1、home.kpmg/inNovember 2022Specialty chemicals industry in India 2022 KPMG Assurance and Consulting Services LLP,an Indian Limited Liability Partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited,a private English company li

2、mited by guarantee.All rights reserved.2022 KPMG Assurance and Consulting Services LLP,an Indian Limited Liability Partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All r

3、ights reserved.2 2022 KPMG Assurance and Consulting Services LLP,an Indian Limited Liability Partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.2022 KP

4、MG Assurance and Consulting Services LLP,an Indian Limited Liability Partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.2 2022 KPMG Assurance and Consu

5、lting Services LLP,an Indian Limited Liability Partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.2 2022 KPMG Assurance and Consulting Services LLP,an

6、Indian Limited Liability Partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.2 2022 KPMG Assurance and Consulting Services LLP,an Indian Limited Liabili

7、ty Partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.2Table of contentsExecutive summary 41.The buoyant Indian specialty chemicals market 6 1.1 Specia

8、lty chemicals market segmentation2.Impact of COVID-19 on the industry 10 2.1 Assessing the impact of COVID-19 across segments 3.Opportunities driven by multinational offshoring strategies 12 3.1 India emerging as a viable alternative 3.2 Capturing the export opportunity within segments 4.Opportuniti

9、es in the Indian market 16 4.1 Indias trade flow presents a multifold opportunity for the sector 4.2 Rise in demand in different end-user industries 4.3 Favourable government initiatives 5.Enablers for growth 206.Key strategies adopted by companies within the sector 22 6.1-6.3 Case studies of Indian

10、 and multinational companies 6.4 Key learnings 7.Key takeaways 26 2022 KPMG Assurance and Consulting Services LLP,an Indian Limited Liability Partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited,a private English company

11、 limited by guarantee.All rights reserved.3From identifying new growth opportunities to effectively addressing long-term E,S and G challenges,KPMG in India can assist.Executive summaryThe Indian chemical industry plays a pivotal role in contributing to the economy of the country,accounting for appro

12、ximately 7 per cent of GDP and is expected to reach USD304 billion by 20251,up from USD178 billion in 2021.The industry continues to remain an attractive hub for opportunities for both domestic and multinational manufacturers.Specialty chemicals segment comprises a significant portion of Indias chem

13、ical industry.With rising demand for value-added products by both domestic consumption and exports,the industry has experienced a significant increase from end-user segments such as the food industry,automobile industry,real estate,clothes and cosmetics,among other industries.Additionally,the Indian

14、 specialty chemicals industry is also expected to outpace China,Japan and the rest of the world.From a trading perspective,specialty chemicals account for a significant share of more than 50 per cent of chemical exports2.Active pharmaceutical ingredients(APIs)and dyes and pigments continue to domina

15、te the sub-segments in terms of influencing export potential.The competitive intensity,margin profiles,safety from price fluctuations in raw materials and growth potential vary between the segments within specialised chemicals.Operations in several key industries globally were disrupted during the C

16、OVID-19-induced lockdown period,as revenues were strained due to the hindrance in transportation facilities,causing stockpiles and unavailability of labour.However,prevailing factors also spurred demand for a few specialty chemical sub-segments because these were identified,as necessary.Consumer dem

17、and,for instance,increased for products related to hygiene.The lockdown period also led to supply chain disruptions,which forced manufacturers to de-risk their supply chains and shift their reliance away from crucial manufacturers located in China and toward alternative countries like India.Moreover

18、,stringent pollution control regulations and high labour costs,along with China plus one strategy are expected to encourage manufacturers from China and other developed nations to move their manufacturing capabilities to India.Additionally,Indias strong process engineering capabilities,low-cost manu

19、facturing capabilities and abundant manpower are leading to an array of opportunities for imports and exports of specialty chemicals.Likewise,government initiatives,such as the Petroleum,chemicals and petrochemicals investment region(PCPIR)policy and production-linked incentive(PLI)schemes,are provi

20、ding reassurance to further develop the potential for domestic manufacturing and specialty chemicals,which are anticipated to benefit from this momentum.While India aims to emerge as a manufacturing hub for the world,there are likely to be a few challenges in the near term.Therefore,the country shou

21、ld also focus on aspects such as research and development,capital investment,acquisitions,economies of scale,and most importantly,expanding domestic demand to sustain the rising growth of the industry.1.Analysis:Chemical sector in India grows by leaps and bounds,Livemint,June 20222.India-Country Com

