical research BA/ BE StudiesKnowledge process outsourcing
Data management and early phase trials offer immense opportunities for CROs. There
have been several Private Equity (PE) investments in the recent past, driven by current
attractive returns and future potential. Actis' investment in Veeda Clinical Research, Kotak
Private Equity Group and 3i Capital in Siro Clinpharm, OrbiMed in Ecron Acunova and
MPM Capital in Sai Advantium are some examples. Actis Biologics is working together
with the Malaysian government on new molecules for diabetes, anti-cancer diagnosis,
and asthma and also jointly building the Bio-City Park in Malaysia. 'Developing country'
diseases offer another area of huge potential where the focus of Western drug companies
is currently limited. The long term arrangement between the Malaysian government and
Vivo Bio for manufacturing malaria vaccine is one such example.
Contract research (and manufacturing) offers a long term strategic advantage
The nature of relationships between Indian CRAMS suppliers and the pharma companies
is transitioning from transactional based to long term partnerships, often involving
sharing and creation of joint intellectual property triggering performance-based milestone
payments. Big pharma companies are also acquiring stakes in their CRAMS partners to
secure supply and develop a stronger relationship.
Fig. 5: Indian CRO Industry
Source: Crisil Research, Tata Strategic Analysis
CRO segments inIndia
Break up of Developmentstage in India
(Focus on genericdrug development)
Break up of Clinicalstudies
• Availability of large patient population in diverse therapeutic category is the major driver for growth of CRO - Clinical Trial in India
• Cost of clinical trials is a fraction compared to developed markets like US
Developmentstage (Clinical),
80%
Discovery20%
Clinical studies,63%
BE/ BA Studies,37%
Phase III,53%
Phase II,30%
Phase IV,10%
Phase I,7%
72 73
faster. This results in substantial acceleration of the drug development time in addition to
lower costs per patient. In addition, India has a large population of doctors and scientists,
representing the largest English-speaking talent pool in some disciplines. For example,
India produces three times as many master graduates annually in chemistry than the US.
With the large number of DMF filings, technical competency is well established. It has the
largest number of USFDA approved facilities outside US with GMP and GLP certifications.
Intellectual property is respected and the laws are conducive to IP protection. Moreover,
Indian strength in synthetic and medicinal chemistry makes it a lucrative destination for
contract research, even for early research and discovery activities. Given the advantages
of focus, cost and speed, the question is no longer about whether to outsource but rather
of finding the right partners. Overall, clinical development, discovery and non-clinical
services costs account for 85% of R&D budget which can be reduced by using CROs. In
addition to cost advantages, multinational pharmaceutical companies benefit from staying
closer to schedule and their ability to expand speed and capacity of their R&D operations
while maintaining high levels of quality resulting in a much required boost of R&D
productivity (Refer Figure 4).
Moving up the value chain ladder
Contract work in research/ discovery has evolved from low end research activities to more
value added high end research. Reputation for research quality, speed in project
execution, world class infrastructure, quality manpower, patent protection and strong
client relationships are critical for growth of CRAMS. Currently clinical trials account for
the largest share of the Indian CRO market (Refer Figure 5). Increasingly, Indian CRAMS
such as Jubilant Biosys are striving for end-to-end solutions, integrating a large array of
services into a holistic offering, particularly within Discovery/ Pre-clinical. Furthermore,
Indian CRAMS have also started to engage in performance-based contracts enabling them
to retain a larger share of their value-added, as exemplified by the collaboration between
Jubilant Biosys and Endo on the area of oncology.
Outsourcing in drug discovery occurs mainly in the following segments - broad based
screening, genomic targets, chemistry and gene therapy. Therapeutic areas involved
include oncology, infectious diseases, CNS, cardiovascular disorders, autoimmune/
inflammation and metabolic diseases. Currently Phase II-III has emerged as the most
established component of clinical development. The adoption of new tools and
techniques such as biotechnology, bio informatics, genomics etc. along with new IT
solutions has brought about a change in the way new drugs are being developed and
brought to market. This will increasingly drive outsourcing of research and development to
India, also due to its strong IT services sector (Refer Figure 6).
