INDIACHEM GUJARAT - Tata Strategic Management Group · Federation House, 1 Tansen Marg ... supplying various dyes and organic pigments to the export ... The fiscal ) INDIACHEM GUJARAT

INDIACHEM GUJARAT 2009

Federation of Indian Chambers of Commerce and Industry

Mr. R K Bhatia (Head - Chemicals & Pharmaceuticals Division, FICCI)

Federation House, 1 Tansen MargNew Delhi-110 001

Tel. : 91-11-23316540 (D)/23357350 (D)EPBX : 91-11-23738760-70 (Extn.395/474)Fax : 91-11-23320714/233721504

E-mail : [email protected]

Ms. Ranjita C Sood (Asst. Director-Chemicals & Pharmaceuticals Division, FICCI)E-mail : [email protected]

Website : www.ficci.com

Pratik Kadakia (Practice Head - Chemical & Energy)E-mail : [email protected]

Abhishek Nigam E-mail : [email protected]

Nirmal, 18th Floor, Nariman PointMumbai-400021

Tel No. : 91-22-66376789Fax No. : 91-22-66376600Website : www.tsmg.com


Disclaimer: All rights reserved. Includes copyrighted material.The same may not be reproduced, distributed, modified or in any manner communicated to any third party except with the written approval of Tata Strategic Management Group.This report is for information purpose only. While due care has been taken during the compilation of this report to ensure that the information is accurate to the best of Tata Strategic Management Group's knowledge and belief, the content is not to be construed in any manner whatsoever as a substitute for professional advice. Tata Strategic Management Group accepts no responsibility for any loss arising from any action taken or not taken by anyone basis this report.



Contents

Executive Summary

Introduction

Industry Reports

Thought Notes

About Tata Strategic Management Group

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Agrochemicals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Colourants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Other Specialty Chemicals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Indian Specialty Chemicals: When will growth return? . . . . . . . . 47

Green Chemistry: Building a greener future. . . . . . . . . . . . . . . . . 55

Outlook for personal care ingredients industry:. . . . . . . . . . . . . . 61

An Indian perspective

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v

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About (FICCI)

1INDIACHEM GUJARAT 2009


Executive Summary

T

Agrochemicals

his FICCI report on the Indian Specialty Chemical Industry, prepared by Tata

Strategic Management Group, provides an overview of the Agrochemicals,

Colourants and Other Specialty Chemicals industry segments. The report

highlights the market size and growth, demand-supply scenario, trade overview and

market, technological & regulatory trends, ending with a brief future outlook for each

segment.

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 USD 50 billion. Specialty and knowledge chemicals put

together account for about half of the chemical industry and could grow at a higher

rate of ~14%-15% over the next few years.

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 natural

resources, what works for Gujarat is a 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 is the leading producer of major chemicals in the country accounting for

almost half of national production.

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 a rate of 11% from around USD 1.22 billion in 2008 to

an estimated USD 1.36 billion in 2009. With 125 technical grade manufacturers and

800 formulators, India is the fourth 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 50% of the industry revenues. Government focus on

achieving food grain self sufficiency coupled with limited farmland availability is

expected to provide a further impetus to the industry.



Executive Summary

T

Agrochemicals

his FICCI report on the Indian Specialty Chemical Industry, prepared by Tata

Strategic Management Group, provides an overview of the Agrochemicals,

Colourants and Other Specialty Chemicals industry segments. The report

highlights the market size and growth, demand-supply scenario, trade overview and

market, technological & regulatory trends, ending with a brief future outlook for each

segment.



industry has registered a growth of ~10% p.a. over the last few years and is currently

estimated to be around USD 50 billion. Specialty and knowledge chemicals put

together account for about half of the chemical industry and could grow at a higher

rate of ~14%-15% over the next few years.


investment in India. Apart from having sound infrastructure facilities, skilled

manpower, excellent domestic and international connectivity and rich natural

resources, what works for Gujarat is a 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 is the leading producer of major chemicals in the country accounting for

almost half of national production.

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 a rate of 11% from around USD 1.22 billion in 2008 to

an estimated USD 1.36 billion in 2009. With 125 technical grade manufacturers and

800 formulators, India is the fourth 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 50% of the industry revenues. Government focus on

achieving food grain self sufficiency coupled with limited farmland availability is

expected to provide a further impetus to the industry.

2 INDIACHEM GUJARAT 2009

Colourants

Other Specialty Chemicals

The Indian dyes and pigments industry valued at ~ USD 3.7 billion dollars is about 7%

of the global market, supplying various dyes and organic pigments to the export

markets like Europe and United States. The slump in global demand and commodity

nature of several products has resulted in margin pressures for industry participants.

Also, there is a growing need for environment friendly products and processes driven

by regulations such as REACH (Registration, Evaluation and Authorization of Chemical

substances).

An innovative approach is required to help the industry overcome the above

challenges. Greater investments in research & development would help improve the

product portfolio focussing on specialty and high performance colourants. Adoption of

green chemistry practices could help the industry reduce its environmental footprint

and ensure continued access to export markets. This integrated approach will enable

the Indian colourants industry to maintain its growth momentum at over 8% p.a. over

the next few years.

Other specialty chemicals primarily consist of APIs (Active Pharmaceutical Ingredients),

paints & coatings chemicals, construction chemicals, polymer additives, water

treatment chemicals and personal care ingredients. API is the biggest segment valued

at ~USD 5 billion and is also the fastest growing at ~ 21% p.a. over the last 4 years

driven largely by CRAMS (Contract Research & Manufacturing Services). Paints &

coatings chemicals segment with a market size of ~USD 1.2 billion in 2008 is another

large segment. Other key segments include water treatment chemicals valued at ~USD

475 million, personal care ingredients valued at ~USD 300 million, construction

chemicals valued at USD 265 million and polymer additives valued at ~ USD 240

million in 2008. All these segments are expected to grow at rates above the chemical

industry average, based on growth in their respective end use industries and evolving

applications.

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 select segments of the Indian chemical

industry in general and specialty chemicals in particular.

Introduction


Colourants


The Indian dyes and pigments industry valued at ~ USD 3.7 billion dollars is about 7%

of the global market, supplying various dyes and organic pigments to the export

markets like Europe and United States. The slump in global demand and commodity

nature of several products has resulted in margin pressures for industry participants.

Also, there is a growing need for environment friendly products and processes driven

by regulations such as REACH (Registration, Evaluation and Authorization of Chemical

substances).

An innovative approach is required to help the industry overcome the above

challenges. Greater investments in research & development would help improve the

product portfolio focussing on specialty and high performance colourants. Adoption of

green chemistry practices could help the industry reduce its environmental footprint

and ensure continued access to export markets. This integrated approach will enable

the Indian colourants industry to maintain its growth momentum at over 8% p.a. over

the next few years.

Other specialty chemicals primarily consist of APIs (Active Pharmaceutical Ingredients),

paints & coatings chemicals, construction chemicals, polymer additives, water

treatment chemicals and personal care ingredients. API is the biggest segment valued

at ~USD 5 billion and is also the fastest growing at ~ 21% p.a. over the last 4 years

driven largely by CRAMS (Contract Research & Manufacturing Services). Paints &

coatings chemicals segment with a market size of ~USD 1.2 billion in 2008 is another

large segment. Other key segments include water treatment chemicals valued at ~USD

475 million, personal care ingredients valued at ~USD 300 million, construction

chemicals valued at USD 265 million and polymer additives valued at ~ USD 240

million in 2008. All these segments are expected to grow at rates above the chemical

industry average, based on growth in their respective end use industries and evolving

applications.

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 select segments of the Indian chemical

industry in general and specialty chemicals in particular.

Introduction




Indian Chemical Industry



chemical industry which includes, as per National Industrial Classification, basic

chemicals and its products, petrochemicals, fertilizers, paints and varnishes, gases,

soaps, perfumes and toiletries and pharmaceuticals is one of the most diversified of all

industrial sectors covering thousands of commercial products. The industry has

registered a growth of ~8-10% over the last few years and is currently estimated to be

around USD 50 billion.

The relevance of the chemical industry to the overall manufacturing sector can be

gauged by the fact that 'Basic chemicals and chemical products' account for 14% in

overall Index of Industrial Production (IIP). On an average the chemicals segment has

grown at a higher rate than the overall manufacturing industry. From the trade flow

perspective, exports of chemicals and petrochemicals together accounted for 10.9% of

country's total exports in the latest fiscal year. The corresponding figure for imports is

only 6.7%.

The Indian Chemicals Industry comprises both small and large-scale units. The fiscal

concessions granted to the small sector in mid-eighties led to the establishment of a

large number of units in the Small Scale Industries (SSI) sector. A large number of

MNCs also participate in the industry. In the Chemical Sector, 100 percent FDI is

permissible. Manufacture of most chemical products including organic/ inorganic,

dyestuffs and pesticides is delicensed.

Introduction

Indian Chemical Industry(USD billion)

Source: Tata Strategic Estimates

28

50

2003 2008




Indian Chemical Industry



chemical industry which includes, as per National Industrial Classification, basic

chemicals and its products, petrochemicals, fertilizers, paints and varnishes, gases,

soaps, perfumes and toiletries and pharmaceuticals is one of the most diversified of all

industrial sectors covering thousands of commercial products. The industry has

registered a growth of ~8-10% over the last few years and is currently estimated to be

around USD 50 billion.

The relevance of the chemical industry to the overall manufacturing sector can be

gauged by the fact that 'Basic chemicals and chemical products' account for 14% in

overall Index of Industrial Production (IIP). On an average the chemicals segment has

grown at a higher rate than the overall manufacturing industry. From the trade flow

perspective, exports of chemicals and petrochemicals together accounted for 10.9% of

country's total exports in the latest fiscal year. The corresponding figure for imports is

only 6.7%.

The Indian Chemicals Industry comprises both small and large-scale units. The fiscal

concessions granted to the small sector in mid-eighties led to the establishment of a

large number of units in the Small Scale Industries (SSI) sector. A large number of

MNCs also participate in the industry. In the Chemical Sector, 100 percent FDI is

permissible. Manufacture of most chemical products including organic/ inorganic,

dyestuffs and pesticides is delicensed.

Introduction

Indian Chemical Industry(USD billion)


28

50

2003 2008


Specialty Chemicals Overview

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'. It is a highly knowledge driven

industry with raw materials cost 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 favourable price-performance ratio.

The specialty chemicals segment including the knowledge chemicals constitutes about

half of the Indian Chemical industry. The specialty chemicals segment caters to a large

number of end use industries including construction, automotive, polymers, personal

care, water treatment, textile, paints and coatings, etc. The knowledge chemicals

segment caters to the key end use industries of pharmaceuticals, agrochemicals and

biotechnology.

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 14%-

15% p.a. to reach 40 billion USD by 2012. The growth slowdown, demand contraction

and recovery witnessed over the last year or so have not impacted the long-term

growth prospects of the industry.

Industry Report

12

18

40

2002 2006 2012

Indian Specialty & KnowledgeChemicals Industry(USD million)

11%

xx%

CAGR

14%



Specialty Chemicals Overview

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'. It is a highly knowledge driven

industry with raw materials cost 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 favourable price-performance ratio.

The specialty chemicals segment including the knowledge chemicals constitutes about

half of the Indian Chemical industry. The specialty chemicals segment caters to a large

number of end use industries including construction, automotive, polymers, personal

care, water treatment, textile, paints and coatings, etc. The knowledge chemicals

segment caters to the key end use industries of pharmaceuticals, agrochemicals and

biotechnology.

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 14%-

15% p.a. to reach 40 billion USD by 2012. The growth slowdown, demand contraction

and recovery witnessed over the last year or so have not impacted the long-term

growth prospects of the industry.

Industry Report

12

18

40

2002 2006 2012

Indian Specialty & KnowledgeChemicals Industry(USD million)

11%

xx%

CAGR

14%




Industry Report

Gujarat: A Favoured Investment Destination

Chemical Industry in Gujarat


investment in India. Gujarat is spearheading Indian march for global economic

superpower status due to its inherent entrepreneurial spirit. Apart from having sound

infrastructure facilities, skilled manpower, excellent domestic and international

connectivity and rich natural resources, what works for Gujarat is a government that

has focused on industrial development in the state. Besides progressive reforms,

annual industrial summits and seminars are conducted to boost industrial

development in the state. These summits offer a perfect platform for business leaders,

investors, corporations, thought leaders, policy and opinion makers to understand and

explore business opportunities with the state of Gujarat. Gujarat has achieved an

annual growth rate of 10.5% over the past five years and contributes ~16% to the

industrial production of the country. As per the Vibrant Gujarat Summit 2009 report,

MOUs worth over USD 250 billion were signed across various industrial sectors.

The chemical and petrochemical industry in Gujarat is the fastest growing sector in the

State's economy and Gujarat is the leading producer of major chemicals in the country

with a share of 51% in FY 07. Major chemical industries located in Gujarat include

pharmaceutical, dyestuff, paints, bulk, specialty and fine chemicals. Key characteristics

of the chemical industry in Gujarat include high focus on domestic demand and limited

focus on exports as well as high fragmentation.

100

5040

23

40

Infrastructure Manufacturing InvestmentRegions

UrbanDevelopment

Others

MOUs signed by sector: 2009 (USD billion)

Source: Vibrant Gujarat

Chemicals & Petrochemicals:~ USD 9 billion

Oil & Gas, Power:~ USD 73 billion



Industry Report

Gujarat: A Favoured Investment Destination

Chemical Industry in Gujarat


investment in India. Gujarat is spearheading Indian march for global economic

superpower status due to its inherent entrepreneurial spirit. Apart from having sound

infrastructure facilities, skilled manpower, excellent domestic and international

connectivity and rich natural resources, what works for Gujarat is a government that

has focused on industrial development in the state. Besides progressive reforms,

annual industrial summits and seminars are conducted to boost industrial

development in the state. These summits offer a perfect platform for business leaders,

investors, corporations, thought leaders, policy and opinion makers to understand and

explore business opportunities with the state of Gujarat. Gujarat has achieved an

annual growth rate of 10.5% over the past five years and contributes ~16% to the

industrial production of the country. As per the Vibrant Gujarat Summit 2009 report,

MOUs worth over USD 250 billion were signed across various industrial sectors.

The chemical and petrochemical industry in Gujarat is the fastest growing sector in the

State's economy and Gujarat is the leading producer of major chemicals in the country

with a share of 51% in FY 07. Major chemical industries located in Gujarat include

pharmaceutical, dyestuff, paints, bulk, specialty and fine chemicals. Key characteristics

of the chemical industry in Gujarat include high focus on domestic demand and limited

focus on exports as well as high fragmentation.

100

5040

23

40

Infrastructure Manufacturing InvestmentRegions

UrbanDevelopment

Others

MOUs signed by sector: 2009 (USD billion)

Source: Vibrant Gujarat

Chemicals & Petrochemicals:~ USD 9 billion

Oil & Gas, Power:~ USD 73 billion


Major Chemical Companies

Specialty Chemicals in Gujarat

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 are present as well. Leading domestic and multinational companies

include Reliance, 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.

Gujarat is a one of the leading producers of specialty chemicals in India with presence

of a large number of domestic and multinational players. Major players include Ciba

Specialty Chemicals (BASF), Clariant India, Foseco and Balmer Lawrie. The growth of

specialty chemicals industry in the state is fuelled by huge demand from textile,

petrochemical and paints industry located within the state, its proven R&D

effectiveness and excellent domestic and global reach.

Punjab, 4%

Tamil Nadu, 6%

OtherStates, 23%

Maharashtra,8%

Gujarat,51%

UP, 8%

State wise share in chemicals production: FY 07 (%)

Source: Ministry of Chemicals & Fertilizers

Agrochemicals


Major Chemical Companies

Specialty Chemicals in Gujarat

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 are present as well. Leading domestic and multinational companies

include Reliance, 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.

Gujarat is a one of the leading producers of specialty chemicals in India with presence

of a large number of domestic and multinational players. Major players include Ciba

Specialty Chemicals (BASF), Clariant India, Foseco and Balmer Lawrie. The growth of

specialty chemicals industry in the state is fuelled by huge demand from textile,

petrochemical and paints industry located within the state, its proven R&D

effectiveness and excellent domestic and global reach.

Punjab, 4%

Tamil Nadu, 6%

OtherStates, 23%

Maharashtra,8%

Gujarat,51%

UP, 8%

State wise share in chemicals production: FY 07 (%)

Source: Ministry of Chemicals & Fertilizers

Agrochemicals



Agrochemicals

Introduction

Global Agrochemicals Industry

Indian Agrochemicals Industry

Agrochemicals or pesticides are chemical substances used to ward off, kill or control

pests, unwanted plants or animals that may harm or damage the crops. Agrochemicals

can be classified into the following key segments:

1. Insecticides

2. Herbicides/ Weedicides

3. Fungicides

4. Bio-pesticides

5. Others (Nematocides, Rodenticides etc.)

Global Agrochemical industry grew at a CAGR of 9.3% from 2003 to reach USD 41.7

billion in 2008.

North America, European Union and Asia Pacific together consume over 75% of the

world's agrochemicals. Globally, herbicides are the largest consumed agrochemical

with a share of 45% followed by insecticides at 33%.

Industry Overview

As an allied industry of agriculture, which accounts for 18.5 percent of India's GDP, the

agrochemicals industry is a significant industry for the Indian economy. The Indian

agrochemicals market grew at a rate of 11% from USD 1.22 billion in 2008 to an

estimated USD 1.36 billion in 2009.