22、mercial Guide,International Trade Administration,September 20224 2022 KPMG Assurance and Consulting Services LLP,an Indian Limited Liability Partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited,a private English company

23、limited by guarantee.All rights reserved.5 2022 KPMG Assurance and Consulting Services LLP,an Indian Limited Liability Partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.A

24、ll rights reserved.The buoyant Indian specialty chemicals market016 2022 KPMG Assurance and Consulting Services LLP,an Indian Limited Liability Partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited,a private English compa

25、ny limited by guarantee.All rights reserved.The Indian specialty chemicals industry has expanded exponentially in recent years.It represents 22 per cent of Indias overall chemicals and petrochemicals market and is valued at USD32 billion.The industry is anticipated to reach USD64 billion by 2025 at

26、a CAGR of 12.4 per cent1.The specialty chemicals segment has been one of the fastest growing segments in the Indian manufacturing sector.This expansion can be attributed to increased demand from many end-user sectors,favourable government policies,a growing domestic customer base,changes in consumer

27、 lifestyle among other factors.From a trading perspective,specialty chemicals account for a significant share of more than 50 per cent of chemical exports.Among the sub-segments,dyes and pigments,and pharma Activepharmaceuticalingredient(APIs)remain dominant in driving the potential for exports.1.In

28、dian Specialty Chemicals,Yes Securities,January 20222.Specialty Chemicals,Motilal Oswal,June 20213.India to double specialty chemicals market share in 5 years,Crisil,March 2022In terms of global market share,Indias specialty chemicals comprise approximately 4 per cent,while China accounts for 26 per

29、 cent2.However,as shown in Exhibit 2,Indias specialty chemicals industry is predicted to grow rapidly,outpacing China,Japan and the rest of the world in percentage terms.Given its smaller global market share,Indias absolute growth will be slower.However,its market share is predicted to increase from

30、 4 per cent to 6 per cent by 2026,on the back of strong revenue growth of 15-20 per cent during FY20233.Exhibit 1:Indian specialty chemicals industry size(USD billion)1Exhibit 2:Specialty chemicals market CAGR(%)among select regions(FY2020-2025)12015ChinaNorth AmericaWesternEuropeJapanIndiaGlobalCAG

31、R 11.7per centCAGR 12.4per cent025E63214127 2022 KPMG Assurance and Consulting Services LLP,an Indian Limited Liability Partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited,a private English company limited by

32、 guarantee.All rights reserved.2022 KPMG Assurance and Consulting Services LLP,an Indian Limited Liability Partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights re

33、served.81.1 Specialty chemicals market segmentation The specialty chemicals industry comprises a wide range of sub-segments.The rising demand for these is a key reason for growth in the industry,as a whole.These are classified based on end-user markets.Some specialty chemical segments are also impor

34、tant for multiple industries.The majority of the Indian specialty market is dominated by dyes and pigments.Furthermore,the segment is likely to rise as a result of the governments objective of establishing more than 100 smart cities,which is expected to drive demand for paints and coatings2.1.Specia

35、lty Chemicals,Motilal Oswal,June 20212.Smart Cities Mission,IBEF,accessed in November 2022Exhibit 3:Breakup of select Indian specialty chemicals(per cent)1Dyes and pigmentsPolymersSurfactantsTextile chemicalsWater ChemicalsPersonal care chemicalsConstruction chemicals4686613138 2022 KPMG Assurance a

36、nd Consulting Services LLP,an Indian Limited Liability Partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.9SegmentsMarket size in 2020(USD billion)1CAG

37、R%(2020-2026)1End-user industriesEntry barriersMarket growthDyes and pigments7.010.0Textile;Paints and coatingsPersonal care chemicals1.015.0Cosmetics;Hair careSurfactants2.011.0Home care,personal careTextile chemicals1.811.5ApparelPolymers1.310.0Automotive;PipesConstruction chemicals1.415.0Real est

38、ate;InfrastructureFlavours and Fragrances2.417.1Food processing;Personal careWater chemicals0.815.0Water treatmentLowMediumHigh1.Specialty Chemicals,Motilal Oswal,June 2021COVID-19 impact on specialty chemicals segmentImpact of COVID-19 on the industry0210 2022 KPMG Assurance and Consulting Services

39、 LLP,an Indian Limited Liability Partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.11 11 2022 KPMG Assurance and Consulting Services LLP,an Indian Lim