Fig. 6: Indian CRO Industry
22 70202
485
1020
2002 2004 2006 2008 2010e
Indian CRO Revenues, 2002-2010e (USD Mn.)
62% CAGR
Leading Indian CROs
Source: Secondary research, Zinnov, Tata Strategic Analysis
Illustrative list of areas addressed eg. GVK Bio:Medicinal chemistry InformaticsBiology Process R&DClinical research BA/ BE StudiesKnowledge process outsourcing
Data management and early phase trials offer immense opportunities for CROs. There
have been several Private Equity (PE) investments in the recent past, driven by current
attractive returns and future potential. Actis' investment in Veeda Clinical Research, Kotak
Private Equity Group and 3i Capital in Siro Clinpharm, OrbiMed in Ecron Acunova and
MPM Capital in Sai Advantium are some examples. Actis Biologics is working together
with the Malaysian government on new molecules for diabetes, anti-cancer diagnosis,
and asthma and also jointly building the Bio-City Park in Malaysia. 'Developing country'
diseases offer another area of huge potential where the focus of Western drug companies
is currently limited. The long term arrangement between the Malaysian government and
Vivo Bio for manufacturing malaria vaccine is one such example.
Contract research (and manufacturing) offers a long term strategic advantage
The nature of relationships between Indian CRAMS suppliers and the pharma companies
is transitioning from transactional based to long term partnerships, often involving
sharing and creation of joint intellectual property triggering performance-based milestone
payments. Big pharma companies are also acquiring stakes in their CRAMS partners to
secure supply and develop a stronger relationship.
Fig. 5: Indian CRO Industry
Source: Crisil Research, Tata Strategic Analysis
CRO segments inIndia
Break up of Developmentstage in India
(Focus on genericdrug development)
Break up of Clinicalstudies
• Availability of large patient population in diverse therapeutic category is the major driver for growth of CRO - Clinical Trial in India
• Cost of clinical trials is a fraction compared to developed markets like US
Developmentstage (Clinical),
80%
Discovery20%
Clinical studies,63%
BE/ BA Studies,37%
Phase III,53%
Phase II,30%
Phase IV,10%
Phase I,7%
74 75
It is a foregone conclusion that pharmaceutical and biotech companies need to relook at
their business models if they have to successfully compete in the new environment.
Contract manufacturing was just the tip of the iceberg. If companies have to be really
successful and optimize their operations for better business results, they need to revamp
their R&D process and capture the opportunity presented by emerging economies. Price
realizations that the pharma companies have got used to may be a thing of the past,
especially with focus on reducing final cost of dose by payers and governments even in
the developed world. Off-shoring contract research (and manufacturing) services are
therefore an opportunity to not just save costs tactically for the short term, but also a
strategic move to improve productivity and develop further capabilities, while also moving
closer to the future healthcare customers in developing markets.
© Tata Strategic Management Group. All rights reserved
GST: An Opportunity to reassess your Supply Chain
The cascading effect of local taxes and complex regulatory structure of central and
state bodies have added to the inefficiencies for businesses. The proposed GST augurs
well for businesses thru simplified process that will create competitive advantage for
those who are prepared say Siddharth Paradkar (Principal - Logistics) and Pratik
Kadakia (Practice Head - Chemicals & Energy) of Tata Strategic Management Group.
Introduction
The dual governance structure of central and state bodies make the current tax system
very complicated. The multi-layered system, with both Central and State governments
having the power to levy taxes brings about many inefficiencies in the system. The double
taxation policy also adds cost as the tax paid in earlier in the value chain gets re-taxed and
firms end up paying tax on the tax paid.
The government over the past years has tried to bring about some changes to try and
minimise this cascading impact, however this is not to the same extent as the new Goods
and Services Tax (GST) intends to do.