25.8 25.2 26.730.7 31.2 30.4

33.4

41.7

-2.4

6.2

15

1.5-2.5

9.7

25

2001 2002 2003 2004 2005 2006 2007 2008

Market Size % yoy growth

Source : Industry Report

Market Size (USD Bn)

25.8 25.2 26.730.7 31.2 30.4

33.4

41.7

-2.4

6.2

15

1.5-2.5

9.7

25

2001 2002 2003 2004 2005 2006 2007 2008






Agrochemicals

Introduction

Global Agrochemicals Industry

Indian Agrochemicals Industry

Agrochemicals or pesticides are chemical substances used to ward off, kill or control

pests, unwanted plants or animals that may harm or damage the crops. Agrochemicals

can be classified into the following key segments:

1. Insecticides

2. Herbicides/ Weedicides

3. Fungicides

4. Bio-pesticides

5. Others (Nematocides, Rodenticides etc.)

Global Agrochemical industry grew at a CAGR of 9.3% from 2003 to reach USD 41.7

billion in 2008.

North America, European Union and Asia Pacific together consume over 75% of the

world's agrochemicals. Globally, herbicides are the largest consumed agrochemical

with a share of 45% followed by insecticides at 33%.

Industry Overview

As an allied industry of agriculture, which accounts for 18.5 percent of India's GDP, the

agrochemicals industry is a significant industry for the Indian economy. The Indian

agrochemicals market grew at a rate of 11% from USD 1.22 billion in 2008 to an

estimated USD 1.36 billion in 2009.

25.8 25.2 26.730.7 31.2 30.4

33.4

41.7

-2.4

6.2

15

1.5-2.5

9.7

25

2001 2002 2003 2004 2005 2006 2007 2008




25.8 25.2 26.730.7 31.2 30.4

33.4

41.7

-2.4

6.2

15

1.5-2.5

9.7

25

2001 2002 2003 2004 2005 2006 2007 2008







India is the fourth largest producer of agrochemicals in the world after the United

States, Japan and China. On the other hand India's agrochemicals consumption is one

of the lowest in the world with per hectare consumption of just 0.38 kg compared to

US (4.5 Kg/hectare) and Japan (11 Kg/hectare).

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 Kgs) to formulators. Formulators, in turn, prepare formulations by adding

inert carriers, solvents, surface active agents, deodorants etc. These formulations are

packed for retail sale and bought by the farmers.

Considering the high dependence upon monsoons, the market for agrochemicals is

expected to grow at a conservative growth rate of 7.5% to reach ~ USD 1.7 billion by

2012. Key market drivers include:

1. Growth in demand for food grains: Increasing population and high emphasis on

achieving food grain self-sufficiency as highlighted in the 2009-10 budget, is

expected to drive growth.

2. Limited farmland availability: Exports are a significant fraction of the Indian

agrochemical output. Available arable land per capita has been reducing globally

and is expected to reduce further.

Indian agriculture has the daunting task of feeding and clothing 16 percent of the

world's population from less than 2 percent of the total landmass. With already 190

million hectares of gross cultivated area, the scope for bringing new areas under

cultivation is severely limited. Thus the pressure is to increase yield per hectare by

increasing usage of agrochemicals

Industry Structure

Growth Forecast & Drivers

3. Growth of horticulture & floriculture: While the Indian floriculture industry has

grown by 50% in last 3 years, Government of India has launched a national

horticulture mission to double production by 2012. Flourishing horticulture &

floriculture industries will need increasing amounts of agrochemicals, especially

fungicides.

Industry Structure

RawMaterialSupplier

TechnicalGrade

Manufacturer

Distributor/Retailer

EndUser

Formulator

0.15

0.27

1998 2015E

Source: Yara Fertilizer Handbook, PotashCorp

World- Available arable land per capita (Hectare)

Fungicides,21%

Herbicides,18%

Biopesticides &Ohers, 8%

Insecticides,53%

Product Shares 2008 (%)

Source: Industry Report, Tata Strategic Estimates

4. Increasing awareness: Government of India estimates suggest that the total value

of crops lost due to non-use of pesticides is around USD 17 billion every year.

Companies are increasing their marketing efforts in order to train farmers about

the right use of agrochemicals in terms of quantity to be used, the right application

methodology and which chemicals to use for which kind of pest problems. With

increased awareness, the use of agrochemicals will also increase.

Key Segments

146

205

300

2002 2007 2012E

Source: Horticulture Commissioner, National Horticulture Mission

Horticultural Production, India (MnTonnes)

C AGR : 7. 5%:




India is the fourth largest producer of agrochemicals in the world after the United

States, Japan and China. On the other hand India's agrochemicals consumption is one

of the lowest in the world with per hectare consumption of just 0.38 kg compared to

US (4.5 Kg/hectare) and Japan (11 Kg/hectare).

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 Kgs) to formulators. Formulators, in turn, prepare formulations by adding

inert carriers, solvents, surface active agents, deodorants etc. These formulations are

packed for retail sale and bought by the farmers.

Considering the high dependence upon monsoons, the market for agrochemicals is

expected to grow at a conservative growth rate of 7.5% to reach ~ USD 1.7 billion by

2012. Key market drivers include:

1. Growth in demand for food grains: Increasing population and high emphasis on

achieving food grain self-sufficiency as highlighted in the 2009-10 budget, is

expected to drive growth.

2. Limited farmland availability: Exports are a significant fraction of the Indian

agrochemical output. Available arable land per capita has been reducing globally

and is expected to reduce further.

Indian agriculture has the daunting task of feeding and clothing 16 percent of the

world's population from less than 2 percent of the total landmass. With already 190

million hectares of gross cultivated area, the scope for bringing new areas under

cultivation is severely limited. Thus the pressure is to increase yield per hectare by

increasing usage of agrochemicals

Industry Structure


3. Growth of horticulture & floriculture: While the Indian floriculture industry has

grown by 50% in last 3 years, Government of India has launched a national

horticulture mission to double production by 2012. Flourishing horticulture &

floriculture industries will need increasing amounts of agrochemicals, especially

fungicides.

Industry Structure

RawMaterialSupplier

TechnicalGrade

Manufacturer

Distributor/Retailer

EndUser

Formulator

0.15

0.27

1998 2015E

Source: Yara Fertilizer Handbook, PotashCorp

World- Available arable land per capita (Hectare)

Fungicides,21%

Herbicides,18%

Biopesticides &Ohers, 8%

Insecticides,53%

Product Shares 2008 (%)


4. Increasing awareness: Government of India estimates suggest that the total value

of crops lost due to non-use of pesticides is around USD 17 billion every year.

Companies are increasing their marketing efforts in order to train farmers about

the right use of agrochemicals in terms of quantity to be used, the right application

methodology and which chemicals to use for which kind of pest problems. With

increased awareness, the use of agrochemicals will also increase.

Key Segments

146

205

300

2002 2007 2012E

Source: Horticulture Commissioner, National Horticulture Mission

Horticultural Production, India (MnTonnes)

C AGR : 7. 5%:




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 17% in 2005 to

21% in 2008.

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.

Supply Overview and Trade Flow

The Indian agrochemicals market is characterized by low capacity utilization. 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.

Stored produceZinc Phosphide

Phosphide, AluminiumOthers

Rice, Tobacco

Maize,Spinosyns, neem-based Bio-pesticides

Rice, Wheat Glyphosate, Isoproturon, 2,4-DHerbicides

Fruits, Vegetables,Rice

MancozebZiram

, Copper Oxychloride,Fungicides

Cotton, Rice Acephate, Cypermethrin

Monocrotophos,Insecticides

Main ApplicationsMajor ProductsSegment

Bio-pesticides: Bio-pesticides are pesticides derived from natural materials like

animals, plants, bacteria and certain minerals. For instance, neem has pesticidal

properties and is used for production of certain bio-pesticides. 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.

Change in Share (% of total)

10%

21%

10%

18%

8%

80%

53%

2000 2007

Insecticides HerbicidesFungicides Biopesticides & others


Installed Capacity and production

148 145 146

82 85 83

2005 2006 2007

Capacity Production

Source: Department of Chemicals, Government of India

The total installed capacity in 2007 was 146,000 MT and total production was 83,430

MT leading to a low capacity utilization of 57%.

The Indian export market has grown from ~ USD 180 million in 1999 to ~ USD 600

million in 2008 with a CAGR of ~ 14% driven by underutilized capacity and shut down

of production capacity in China before Olympics 2008. Key export destinations are

USA, U.K., Russia, France, Netherlands, Belgium, Spain, South Africa, Bangladesh,

Malaysia and Singapore. Imports in the agrochemical sector are around 2.5% in

volume. Imports mainly consist of new generation pesticides and patented molecules.

82.2 84.7 83.4

2.2 2.2 1.8

24.2

33.025.0

60.253.9

60.3

2005 2006 2007

Production Import Export Consumption

Import-Export Overview

(‘000 MT)

Note: Consumption = Production + Import-

Export





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 17% in 2005 to

21% in 2008.

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.

Supply Overview and Trade Flow

The Indian agrochemicals market is characterized by low capacity utilization. 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.

Stored produceZinc Phosphide

Phosphide, AluminiumOthers

Rice, Tobacco

Maize,Spinosyns, neem-based Bio-pesticides

Rice, Wheat Glyphosate, Isoproturon, 2,4-DHerbicides

Fruits, Vegetables,Rice

MancozebZiram

, Copper Oxychloride,Fungicides

Cotton, Rice Acephate, Cypermethrin

Monocrotophos,Insecticides

Main ApplicationsMajor ProductsSegment

Bio-pesticides: Bio-pesticides are pesticides derived from natural materials like

animals, plants, bacteria and certain minerals. For instance, neem has pesticidal

properties and is used for production of certain bio-pesticides. 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.

Change in Share (% of total)

10%

21%

10%

18%

8%

80%

53%

2000 2007

Insecticides HerbicidesFungicides Biopesticides & others


Installed Capacity and production

148 145 146

82 85 83

2005 2006 2007

Capacity Production


The total installed capacity in 2007 was 146,000 MT and total production was 83,430

MT leading to a low capacity utilization of 57%.

The Indian export market has grown from ~ USD 180 million in 1999 to ~ USD 600

million in 2008 with a CAGR of ~ 14% driven by underutilized capacity and shut down

of production capacity in China before Olympics 2008. Key export destinations are

USA, U.K., Russia, France, Netherlands, Belgium, Spain, South Africa, Bangladesh,

Malaysia and Singapore. Imports in the agrochemical sector are around 2.5% in

volume. Imports mainly consist of new generation pesticides and patented molecules.

82.2 84.7 83.4

2.2 2.2 1.8

24.2

33.025.0

60.253.9

60.3

2005 2006 2007

Production Import Export Consumption

Import-Export Overview

(‘000 MT)

Note: Consumption = Production + Import-

Export


18 INDIACHEM GUJARAT 2009 19INDIACHEM GUJARAT 2009


Competitive Landscape

With 800 formulators, the Indian agrochemicals market is highly fragmented in nature.

The competition is fierce with large number of organized sector players and a

significant spurious pesticides market. Market entry barriers are low with low start-up

costs. The market has been witnessing mergers and acquisitions with large players

buying out small manufacturers.

Market Trends

Technology Trends

The market is gradually moving towards environmentally safe options. This may lead

to increasing R&D in Biopesticides segment. The Government of India is promoting

research on the use of alternative and safe pesticides using neem seeds. 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).

Large market players are focusing on brand building by conducting awareness camps

for farmers and providing complete solutions. Strategic alliances with other players,

backward integration and increased marketing efforts are the key trends in the

agrochemicals industry.

On the technology front, increased R&D is expected for development of new

molecules and low dosage, high potency molecules.

New segments like Seed treatment chemicals, Bio-pesticides and Semiochemicals will

see technological advancements.

Brief Profile of key companies

21 manufacturing sites – 9 in India with licensed capacity of 91,000 onnes for pesticides and 41,000 Tonnes for pesticide intermediates

Production Capacity

Integration of Advanta with UPL to realize acquisition synergies

Future Plans

Acquisition of Advanta BV, Netherlands (2006), Cerexagri, France (2007)

Key Alliances

Key Brands

Sales (FY 2009)

Market Segments

Player

Insecticide –Viraat

Herbicide –Devrinol, Orrja

Fungicide –Saafe, Zeemil

Rs. 2100 Crores (Crop protection)

Crop Protection, Industrial & Specialty Chemicals, Seeds

United Phosphorous Ltd. (UPL)


Production Capacity


Future Plans


Key Alliances

Key Brands

Sales (FY 2009)

Market Segments

Player







Production facilities at Thane, Himatnagarand Ankleshwar with combined capacity of 6300 Tons for Active ingredients and 7650 Tons for powder formulations and 10,000 KL for liquid formulations

Production Capacity

R&D focus on environmentally safe products

Fungicides - Fluopyram, Bixafen and Isotianilscheduled for launch in 2010 and 2011, three other candidates at an advanced stage of development

Future Plans

R&D alliance with GVK Biosciences for active ingredients

Key Alliances

Key Brands

Sales (FY 2009)

Market Segments

Player

Fungicide –Antracol, Folicur

Insecticide –Confidor, Calypso

Herbicide –Atlantis, Topstar

Rs. 1482 Crores

Crop Protection, Non-agricultural pest management, Plant & seeds biotechnology

Bayer CropScience Ltd.


Production Capacity



Future Plans


Key Alliances

Key Brands

Sales (FY 2009)

Market Segments

Player




Rs. 1482 Crores



Factories at Akola, Ankleshwar, Lote, Turbhe, Patancheru with production capacity of 10,000 MTPA for technical grades and 30,000 Tons/Litres for formulations

Production Capacity

Eight new molecules under R&D

Plans to become Global supplier for Active Ingredients (AI). Target of cumulative sales of Rs. 1000 Crores from AI in the next 5 years. New AI plant in Dahej to be ready by June 2010

Future Plans

Marketing alliances with FMC, Dupont, Syngenta, Bayer, Nihon Nohayaku

Key Alliances

Key Brands

Sales (FY 2009)

Market Segments

Player

Fungicide –Contaf, Contaf Plus, Master

Insecticide –Rogor, Daksh, Tata Mida

Herbicide –Fateh, Tata Metri

Domestic: Rs. 541.7 Crores,

Export: Rs 295 Crores

Pesticides, Plant Nutrients, Seeds, Leather Chemicals

Rallis India Ltd.


Production Capacity



Future Plans


Key Alliances

Key Brands

Sales (FY 2009)

Market Segments

Player







Rallis India Ltd.



Competitive Landscape

With 800 formulators, the Indian agrochemicals market is highly fragmented in nature.

The competition is fierce with large number of organized sector players and a

significant spurious pesticides market. Market entry barriers are low with low start-up

costs. The market has been witnessing mergers and acquisitions with large players

buying out small manufacturers.

Market Trends

Technology Trends

The market is gradually moving towards environmentally safe options. This may lead

to increasing R&D in Biopesticides segment. The Government of India is promoting

research on the use of alternative and safe pesticides using neem seeds. 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).

Large market players are focusing on brand building by conducting awareness camps

for farmers and providing complete solutions. Strategic alliances with other players,

backward integration and increased marketing efforts are the key trends in the

agrochemicals industry.

On the technology front, increased R&D is expected for development of new

molecules and low dosage, high potency molecules.

New segments like Seed treatment chemicals, Bio-pesticides and Semiochemicals will

see technological advancements.

Brief Profile of key companies


Production Capacity


Future Plans


Key Alliances

Key Brands

Sales (FY 2009)

Market Segments

Player








Production Capacity


Future Plans


Key Alliances

Key Brands

Sales (FY 2009)

Market Segments

Player








Production Capacity



Future Plans


Key Alliances

Key Brands

Sales (FY 2009)

Market Segments

Player




Rs. 1482 Crores




Production Capacity



Future Plans


Key Alliances

Key Brands

Sales (FY 2009)

Market Segments

Player




Rs. 1482 Crores




Production Capacity



Future Plans


Key Alliances

Key Brands

Sales (FY 2009)

Market Segments

Player







Rallis India Ltd.


Production Capacity



Future Plans


Key Alliances

Key Brands

Sales (FY 2009)

Market Segments

Player







Rallis India Ltd.



Regulatory Trends

Outlook

Key Opportunities

The Indian crop protection industry is regulated by the Insecticide Act, 1968 and

Insecticide Rules, 1971. While the Insecticide Act focuses on regulating manufacture,

sale, distribution, use and import of pesticides, the Insecticide Rules deal with

registration procedure.

The Indian Patent Act 2005, brought agrochemical products under patent protection,

thus making the Indian market attractive for International companies with regards to

intellectual property protection. It also provided Indian companies an opportunity to

explore new molecule development options and make R&D a strategic component.

However, patent registration does not ensure monopoly in the Indian market for more

than 3 years owing to lax regulatory control and counterfeit chemical manufacturers.

The future prospects of the agrochemicals industry look promising in the near term

on account of the increasing need to protect farm produce from pests, increasing

awareness amongst farmers and India's export competency. Further the growing

varieties of various pests, diseases, and their growing resistance to various pesticides

will keep the demand for new products going. The agrochemical space offers enough

scope for growth for both innovators as well as generic players.

1. Scope for increase in usage: Since just about 35-40% of the total farmland is under

crop protection, there is a significant unserved market to tap into. By conducting

special training programmes for farmers regarding the need to use agrochemicals,

Indian companies can hope to increase pesticide consumption.

