Avendus Specialty Chemicals Report
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chemical industry segments...
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Message from the authors ............................................................................................. 05
II. Specialty chemicals : Amalgamation Amalgamation of disparate parts .................................... 06
Market growth drivers ................. .................................... ...................................... ...................................... ...................................... ...................................... ....................... .... Key success factors ................. .................................... ...................................... ...................................... ...................................... ...................................... ............................. .......... Key trends ................... ...................................... ...................................... ...................................... ...................................... ...................................... ...................................... .......................... ....... Challenges ................. .................................... ...................................... ...................................... ...................................... ...................................... ...................................... .......................... ....... Segment attractiveness ................... ..................................... ..................................... ...................................... ...................................... ...................................... ..................... Key takeaways ................. .................................... ..................................... ..................................... ...................................... ...................................... ...................................... .....................
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...................................... ...................................... ...................................... ...................................... ....................... .... 12 III. Specialty chemical segments ...................
AGROCHEMICALS | Page 12 - 29
Executive summary ................. .................................... ...................................... ...................................... ...................................... ...................................... ............................. .......... 13 Introduction to agrochemicals : A critical agricultural input ................... ...................................... .......................... ....... 14 > Intro Introductio duction n to agro agrochem chemicals icals .............................................................................................................. 14 > Classi�cation of agrochemicals ............................................................................................................. 14 > Ag Agro roche chemic micals als value value chain chain ..................................................................................................................... 16 Market size and growth ................... ..................................... ..................................... ...................................... ...................................... ...................................... ..................... 17 Key success factors .................. ..................................... ...................................... ...................................... ...................................... ...................................... ............................. .......... 23 Key trends shaping the market ................... ...................................... ...................................... ...................................... ...................................... ....................... .... 24 Key challenges ................. .................................... ..................................... ..................................... ...................................... ...................................... ...................................... ..................... 25 Competitive landscape................. landscape.................................... ...................................... ...................................... ...................................... ...................................... ....................... .... 26 > Com Compan panies ies to to watch watch out out for for ....................................................................................................................27 27 Rallis .......................................................................................................................................................... 28 Indo�l ........................................................................................................................................................ 28 PI Industries Industries .............................................................................................................................................28 28 Dhanuka ...................................................................................................................................................29 Dhanuka
Future outlook : Marketing and product portfolio management as the key diff erentiators erentiators ............................................................................................................................................. 29
FLAVORS FLAV ORS AND FRAGRANCES | Page 30 - 43
Executive summary.................. summary..................................... ...................................... ...................................... ...................................... ...................................... ............................. .......... 31 Introduction to F&F : An important contributor to sensorial connect .......................... 32 > An intr introdu oducti ction on to to F&F F&F ............................................................................................................................. 32 > Indu Industr stryy val value ue cha chain in ................................................................................................................................... 32 Market size and market growth ................... ...................................... ...................................... ...................................... ...................................... ....................... .... 34 Key success factors .................. ..................................... ...................................... ...................................... ...................................... ...................................... ............................. .......... 37 > Ing Ingre redie dient nt manufact manufacture urers rs ........................................................................................................................ 37 > Bl Blen end der erss .......................................................................................................................................................... 37 Trends shaping the market .................. ..................................... ...................................... ...................................... ...................................... ................................ ............. 37 Challenges and concomitant opportunities for Indian players ....................................... 40
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SPECIALTY CHEMICALS IN INDIA
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Competitive landscape and companies to watch out for .................................................. 41 > Ingredients manufacturers ...................................................................................................................... 41 > Blenders .......................................................................................................................................................... 41 > Companies to watch out for ....................................................................................................................41 Synthite Industries ................................................................................................................................ 42 Privi Organics .......................................................................................................................................... 42
Future outlook ................................................................................................................................... 42 > M&A and JVs in the Indian market ........................................................................................................ 43
DYES AND PIGMENTS | Page 44 - 53
Executive summary .......................................................................................................................... 45 Introduction to the market ........................................................................................................... 46 > Introduction to dyes and pigments ..................................................................................................... 46 > Value chain .................................................................................................................................................... 46 > Classi�cation of dyes and pigments ..................................................................................................... 47 Market size and market growth .................................................................................................. 48 Key sucess factors ............................................................................................................................. 49 Trends shaping the market ........................................................................................................... 50 Competitive landscape .................................................................................................................. 51 > Companies to watch out for ....................................................................................................................52 Aarti Industries ...................................................................................................................................... 52 Sudarshan Chemicals .......................................................................................................................... 52 Neelikon ................................................................................................................................................... 53
Future outlook ................................................................................................................................... 53
SURFACTANTS | Page 54 - 59
Executive summary .......................................................................................................................... 55 Introduction to the market ........................................................................................................... 56 > Introduction to surfactants ..................................................................................................................... 56 > Value chain .................................................................................................................................................... 56 Market size and market growth .................................................................................................. 57 Key success factors ........................................................................................................................... 58 Trends shaping the market ........................................................................................................... 58 Competitive landscape .................................................................................................................. 59 > M&A activity and capital expansion ..................................................................................................... 59 Future outlook ................................................................................................................................................ 59