GST is expected to be the next big bang fiscal reform in the Indian context. GST, if
implemented in the true spirit of its intent, will bring about major change and result in
rationalizing and simplifying the tax structure at both the Central and State levels (even
across state borders).
What is Goods and Services Tax (GST)
GST is an evolution of the current tax regime, transforming the complex and cascading
structure into a unified value added system of taxation. Under this, a value added tax
would be levied at every point of the supply chain providing for credit for any / all taxes
paid previously.
Keeping in line with the governance structure of the country GST would be levied
simultaneous by the Centre and State (CGST and SGST respectively). All essential
characteristics in terms of its structure, design applicability, etc. would be common
between CGST and SGST, across all states.
GST is expected to replace most of the current applicable indirect taxes as listed in the
table below (Exhibit 1).
74 75
It is a foregone conclusion that pharmaceutical and biotech companies need to relook at
their business models if they have to successfully compete in the new environment.
Contract manufacturing was just the tip of the iceberg. If companies have to be really
successful and optimize their operations for better business results, they need to revamp
their R&D process and capture the opportunity presented by emerging economies. Price
realizations that the pharma companies have got used to may be a thing of the past,
especially with focus on reducing final cost of dose by payers and governments even in
the developed world. Off-shoring contract research (and manufacturing) services are
therefore an opportunity to not just save costs tactically for the short term, but also a
strategic move to improve productivity and develop further capabilities, while also moving
closer to the future healthcare customers in developing markets.
© Tata Strategic Management Group. All rights reserved
GST: An Opportunity to reassess your Supply Chain
The cascading effect of local taxes and complex regulatory structure of central and
state bodies have added to the inefficiencies for businesses. The proposed GST augurs
well for businesses thru simplified process that will create competitive advantage for
those who are prepared say Siddharth Paradkar (Principal - Logistics) and Pratik
Kadakia (Practice Head - Chemicals & Energy) of Tata Strategic Management Group.
Introduction
The dual governance structure of central and state bodies make the current tax system
very complicated. The multi-layered system, with both Central and State governments
having the power to levy taxes brings about many inefficiencies in the system. The double
taxation policy also adds cost as the tax paid in earlier in the value chain gets re-taxed and
firms end up paying tax on the tax paid.
The government over the past years has tried to bring about some changes to try and
minimise this cascading impact, however this is not to the same extent as the new Goods
and Services Tax (GST) intends to do.
GST is expected to be the next big bang fiscal reform in the Indian context. GST, if
implemented in the true spirit of its intent, will bring about major change and result in
rationalizing and simplifying the tax structure at both the Central and State levels (even
across state borders).
What is Goods and Services Tax (GST)
GST is an evolution of the current tax regime, transforming the complex and cascading
structure into a unified value added system of taxation. Under this, a value added tax
would be levied at every point of the supply chain providing for credit for any / all taxes
paid previously.
Keeping in line with the governance structure of the country GST would be levied
simultaneous by the Centre and State (CGST and SGST respectively). All essential
characteristics in terms of its structure, design applicability, etc. would be common
between CGST and SGST, across all states.
GST is expected to replace most of the current applicable indirect taxes as listed in the
table below (Exhibit 1).
76 77
Impact of GST
Implementation of GST will have significant impact and will change the manner in which
business is carried out in comparison with the ways of the current tax regime.
With a single rate being applied to all goods and services there will be a significant
redistribution of taxes across all categories resulting in reduction in taxes on
manufactured goods and hence impacting the pricing of the product.
The integration of tax on Goods and Service through GST would provide the additional
benefit of providing credit for service tax paid by manufacturers. Both CENVAT & VAT
which are in practice now, give tax credit to the manufacturer for the tax paid for raw
materials (hence a tax is charged only on the value added by the manufacturer). More
often than not, there are various services including logistics involved in getting the input
material to its final customer. Service tax is paid on the cost of such services. With the
implementation of GST, cost of any services including logistics cost will be considered a
value add, and the manufacturer will get tax credit for the service tax paid.