2. Excess capacity: The excess production capacity is a perfect opportunity to

increase exports by utilizing India's low cost producer status.

3. Patent expiry: Agrochemicals are protected by patents to encourage innovation.

Between 2009 and 2014 many molecules are likely to go off patent throwing the

market open for generic players. The estimated total likely viable opportunity

through patent expiry is over USD 3 billion.

Key Challenges

1. R&D: R&D to develop a new agrochemical molecule takes an average of 9 years

and USD 180 million. Indian companies will find it difficult to build such R&D

capabilities and still compete on cost and maintain margins.

2. GM Seed threat: Genetically modified seeds possess self-immunity towards

natural adversaries. This can be a potential threat to the business of agrochemicals.

Best example of such an introduction in the Indian market is "BT Cotton", which

resulted in a decline in the consumption of agrochemicals by cotton crop. However,

there have been few reports of BT Cotton being unable to develop immunity

towards new type of pests.

3. Need for efficient distribution system: The number of end users is large and

widespread. High penetration and effective distribution is essential to ensure

product availability. Also, generally the retailer is the only point of contact with

the end user and hence has the most influence on the purchase decision.

However, the retailer in not likely to possess the technological knowledge about

the chemicals and will be unable to assist the farmer in identifying the problem

and offer the right solution. Lately, Agrochemical companies have been directly

dealing with retailers by cutting the distributor from the value chain thereby

reducing distribution costs and offering competitive prices to farmers. Direct

contact with retailers also enables the companies to train them in the correct use

and application of the products.

4. Government support for safer alternatives (IPM) & rising demand for organic

farming: Government is aggressively promoting Integrated Pest Management

(IPM) and zero budget farming. National Center for Integrated Pest Management

has been working since 1988 with the mission to promote adoption of IPM

Technologies to reduce the environmental and public health hazards due to

excessive reliance on chemical pesticides. NGOs are educating farmers about the

advantages of bio-pesticides. 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 concern about the negative impacts of pesticide

usage.

5. Excise Duty: While seeds and fertilizers are exempt from excise duty, pesticides

attract excise duty at 8%. The PMFAI had requested a reduction in excise duty to

4% in the 2009 budget but failed to get the same.



Regulatory Trends

Outlook

Key Opportunities

The Indian crop protection industry is regulated by the Insecticide Act, 1968 and

Insecticide Rules, 1971. While the Insecticide Act focuses on regulating manufacture,

sale, distribution, use and import of pesticides, the Insecticide Rules deal with

registration procedure.

The Indian Patent Act 2005, brought agrochemical products under patent protection,

thus making the Indian market attractive for International companies with regards to

intellectual property protection. It also provided Indian companies an opportunity to

explore new molecule development options and make R&D a strategic component.

However, patent registration does not ensure monopoly in the Indian market for more

than 3 years owing to lax regulatory control and counterfeit chemical manufacturers.

The future prospects of the agrochemicals industry look promising in the near term

on account of the increasing need to protect farm produce from pests, increasing

awareness amongst farmers and India's export competency. Further the growing

varieties of various pests, diseases, and their growing resistance to various pesticides

will keep the demand for new products going. The agrochemical space offers enough

scope for growth for both innovators as well as generic players.

1. Scope for increase in usage: Since just about 35-40% of the total farmland is under

crop protection, there is a significant unserved market to tap into. By conducting

special training programmes for farmers regarding the need to use agrochemicals,

Indian companies can hope to increase pesticide consumption.

2. Excess capacity: The excess production capacity is a perfect opportunity to

increase exports by utilizing India's low cost producer status.

3. Patent expiry: Agrochemicals are protected by patents to encourage innovation.

Between 2009 and 2014 many molecules are likely to go off patent throwing the

market open for generic players. The estimated total likely viable opportunity

through patent expiry is over USD 3 billion.

Key Challenges

1. R&D: R&D to develop a new agrochemical molecule takes an average of 9 years

and USD 180 million. Indian companies will find it difficult to build such R&D

capabilities and still compete on cost and maintain margins.

2. GM Seed threat: Genetically modified seeds possess self-immunity towards

natural adversaries. This can be a potential threat to the business of agrochemicals.

Best example of such an introduction in the Indian market is "BT Cotton", which

resulted in a decline in the consumption of agrochemicals by cotton crop. However,

there have been few reports of BT Cotton being unable to develop immunity

towards new type of pests.

3. Need for efficient distribution system: The number of end users is large and

widespread. High penetration and effective distribution is essential to ensure

product availability. Also, generally the retailer is the only point of contact with

the end user and hence has the most influence on the purchase decision.

However, the retailer in not likely to possess the technological knowledge about

the chemicals and will be unable to assist the farmer in identifying the problem

and offer the right solution. Lately, Agrochemical companies have been directly

dealing with retailers by cutting the distributor from the value chain thereby

reducing distribution costs and offering competitive prices to farmers. Direct

contact with retailers also enables the companies to train them in the correct use

and application of the products.

4. Government support for safer alternatives (IPM) & rising demand for organic

farming: Government is aggressively promoting Integrated Pest Management

(IPM) and zero budget farming. National Center for Integrated Pest Management

has been working since 1988 with the mission to promote adoption of IPM

Technologies to reduce the environmental and public health hazards due to

excessive reliance on chemical pesticides. NGOs are educating farmers about the

advantages of bio-pesticides. 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 concern about the negative impacts of pesticide

usage.

5. Excise Duty: While seeds and fertilizers are exempt from excise duty, pesticides

attract excise duty at 8%. The PMFAI had requested a reduction in excise duty to

4% in the 2009 budget but failed to get the same.


6. Counterfeit Products: Presence of a flourishing counterfeit market with spurious

products eats into the margins of the organized sector. The spurious pesticides

market size in India is estimated to be USD 233 million in 2009. There is no

provision in the Indian Insecticide Act to deal with counterfeit pesticides.

Threats like genetically modified seeds, Integrated Pest Management, organic farming

etc. can be turned into opportunities if the industry re-orients itself such that its

product offering includes a broader range of agri-inputs instead of only agrochemicals.


6. Counterfeit Products: Presence of a flourishing counterfeit market with spurious

products eats into the margins of the organized sector. The spurious pesticides

market size in India is estimated to be USD 233 million in 2009. There is no

provision in the Indian Insecticide Act to deal with counterfeit pesticides.

Threats like genetically modified seeds, Integrated Pest Management, organic farming

etc. can be turned into opportunities if the industry re-orients itself such that its

product offering includes a broader range of agri-inputs instead of only agrochemicals.

INDIACHEM GUJARAT 2009 25INDIACHEM GUJARAT 2009


Colourants

Introduction

The colourant industry is a major component of the global chemical industry. A

colourant has the property of causing a change in the colour of the substrate.

Colourants(USD 28 Bn)

Dyes(USD 7.7 Bn)

Pigments(USD 20.3 Bn)

Organic(USD 5.6 Bn)

Inorganic(USD 14.7 Bn)

Global markets for dyes & pigments

Source: Chemical Weekly

The global colourants market is roughly estimated at ~ USD 28 billion excluding an

additional USD 7 billion of dye intermediates.

According to the US International Trade Commission, dyes are broadly classified based

on their usage/ technology as shown in the chart below.

Reactive,26%

Disperse,21%

Direct, 11%

Vat, 11%

Others,31%

Dyes by usage (% volume)

Source: Industry reports

Pigments are broadly classified as organic and inorganic. The global pigment industry is

estimated at ~7.4 million tons including white pigment such as Titanium Dioxide (TiO2)

and carbon black which is used as a black colourant.

INDIACHEM GUJARAT 2009 25INDIACHEM GUJARAT 2009


Colourants

Introduction

The colourant industry is a major component of the global chemical industry. A

colourant has the property of causing a change in the colour of the substrate.

Colourants(USD 28 Bn)

Dyes(USD 7.7 Bn)

Pigments(USD 20.3 Bn)

Organic(USD 5.6 Bn)

Inorganic(USD 14.7 Bn)

Global markets for dyes & pigments


The global colourants market is roughly estimated at ~ USD 28 billion excluding an

additional USD 7 billion of dye intermediates.

According to the US International Trade Commission, dyes are broadly classified based

on their usage/ technology as shown in the chart below.

Reactive,26%

Disperse,21%

Direct, 11%

Vat, 11%

Others,31%

Dyes by usage (% volume)


Pigments are broadly classified as organic and inorganic. The global pigment industry is

estimated at ~7.4 million tons including white pigment such as Titanium Dioxide (TiO2)

and carbon black which is used as a black colourant.



Pigments (7.4)

Titanium Dioxide(4.7)

Carbon Black(0.8)

Iron Oxide (1.3)

Other Inorganic(0.2)

Colour Organic & Special Effect (0.4)

Azo-Red(0.08)

Diarylide-Yellow(0.08)

Phthalocyanine-Blue,Green (0.08)

Performance & Special Effect(0.11)

HPP (0.05)

Metal Effect (0.04)

Pearlescent(0.02)

Global pigments market(Mn tons)


Colour & Special Effect(1.9)

Due to a large demand base in Asian countries, availability of cheaper manpower and

less stringent environmental norms there has been a gradual shift in production, with

Asia now accounting for more than 40% of the global supply.

Regional production of dyestuffs(% volume)

Asia, 42%

US, 24%

Others, 12%

Europe, 22%


Industry overview

India accounts for ~7% of the global share of the dyestuffs industry and produces

~150,000 tons. The Indian dyestuff industry is highly fragmented and characterised by

a large number of players in the unorganized sector. Around 1000 units fall under the

small scale industry category and only about 50 are large organized units. These units

are mainly present in the western states of Gujarat and Maharashtra, with Gujarat

accounting for almost 80% of capacity.

In India the dyes industry supplies the majority of its production, almost 80%, to the

textile industry. The balance is consumed by the paper and leather industry. Also,

these dyestuffs are exported to Europe, South East Asia and Taiwan to cater to the

textile industries in these countries.

Printing inks and coatings account for greater than 70% of consumption of pigments.

Titanium dioxide is a major raw material used in the manufacture of paints. The

domestic production of TiO2 in India is ~60,000 tons. The requirement of pigments for

the growing domestic ink and coating market is estimated at greater than USD 20

million each and the requirements of these sectors are helping to drive the demand

for pigments.

Pigments by end use (% volume)

Plastics,10%

Others, 9%

Inks, 47%Textiles,10%

Coatings,24%


Inks, 47%

There are a wide variety of dyestuffs being manufactured in the country. However,

almost 80% of these are commodities and face intense pricing pressures reducing the

margins of the industry.

The per-capita consumption of dyestuffs at ~50 gms is much lower than the world

average of over 400 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.

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.

Within India, the major players in the pigments industry are Sudarshan Chemicals and

Clariant India while in the dyestuff industry companies such as are Atul, Clariant India,

Dystar, Ciba (BASF) and IDI are large players present in the organized sector.

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.

The organised sector, with a better product range, technology and marketing reach,

Supply Overview



Pigments (7.4)

Titanium Dioxide(4.7)

Carbon Black(0.8)

Iron Oxide (1.3)

Other Inorganic(0.2)

Colour Organic & Special Effect (0.4)

Azo-Red(0.08)

Diarylide-Yellow(0.08)

Phthalocyanine-Blue,Green (0.08)

Performance & Special Effect(0.11)

HPP (0.05)

Metal Effect (0.04)

Pearlescent(0.02)

Global pigments market(Mn tons)


Colour & Special Effect(1.9)

Due to a large demand base in Asian countries, availability of cheaper manpower and

less stringent environmental norms there has been a gradual shift in production, with

Asia now accounting for more than 40% of the global supply.

Regional production of dyestuffs(% volume)

Asia, 42%

US, 24%

Others, 12%

Europe, 22%


Industry overview

India accounts for ~7% of the global share of the dyestuffs industry and produces

~150,000 tons. The Indian dyestuff industry is highly fragmented and characterised by

a large number of players in the unorganized sector. Around 1000 units fall under the

small scale industry category and only about 50 are large organized units. These units

are mainly present in the western states of Gujarat and Maharashtra, with Gujarat

accounting for almost 80% of capacity.

In India the dyes industry supplies the majority of its production, almost 80%, to the

textile industry. The balance is consumed by the paper and leather industry. Also,

these dyestuffs are exported to Europe, South East Asia and Taiwan to cater to the

textile industries in these countries.

Printing inks and coatings account for greater than 70% of consumption of pigments.

Titanium dioxide is a major raw material used in the manufacture of paints. The

domestic production of TiO2 in India is ~60,000 tons. The requirement of pigments for

the growing domestic ink and coating market is estimated at greater than USD 20

million each and the requirements of these sectors are helping to drive the demand

for pigments.

Pigments by end use (% volume)

Plastics,10%

Others, 9%

Inks, 47%Textiles,10%

Coatings,24%


Inks, 47%

There are a wide variety of dyestuffs being manufactured in the country. However,

almost 80% of these are commodities and face intense pricing pressures reducing the

margins of the industry.

The per-capita consumption of dyestuffs at ~50 gms is much lower than the world

average of over 400 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.

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.

Within India, the major players in the pigments industry are Sudarshan Chemicals and

Clariant India while in the dyestuff industry companies such as are Atul, Clariant India,

Dystar, Ciba (BASF) and IDI are large players present in the organized sector.

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.

The organised sector, with a better product range, technology and marketing reach,

Supply Overview



was able to increase its market share. Further bans on certain dyestuffs 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 Indian capacity for organic pigments in India is estimated at about 50,000 tpa.

Major producers include Meghmani Organics, Clariant India, Sudarshan Chemicals,

Pidilite Industries, Heubach Colours, e.t.c.

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.

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 the 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.

As per global reports, the world demand for dyes and organic pigments is forecast to

increase 3.9 percent per year to USD16.2 billion in 2013. In volume terms, demand will

grow 3.5 percent annually to 2.3 million metric tons. This growth will have a direct

bearing on the domestic production of dyes and organic pigments since a large

proportion of production is exported.


India colourants market (USD Bn)

3.7

5.1

2008-09 2012-13P

~8%

Source: Industry reports, Tata Strategic analysis

Due to a 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 continued demand.

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. At around 8% growth, the Indian colourants

industry (including pigments, dyes and dye intermediates) is likely to reach ~ USD 5.1

billion by 2012-13 and is expected to capture 10-12% of the global market.

Industry Trends

Regulatory

• Stricter domestic environmental laws

• Compliance to REACH regulations

Market

• Global overcapacity

• Customer requirements of environment friendly and high performance products

Technology

• Colour solution approach to counter commoditization

Source: Tata Strategic analysis

Trends in dyes and pigments industry

Market Trends

Regulatory Trends

The global capacity of dyestuffs has exceeded the demand resulting in an oversupply

scenario. Due to the lack of export demand, the prices of the colourants 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.

Local environmental regulations in Europe and United States coupled with the low cost

of manufacturing had resulted in the initial growth of the Indian dyestuff industry.

Regulations such as REACH (Registration, Evaluation, Authorization and Restriction of

Chemical substances), which have been designed with the objective of protecting



was able to increase its market share. Further bans on certain dyestuffs 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 Indian capacity for organic pigments in India is estimated at about 50,000 tpa.

Major producers include Meghmani Organics, Clariant India, Sudarshan Chemicals,

Pidilite Industries, Heubach Colours, e.t.c.

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.

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 the 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.

As per global reports, the world demand for dyes and organic pigments is forecast to

increase 3.9 percent per year to USD16.2 billion in 2013. In volume terms, demand will

grow 3.5 percent annually to 2.3 million metric tons. This growth will have a direct

bearing on the domestic production of dyes and organic pigments since a large

proportion of production is exported.


India colourants market (USD Bn)

3.7

5.1

2008-09 2012-13P

~8%

Source: Industry reports, Tata Strategic analysis

Due to a 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 continued demand.

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. At around 8% growth, the Indian colourants

industry (including pigments, dyes and dye intermediates) is likely to reach ~ USD 5.1

billion by 2012-13 and is expected to capture 10-12% of the global market.

Industry Trends

Regulatory

• Stricter domestic environmental laws

• Compliance to REACH regulations

Market

• Global overcapacity

• Customer requirements of environment friendly and high performance products

Technology

• Colour solution approach to counter commoditization

Source: Tata Strategic analysis

Trends in dyes and pigments industry

Market Trends

Regulatory Trends

The global capacity of dyestuffs has exceeded the demand resulting in an oversupply

scenario. Due to the lack of export demand, the prices of the colourants 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.

Local environmental regulations in Europe and United States coupled with the low cost

of manufacturing had resulted in the initial growth of the Indian dyestuff industry.

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. The processors and manufacturers have to

undergo a process of registration, evaluation and authorization under this legislation.

The suppliers have to ensure that their products are free of 15 SVHCs (Substances of

very high concern) as given in the REACH authorization list.

Exporters who are not able to provide such information are losing their market share

and this is resulting in the closure of small establishments and helping increase the

share of the organized players.

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.

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.

The Indian dyestuff industry is facing challenges due to reduced export demand

growth and decreasing profitability. The industry needs to place more emphasis on

innovation. Greater focus on research & development is required to improve the

product portfolio and build better quality and high performance colourants. There is a

need to adopt green chemistry practices to improve the environment friendliness of

the products and the processes, thereby ensuring access to export markets and

compliance to local regulations.

Such a holistic approach will ensure that the Indian dyes and pigments industry is able

to overcome the challenges and convert them to opportunities, resulting in profitable

growth.