40、ited Liability Partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.The COVID-19 pandemic disrupted manufacturing in major industries globally,primarily

41、due to the lockdowns that impacted the manufacturing segments significantly.Correspondingly,the specialty chemicals industry in India also encountered challenges such as limited transportation facilities,stockpiling at ports and unavailability of labour at plants,which hindered product processing an

42、d loading.The industry observed a fall in demand in some of the major end-user markets which specialty chemicals cater to.This comprised industries such as automotive,construction,and textiles,which witnessed a significant drop in demand due to the global recession and volatility in economic activit

43、ies.Conversely,increased demand for end-user market products in hygiene and personal care,boosted the growth potential of the specialty chemicals market,primarily on account of change in consumer preference due to conscious measures undertaken towards better health and hygiene choices.Firms within s

44、pecialty chemicals segment that cater to the pharmaceutical industries also observed vast growth.A specialised chemicals and organic intermediates manufacturer reported a 30 per cent rise in sales of the chemical isobutyl benzene(IBB),which is used to make Ibuprofen(a pain-relieving medicine).The pa

45、ndemic also prompted various multinational chemical companies to seek suppliers beyond the dominant Chinese market.Indias favourable macro-economic factors attracted such companies to the country,leading to an influx of orders for Indian manufacturers.2.1 Assessing the impact of COVID-19 across segm

46、ents1SegmentsCOVID impactHighlightsDyes and pigmentsNeutralDomestic manufacturers profited as import from China was disrupted Personal care chemicalsPositiveIncrease in demand due to consumer preference for hygiene productsSurfactantsPositiveHigh demand for disinfectants,cleaning agents and detergen

47、tsTextile chemicalsNegativeMajor demand disorder due to headwinds in end-user marketPolymersNeutralStrong demand in the packaging segment,partially offset by lower demand in automotive and industrial applicationsConstruction chemicalsNegativeNegative impact due to the decline in construction activit

48、yFlavours and FragrancesPositiveHigh demand for packaged foods and fragrances have positively impacted the sectorWater ChemicalsNeutralThe adverse impact of declining industrial activity was partially offset by increased demand for water disinfectants1.Specialty Chemicals Market in India 2022,Netscr

49、ibes,April 2022The pandemic had a mixed impact on the specialty chemical industry;industries experiencing a global recession and volatility in economic activities saw a drop in demand,whereas increasing health consciousness and hygiene,as well as the need for pain relievers,drove the demand for spec

50、ialty chemicals used in their production.11Opportunities driven by multinational offshoring strategies0312 2022 KPMG Assurance and Consulting Services LLP,an Indian Limited Liability Partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG Intern

51、ational Limited,a private English company limited by guarantee.All rights reserved.13 2022 KPMG Assurance and Consulting Services LLP,an Indian Limited Liability Partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited,a pri

52、vate English company limited by guarantee.All rights reserved.Companies within Asia play a pivotal role in the global specialty chemical spectrum.On the back of rapid industrialisation,Asian countries expanded their share in the manufacturing of specialty chemicals,resulting in a structural shift in

53、 manufacturing from the EU and North America to Asia.Among the Asian countries,China emerged as a global major in the specialty chemical manufacturing industry,dominating production levels as well as exports to the rest of the world.However,due to the countrys economic reforms transformation,such as

54、 environmental restrictions and labour costs,Chinas chemical industrywent through a transition period.Also,the relocation of hazardous manufacturing plants to designated industrial parks resulted in significant supply-chain disruptions in the countrys chemical industry.These factors led several spec

55、ialty chemical firms to re-evaluate their company strategies in terms of the location of their business activities and manufacturing sites.Some of these companies with operations in China looked into alternate locations to diversify or completely relocate their operations.3.1 India emerging as a via

56、ble alternativeIndia has the opportunity and potential to emerge as a viable alternative hub for specialty chemical manufacturing.The operational cost disparity between China and India has reduced due to Chinas enhanced pollution control regulations.Additionally,as a result of the China plus one off

57、shore strategy,numerous global manufacturers are relocating capacities to low-cost regions with high technological capabilities,such as India.India provides low-cost operations;feedstock availability;skilled labor;benefit of a long coastline and navigable waterways for ease of trade;favourable gover

58、nment policies;significant import substitution opportunity;strong intellectual property protection,among other advantages.Macro-economic factors leading to a positive ecosystem and improving the ease of doing business has been critical to attract foreign specialty chemicals manufacturers in the coun