Inter-state transactions to become tax neutral
Under GST inter-state sales transaction between two dealers would be cost equivalent
compared with stock transfers / branch transfers. According to the proposed model,
Centre would levy IGST which would be CGST plus SGST on all inter-state transactions of
taxable goods and services. The inter-State seller will pay IGST on value addition after
adjusting available credit of IGST, CGST, and SGST on his purchases. Similarly the
importing dealer will claim credit of IGST while discharging his output tax liability in his
own State. This will result in inter-state sales transaction becoming tax neutral when
compared to intra-state sales. India would become one single common market no longer
divided by state borders.
Business implication of GST
Logistics and supply chains will therefore see a major change; sourcing, distribution and
warehousing decisions which are currently planned based on a state level tax avoidance
mechanism instead of operational efficiencies will be reorganized to leverage efficiencies
of scale, location and other factors relevant to the business.
Rationalization of Warehouses and Transport network
Exhibit 1: Taxes subsumed under GST
> Central Excise Duty > VAT / Sales Tax > Service Tax > Entertainment Tax> Additional customs Duty > Entry Tax (not in lieu of Octroi)> Surcharge and cesses > Other Taxes and Duties (includes Luxury Tax, Taxes
on lottery, betting and gambling, and all cesses and surcharges by States)
Central Taxes State Taxes
GST would eliminate the existing penalties on inter state sales transactions and facilitate
consolidation of vendors and suppliers. This will eliminate the need to have state wise
warehouses to avoid CST and the associated paperwork, leading to elimination of one
extra, redundant level of warehousing in the supply chain. This will result in reduction in
the number of warehouses (Exhibit 2), improved efficiencies, better control and reduction
in inventory due to lesser numbers of stocking points and cases of stock outs. This would
allow a firm to take advantage of economies of scale and consolidate warehouses at the
same time reduce capital deployed in the business. Larger warehouses can benefit from
technological sophistication by deploying state-of-the-art planning and warehousing
systems which are not feasible in smaller, scattered warehouses. At the same time IT
costs of having ERPs deployed at many small warehouses can be saved. This will pave the
way for improved service levels at lower cost in the overall supply chain.
A rationalization similar to warehousing can also be done in distribution and
transportation routes as tax ceases to become the deciding factor. Since the tax rates
across states are envisaged to be uniform, state boundaries will no longer be the
parameter for deciding routes. At the same time, with larger warehouses, transportation
lot sizes will automatically increase, making way for more efficient bigger trucks. The
optimization and rationalization that these options can bring about in the supply chains of
a firm on account of GST will provide a competitive advantage to the business through
better service and faster turnaround times at lower costs.
STRATEGIC MANAGEMENT GROUP
99STRATEGIC MANAGEMENT GROUP
Exhibit 2 : GST will enable manufacturers to realize higher margins
COMPARISON BETWEEN CURRENT AND POST -GST1 SCENARIO
130Final Price0CST
30Margin100Landed cost
Manufacturer
State Border
5Depot cost
140.4Final Price5.4VAT
0Margin
130Landed costDepot
145.6Final Price5.6VAT5.4VAT credit
5Margin140.4Landed cost
Distributor
171.6MRP6.6 VAT5.6VAT credit25Margin
145.6Landed costRetailer
Current Scenario - Companies have depots in destination states to counter CST 2 All figures in Rs. / Unit
135Final Price35Margin
100Landed costManufacturer
State Border
145.6Final Price5.6 VAT
5Margin135Landed cost
Distributor
Post GST Scenario - Zero CST on inter -state sales
Post-GST the supply chain can be designed purely on logistics cost and customer service considerations that will positively impact the business
Notes :1) Goods and Services Tax 2) Central sales tax: Inter-state sales tax
Source: Tata Strategic analysis
A
B
INDICATIVE
171.6MRP6.6 VAT5.6VAT credit25Margin
145.6Landed costRetailer
76 77
Impact of GST
Implementation of GST will have significant impact and will change the manner in which
business is carried out in comparison with the ways of the current tax regime.