Technological Trends

Future Outlook



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. The processors and manufacturers have to

undergo a process of registration, evaluation and authorization under this legislation.

The suppliers have to ensure that their products are free of 15 SVHCs (Substances of

very high concern) as given in the REACH authorization list.

Exporters who are not able to provide such information are losing their market share

and this is resulting in the closure of small establishments and helping increase the

share of the organized players.

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.

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.

The Indian dyestuff industry is facing challenges due to reduced export demand

growth and decreasing profitability. The industry needs to place more emphasis on

innovation. Greater focus on research & development is required to improve the

product portfolio and build better quality and high performance colourants. There is a

need to adopt green chemistry practices to improve the environment friendliness of

the products and the processes, thereby ensuring access to export markets and

compliance to local regulations.

Such a holistic approach will ensure that the Indian dyes and pigments industry is able

to overcome the challenges and convert them to opportunities, resulting in profitable

growth.

Technological Trends

Future Outlook


01 33INDIACHEM GUJARAT 2009



Introduction

Market Overview

Other specialty chemicals serve a wide variety of end use industries ranging from

pharmaceutical to construction. These chemicals can be categorized into the following

key segments:

1. APIs (Active Pharmaceutical Ingredients)

2. Paints & Coatings Chemicals

3. Water Treatment Chemicals

4. Personal Care Ingredients

5. Construction Chemicals

6. Polymer Additives

APIs are the key ingredients for making a drug. The API market in India stands at ~ USD

5 billion in 2008. This segment has achieved a CAGR of 21% in the period from 2004-

08. Approximately 90% of the total APIs manufactured in India are exported to Europe,

USA and Japan. APIs account for approximately 55% of the CRAMS market in India, the

rest being accounted by dosages and intermediates.

APIs (Active Pharmaceutical Ingredients)

API Exports from India: 2008 (% of total)

Semi regulated

54%

Generics39%

Innovators7%

Regulated46%

Total: 4.3 billion


Anti diabetic, anti inflammatory and anti infective drugs make up bulk of the Indian API

exports. Growing segments include lipid regulators, ace inhibitors and anti depressants.

01 33INDIACHEM GUJARAT 2009



Introduction

Market Overview

Other specialty chemicals serve a wide variety of end use industries ranging from

pharmaceutical to construction. These chemicals can be categorized into the following

key segments:

1. APIs (Active Pharmaceutical Ingredients)

2. Paints & Coatings Chemicals

3. Water Treatment Chemicals

4. Personal Care Ingredients

5. Construction Chemicals

6. Polymer Additives

APIs are the key ingredients for making a drug. The API market in India stands at ~ USD

5 billion in 2008. This segment has achieved a CAGR of 21% in the period from 2004-

08. Approximately 90% of the total APIs manufactured in India are exported to Europe,

USA and Japan. APIs account for approximately 55% of the CRAMS market in India, the

rest being accounted by dosages and intermediates.

APIs (Active Pharmaceutical Ingredients)

API Exports from India: 2008 (% of total)

Semi regulated

54%

Generics39%

Innovators7%

Regulated46%

Total: 4.3 billion


Anti diabetic, anti inflammatory and anti infective drugs make up bulk of the Indian API

exports. Growing segments include lipid regulators, ace inhibitors and anti depressants.



Industry Overview

l

l


l

l

l

API 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 Pharma'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 market for APIs is expected to grow at a CAGR of 22% to reach ~ USD 11 billion in

2012. Key growth drivers include:

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

Future Outlook

Market Overview

l

l

l

Buyer power is high and supplier power is limited due to buyer's focus on lowest

possible costs and more than 1000 Indian companies competing in manufacturing.

This is further augmented by huge competition from Chinese manufacturers.

Insufficient barriers to entry exist in generics whereas barriers to entry are tough in

innovator drugs with adherence to strict and costly international certification norms,

strong chemistry & process knowledge and 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.

The market for API manufacturing in India will grow tremendously due to high demand

from US and European drug makers. Though competition from Chinese companies is

huge, Indian companies have an edge due to stricter confirmation to manufacturing

norms. Lack of time adherence and absence of service oriented business model are

some of the weaknesses that companies have to overcome to generate better

margins. Efficient and experienced R&D and process development team will help to

overcome the above.

In 2008, the Indian paints and varnishes industry was worth ~ USD 3 billion with the

organized sector accounting for 65-70% of the market. The top three players, Asian

paints, Kansai Nerolac and Berger paints, have a combined market share of ~ 70%. The

market can be divided into two broad segments, decorative paints which account for

75% of the market and industrial paints which make up the remaining market.

The paints and coatings chemicals market achieved a 14% CAGR in the period from

2004-08 to reach USD 1.2 billion in 2008. Chemicals used are primarily of three types:

Binders like epoxy and polyurethane which determine properties like durability,

adhesion and finish

Pigments which offer desired color to the paint

Other additives like emulsifiers, mold releasing agents and stabilizers which

enhance paint quality

Paints & Coatings Chemicals

Market size (USD billion)

2.3

5

11

2004 2008 2012

21%

xx%

22%


CAGR



Industry Overview

l

l


l

l

l

API 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 Pharma'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 market for APIs is expected to grow at a CAGR of 22% to reach ~ USD 11 billion in

2012. Key growth drivers include:

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


Future Outlook

Market Overview

l

l

l

Buyer power is high and supplier power is limited due to buyer's focus on lowest

possible costs and more than 1000 Indian companies competing in manufacturing.

This is further augmented by huge competition from Chinese manufacturers.

Insufficient barriers to entry exist in generics whereas barriers to entry are tough in

innovator drugs with adherence to strict and costly international certification norms,

strong chemistry & process knowledge and 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.

The market for API manufacturing in India will grow tremendously due to high demand

from US and European drug makers. Though competition from Chinese companies is

huge, Indian companies have an edge due to stricter confirmation to manufacturing

norms. Lack of time adherence and absence of service oriented business model are

some of the weaknesses that companies have to overcome to generate better

margins. Efficient and experienced R&D and process development team will help to

overcome the above.

In 2008, the Indian paints and varnishes industry was worth ~ USD 3 billion with the

organized sector accounting for 65-70% of the market. The top three players, Asian

paints, Kansai Nerolac and Berger paints, have a combined market share of ~ 70%. The

market can be divided into two broad segments, decorative paints which account for

75% of the market and industrial paints which make up the remaining market.

The paints and coatings chemicals market achieved a 14% CAGR in the period from

2004-08 to reach USD 1.2 billion in 2008. Chemicals used are primarily of three types:

Binders like epoxy and polyurethane which determine properties like durability,

adhesion and finish

Pigments which offer desired color to the paint

Other additives like emulsifiers, mold releasing agents and stabilizers which

enhance paint quality

Paints & Coatings Chemicals


2.3

5

11

2004 2008 2012

21%

xx%

22%


CAGR



Industry Overview

l

l

The industry is highly competitive with significant participation from unorganized

players. Major organized players include Rhodia Chemicals India Ltd., Rohm & Haas

India Pvt. Ltd., Ciba India Ltd., E.I. DuPont India Pvt. Ltd., Bayer Material Science Pvt.

Ltd. and BASF Coatings India Ltd.


The market for paints and coatings additives is expected to grow at a CAGR of 12% to

reach ~ USD 1.9 billion in 2012. Key growth drivers include:

Low per capita paint consumption of about 0.5 kg p.a. when compared to 22 kg

p.a. in developed countries

Increasing demand for paints due to growth in the automotive and construction

sector


700

1,200

1,900

2004 2008 2012

14%

33%

12%


CAGR


The market is extremely competitive with the presence of a large number of domestic

and multinational players. Low margins can be increased through educating the

unorganized paint manufacturers on the quality and quantity of chemicals to be used

in their formulations. Cheaper imports from China are also proving a threat to

domestic manufacturers.

The recent Government ban on use of lead and cadmium compounds is increasingly

impacting the industry and these compounds are being replaced with suitable

alternatives.

Future Outlook

Market Overview

The market is expected to grow towards environment friendly chemicals due to

imposition of stricter norms as per international standards. Players who are able to

modify their product portfolio accordingly shall have a competitive edge over others.

Water treatment chemicals are used for a wide range of industrial and in process

applications such as reducing effluent toxicity, control Biological Oxygen Demand &

Chemical Oxygen Demand and disinfecting water for potable purpose. The Indian

water treatment chemicals market achieved an 8% CAGR in the period from 2004-08

to reach ~ USD 475 million in 2008. Coagulants and flocculants form the largest

segment with ~ 40% market share followed by biocides and disinfectants with ~ 17%

market share. 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.

Water Treatment Chemicals

Others, 30%

pHAdjusters,

5%

Biocides &Disinfectants

18%

Coagulants&

Flocculants,40%

DefoamingAgents, 7%

Product share: 2008 (% of total)

Total:


Total: USD 475 million

Industry Overview

The Indian water treatment chemicals market is highly competitive, and participants

include private companies, MNCs, as well as joint ventures. Around 60 percent of the

market is dominated by the organized sector, largely multinationals and large-scale

domestic companies like Nalco Chemicals India Ltd., Thermax Limited and Ion

Exchange (India) Ltd. These companies have a diverse product portfolio and a strong

distribution network to cater to the Indian market.



Industry Overview

l

l

The industry is highly competitive with significant participation from unorganized

players. Major organized players include Rhodia Chemicals India Ltd., Rohm & Haas

India Pvt. Ltd., Ciba India Ltd., E.I. DuPont India Pvt. Ltd., Bayer Material Science Pvt.

Ltd. and BASF Coatings India Ltd.


The market for paints and coatings additives is expected to grow at a CAGR of 12% to

reach ~ USD 1.9 billion in 2012. Key growth drivers include:

Low per capita paint consumption of about 0.5 kg p.a. when compared to 22 kg

p.a. in developed countries

Increasing demand for paints due to growth in the automotive and construction

sector


700

1,200

1,900

2004 2008 2012

14%

33%

12%


CAGR


The market is extremely competitive with the presence of a large number of domestic

and multinational players. Low margins can be increased through educating the

unorganized paint manufacturers on the quality and quantity of chemicals to be used

in their formulations. Cheaper imports from China are also proving a threat to

domestic manufacturers.

The recent Government ban on use of lead and cadmium compounds is increasingly

impacting the industry and these compounds are being replaced with suitable

alternatives.

Future Outlook

Market Overview

The market is expected to grow towards environment friendly chemicals due to

imposition of stricter norms as per international standards. Players who are able to

modify their product portfolio accordingly shall have a competitive edge over others.

Water treatment chemicals are used for a wide range of industrial and in process

applications such as reducing effluent toxicity, control Biological Oxygen Demand &

Chemical Oxygen Demand and disinfecting water for potable purpose. The Indian

water treatment chemicals market achieved an 8% CAGR in the period from 2004-08

to reach ~ USD 475 million in 2008. Coagulants and flocculants form the largest

segment with ~ 40% market share followed by biocides and disinfectants with ~ 17%

market share. 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.

Water Treatment Chemicals

Others, 30%

pHAdjusters,

5%

Biocides &Disinfectants

18%

Coagulants&

Flocculants,40%

DefoamingAgents, 7%


Total:



Industry Overview

The Indian water treatment chemicals market is highly competitive, and participants

include private companies, MNCs, as well as joint ventures. Around 60 percent of the

market is dominated by the organized sector, largely multinationals and large-scale

domestic companies like Nalco Chemicals India Ltd., Thermax Limited and Ion

Exchange (India) Ltd. These companies have a diverse product portfolio and a strong

distribution network to cater to the Indian market.




l

l

l

The market for water treatment chemicals is expected to grow at a CAGR of 9% to

reach ~ USD 675 million in 2012. Key market drivers include:

Rapid industrialization leading to huge demand for effluent treatment

Stricter effluent norms coupled with greater awareness about environmental

conservation have necessitated efficient industrial water treatment

Awareness among end users about recycling water, and cost effectiveness of

recycling water in the long term

8%350

475

680

2004 2008 2012

9%

XX% CAGRMarket size (USD billion)


Personal Care Ingredients

Market Overview

l

l

l

l

l

l

Industry Overview


The Indian personal care industry was worth ~ USD 6 billion in 2008. It can be sub

divided into hair care, skin care, oral care and fragrances with skin care as the fastest

growing segment. The Indian personal care ingredients market can be divided into

active and inactive ingredients. The personal care ingredients market has grown at ~

10% p.a. in the period from 2004-08 to reach USD 300-350 million in 2008. Wash

products like soaps and shower gels account for half of the consumption in this

segment. Other key product categories for specialty chemicals applications include

hair oil, shampoo & conditioner, talc, deodorants & fairness creams. Currently the

main active ingredients being used in the Indian personal care market are:

Skin lightening agents

Moisturizers and humectants

Antimicrobials

Conditioning agents

Anti-dandruff agents

Other active ingredients include products used for anti-aging such as Vitamins A, C

and E, ingredients for antiperspirants and exfoliating ingredients such as Alpha and

Beta Hydroxy Acids.

The market is extremely competitive with more than 1500 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, Sami Labs and Givaudan. These companies,

however, are not able to cater to the export market due to lack of investment and

inability to meet international regulations. Multinational companies account for about

35% of the market but are strengthening their presence in the country. BASF India

Ltd., Ciba Specialty Chemicals and Clariant Chemicals are the leading multinational

players in India.

The market for active personal care ingredients has a potential to grow at 15% p.a. to

reach ~ USD 525 million in 2012. Key growth drivers include:


Future Outlook

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. However, saturation has reached the Indian market in terms

of product offerings. Innovative products catering to niche applications are likely to

help market participants sustain their competitive edge.




l

l

l

The market for water treatment chemicals is expected to grow at a CAGR of 9% to

reach ~ USD 675 million in 2012. Key market drivers include:

Rapid industrialization leading to huge demand for effluent treatment

Stricter effluent norms coupled with greater awareness about environmental

conservation have necessitated efficient industrial water treatment

Awareness among end users about recycling water, and cost effectiveness of

recycling water in the long term

8%350

475

680

2004 2008 2012

9%

XX% CAGRMarket size (USD billion)


Personal Care Ingredients

Market Overview

l

l

l

l

l

l

Industry Overview


The Indian personal care industry was worth ~ USD 6 billion in 2008. It can be sub

divided into hair care, skin care, oral care and fragrances with skin care as the fastest

growing segment. The Indian personal care ingredients market can be divided into

active and inactive ingredients. The personal care ingredients market has grown at ~

10% p.a. in the period from 2004-08 to reach USD 300-350 million in 2008. Wash

products like soaps and shower gels account for half of the consumption in this

segment. Other key product categories for specialty chemicals applications include

hair oil, shampoo & conditioner, talc, deodorants & fairness creams. Currently the

main active ingredients being used in the Indian personal care market are:

Skin lightening agents

Moisturizers and humectants

Antimicrobials

Conditioning agents

Anti-dandruff agents

Other active ingredients include products used for anti-aging such as Vitamins A, C

and E, ingredients for antiperspirants and exfoliating ingredients such as Alpha and

Beta Hydroxy Acids.

The market is extremely competitive with more than 1500 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, Sami Labs and Givaudan. These companies,

however, are not able to cater to the export market due to lack of investment and

inability to meet international regulations. Multinational companies account for about

35% of the market but are strengthening their presence in the country. BASF India

Ltd., Ciba Specialty Chemicals and Clariant Chemicals are the leading multinational

players in India.

The market for active personal care ingredients has a potential to grow at 15% p.a. to

reach ~ USD 525 million in 2012. Key growth drivers include:


Future Outlook

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. However, saturation has reached the Indian market in terms

of product offerings. Innovative products catering to niche applications are likely to

help market participants sustain their competitive edge.



l

l

l

Growth in the personal care industry due to huge demand from the consumers.

Brands are being increasingly popularized by promoting the active ingredient being

used in production

Rising consumer awareness through media campaigns and health experts

Huge export potential due to India's vast experience in producing natural products

200

300

525

2004 2008 2012

10%

xx%

15%

CAGRMarket size (USD billion)



Future Outlook

The market is highly competitive with a large number of domestic and multinational

companies as a result of which the supplier loyalty is low with manufacturers switching

suppliers based on cost benefit and value addition.

There is limited investment in research and development of new ingredients and the

problem is further accentuated with requirement of customized ingredients for

different regions in India. This has resulted in India becoming a raw material sourcing

hub for multinational corporations. Another problem faced by the industry is the

limited lifetime of active ingredients in formulations as they are biodegradable.

Imposition of stringent regulation in disclosing the ingredient composition to the

consumer is expected to increase sales of personal care ingredient manufacturers.

Companies which are able to innovate and come out with value added products will

have a competitive edge in the market. This requires considerable investment in

research and development of new ingredients with special focus on increasing the

lifetime of the ingredient. There is a growing demand of natural ingredients based

products from export market and Indian expertise in such products can be used to tap

the same. Increased investment and conformation to export regulations are required

to achieve this.

Construction Chemicals

Market Overview

The Indian construction chemicals market constitutes a variety of products ranging

from admixtures to sealants to flooring chemicals. This segment has achieved a CAGR

of 16% in the period from 2005-08 to reach ~ USD 265 million in 2008. However, the

market is still very small when compared to other global markets like the United States

which was estimated at ~ USD 7 billion in 2008. Admixtures form the biggest segment

with 34% share followed by flooring chemicals with 16% share.