POLYMER ADDITIVES | Page 60 - 67
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Executive summary .......................................................................................................................... 61 Introduction to the market ........................................................................................................... 62 > Plastic : Value chain .................................................................................................................................... 62 > Types of polymer additives ..................................................................................................................... 62 Market size and market growth .................................................................................................. 63
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Key success factors ........................................................................................................................... 65 Trends shaping the market ........................................................................................................... 65 Competitive landscape and companies to watch out for .................................................. 65 > Companies to watch out for .....................................................................................................................66 HPL Additives .......................................................................................................................................... 66 Future outlook ................................................................................................................................... 66
PERSONAL CARE INGREDIENTS | Page 68 - 77
Executive summary .......................................................................................................................... 69 Introduction to the market ........................................................................................................... 70 > Types of personal care ingredients ....................................................................................................... 70 > Value chain ..................................................................................................................................................... 71 Market size and market growth .................................................................................................. 72 Key success factors ........................................................................................................................... 74 Trends shaping the market ........................................................................................................... 74 Competitive landscape .................................................................................................................. 76 > Companies to watch out for ....................................................................................................................76 Kumar Organics ..................................................................................................................................... 76 Future outlook ................................................................................................................................... 77
CONSTRUCTION CHEMICALS | Page 78 - 85
Executive summary .......................................................................................................................... 79 Introduction to the market ............................................................................................................ 80 > Value chain .................................................................................................................................................... 80 > Types of products ....................................................................................................................................... 80 Market size and market growth .................................................................................................. 81 Key success factors ........................................................................................................................... 82 Trends shaping the market ........................................................................................................... 82 Competitive landscape and companies to watch out for .................................................. 83 > Companies to watch out for ....................................................................................................................84 Pidilite ....................................................................................................................................................... 84 Future outlook ................................................................................................................................... 84
WATER CHEMICALS | Page 86 - 95
Executive summary .......................................................................................................................... 87 Introduction to the market ........................................................................................................... 88 > Types of water chemicals ......................................................................................................................... 88 Market size and market growth .................................................................................................. 88 Key success factors ........................................................................................................................... 90 Trends shaping the market ........................................................................................................... 91 Competitive landscape .................................................................................................................. 93 Future outlook ................................................................................................................................... 94
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TEXTILE CHEMICALS | Page 96 - 101
Executive summary ........................................................................................................................ 97 Introduction to the market ......................................................................................................... 98 Market size and market growth ................................................................................................ 99 Trends shaping the market ......................................................................................................... 100 Competitive landscape ................................................................................................................ 100 Challenges for textile chemicals ............................................................................................... 101 Future outlook ................................................................................................................................. 101
IV. APPENDICES | Page 102 - 106
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Appendix-I ........................................................................................................................................ 103 > Segment attractiveness : Scoring methodology ........................................................................... 103 Appendix-II ....................................................................................................................................... 104 > Recent inbound and outbound transactions : Strategic M&A .................................................. 104 Appendix-III ...................................................................................................................................... 106 > Trading multiples of select listed Indian and global specialty chemical players ................ 106
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Specialty chemicals, which comprise low volume, high value chemicals with speci�c applications, constitute a signi�cant part of the Indian chemcial industry. With increasing demand for value added high performance products in all spheres of the life of an average Indian, we expect growth in demand for specialty chemicals that add such functionalities to products. At the same time, the shift of manufacturing to the East and India’s export competitiveness is expected to strengthen India’s position as a manufacturing hub for specialty chemicals. A glimpse of India’s emergence as a major export hub is already seen in segments such as agrochemicals and colorants, in which a signi�cant part of India’s production is exported. While globally the specialty chemicals industry is diff erentiated from bulk chemicals by extensive R&D and innovation, such a demarcation is almost non-existent in the Indian context due to the “genericized” nature of the Indian specialty chemicals industry. However, we view the specialty chemicals space as an amalgamation of parts – multiple segments having unique characteristics and correspondingly witnessing diff erent industry dynamics. While the Indian specialty chemicals sector is well covered and researched, given the disparate characteristics of the various segments, we felt there was need for a more detailed study on each of the segments. In this report we will endeavour to deep - dive into the key segments within this space to test how they compare on various performance parameters. Our aim has been to identify, in the Indian context, the most attractive segments and within these segments, the most specialized and high growth niches.
Mr. Preet Mohan Singh Executive Director
Mr. Koushik Bhattacharyya Vice President
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!"#$%&'() $+#,%$&'! &,&'0&,&(%.3 .1 4%!"&-&(# "&-(! The de�nition of specialty chemicals varies widely across the industr y. For the purpose of this whitepaper, we have de �ned it as chemicals which are used in low quantities (not in bulk) and are targeted towards speci �c end-use applications. From a �nancial perspective, a more tangible metric to distinguish between specialty and bulk chemicals is the EBITDA margin of the business. Specialty chemicals, by virtue of being high value, specialized products command higher margins than most bulk products. Globally, specialty chemicals are driven by extensive product R&D and innovation, which is a signi �cant diff erentiator over the commoditized chemical industry. However, in the Indian context, this line of demarcation is almost non-existent due to the “genericized” nature of the specialty industry. This also leads to a visible di ff erence in margin structure of global and Indian specialty chemical companies. Specialty chemicals can be sub-divided based on end-user industries. In addition to end-use driven segments, there are a few categories of specialty chemicals which are used across several end-user segments for similar applications. Our whitepaper breaks down the specialty chemicals industry into a mix of end-use driven segments (agrochemicals, personal care ingredients, polymer additives, water chemicals, textile chemicals and construction chemicals) and application-driven segments (surfactants, �avours and fragrances and dyes and pigments). These are the largest constituents of the specialty chemicals industry and cumulatively constitute over 80% of the specialty chemicals universe. Segments within specialty chemicals vary in attractiveness and witness varying levels of competitive intensity, margin pro �les, defensibility against raw material cost movements, and growth (including growth of the end-user segment in many cases).
Figure 1: Market size and growth Source: Literature review; Avendus analysis Note: USD 1 = INR 60 throughout the report
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