With a single rate being applied to all goods and services there will be a significant
redistribution of taxes across all categories resulting in reduction in taxes on
manufactured goods and hence impacting the pricing of the product.
The integration of tax on Goods and Service through GST would provide the additional
benefit of providing credit for service tax paid by manufacturers. Both CENVAT & VAT
which are in practice now, give tax credit to the manufacturer for the tax paid for raw
materials (hence a tax is charged only on the value added by the manufacturer). More
often than not, there are various services including logistics involved in getting the input
material to its final customer. Service tax is paid on the cost of such services. With the
implementation of GST, cost of any services including logistics cost will be considered a
value add, and the manufacturer will get tax credit for the service tax paid.
Inter-state transactions to become tax neutral
Under GST inter-state sales transaction between two dealers would be cost equivalent
compared with stock transfers / branch transfers. According to the proposed model,
Centre would levy IGST which would be CGST plus SGST on all inter-state transactions of
taxable goods and services. The inter-State seller will pay IGST on value addition after
adjusting available credit of IGST, CGST, and SGST on his purchases. Similarly the
importing dealer will claim credit of IGST while discharging his output tax liability in his
own State. This will result in inter-state sales transaction becoming tax neutral when
compared to intra-state sales. India would become one single common market no longer
divided by state borders.
Business implication of GST
Logistics and supply chains will therefore see a major change; sourcing, distribution and
warehousing decisions which are currently planned based on a state level tax avoidance
mechanism instead of operational efficiencies will be reorganized to leverage efficiencies
of scale, location and other factors relevant to the business.
Rationalization of Warehouses and Transport network
Exhibit 1: Taxes subsumed under GST
> Central Excise Duty > VAT / Sales Tax > Service Tax > Entertainment Tax> Additional customs Duty > Entry Tax (not in lieu of Octroi)> Surcharge and cesses > Other Taxes and Duties (includes Luxury Tax, Taxes
on lottery, betting and gambling, and all cesses and surcharges by States)
Central Taxes State Taxes
GST would eliminate the existing penalties on inter state sales transactions and facilitate
consolidation of vendors and suppliers. This will eliminate the need to have state wise
warehouses to avoid CST and the associated paperwork, leading to elimination of one
extra, redundant level of warehousing in the supply chain. This will result in reduction in
the number of warehouses (Exhibit 2), improved efficiencies, better control and reduction
in inventory due to lesser numbers of stocking points and cases of stock outs. This would
allow a firm to take advantage of economies of scale and consolidate warehouses at the
same time reduce capital deployed in the business. Larger warehouses can benefit from
technological sophistication by deploying state-of-the-art planning and warehousing
systems which are not feasible in smaller, scattered warehouses. At the same time IT
costs of having ERPs deployed at many small warehouses can be saved. This will pave the
way for improved service levels at lower cost in the overall supply chain.
A rationalization similar to warehousing can also be done in distribution and
transportation routes as tax ceases to become the deciding factor. Since the tax rates
across states are envisaged to be uniform, state boundaries will no longer be the
parameter for deciding routes. At the same time, with larger warehouses, transportation
lot sizes will automatically increase, making way for more efficient bigger trucks. The
optimization and rationalization that these options can bring about in the supply chains of
a firm on account of GST will provide a competitive advantage to the business through
better service and faster turnaround times at lower costs.