Miscellaneo31%

us,

Repair andRehabilitation

9% Flooring,

16%

Admixtures,34%

Waterproofi10%

ng,




Industry Overview

The Indian construction chemicals market is fairly organized but fragmented in product

type and application areas. The top 20 organized players account for ~ 70% of the

market; the rest being accounted by small and unorganized players. Fosroc & BASF SE

are the leading players in the Indian construction chemicals market.

SWC, 5%

PidiliteIndustriesLtd., 6%

Others, 50% Sika India,13%

Fosroc, 14%

BASF SE,12%

Total:



Market share: 2008 (% of total)



l

l

l

Growth in the personal care industry due to huge demand from the consumers.

Brands are being increasingly popularized by promoting the active ingredient being

used in production

Rising consumer awareness through media campaigns and health experts

Huge export potential due to India's vast experience in producing natural products

200

300

525

2004 2008 2012

10%

xx%

15%

CAGRMarket size (USD billion)



Future Outlook

The market is highly competitive with a large number of domestic and multinational

companies as a result of which the supplier loyalty is low with manufacturers switching

suppliers based on cost benefit and value addition.

There is limited investment in research and development of new ingredients and the

problem is further accentuated with requirement of customized ingredients for

different regions in India. This has resulted in India becoming a raw material sourcing

hub for multinational corporations. Another problem faced by the industry is the

limited lifetime of active ingredients in formulations as they are biodegradable.

Imposition of stringent regulation in disclosing the ingredient composition to the

consumer is expected to increase sales of personal care ingredient manufacturers.

Companies which are able to innovate and come out with value added products will

have a competitive edge in the market. This requires considerable investment in

research and development of new ingredients with special focus on increasing the

lifetime of the ingredient. There is a growing demand of natural ingredients based

products from export market and Indian expertise in such products can be used to tap

the same. Increased investment and conformation to export regulations are required

to achieve this.

Construction Chemicals

Market Overview

The Indian construction chemicals market constitutes a variety of products ranging

from admixtures to sealants to flooring chemicals. This segment has achieved a CAGR

of 16% in the period from 2005-08 to reach ~ USD 265 million in 2008. However, the

market is still very small when compared to other global markets like the United States

which was estimated at ~ USD 7 billion in 2008. Admixtures form the biggest segment

with 34% share followed by flooring chemicals with 16% share.

Miscellaneo31%

us,

Repair andRehabilitation

9% Flooring,

16%

Admixtures,34%

Waterproofi10%

ng,




Industry Overview

The Indian construction chemicals market is fairly organized but fragmented in product

type and application areas. The top 20 organized players account for ~ 70% of the

market; the rest being accounted by small and unorganized players. Fosroc & BASF SE

are the leading players in the Indian construction chemicals market.

SWC, 5%

PidiliteIndustriesLtd., 6%

Others, 50% Sika India,13%

Fosroc, 14%

BASF SE,12%

Total:



Market share: 2008 (% of total)




l

l

l

The market for construction chemicals is expected to grow at a CAGR of 13% to reach ~

USD 425 million in 2012. The demand will remain flat in 2009 but is expected to pick

up considerably in 2010. Key market drivers include:

Growth in construction activities due to increased Government spending specially

in rural areas

100% Foreign Direct Investment (FDI) in Real Estate to boost construction activities

Increased product awareness and compliance with international manufacturing

standards

xx%

13%

170

265

425

2005 2008 2012



16%

CAGR


Future Outlook

The construction chemical industry faces intense competition from traditional

products like sand and tar. However, due to increased product awareness and

compliance with international standards, construction chemicals are slowly capturing

the Indian market.

Due to lack of entry barriers, competition is high and a lot of low value products are

being sold in the market. Domestic companies have easy access to foreign technology

and are hence able to compete with multinational players. Margins are lowered

because most contractors prefer low cost chemicals to reduce the construction cost.

High value products have limited demand from premium construction houses. Exports

are limited and have to comply with REACH regulation.

Construction chemicals market has a huge growth potential due to the construction

and manufacturing boom in India. High price sensitivity is the key challenge being

faced by the industry. Following are the critical success factors for growth in the

market:

l

l

Market Overview

Product innovation and diversification

Creating product awareness

Polmer additives are specialty chemicals added to the base polymer to enhance

certain properties or improve processing and account for roughly 10% of the

manufacturing cost. The Indian polymer additives market has achieved a CAGR of 10%

in the period from 2004-08 to reach ~ USD 235 million in 2008. Plasticizers form the

largest segment with 43% market share followed by heat stabilizers with 21% market

share. In terms of end use industry perspective, PVC consumes the maximum amount

of additives accounting for 40% of the total market followed by polyolefins with 20%.

Polymer Additives

Antioxidants,8%

FlameRetardants,

5%

Others, 19%

HeatStabilizers,

21%

LightStabilizers,

4%

Total: USD 235million

Plasticizers,43%



Industry Overview

The organized segment has approximately 30 players and is dominated by

multinational companies like Ciba India Ltd., Clariant Chemicals India Ltd., BASF,

LANXESS India Private Ltd., Baerlocher India Ltd., Akzo Nobel Chemicals (India) Limited

and Rohm & Haas India 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. Ciba is the market leader in

flame retardants, light stabilizers, and antioxidants.




l

l

l

The market for construction chemicals is expected to grow at a CAGR of 13% to reach ~

USD 425 million in 2012. The demand will remain flat in 2009 but is expected to pick

up considerably in 2010. Key market drivers include:

Growth in construction activities due to increased Government spending specially

in rural areas

100% Foreign Direct Investment (FDI) in Real Estate to boost construction activities

Increased product awareness and compliance with international manufacturing

standards

xx%

13%

170

265

425

2005 2008 2012



16%

CAGR


Future Outlook

The construction chemical industry faces intense competition from traditional

products like sand and tar. However, due to increased product awareness and

compliance with international standards, construction chemicals are slowly capturing

the Indian market.

Due to lack of entry barriers, competition is high and a lot of low value products are

being sold in the market. Domestic companies have easy access to foreign technology

and are hence able to compete with multinational players. Margins are lowered

because most contractors prefer low cost chemicals to reduce the construction cost.

High value products have limited demand from premium construction houses. Exports

are limited and have to comply with REACH regulation.

Construction chemicals market has a huge growth potential due to the construction

and manufacturing boom in India. High price sensitivity is the key challenge being

faced by the industry. Following are the critical success factors for growth in the

market:

l

l

Market Overview

Product innovation and diversification

Creating product awareness

Polmer additives are specialty chemicals added to the base polymer to enhance

certain properties or improve processing and account for roughly 10% of the

manufacturing cost. The Indian polymer additives market has achieved a CAGR of 10%

in the period from 2004-08 to reach ~ USD 235 million in 2008. Plasticizers form the

largest segment with 43% market share followed by heat stabilizers with 21% market

share. In terms of end use industry perspective, PVC consumes the maximum amount

of additives accounting for 40% of the total market followed by polyolefins with 20%.

Polymer Additives

Antioxidants,8%

FlameRetardants,

5%

Others, 19%

HeatStabilizers,

21%

LightStabilizers,

4%

Total: USD 235million

Plasticizers,43%



Industry Overview

The organized segment has approximately 30 players and is dominated by

multinational companies like Ciba India Ltd., Clariant Chemicals India Ltd., BASF,

LANXESS India Private Ltd., Baerlocher India Ltd., Akzo Nobel Chemicals (India) Limited

and Rohm & Haas India 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. Ciba is the market leader in

flame retardants, light stabilizers, and antioxidants.



l

l

The market for polymer additives is expected to grow at a CAGR of 11% to reach ~ USD

360 million in 2012. Key market drivers include:

Growth in plastic demand due to increased usage in packaging, construction and

automotive sectors

Replacement of wood, metal and glass by plastic across various applications

165

240

360

2004 2008 2012

10%

xx%

11%

Market size (USD billion) CAGR



Future Outlook

Increasing demand for environment friendly additives by domestic market together

with regulations such as REACH on exports is forcing players to adopt environment

friendly manufacturing route. With rising consumer awareness, players switching to

oleochemical route have a competitive advantage over others.

The present market is characterized by falling prices and low profit margins due to

overcapacity of major manufacturers, reduction in import tariffs and dollar

devaluation. Strict regulation on additive use in plastics is expected to drive demand

and increase sales.

Development of environment friendly additives is a major challenge being faced by the

industry. Companies that are able to modify their product portfolio accordingly shall

have a competitive advantage over others. The problem of overcapacity is likely to be

addressed either by certain players exiting the market or via mergers and acquisitions.

Thought Notes



l

l

The market for polymer additives is expected to grow at a CAGR of 11% to reach ~ USD

360 million in 2012. Key market drivers include:

Growth in plastic demand due to increased usage in packaging, construction and

automotive sectors

Replacement of wood, metal and glass by plastic across various applications

165

240

360

2004 2008 2012

10%

xx%

11%

Market size (USD billion) CAGR



Future Outlook

Increasing demand for environment friendly additives by domestic market together

with regulations such as REACH on exports is forcing players to adopt environment

friendly manufacturing route. With rising consumer awareness, players switching to

oleochemical route have a competitive advantage over others.

The present market is characterized by falling prices and low profit margins due to

overcapacity of major manufacturers, reduction in import tariffs and dollar

devaluation. Strict regulation on additive use in plastics is expected to drive demand

and increase sales.

Development of environment friendly additives is a major challenge being faced by the

industry. Companies that are able to modify their product portfolio accordingly shall

have a competitive advantage over others. The problem of overcapacity is likely to be

addressed either by certain players exiting the market or via mergers and acquisitions.

Thought Notes

Indian Specialty Chemicals:

When will growth return?Triggered by the economic downturn- slowdowns in key end use industries and

inventory adjustments across the supply chain have impacted the growth momentum of the Indian specialty chemicals industry. A revival of domestic

demand and competitiveness as a global supply base should enable India to establish itself as an emerging specialty chemicals hub. The big question is when

will the revival happen? Pratik Kadakia, Abhishek Nigam and Ashwin Rao of Tata Strategic offer a perspective on this and on what companies should do in

the interim to their advantage.

Indian Specialty Chemicals:

When will growth return?Triggered by the economic downturn- slowdowns in key end use industries and

inventory adjustments across the supply chain have impacted the growth momentum of the Indian specialty chemicals industry. A revival of domestic

demand and competitiveness as a global supply base should enable India to establish itself as an emerging specialty chemicals hub. The big question is when

will the revival happen? Pratik Kadakia, Abhishek Nigam and Ashwin Rao of Tata Strategic offer a perspective on this and on what companies should do in

the interim to their advantage.



Indian specialty chemicals in 2006-07: An unfolding

growth story

Slowdown in end-use industries

Slowdown in the Indian chemicals industry

The Indian specialty chemicals industry estimated at ~ USD 18 billion (including

knowledge chemicals) in 2006-07 was an unfolding growth story. While the growth in

developed markets of US, Europe and Japan had stagnated, the Indian specialty

chemicals market continued to grow and was projected to double over the next five

years.

So what has changed in the past one year or so? The economic slowdown has

adversely affected the growth of several industries across the world. The Indian

chemicals industry in general and the specialty chemicals segment in particular, have

been no different. In this article we explore whether the economic slowdown has

fundamentally changed the script of the growth story or the Indian specialty chemistry

industry would continue to chart its growth path.

The demand for specialty chemicals industry is driven by a wide range of end-use

industries. While some of these such as pharmaceuticals, pesticides and water

treatment have felt the tremors of the global slowdown to a lesser extent; others like

textile, construction, automobile and personal care segments have suffered a

significant loss in growth momentum (Refer Exhibit 1). Housing market slowdown,

stalling of infrastructure projects, reduction in discretionary expenses and weakened

demand from export markets have adversely affected the growth rates of the relevant

end-use industries. This has directly impacted the growth of the Indian specialty

chemicals industry.

The economic slowdown has no doubt impacted the growth of the overall Indian

chemical industry in the short term. Analysis of the financial performance (revenue

and profitability) of various chemical companies in India shows that different segments

have been impacted differently by the current slowdown (Refer Exhibit 2). From the

base chemicals perspective, organic and petrochemical companies have fared

relatively poorly as compared to inorganic chemicals, while within specialty chemicals,

agrochemical companies have fared relatively better than other segments.

The growth rate started to slow down by end of 2007, with the first contraction in

chemicals production reported in Sep 2008. The next six months continued to witness

sub-zero/ near-zero growth due to demand slowdown and inventory reduction. There

were also concerns of dumping of several products by countries with huge

overcapacities like China. All these factors along with a sharp drop in crude oil prices

resulted in a



Indian specialty chemicals in 2006-07: An unfolding

growth story

Slowdown in end-use industries

Slowdown in the Indian chemicals industry

The Indian specialty chemicals industry estimated at ~ USD 18 billion (including

knowledge chemicals) in 2006-07 was an unfolding growth story. While the growth in

developed markets of US, Europe and Japan had stagnated, the Indian specialty

chemicals market continued to grow and was projected to double over the next five

years.

So what has changed in the past one year or so? The economic slowdown has

adversely affected the growth of several industries across the world. The Indian

chemicals industry in general and the specialty chemicals segment in particular, have

been no different. In this article we explore whether the economic slowdown has

fundamentally changed the script of the growth story or the Indian specialty chemistry

industry would continue to chart its growth path.

The demand for specialty chemicals industry is driven by a wide range of end-use

industries. While some of these such as pharmaceuticals, pesticides and water

treatment have felt the tremors of the global slowdown to a lesser extent; others like

textile, construction, automobile and personal care segments have suffered a

significant loss in growth momentum (Refer Exhibit 1). Housing market slowdown,

stalling of infrastructure projects, reduction in discretionary expenses and weakened

demand from export markets have adversely affected the growth rates of the relevant

end-use industries. This has directly impacted the growth of the Indian specialty

chemicals industry.

The economic slowdown has no doubt impacted the growth of the overall Indian

chemical industry in the short term. Analysis of the financial performance (revenue

and profitability) of various chemical companies in India shows that different segments

have been impacted differently by the current slowdown (Refer Exhibit 2). From the

base chemicals perspective, organic and petrochemical companies have fared

relatively poorly as compared to inorganic chemicals, while within specialty chemicals,

agrochemical companies have fared relatively better than other segments.






resulted in a



15

9

17

14

11

15

14

20

10

7

12

6

7

10

9

12

Personal Care

Paper

Leather

Automobiles

Paints

Glass

Construction

Textiles

Exhibit 1: End Use Industry (EUI) growth projections (%)

High - moderate (Housing/ automotive slow down)

Severe (Exports affected)

Low - moderate

High - moderate (Cut on discretionary expenses)

Severe (Cut on discretionary expenses, high interest rates, carsexpensive liability, some respite due to launch of small cars)


High - moderate (Housing slow down, infrastructure projects stalled)

Severe (Exports constitute 40 - 50%; badly affected)

Impact of slowdown

Pre-downturnDue to slowdown © Tata Strategic Management Group

30

16

9

25

4

-4

6

22

-4

15

23

-18

-172

79

108

-15

26

35

42

Base chemicals (% change)

-4

19

-1

18

-15

0

14

19

-40

106TataChemicals

RIL(Petrochem.)

GACL

GNFC

KanoriaChemicals

Specialty chemicals (% change)

-20

BASF India

Clariant India*

Bayer Cropscience

Rallis

Excel Crop Care

Pidilite

AkzoNobel(ICI Paints)

SI Group

Jubilant

Organosys(Ind. & Perf. products)

Ion exchange (chemicals)

Ino

rga

nic

Organ

ic &Petro

chem

ical

Agro

chem

ica l

Co

nstru

ction

Exhibit 2: Company financial performance (Standalone/ India operations)

* Calendar year reportingOperating Income

% change (FY09 over FY08)

EBIT

© Tata Strategic Management GroupSource: Capitaline, Company annual reports

6

0

-

ations)

Exhibit 3 : Fall in chemicalprices in Q4 2008 (% decrease)

Source: Analyst reports, Industry news©Tata Strategic Management Group

98

51

34

40

SulphuricAcid

AceticAcid

Benzene

Plasticizer






resulted in a price crash of several chemicals and petrochemicals in the last quarter of

2008 (Refer Exhibit 3). Base chemicals witnessed 33-50% price erosion during the

same period. This compounded the already existing credit crunch resulting in a draw

down of inventory by chemical users. Drop in demand forced several manufacturers to

cut production across the industry (Refer Exhibit 4).

Exhibit 4 : Plant production cutslReliance Industries Ltd

Lower operating rates due to production cuts at Patalganga facility in Q3 Fy’09n Fiber intermediate at 91%

nPolyester plants at 81%lAsian Paints

Chemical plant closed for a period of amonth

lBASF IndiaProduction cuts in plants catering toautomobile, construction and textilessector

Companies utilized this period to drive performance improvement initiatives to

minimize the impact on the bottom-line. For example, the petrochemicals business

segment of Reliance Industries Ltd. reported higher EBIT in Q1 FY 2010, than in Q1 FY

2009 despite lower quarterly revenues.



15

9

17

14

11

15

14

20

10

7

12

6

7

10

9

12

Personal Care

Paper

Leather

Automobiles

Paints

Glass

Construction

Textiles

Exhibit 1: End Use Industry (EUI) growth projections (%)


Severe (Exports affected)

Low - moderate

High - moderate (Cut on discretionary expenses)

Severe (Cut on discretionary expenses, high interest rates, carsexpensive liability, some respite due to launch of small cars)


High - moderate (Housing slow down, infrastructure projects stalled)

Severe (Exports constitute 40 - 50%; badly affected)

Impact of slowdown

Pre-downturnDue to slowdown © Tata Strategic Management Group

30

16

9

25

4

-4

6

22

-4

15

23

-18

-172

79

108

-15

26

35

42

Base chemicals (% change)

-4

19

-1

18

-15

0

14

19

-40

106TataChemicals

RIL(Petrochem.)