59、try.The country is well positioned to expand its globalmarket share as it continues to invest in core R&D competence,scaleand the capacity to deliver products at lower costs(through efficiency measures)in order to build a competitive edge.The China plus one strategy is expected to attract chemical m

60、anufactures to setup and expand their production capabilities in India.This ultimately will support the growth of specialty chemicals market within the country.Exhibit 4:Specialty chemicals export dynamics1 2022 KPMG Assurance and Consulting Services LLP,an Indian Limited Liability Partnership and a

61、 member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.3.2 Capturing the export opportunity within segmentsChina contributes to 18 per cent of specialty chemical exports gl

62、obally,which is nearly quadruple the value of Indian exports1.However,as India presents itself as a viable alternative market for specialty chemical companies,there is a potential to reduce the disparity in Chinas and Indias export capacities.As indicated in the illustration below,Indias export numb

63、ers in some sub-segments are significantly low,compared to China.However,scaling up production in these sub-segments with a focus on expanding the export capacity may help India bridge the gap.Global chemical leaders re-evaluating their procurement from China to India,can also help accelerate plans

64、for expansion.Moreover,improving the productivity of chemicals catering to electronics,food additives,rubber and flavours and fragrances can aid in exploring the potential of the export share in these segments.Polymer additivesGlobal exports(USD billion)Indias export share(in per cent)Chinas export

65、share(in per cent)151512558%22%19%2%2%12%27%46%1%0%Electronic chemicalsFood additivesRubber chemicalsFlavours and fragrances1.Specialty Chemicals,Motilal Oswal,June 202114 2022 KPMG Assurance and Consulting Services LLP,an Indian Limited Liability Partnership and a member firm of the KPMG global org

66、anization of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.15Opportunities in the Indian market0416 2022 KPMG Assurance and Consulting Services LLP,an Indian Limited Liability Partnership and a member firm of th

67、e KPMG global organization of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.16 2022 KPMG Assurance and Consulting Services LLP,an Indian Limited Liability Partnership and a member firm of the KPMG global organiz

68、ation of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.4.1 Indias trade flow presents a multifold opportunity for the sectorIndia is fast becoming a preferred manufacturing destination for companies across the g

69、lobe,for its low cost manufacturing capabilities,strong process engineering skills and abundant availability of manpower.This is leading to creation of multifold opportunities in both exports and imports of specialty chemicals.Indias chemical export registered a record USD29.2 billion1 in 2021-22 wi

70、th specialty chemicals accounting for more than 50 per cent in the same.India has emerged as a significant contributor in global dyes production with a market share of approximately 16-18 per cent of the worlds dyestuff exports.Indian dye is exported to over 90 countries1.The exports of Indias top 1

71、0 specialty chemical manufacturers have grown at a CAGR of 20.8 per cent between FY15-FY20 as compared with revenue growth of 17.1 per cent during the same period1.4.2 Rise in demand in different end-user industriesResurgence in demand has influenced Indian companies to revisit their capacity expans

72、ion plans.Companies have been focusing on capacity expansion due to demand fueled by growth in the end-user industries such as pharmaceuticals,food,construction,electronics,dyes and pigments,among others.Demand for a wide range of cosmetic chemicals,health care goods,and hygiene products that contai

73、n specialty chemicals has also picked up.As a result,capital spending by companies within the sector is expected to increase by 50 per cent y-o-y to INR6,000-6,200 crore through 20233,well exceeding the INR5,000 crore spent before the pandemic in fiscal 2020.As outlined in Exhibit 5,India is a net i

74、mporter of specialty chemicals.However,reforms and policies undertaken by the Indian government,along with other strategic advantages,presents India as a viable destination for both domestic and multinational companies to align their priorities and capitalise on the import substitution opportunity,b

75、y scaling up production and resultantly reducing Indias dependence on imports.Exhibit 5:Indias three-year average total trade in TMTA*(2019-21)2Exhibit 6:Indias three-year average total exports and imports in TMTA*(2019-21)1.Exports of Indian chemicals register growth of 106%in 2021-22 over 2013-14,

76、Ministry of Commerce&Industry,April 20222.DCPC Imports-Exports list,Chemicals.nic.in,accessed in August 20223.Specialty chemicals capex to spurt 50%,riding on strong demand owing to China+1 strategy,Crisil,September 2021ImportExport15,295.4510,272.99Polymers/Textiles4,6508,5821,2331,274501723,984210