STRATEGIC MANAGEMENT GROUP
99STRATEGIC MANAGEMENT GROUP
Exhibit 2 : GST will enable manufacturers to realize higher margins
COMPARISON BETWEEN CURRENT AND POST -GST1 SCENARIO
130Final Price0CST
30Margin100Landed cost
Manufacturer
State Border
5Depot cost
140.4Final Price5.4VAT
0Margin
130Landed costDepot
145.6Final Price5.6VAT5.4VAT credit
5Margin140.4Landed cost
Distributor
171.6MRP6.6 VAT5.6VAT credit25Margin
145.6Landed costRetailer
Current Scenario - Companies have depots in destination states to counter CST 2 All figures in Rs. / Unit
135Final Price35Margin
100Landed costManufacturer
State Border
145.6Final Price5.6 VAT
5Margin135Landed cost
Distributor
Post GST Scenario - Zero CST on inter -state sales
Post-GST the supply chain can be designed purely on logistics cost and customer service considerations that will positively impact the business
Notes :1) Goods and Services Tax 2) Central sales tax: Inter-state sales tax
Source: Tata Strategic analysis
A
B
INDICATIVE
171.6MRP6.6 VAT5.6VAT credit25Margin
145.6Landed costRetailer
78 79
Opportunity to explore alternate distribution models
Organizations will now be able to explore different distribution models such as setting up mother warehouse and regional distribution hubs and possibly step away from traditional C&F and distributor based models currently adopted. This will lead to logistics and distribution to evolve more strongly as a competitive advantage.
The government has already begun the process of amending the constitution and getting the necessary consensus from all the stake holders. Though the exact details are still sketchy, the structure and deliverables have been clearly laid down for all to see. We expect GST to be implemented during the course of the financial year 2012-13.
Thus GST offers a great opportunity to revisit your Supply Chain & Distribution strategy, and identify what is required to become GST ready. Those who move early are likely to gain an advantage on cost and service levels over their competitors and deliver a better value proposition to the customer.
©Tata Strategic Management Group, 2011. No part of it may be circulated or reproduced for distribution without prior written approval from Tata Strategic Management Group.
78 79
Opportunity to explore alternate distribution models
Organizations will now be able to explore different distribution models such as setting up mother warehouse and regional distribution hubs and possibly step away from traditional C&F and distributor based models currently adopted. This will lead to logistics and distribution to evolve more strongly as a competitive advantage.
The government has already begun the process of amending the constitution and getting the necessary consensus from all the stake holders. Though the exact details are still sketchy, the structure and deliverables have been clearly laid down for all to see. We expect GST to be implemented during the course of the financial year 2012-13.
Thus GST offers a great opportunity to revisit your Supply Chain & Distribution strategy, and identify what is required to become GST ready. Those who move early are likely to gain an advantage on cost and service levels over their competitors and deliver a better value proposition to the customer.
©Tata Strategic Management Group, 2011. No part of it may be circulated or reproduced for distribution without prior written approval from Tata Strategic Management Group.
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About FICCIEstablished in 1927, FICCI is the largest and oldest apex business organisation in India. Its history is
closely interwoven with India's struggle for independence and its subsequent emergence as one of the
most rapidly growing economies globally. FICCI plays a leading role in policy debates that are at the
forefront of social, economic and political change. Through its 400 professionals, FICCI is active in 53
sectors of the economy. FICCI's stand on policy issues is sought out by think tanks, governments and
academia. Its publications are widely read for their in-depth research and policy prescriptions. FICCI
has joint business councils with 75 countries around the world.
A non-government, not-for-profit organisation, FICCI is the voice of India's business and industry. FICCI
has direct membership from the private as well as public sectors, including SMEs and MNCs, and an
indirect membership of over 3,00,000 companies from regional chambers of commerce.
FICCI works closely with the government on policy issues, enhancing efficiency, competitiveness and
expanding business opportunities for industry through a range of specialised services and global
linkages. It also provides a platform for sector specific consensus building and networking.
Partnerships with countries across the world carry forward our initiatives in inclusive development,
which encompass health, education, livelihood, governance, skill development, etc. FICCI serves as the
first port of call for Indian industry and the international business community.
Industry’s Voice for Policy Change
FICCIFederation House, 1 Tansen Marg, New Delhi-110 001
Tel: +91-11-2331 6540 (Dir)EPBX: +91-11-2373 8760-70 (Extn 395)
Fax: +91-11-2332 0714/ 2372 1504E- Mail: [email protected]
Mr P. S. Singh Consultant-Chemicals Division
Ms Charu SmitaAssistant Director- Chemicals Division
Contact Details