GACL

GNFC

KanoriaChemicals

Specialty chemicals (% change)

-20

BASF India

Clariant India*

Bayer Cropscience

Rallis

Excel Crop Care

Pidilite

AkzoNobel(ICI Paints)

SI Group

Jubilant

Organosys(Ind. & Perf. products)

Ion exchange (chemicals)

Ino

rga

nic

Organ

ic &Petro

chem

ical

Agro

chem

ica l

Co

nstru

ction

Exhibit 2: Company financial performance (Standalone/ India operations)

* Calendar year reportingOperating Income

% change (FY09 over FY08)

EBIT

© Tata Strategic Management GroupSource: Capitaline, Company annual reports

6

0

-

ations)

Exhibit 3 : Fall in chemicalprices in Q4 2008 (% decrease)

Source: Analyst reports, Industry news©Tata Strategic Management Group

98

51

34

40

SulphuricAcid

AceticAcid

Benzene

Plasticizer






resulted in a price crash of several chemicals and petrochemicals in the last quarter of

2008 (Refer Exhibit 3). Base chemicals witnessed 33-50% price erosion during the

same period. This compounded the already existing credit crunch resulting in a draw

down of inventory by chemical users. Drop in demand forced several manufacturers to

cut production across the industry (Refer Exhibit 4).

Exhibit 4 : Plant production cutslReliance Industries Ltd

Lower operating rates due to production cuts at Patalganga facility in Q3 Fy’09n Fiber intermediate at 91%

nPolyester plants at 81%lAsian Paints

Chemical plant closed for a period of amonth

lBASF IndiaProduction cuts in plants catering toautomobile, construction and textilessector

Companies utilized this period to drive performance improvement initiatives to

minimize the impact on the bottom-line. For example, the petrochemicals business

segment of Reliance Industries Ltd. reported higher EBIT in Q1 FY 2010, than in Q1 FY

2009 despite lower quarterly revenues.



Fundamental drivers for growth remain robust

Opportunity to review and refocus

The exact nature of the growth recovery would vary for different chemicals and be

dependant on larger macroeconomic variables like impact of monsoons on Indian GDP

growth. However the two most significant growth drivers of Indian specialty chemicals

industry remain robust: the huge unrealized potential of the domestic market

(reflected in the very low per capita consumption of chemicals and their end products)

and the preferred global competitive supply base (due to advantages in several areas

including human resources, operational excellence and feedstock) (Refer Exhibit 5).

Huge unrealized potential of domestic market

Per capita consumption of several chemicals and related consumer products is low in

India, far below the world average. Even at revised GDP growth rate projections of ~7%

p.a., the Indian domestic market offers a vast untapped potential. Rise in per capita

income will fuel the demand for better quality and higher performance products

leading to increased demand for specialty chemicals.

Preferred destination as a supply base

Besides being a large market, India is also establishing itself as a reliable and cost

effective manufacturer of specialty chemicals. The erstwhile cost advantage of China

with respect to India in manufacturing is narrowing. Besides providing access to a rich

pool of knowledge workers, India also provides a robust legal and regulatory

framework for research based development, not to mention a better intellectual

property protection environment. Also, India has a vast bio-resource potential to

support the global trend of using sustainable agri-based feedstock and is providing the

infrastructure for research in evolving areas such as green chemistry.

The fundamentals of the Indian growth story continue to remain; however the

economic slowdown has shifted the timelines of the demand trajectory. The growth

slowdown and subsequent demand contraction in 2008-09 has been sudden and steep

but the first signs of revival are there to be seen. The Index of Industrial Production

(IIP) has turned positive after months of de-growth. The six core infrastructure

industries grew 6.5 % in June 2009 with cement showing a strong performance,

Source: A Scenario for the Chemicals Industry in EU, Sep 2007; Arthur D. Little Benelux

Federchimica ,

28

15

7.0

0.6

3.0

0.5

0.05

0.2

0.2

Paper

Dyestuff

Adhesives

Detergents

Paint

Per capita consumption: (kg)

World Avg.India

Brazil & China

Asia average

61

22

4 7 4

95

Swit

zerl

and

Ital

y

Pola

nd

Ind

ia

Ch

ina

(Co

asta

l)

Ch

ina

(In

lan

d)

Unit labor costs $/person/yr)

across countries (’000

India has advantages in labor costs, R&Dcapability & skilled human resource

Exhibit 5

14

25

5.0Polymers

© Tata Strategic Management Group

-4.7

5.6 6.1

2.6

6.6

10.4

4

-3.7

14.7

7

12.8

5.3

Jun-08 Jun-09

Crude Oil Petroleumproducts

Coal Electricity Cement FinishedSteel

Exhibit 6: Revival of core infrastructure industries

© Tata Strategic Management Group Source : Economic Times, July 24,09

highlighting the upsurge in construction activity. Similarly, growth in coal and

electricity sectors is an indicator of rising energy demand which correlates to

acceleration of the overall economic activity (Refer Exhibit 6).

The key question is: when will growth return to pre-crisis levels? The worst may be

behind us. For example, BASF India in its recently declared financial results for Q1 FY

2010 reported sales turnover, operating profit and net profit higher than not only the

last quarter but better than any of the last 4 quarters. A slow up-turn could see the

demand reach pre-crisis levels by mid 2010 subject to overall GDP growth projections

holding firm. The growth could return to earlier projected levels of ~15% p.a. driven

largely by strong domestic end-use industries growth and some revival in the global

markets (Refer Exhibit 7).



Fundamental drivers for growth remain robust

Opportunity to review and refocus

The exact nature of the growth recovery would vary for different chemicals and be

dependant on larger macroeconomic variables like impact of monsoons on Indian GDP

growth. However the two most significant growth drivers of Indian specialty chemicals

industry remain robust: the huge unrealized potential of the domestic market

(reflected in the very low per capita consumption of chemicals and their end products)

and the preferred global competitive supply base (due to advantages in several areas

including human resources, operational excellence and feedstock) (Refer Exhibit 5).

Huge unrealized potential of domestic market

Per capita consumption of several chemicals and related consumer products is low in

India, far below the world average. Even at revised GDP growth rate projections of ~7%

p.a., the Indian domestic market offers a vast untapped potential. Rise in per capita

income will fuel the demand for better quality and higher performance products

leading to increased demand for specialty chemicals.

Preferred destination as a supply base

Besides being a large market, India is also establishing itself as a reliable and cost

effective manufacturer of specialty chemicals. The erstwhile cost advantage of China

with respect to India in manufacturing is narrowing. Besides providing access to a rich

pool of knowledge workers, India also provides a robust legal and regulatory

framework for research based development, not to mention a better intellectual

property protection environment. Also, India has a vast bio-resource potential to

support the global trend of using sustainable agri-based feedstock and is providing the

infrastructure for research in evolving areas such as green chemistry.

The fundamentals of the Indian growth story continue to remain; however the

economic slowdown has shifted the timelines of the demand trajectory. The growth

slowdown and subsequent demand contraction in 2008-09 has been sudden and steep

but the first signs of revival are there to be seen. The Index of Industrial Production

(IIP) has turned positive after months of de-growth. The six core infrastructure

industries grew 6.5 % in June 2009 with cement showing a strong performance,

Source: A Scenario for the Chemicals Industry in EU, Sep 2007; Arthur D. Little Benelux

Federchimica ,

28

15

7.0

0.6

3.0

0.5

0.05

0.2

0.2

Paper

Dyestuff

Adhesives

Detergents

Paint

Per capita consumption: (kg)

World Avg.India

Brazil & China

Asia average

61

22

4 7 4

95

Swit

zerl

and

Ital

y

Pola

nd

Ind

ia

Ch

ina

(Co

asta

l)

Ch

ina

(In

lan

d)

Unit labor costs $/person/yr)

across countries (’000

India has advantages in labor costs, R&Dcapability & skilled human resource

Exhibit 5

14

25

5.0Polymers


-4.7

5.6 6.1

2.6

6.6

10.4

4

-3.7

14.7

7

12.8

5.3

Jun-08 Jun-09

Crude Oil Petroleumproducts

Coal Electricity Cement FinishedSteel

Exhibit 6: Revival of core infrastructure industries

© Tata Strategic Management Group Source : Economic Times, July 24,09

highlighting the upsurge in construction activity. Similarly, growth in coal and

electricity sectors is an indicator of rising energy demand which correlates to

acceleration of the overall economic activity (Refer Exhibit 6).

The key question is: when will growth return to pre-crisis levels? The worst may be

behind us. For example, BASF India in its recently declared financial results for Q1 FY

2010 reported sales turnover, operating profit and net profit higher than not only the

last quarter but better than any of the last 4 quarters. A slow up-turn could see the

demand reach pre-crisis levels by mid 2010 subject to overall GDP growth projections

holding firm. The growth could return to earlier projected levels of ~15% p.a. driven

largely by strong domestic end-use industries growth and some revival in the global

markets (Refer Exhibit 7).


201020072002

Inv. slowdown adj/demand

Demand(NOT TO SCALE)

Time -year end

(NOT TO SCALE)

Pre-growth projection

CAGR: 15-17%

downturn

2012

~4- quartersprojection-shift

8

Opportunity to reviewstrategy and build

capability

Past growth curveCAGR: 11-12%

Preslowdown

Post recovery

20092008

Exhibit 7: Specialty chemicals growth projections INDICATIVE

Post-downturngrowth curve CAGR: ~15%

Slowdown, demandcontraction & recovery


The current economic slowdown has provided an opportunity to specialty chemical

companies in India to review their strategic direction and strengthen capabilities

required to cater to the unique requirements of the domestic market. Companies that

invest to increase their competitiveness and work towards innovative solutions to

meet specific customer needs would be best positioned to reap benefits when high

growth returns for the Indian specialty chemicals industry which may not be too far

into the future.

Green Chemistry: Building a greener future

Going green will no longer be a matter of choice but will become a strategic imperative for Indian chemical companies, say Pratik Kadakia,

Abhishek Nigam and Ashwin Rao of Tata Strategic Management Group


201020072002

Inv. slowdown adj/demand

Demand(NOT TO SCALE)

Time -year end

(NOT TO SCALE)

Pre-growth projection

CAGR: 15-17%

downturn

2012

~4- quartersprojection-shift

8

Opportunity to reviewstrategy and build

capability

Past growth curveCAGR: 11-12%

Preslowdown

Post recovery

20092008

Exhibit 7: Specialty chemicals growth projections INDICATIVE

Post-downturngrowth curve CAGR: ~15%

Slowdown, demandcontraction & recovery


The current economic slowdown has provided an opportunity to specialty chemical

companies in India to review their strategic direction and strengthen capabilities

required to cater to the unique requirements of the domestic market. Companies that

invest to increase their competitiveness and work towards innovative solutions to

meet specific customer needs would be best positioned to reap benefits when high

growth returns for the Indian specialty chemicals industry which may not be too far

into the future.

Green Chemistry: Building a greener future

Going green will no longer be a matter of choice but will become a strategic imperative for Indian chemical companies, say Pratik Kadakia,




Green chemistry gained popularity in the 1990s when Paul Anastas and John Warner

popularised it through their 12 tenets. Today, it is acknowledged as a science based,

economically driven approach to environmental protection and sustainable

development. In their efforts to ensure sustainability, companies around the world are

increasingly looking at reducing waste generation and energy usage while attempting

to manufacture chemical products from renewable feedstock.

In India, chemical companies are fast making progress to lower the industry's

environmental footprint by adopting green chemistry strategies that reduce emissions,

improve sustainability and promote the eco-credentials of manufactured products and

processes (see Box). This trend is being fuelled not only by a growing awareness

among Indian consumers of the environment and mankind's impact on it, but also by

the rise of a wealthy Indian middle class with a much greater spending power than in

the past (Figure 1).

Growing environmental consciousness has resulted in an increasing demand for green

products and processes, such as green buildings. Greening a building adds 3-8%

additional cost over a conventional building; however, the payback is less than three

years due to savings in operational expenses. Over 300 such buildings have been

constructed in India and it is expected that over 700 more will have been built by

2010, ensuring a demand for green building materials such as high performance glass,

low VOC paints and fly ash blocks.1

New legislation, such as Europe's Evaluation, Authorisation and Restriction of

Chemicals (REACH) regulations, has also affected the way that chemical companies do

business around the world, including in India. About 15% of India's chemical exports,

roughly US$500m, are to the EU, a sizable market that is difficult to ignore. Many

Indian manufacturers compete on cost basis for exports, a business model that

traditionally provides little incentive for rigorous risk assessment of chemicals.2

However, companies that take steps to ensure sustainability and go green will have

unrestricted access to markets, boost their reputation and gain a competitive

advantage in the marketplace. REACH and other stringent regulations expected in the

future are spurring investments in green technology.

The Indian ‘green’ story (( Box)))

l

l

l

l

l

The Indian textile industry, one of the biggest consumers of chemicals, has recently adopted microbial de - colourisation and degradation procedures, and begun exploring biodiversity for natural dyes and developing eco-friendly methodology for synthetic dyes.8

Hindustan Petroleum Corporation Limited (HPCL), a public sector refiner, has stated its intent to bring to market green lubricants developed from renewable feedstock.

DuPont, as part of its R&D strategy, has set up a knowledge centre in India focusing on areas like green technologies for refinery processes.9

Gujarat Narmada Fertilizers Company Ltd, a public sector firm, GNFC, a public sector company, has developed and implemented an Environment Management System (EMS) for its fertilisers, , chemicals and supporting services at Gujarat. Due to EMS, the firm has reduced its energy, water and lube oil consumption and increased its revenue from scrap sale due to better segregation.

Tata Chemicals has established an Innovation Centre to focus on green technologies in emerging areas such as nano-technology, fermentation and bio-fuels. The centre plays a dual role, greening existing businesses by researchingbiochemical processes that are more environment- friendly and energy efficient and developing new green products.



Green chemistry gained popularity in the 1990s when Paul Anastas and John Warner

popularised it through their 12 tenets. Today, it is acknowledged as a science based,

economically driven approach to environmental protection and sustainable

development. In their efforts to ensure sustainability, companies around the world are

increasingly looking at reducing waste generation and energy usage while attempting

to manufacture chemical products from renewable feedstock.

In India, chemical companies are fast making progress to lower the industry's

environmental footprint by adopting green chemistry strategies that reduce emissions,

improve sustainability and promote the eco-credentials of manufactured products and

processes (see Box). This trend is being fuelled not only by a growing awareness

among Indian consumers of the environment and mankind's impact on it, but also by

the rise of a wealthy Indian middle class with a much greater spending power than in

the past (Figure 1).

Growing environmental consciousness has resulted in an increasing demand for green

products and processes, such as green buildings. Greening a building adds 3-8%

additional cost over a conventional building; however, the payback is less than three

years due to savings in operational expenses. Over 300 such buildings have been

constructed in India and it is expected that over 700 more will have been built by

2010, ensuring a demand for green building materials such as high performance glass,

low VOC paints and fly ash blocks.1

New legislation, such as Europe's Evaluation, Authorisation and Restriction of

Chemicals (REACH) regulations, has also affected the way that chemical companies do

business around the world, including in India. About 15% of India's chemical exports,

roughly US$500m, are to the EU, a sizable market that is difficult to ignore. Many

Indian manufacturers compete on cost basis for exports, a business model that

traditionally provides little incentive for rigorous risk assessment of chemicals.2

However, companies that take steps to ensure sustainability and go green will have

unrestricted access to markets, boost their reputation and gain a competitive

advantage in the marketplace. REACH and other stringent regulations expected in the

future are spurring investments in green technology.

The Indian ‘green’ story (( Box)))

l

l

l

l

l

The Indian textile industry, one of the biggest consumers of chemicals, has recently adopted microbial de - colourisation and degradation procedures, and begun exploring biodiversity for natural dyes and developing eco-friendly methodology for synthetic dyes.8

Hindustan Petroleum Corporation Limited (HPCL), a public sector refiner, has stated its intent to bring to market green lubricants developed from renewable feedstock.

DuPont, as part of its R&D strategy, has set up a knowledge centre in India focusing on areas like green technologies for refinery processes.9

Gujarat Narmada Fertilizers Company Ltd, a public sector firm, GNFC, a public sector company, has developed and implemented an Environment Management System (EMS) for its fertilisers, , chemicals and supporting services at Gujarat. Due to EMS, the firm has reduced its energy, water and lube oil consumption and increased its revenue from scrap sale due to better segregation.

Tata Chemicals has established an Innovation Centre to focus on green technologies in emerging areas such as nano-technology, fermentation and bio-fuels. The centre plays a dual role, greening existing businesses by researchingbiochemical processes that are more environment- friendly and energy efficient and developing new green products.



Bioresource potential

The growing biorenewables sector, meanwhile, also presents new and potentially

lucrative opportunities for chemical companies in India. According to business

research and consulting firm Frost & Sullivan, the global bio-renewable chemicals

market was worth an estimated US$1.63 billion in 2007 - 08, and is expected to

increase to US$5 billion by 2015. Bio-refineries that make both fuels and chemicals

from crop plants are expected to replace conventional petro-chemical plants in the not

too distant future, while recent biosyntheses of widely used industrial solvents, such

as methyl ethyl ketone, increase the possibility of replacing oil-based derivatives in

processes and products.3 Carbohydrates, fatty acids and fatty alcohols from oil crops 4

are also being used to generate biosurfactants with the help of microbial enzymes.

Figure1: The Indian income pyramid

Source: National Council of Applied Economic Research, India (NCAER)/ Tata Strategic analysis

132,250

Deprived

Number of Households in ’000 (In 2005-06 Prices)

Aspirers

Seekers

Strivers

Near rich

Clear rich

Sheer rich

Super rich

3,212

13,813

53,276

114,394

6,173

22,268

75,304

78,446

11,647

35,290

102,830

4,937

2,373

1,037

2,369

613

375

1,122

454

103

53

141

255

27.7 %

25.0 %

22.9 %

20.3 %

17.5 %

12.4 %

8.6 %

-6.3%

CAGR2005 2014 -

Total 204,283

221,945

236,506 50

2005-6 2009-10E 2013-14E

Annual Income‘000 USD

>242

120 242

48 120

24 48

12 24

4.8 12

2.2 4.8

<2.2

1 USD = INR

resources and raw materials, as well as access to a large pool of consumers. Besides

being in a position to bring green products to the market quickly and enjoying a first

mover advantage, they could also leverage these gains in other markets.

The initial success of green chemistry in India is also attributed to the role played by

other stakeholders, including government and research organisations, in helping to

foster the uptake and development of green technologies. The green chemistry

programme started by the Department of Science and Technology in 2004 supports

industry-led research and training in the form of workshops. Currently, the department

supports research in several fields, including ionic liquids, non-hazardous bromination

and degradable polymer composites, packaging plastics and bio-surfactants.

While large companies may have the wherewithal to undertake research on their own,

small & medium enterprises (SMEs) need more support. Organisations such as the

Gujarat Cleaner Production Centre (GCPC) recognise this need, and in association with

United Nations Industrial Development Organization (UNIDO) identify and provide

consulting services for SME projects in the green chemistry space.

Several companies, meanwhile, have also tied up with academic institutions, such as

Mumbai University's Institute of Chemical Technology, and research organisations, like

the National Chemical Laboratory, Pune. As a result, active research is being conducted

in areas that include the oxidation of alcohols to carbonyl compounds, green synthesis

of amides from nitriles and making ionic liquids more effective for promoting organic

reactions.

Indian 'enviropreneurs', (entrepreneurs with business models built on addressing

environmental concerns, profitably), are providing a wide range of solutions in the

areas of yield improvement and solvent recycling to minimise waste. Also, special

environment funds are looking to invest in green technologies, especially in enzymatic

production routes and biopolymers.

Company CEOs need to place their bets today on whether they will lead the way in

adopting green chemistry and create a competitive advantage or be a participant in a

crowded space in the future. Leading the green charge successfully will require

companies to devise innovative approaches to deliver economic, environmental and

social benefits.

A case in point is Dow Corning, which started 'Materials Conversion' to recover value

from waste, scrap and off-specification silicone materials - those materials that cannot

be reused in their original form - by converting them to usable products. In this way,

the company both protected the environment by keeping materials out of landfills and 7incinerators and met customer needs in new and existing applications.

Other stakeholders

Competitive advantage

India ranks as the second largest country in the world, with approximately 170 million 5hectares of arable land, and is home to a vast bio-resource potential. National

laboratories, academic institutes and industry are actively pursuing bio-diesel, bio-

ethanol, bio-surfactants, bio-polymers and bio-pharmaceuticals. Sugar mill companies,

such as Mumbai-based Godavari Biorefineries, headquartered in Mumbai, have also

started manufacturing products from renewable resources, forming an entire value-

chain right from sugarcane through sugar to other value-added products like power,

ethanol, chemicals and bio-fertilisers. Meanwhile, grants, such as the US$11 million a

year grants fund of the Indian Council of Scientific and Industrial Research (CSIR), is 6

also helping to promote further development in the bio-renewables domain.

While the concern over the use of land for food, versus non-foods is not yet resolved,

bio-renewables advances nevertheless have the potential to create a significant impact

in India, as well as to alter the sourcing landscape. Companies that invest in R&D in the

region will have a competitive advantage, both in terms of availability of qualified



Bioresource potential

The growing biorenewables sector, meanwhile, also presents new and potentially

lucrative opportunities for chemical companies in India. According to business

research and consulting firm Frost & Sullivan, the global bio-renewable chemicals

market was worth an estimated US$1.63 billion in 2007 - 08, and is expected to

increase to US$5 billion by 2015. Bio-refineries that make both fuels and chemicals

from crop plants are expected to replace conventional petro-chemical plants in the not

too distant future, while recent biosyntheses of widely used industrial solvents, such

as methyl ethyl ketone, increase the possibility of replacing oil-based derivatives in

processes and products.3 Carbohydrates, fatty acids and fatty alcohols from oil crops 4

are also being used to generate biosurfactants with the help of microbial enzymes.

Figure1: The Indian income pyramid

Source: National Council of Applied Economic Research, India (NCAER)/ Tata Strategic analysis

132,250

Deprived

Number of Households in ’000 (In 2005-06 Prices)

Aspirers

Seekers

Strivers

Near rich

Clear rich

Sheer rich

Super rich

3,212

13,813

53,276

114,394

6,173

22,268

75,304

78,446

11,647

35,290

102,830

4,937

2,373

1,037

2,369

613

375

1,122

454

103

53

141

255

27.7 %

25.0 %

22.9 %

20.3 %

17.5 %

12.4 %

8.6 %

-6.3%

CAGR2005 2014 -

Total 204,283

221,945

236,506 50

2005-6 2009-10E 2013-14E

Annual Income‘000 USD

>242

120 242

48 120

24 48

12 24

4.8 12

2.2 4.8

<2.2

1 USD = INR

resources and raw materials, as well as access to a large pool of consumers. Besides

being in a position to bring green products to the market quickly and enjoying a first

mover advantage, they could also leverage these gains in other markets.

The initial success of green chemistry in India is also attributed to the role played by

other stakeholders, including government and research organisations, in helping to

foster the uptake and development of green technologies. The green chemistry

programme started by the Department of Science and Technology in 2004 supports

industry-led research and training in the form of workshops. Currently, the department

supports research in several fields, including ionic liquids, non-hazardous bromination

and degradable polymer composites, packaging plastics and bio-surfactants.

While large companies may have the wherewithal to undertake research on their own,

small & medium enterprises (SMEs) need more support. Organisations such as the

Gujarat Cleaner Production Centre (GCPC) recognise this need, and in association with

United Nations Industrial Development Organization (UNIDO) identify and provide

consulting services for SME projects in the green chemistry space.

Several companies, meanwhile, have also tied up with academic institutions, such as

Mumbai University's Institute of Chemical Technology, and research organisations, like

the National Chemical Laboratory, Pune. As a result, active research is being conducted

in areas that include the oxidation of alcohols to carbonyl compounds, green synthesis

of amides from nitriles and making ionic liquids more effective for promoting organic

reactions.

Indian 'enviropreneurs', (entrepreneurs with business models built on addressing

environmental concerns, profitably), are providing a wide range of solutions in the

areas of yield improvement and solvent recycling to minimise waste. Also, special

environment funds are looking to invest in green technologies, especially in enzymatic

production routes and biopolymers.

Company CEOs need to place their bets today on whether they will lead the way in

adopting green chemistry and create a competitive advantage or be a participant in a

crowded space in the future. Leading the green charge successfully will require

companies to devise innovative approaches to deliver economic, environmental and

social benefits.

A case in point is Dow Corning, which started 'Materials Conversion' to recover value

from waste, scrap and off-specification silicone materials - those materials that cannot

be reused in their original form - by converting them to usable products. In this way,

the company both protected the environment by keeping materials out of landfills and 7incinerators and met customer needs in new and existing applications.

Other stakeholders

Competitive advantage

India ranks as the second largest country in the world, with approximately 170 million 5hectares of arable land, and is home to a vast bio-resource potential. National

laboratories, academic institutes and industry are actively pursuing bio-diesel, bio-

ethanol, bio-surfactants, bio-polymers and bio-pharmaceuticals. Sugar mill companies,

such as Mumbai-based Godavari Biorefineries, headquartered in Mumbai, have also

started manufacturing products from renewable resources, forming an entire value-

chain right from sugarcane through sugar to other value-added products like power,

ethanol, chemicals and bio-fertilisers. Meanwhile, grants, such as the US$11 million a

year grants fund of the Indian Council of Scientific and Industrial Research (CSIR), is 6

also helping to promote further development in the bio-renewables domain.

While the concern over the use of land for food, versus non-foods is not yet resolved,

bio-renewables advances nevertheless have the potential to create a significant impact

in India, as well as to alter the sourcing landscape. Companies that invest in R&D in the

region will have a competitive advantage, both in terms of availability of qualified


Companies need to have a comprehensive and well thought out plan for achieving

sustainability and green objectives. A three-point agenda for Indian companies to

accelerate their journey to go green could be:

1. Build sustainability goals into vision statements, with clear objectives cascading

down to market facing goals. These could take the form of clearly defined revenue

targets for green products - manufactured from renewable feedstock or fully

recyclable products - and operational goals, such as a reduction in the firm's

carbon footprint.

2. Communicate and demonstrate top management support for green initiatives. This

is necessary for innovation to flourish, which is a key enabler in the path to go

green. It will also help the management resist short-term pressures from derailing

long-term strategic intent.

3. Undertake a life-cycle assessment of existing products and look for opportunities

to introduce green products/ services, based on an understanding of current and

evolving customer needs. This could throw up areas within the supply chain that

are environmentally deficient and most probably economically inefficient.

Companies could initially face cost and scalability issues for green technologies and

products. However, a clear roadmap with prioritised actions will help to achieve their

triple bottom line and realise the benefits of green chemistry long before competition

steps in. Companies that understand the market, regulatory and technology trends

have the potential to alter the landscape of the Indian chemical industry and will be in

a better position to take advantage of the opportunities and establish a strong

foothold.

References

1. The Economic Times, Sep 22 2008, 'Eco-friendly 'green buildings' catching on in

India'.

2. ChemicalWatch, Aug 14 2007, 'REACH awareness 'top priority' for Indian firms'.

3. ICIS Chemical Business, 'Are chemical producers engaged in the drive to use green

chemicals?', 11 May 2009.

4. MISTRA website, 'Greenchem - speciality chemicals from renewable resources'.

5. UN Food and Agricultural Organization, 2004 World Almanac.

6. Presentation at 5th Sustainable Chemistry Stakeholders Meeting, 8 Mar 2007,

'Sustainable chemistry and biotechnology activities in India'.

7. Dow Corning Sustainability 2004 and 2006 Summary Report and 'Materials

Conversion' webpage.

8. M. Kidwai, 'Green chemistry in India,' IUPAC, 2001

9. Business Standard, 24 Nov 2008, 'DuPont knowledge centre to focus on green

tech'.

Outlook for personal care ingredients industry:

An Indian perspectiveThe Indian personal care ingredients (PCI) industry has taken rapid strides in the last

few years, as more and more personal care products (PCP) incorporate specialty ingredients in their formulation. However, a comparison with per capita consumption of

PCP in China reflects the largely untapped nature of the Indian market. Favorable demographic factors and increasing beauty consciousness indicate high future demand

for personal care products and specifically for active ingredients. Key trends, including nanotechnology and green chemistry besides others, will influence the strategies of

PCP and consequently PCI players. The eventual winners would be those who ensure better value offerings to meet the needs of the Indian consumer say Pratik Kadakia,



Companies need to have a comprehensive and well thought out plan for achieving

sustainability and green objectives. A three-point agenda for Indian companies to

accelerate their journey to go green could be:

1. Build sustainability goals into vision statements, with clear objectives cascading

down to market facing goals. These could take the form of clearly defined revenue

targets for green products - manufactured from renewable feedstock or fully

recyclable products - and operational goals, such as a reduction in the firm's

carbon footprint.

2. Communicate and demonstrate top management support for green initiatives. This

is necessary for innovation to flourish, which is a key enabler in the path to go

green. It will also help the management resist short-term pressures from derailing

long-term strategic intent.

3. Undertake a life-cycle assessment of existing products and look for opportunities

to introduce green products/ services, based on an understanding of current and

evolving customer needs. This could throw up areas within the supply chain that

are environmentally deficient and most probably economically inefficient.

Companies could initially face cost and scalability issues for green technologies and

products. However, a clear roadmap with prioritised actions will help to achieve their

triple bottom line and realise the benefits of green chemistry long before competition

steps in. Companies that understand the market, regulatory and technology trends

have the potential to alter the landscape of the Indian chemical industry and will be in

a better position to take advantage of the opportunities and establish a strong

foothold.

References

1. The Economic Times, Sep 22 2008, 'Eco-friendly 'green buildings' catching on in

India'.

2. ChemicalWatch, Aug 14 2007, 'REACH awareness 'top priority' for Indian firms'.

3. ICIS Chemical Business, 'Are chemical producers engaged in the drive to use green

chemicals?', 11 May 2009.

4. MISTRA website, 'Greenchem - speciality chemicals from renewable resources'.

5. UN Food and Agricultural Organization, 2004 World Almanac.

6. Presentation at 5th Sustainable Chemistry Stakeholders Meeting, 8 Mar 2007,

'Sustainable chemistry and biotechnology activities in India'.

7. Dow Corning Sustainability 2004 and 2006 Summary Report and 'Materials

Conversion' webpage.

8. M. Kidwai, 'Green chemistry in India,' IUPAC, 2001

9. Business Standard, 24 Nov 2008, 'DuPont knowledge centre to focus on green

tech'.

Outlook for personal care ingredients industry:

An Indian perspectiveThe Indian personal care ingredients (PCI) industry has taken rapid strides in the last

few years, as more and more personal care products (PCP) incorporate specialty ingredients in their formulation. However, a comparison with per capita consumption of

PCP in China reflects the largely untapped nature of the Indian market. Favorable demographic factors and increasing beauty consciousness indicate high future demand

for personal care products and specifically for active ingredients. Key trends, including nanotechnology and green chemistry besides others, will influence the strategies of

PCP and consequently PCI players. The eventual winners would be those who ensure better value offerings to meet the needs of the Indian consumer say Pratik Kadakia,




Chemicals & personal care

Indian personal care products market

From soaps and shampoos in the morning to overnight repair face creams, from

sunscreen products in summers to moisturising lotions in winters; personal care

products literally touch our daily lives. The personal care products we use are in some

measure the signature of our lifestyles and standards of living.

The awareness about ubiquitous personal care products is perhaps matched only by

the total ignorance or misinformation about the chemicals that make these products

what they are. From the metallic salts of fatty acids used to make the common bath

soaps to the high end cosmoceuticals that combine the beauty related properties of

cosmetics with the functional benefits of pharmaceuticals, chemicals (whether derived

from natural or synthetic sources) are an integral part of personal care products.

Specialty chemicals are widely used in personal care products as active ingredients in

the form of emollients, foaming agents, and stabilizers. Their performance

characteristics like thickening, foaming, imparting smoothness and conditioning are

the key functionalities sought in several personal care products. Before we delve into

the personal care ingredients (PCI) industry, let us present an overview of the Indian

personal care products (PCP) market and its key trends.

The personal care products (PCP) market in India is estimated to be worth ~USD 4

billion p.a. Personal hygiene products (including bath and shower products,

deodorants etc.), hair care, skin care, colour cosmetics and fragrances are the key

segments of the personal care market (Refer Fig 1).

46%

31%

16%

6%1%

Bath & shower products HaircareSkincare Colour CosmeticsFragrances

Source: Morgan Stanley Report


Fig 1: Segmental breakup of personal care market

Each of these segments exhibits its unique trends and growth patterns. For example,

the largest segment of personal hygiene products, largely dominated by bar soaps has

grown at ~5% p.a. over the last five years. In comparison, the second largest segment,

hair care products has seen a much higher growth of ~9-10% p.a. during the same

period.



Chemicals & personal care

Indian personal care products market

From soaps and shampoos in the morning to overnight repair face creams, from

sunscreen products in summers to moisturising lotions in winters; personal care

products literally touch our daily lives. The personal care products we use are in some

measure the signature of our lifestyles and standards of living.

The awareness about ubiquitous personal care products is perhaps matched only by

the total ignorance or misinformation about the chemicals that make these products

what they are. From the metallic salts of fatty acids used to make the common bath

soaps to the high end cosmoceuticals that combine the beauty related properties of

cosmetics with the functional benefits of pharmaceuticals, chemicals (whether derived

from natural or synthetic sources) are an integral part of personal care products.

Specialty chemicals are widely used in personal care products as active ingredients in

the form of emollients, foaming agents, and stabilizers. Their performance

characteristics like thickening, foaming, imparting smoothness and conditioning are

the key functionalities sought in several personal care products. Before we delve into

the personal care ingredients (PCI) industry, let us present an overview of the Indian

personal care products (PCP) market and its key trends.

The personal care products (PCP) market in India is estimated to be worth ~USD 4

billion p.a. Personal hygiene products (including bath and shower products,

deodorants etc.), hair care, skin care, colour cosmetics and fragrances are the key

segments of the personal care market (Refer Fig 1).

46%

31%

16%

6%1%

Bath & shower products HaircareSkincare Colour CosmeticsFragrances

Source: Morgan Stanley Report


Fig 1: Segmental breakup of personal care market

Each of these segments exhibits its unique trends and growth patterns. For example,

the largest segment of personal hygiene products, largely dominated by bar soaps has

grown at ~5% p.a. over the last five years. In comparison, the second largest segment,

hair care products has seen a much higher growth of ~9-10% p.a. during the same

period.



The skin care market is relatively smaller and is growing at a relatively high rate while

moving away from basic creams and moisturizers to specialized products such as anti-

wrinkle and dark circle removing creams. For example, the anti-ageing segment,

though only 2% of the skin care market has been growing at a rate of greater than 90%

p.a. over the last few years.

Key trends and growth drivers in India

As in other parts of the world, the driving force behind personal care products has

evolved considerably in India. Starting from purely health notions and moving on to

fitness, the current trend is towards well-being coupled with beauty. In an effort to

adapt to these changes, the industry has moved from basic products such as soaps,

shampoos and hair oils to functional products such as cold creams and now to

specialized products such as sun block lotions, body exfoliating creams and skin

whitening & anti-ageing products.

The sizable Indian population base with rising disposable income offers the personal

care industry a burgeoning middle class to market a large variety of consumer

products. As compared to China, India has a fairly similar personal disposable income

per household and a growing population of women in the 25-44 age group, the key

consumer segment (Refer Fig 2).

Fig 2: Demographics & Economic Drivers, India vs China

Source: EIU, CIA world fact book


1,339

219

4,363

1,166

178

4,429

2008 India

2008 China

1,365

217

7,307

1,221

191

6,250

2012P India

2012P China

Population(Mn)

Femalepopulation 25 to

44 yearsMn

Personal disposableincome perhousehold

(USD)

However, China spends almost 10 times as much on skin care, 6 times as much on

cosmetics and more than 2 times on hair care on a per capita basis (Refer Fig 3). These

figures indicate the huge unrealized potential of the Indian market especially for select

PCP segments.

Several social, market and industry trends signal the possibility of Indian personal care

industry realizing this huge potential in the near future. Increasing urbanization, rising

participation of women in urban work force and growing importance of looks and

personal grooming not only for personal but professional reasons are some of the key

social drivers. Market trends like spread of organized retail to Tier II cities,

development of non-traditional segments like men's cosmetics (with products like hair

gels and fairness creams) and development of a wide range of products at different

price points are all factors which could contribute to the growth of the domestic

personal care market. Industry trends like increasing competition with entry of large

MNCs, increased brand building and customer awareness initiatives by companies are

accelerating growth. Subject to sustained overall GDP growth rates of ~8-9% p.a., the

overall Indian personal care market has the potential to grow at 15%-16% p.a. (much

higher rates for select segments like colour cosmetics, skin care and deodorants) and

thereby double to ~USD 8 billion by 2012-13.

The changing face of the personal care products market is perhaps best reflected in

the corresponding developments in the personal care ingredients industry. Specialty

chemical manufacturers supplying to personal care are adopting 'green chemistry'

principles to better meet consumer demand for natural and safer products and

increasingly stringent regulatory requirements. This includes both product changes

featuring higher proportion of natural ingredients as raw materials and a move to

'greener' production processes based on better energy conservation, safer solvents

and minimization of waste generation.

Advances in the area of nanotechnology are helping researchers create breakthroughs

in biotechnology thereby enabling greater usage of natural ingredients in PCI industry.

Nano-scaled encapsulation techniques are being used to develop better systems to

deliver the active ingredient to the intended target area. Also, strong demand for

multi-functional products such as silicones with improved sensory characteristics and

surfactants with anti-oxidant and anti-inflammatory properties is being witnessed.

The Indian personal care ingredients market is currently estimated at ~USD 300-350

million. The relatively higher price sensitivity of the Indian personal care market has

traditionally limited the role of high value personal care ingredients. This has also

contributed to lower R&D spends and fewer innovations by the Indian personal care

product formulation companies, few of which are backward integrated in the personal

Personal care ingredients: Key global trends

Personal care ingredients in India



The skin care market is relatively smaller and is growing at a relatively high rate while

moving away from basic creams and moisturizers to specialized products such as anti-

wrinkle and dark circle removing creams. For example, the anti-ageing segment,

though only 2% of the skin care market has been growing at a rate of greater than 90%

p.a. over the last few years.

Key trends and growth drivers in India

As in other parts of the world, the driving force behind personal care products has

evolved considerably in India. Starting from purely health notions and moving on to

fitness, the current trend is towards well-being coupled with beauty. In an effort to

adapt to these changes, the industry has moved from basic products such as soaps,

shampoos and hair oils to functional products such as cold creams and now to

specialized products such as sun block lotions, body exfoliating creams and skin

whitening & anti-ageing products.

The sizable Indian population base with rising disposable income offers the personal

care industry a burgeoning middle class to market a large variety of consumer

products. As compared to China, India has a fairly similar personal disposable income

per household and a growing population of women in the 25-44 age group, the key

consumer segment (Refer Fig 2).

Fig 2: Demographics & Economic Drivers, India vs China

Source: EIU, CIA world fact book


1,339

219

4,363

1,166

178

4,429

2008 India

2008 China

1,365

217

7,307

1,221

191

6,250

2012P India

2012P China

Population(Mn)

Femalepopulation 25 to

44 yearsMn

Personal disposableincome perhousehold

(USD)

However, China spends almost 10 times as much on skin care, 6 times as much on

cosmetics and more than 2 times on hair care on a per capita basis (Refer Fig 3). These

figures indicate the huge unrealized potential of the Indian market especially for select

PCP segments.

Several social, market and industry trends signal the possibility of Indian personal care

industry realizing this huge potential in the near future. Increasing urbanization, rising

participation of women in urban work force and growing importance of looks and

personal grooming not only for personal but professional reasons are some of the key

social drivers. Market trends like spread of organized retail to Tier II cities,

development of non-traditional segments like men's cosmetics (with products like hair

gels and fairness creams) and development of a wide range of products at different

price points are all factors which could contribute to the growth of the domestic

personal care market. Industry trends like increasing competition with entry of large

MNCs, increased brand building and customer awareness initiatives by companies are

accelerating growth. Subject to sustained overall GDP growth rates of ~8-9% p.a., the

overall Indian personal care market has the potential to grow at 15%-16% p.a. (much

higher rates for select segments like colour cosmetics, skin care and deodorants) and

thereby double to ~USD 8 billion by 2012-13.

The changing face of the personal care products market is perhaps best reflected in

the corresponding developments in the personal care ingredients industry. Specialty

chemical manufacturers supplying to personal care are adopting 'green chemistry'

principles to better meet consumer demand for natural and safer products and

increasingly stringent regulatory requirements. This includes both product changes

featuring higher proportion of natural ingredients as raw materials and a move to

'greener' production processes based on better energy conservation, safer solvents

and minimization of waste generation.

Advances in the area of nanotechnology are helping researchers create breakthroughs

in biotechnology thereby enabling greater usage of natural ingredients in PCI industry.

Nano-scaled encapsulation techniques are being used to develop better systems to

deliver the active ingredient to the intended target area. Also, strong demand for

multi-functional products such as silicones with improved sensory characteristics and

surfactants with anti-oxidant and anti-inflammatory properties is being witnessed.

The Indian personal care ingredients market is currently estimated at ~USD 300-350

million. The relatively higher price sensitivity of the Indian personal care market has

traditionally limited the role of high value personal care ingredients. This has also

contributed to lower R&D spends and fewer innovations by the Indian personal care

product formulation companies, few of which are backward integrated in the personal

Personal care ingredients: Key global trends

Personal care ingredients in India



care ingredients space. However the recent market developments and changed

competitive landscape with the advent of large corporations willing to take investment

decisions for a longer time horizon have contributed to changing the scenario. Global

trends like high demand for green products are already

Fig 3: Per capita usage, India vs. China

1.57

0.05

1.1

0.22

0.75

0.55

1.42

0.04

2.56

1.32

1.74

5.11

Bath andshower

products

Deodarants

Hair care

Colourcosmetics

Oral hygiene

Skin care

Source: Morgan Stanley report, CIA world fact book© Tata Strategic Management Group

China percapita spend($)

India per capitaspend ($)

well established in the domestic context due to long standing preference of the Indian

consumer for herbal products. Other trends like consumers demanding better

performance from products, whereby a minimum addition of the active ingredient to

justify marketing claims is no longer sufficient, are relatively new.

Indian personal care industry typically uses specialty chemicals such as surfactants,

fragrance compounds, polymer compounds and UV filters as active ingredients.

Growing demand is leading to development of high end specialty active ingredients

with a stronger emphasis on organic (natural) ingredients. Driven by increasing

consumer preference for products with better functional benefits, the personal care

ingredients market is expected to surpass the growth of the personal care products

market.

Way ahead for personal care industry in India

What do all these trends mean for the Indian personal care industry in general and

individual companies in particular? The PCP industry needs to self regulate to ensure

performance claims made in product advertisements are commensurate with benefits

delivered to consumers. The outlook of more stringent regulation governing usage of

active ingredients in personal care products implies the need to strengthen testing

capabilities to ensure adequate product safety especially for PCI players. Also, the

surging demand for green products calls for better product and application R&D

capabilities to use natural ingredients more effectively.

Multinational players with international brands have a strong presence in the Indian

formulation segment. Local brands too are gaining a foothold in the market by

innovatively developing value offerings to meet the unique needs of the Indian

consumer. Going ahead, it will be important to develop R&D capabilities to further

customize products for Indian consumers, create greater awareness among the

burgeoning middle class and ensure effective distribution reach to service them. The

companies that are able to develop a judicious mix of the above will be the eventual

winners.

The time is ripe to review one's strategy and come up with innovative approaches to

help realize the full potential of the Indian personal care sector, where the ingredients

market is likely to double in the next four years.



care ingredients space. However the recent market developments and changed

competitive landscape with the advent of large corporations willing to take investment

decisions for a longer time horizon have contributed to changing the scenario. Global

trends like high demand for green products are already

Fig 3: Per capita usage, India vs. China

1.57

0.05

1.1

0.22

0.75

0.55

1.42

0.04

2.56

1.32

1.74

5.11

Bath andshower

products

Deodarants

Hair care

Colourcosmetics

Oral hygiene

Skin care

Source: Morgan Stanley report, CIA world fact book© Tata Strategic Management Group

China percapita spend($)

India per capitaspend ($)

well established in the domestic context due to long standing preference of the Indian

consumer for herbal products. Other trends like consumers demanding better

performance from products, whereby a minimum addition of the active ingredient to

justify marketing claims is no longer sufficient, are relatively new.

Indian personal care industry typically uses specialty chemicals such as surfactants,

fragrance compounds, polymer compounds and UV filters as active ingredients.

Growing demand is leading to development of high end specialty active ingredients

with a stronger emphasis on organic (natural) ingredients. Driven by increasing

consumer preference for products with better functional benefits, the personal care

ingredients market is expected to surpass the growth of the personal care products

market.

Way ahead for personal care industry in India

What do all these trends mean for the Indian personal care industry in general and

individual companies in particular? The PCP industry needs to self regulate to ensure

performance claims made in product advertisements are commensurate with benefits

delivered to consumers. The outlook of more stringent regulation governing usage of

active ingredients in personal care products implies the need to strengthen testing

capabilities to ensure adequate product safety especially for PCI players. Also, the

surging demand for green products calls for better product and application R&D

capabilities to use natural ingredients more effectively.

Multinational players with international brands have a strong presence in the Indian

formulation segment. Local brands too are gaining a foothold in the market by

innovatively developing value offerings to meet the unique needs of the Indian

consumer. Going ahead, it will be important to develop R&D capabilities to further

customize products for Indian consumers, create greater awareness among the

burgeoning middle class and ensure effective distribution reach to service them. The

companies that are able to develop a judicious mix of the above will be the eventual

winners.

The time is ripe to review one's strategy and come up with innovative approaches to

help realize the full potential of the Indian personal care sector, where the ingredients

market is likely to double in the next four years.



Tata Strategic Management Group is a leading management consulting firm in South

Asia. Set up in 1991, Tata Strategic has completed over 500 engagements with more

than 100 Clients across countries and industry sectors, addressing the business

concerns of the top management. We enhance client value by providing creative

strategy advice, developing innovative solutions and partnering effective

implementation.


BusinessOptimization

Business Portfolio ReviewCompetitive & Growth Strategy, Country/India Entry Strategy

Business Due Diligence for M&A; Turnaround Strategy

StrategyFormulation

OrganizationEffectiveness

Design of Organization Structure & RolesPerformance & Talent Management

Capability Assessment & Development

PerformanceImprovement

Integrated Cost Reduction, Profit enhancementLogistics, Channel & Supply Chain Design

Business Process Improvement; Rightsizing

Input Cost OptimizationMarket Share improvement, Spend Optimization

Business Risk Management

ContactPratik Kadakia (Practice Head-Chemical & Energy)email: [email protected] [email protected]

Co-AuthorsAshwin RaoManjula SinghSiddhartha Gondal

Tata Strategic Management GroupNirmal, 18th Floor, Nariman PointMumbai-400021

Tel no. : 91-22-Fax no. : 91-22-66376600Website: www.tsmg.com

66376789

Established 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 38 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 79 countries around the world.

A non-government, not-for-profit organisation, FICCI has direct membership from the

private as well as public sectors, including SMEs and MNCs. As an apex chamber, over

350 chambers of commerce and industry are our members; thus FICCI is the voice of

India's business and industry.

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 over 350 chambers from across

the country carry forward our initiatives in inclusive development, which encompass

health, education, livelihood, governance, skill development, etc.

With 8 offices in India, overseas offices in the UK, USA, Singapore, etc. and institutional

partnerships with 211 counterpart organisations, FICCI serves as the first port of call

for Indian industry and the international business community.

About Commerce and Industry (FICCI)

Federation of Indian Chambers of

Mr. R K Bhatia (Head-

Federation House, 1 Tansen Marg, New Delhi-110 001Tel. : 91-11-23316540 (D)/23357350 (D)EPBX : 91-11-23738760-70 (Extn.395/474)Fax : 91-11-23320714/233721504

Chemicals & Pharmaceuticals Division, FICCI)


(Assistant Director-Chemicals & Pharmaceuticals Division, FICCI)

E-mail : [email protected] Ms. Ranjita C Sood




Tata Strategic Management Group is a leading management consulting firm in South

Asia. Set up in 1991, Tata Strategic has completed over 500 engagements with more

than 100 Clients across countries and industry sectors, addressing the business

concerns of the top management. We enhance client value by providing creative

strategy advice, developing innovative solutions and partnering effective

implementation.


BusinessOptimization

Business Portfolio ReviewCompetitive & Growth Strategy, Country/India Entry Strategy

Business Due Diligence for M&A; Turnaround Strategy

StrategyFormulation

OrganizationEffectiveness

Design of Organization Structure & RolesPerformance & Talent Management

Capability Assessment & Development

PerformanceImprovement

Integrated Cost Reduction, Profit enhancementLogistics, Channel & Supply Chain Design

Business Process Improvement; Rightsizing

Input Cost OptimizationMarket Share improvement, Spend Optimization

Business Risk Management

ContactPratik Kadakia (Practice Head-Chemical & Energy)email: [email protected] [email protected]

Co-AuthorsAshwin RaoManjula SinghSiddhartha Gondal

Tata Strategic Management GroupNirmal, 18th Floor, Nariman PointMumbai-400021

Tel no. : 91-22-Fax no. : 91-22-66376600Website: www.tsmg.com

66376789

Established 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 38 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 79 countries around the world.

A non-government, not-for-profit organisation, FICCI has direct membership from the

private as well as public sectors, including SMEs and MNCs. As an apex chamber, over

350 chambers of commerce and industry are our members; thus FICCI is the voice of

India's business and industry.

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 over 350 chambers from across

the country carry forward our initiatives in inclusive development, which encompass

health, education, livelihood, governance, skill development, etc.

With 8 offices in India, overseas offices in the UK, USA, Singapore, etc. and institutional

partnerships with 211 counterpart organisations, FICCI serves as the first port of call

for Indian industry and the international business community.

About Commerce and Industry (FICCI)

Federation of Indian Chambers of

Mr. R K Bhatia (Head-

Federation House, 1 Tansen Marg, New Delhi-110 001Tel. : 91-11-23316540 (D)/23357350 (D)EPBX : 91-11-23738760-70 (Extn.395/474)Fax : 91-11-23320714/233721504

Chemicals & Pharmaceuticals Division, FICCI)


(Assistant Director-Chemicals & Pharmaceuticals Division, FICCI)

E-mail : [email protected] Ms. Ranjita C Sood




Mr. R K Bhatia (Head - Chemicals & Pharmaceuticals Division, FICCI)

Federation House, 1 Tansen MargNew Delhi-110 001

Tel. : 91-11-23316540 (D)/23357350 (D)EPBX : 91-11-23738760-70 (Extn.395/474)Fax : 91-11-23320714/233721504


Ms. Ranjita C Sood (Asst. Director-Chemicals & Pharmaceuticals Division, FICCI)E-mail : [email protected]

Website : www.ficci.com

Pratik Kadakia (Practice Head - Chemical & Energy)E-mail : [email protected]

Abhishek Nigam E-mail : [email protected]

Nirmal, 18th Floor, Nariman PointMumbai-400021

Tel No. : 91-22-66376789Fax No. : 91-22-66376600Website : www.tsmg.com


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INDIACHEM GUJARAT - Tata Strategic Management Group · Federation House, 1 Tansen Marg ... supplying various dyes and organic pigments to the export ... The fiscal ) INDIACHEM GUJARAT