77、34962,4282,855Dyes and pigmentsRubber chemicalsAdhesiveAdditivesOthers*Thousand metric tons per annum17 2022 KPMG Assurance and Consulting Services LLP,an Indian Limited Liability Partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG Internati

78、onal Limited,a private English company limited by guarantee.All rights reserved.Exhibit 7:Growth rate of end-user industries(per cent)14.3 Favourable government initiativesPCPIR policy2The Petroleum,chemicals and petrochemicals investment region(PCPIR)was redrafted,with an aim to attract a combined

79、investment of USD142 billion by 2025,USD213 billion by 2030 and USD284 billion by 2035.Import-Export governanceIt is mandatory to mention 8-digit HSN or tariff code for 49 chemical-based products,while issuing GST.This is to curtail tax evasion and enable a better trade intelligence5.Production-link

80、ed incentive(PLI)schemePLI scheme for chemicals is in development stages,aiming for 10-20 per cent output incentives,to boost domestic production and exports3.Public procurement policyAs part of the Make in India scheme,procuring entities should follow the local content criteria for a set of chemica

81、ls.The minimum local content would progressively increase till FY256.Chemicals Promotion and Development Scheme(CPDS)CPDS was implemented to facilitate growth and development of the chemical industry,and specialty chemicals such as dye and dye intermediates4.2034 Vision for Chemicals sector7Governme

82、nt announced the setting-up of a vision 2034 blueprint to explore opportunities to improve domestic production,reduce imports and attract investments in the sector.1.Specialty Chemicals Market in India 2022,Netscribes,April 20222.India specialty chemicals,Yes Securities,January 20223.India:Global Ma

83、nufacturing Hub for Chemicals and Petrochemicals,Department of Chemicals&petro-chemicals,March 20214.National portal of India,India.gov.in,accessed in August 20225.Government makes it mandatory to mention 8-digit HSN Code in tax invoice for 49 chemical-based products,Economic Times,December 20206.Pu

84、blic Procurement(Preference to Make in India),Ministry of Power,November 20217.Government to bring PLI scheme to promote domestic agro-chemicals manufacturing,Economic Times,November 2020Textile-20206.810.215.08.011.015.813.317.05.07.59.214.5Food processingReal EstateHome careAutomobile

85、sConsumer durablesMinimum local content prescribed,under the Public procurement policy6FY1950 per centFY20FY21-23FY23-2560 per cent70 per cent80 per cent18 2022 KPMG Assurance and Consulting Services LLP,an Indian Limited Liability Partnership and a member firm of the KPMG global organization of ind

86、ependent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.19Enablers for growth0520 2022 KPMG Assurance and Consulting Services LLP,an Indian Limited Liability Partnership and a member firm of the KPMG global organization of i

87、ndependent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.20 2022 KPMG Assurance and Consulting Services LLP,an Indian Limited Liability Partnership and a member firm of the KPMG global organization of independent member fir

88、ms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.While there are opportunities favouring growth in the specialty chemicals sector,there is a need to stimulate key enablers to ensure continued growth.Strategies for ushering in these enab

89、lers need to be initiated by the key stakeholders of the industry.The governments role is also pivotal to these enablers.It is essential that there is focus on aspects such as R&D investments and acquisitions,economies of scale,government initiatives to boost manufacturing,duty restructuring,some of

90、 which are highlighted below.Companies should increasingly focus on their innovation cycle and invest in research and development.Some of the larger specialty chemical companies in India spend less than 3 per cent of their revenue towards R&D activities1.The government is aiming to increase Indias p

91、ublic investment in R&D to 2 per cent of GDP by FY25E2.The specialty chemicals industry is also likely to raise its spending to 5-6 per cent during this period.Indian companies in the specialty chemicals industry face low risk from new competitors due to high entry barriers.However,there is a need t

92、o address import dependence.With an aim to expand geographical and segment footprint,companies need to focus on growth to exploit economies of scale.With an emphasis on technology,targeting small to mid-sized firms in Europe,Japan,and the U.S.,can be beneficial for the Indian companies with resource

93、s to expand.They can explore acquiring or partnering with companies in these geographies with expertise in specific innovative chemistries,Industry 4.0 and efficient technologies.This will help in implementing advanced technologies in their domestic manufacturing capabilities.To drive further growth

94、 in the overall specialty chemicals market,introduction of collaborative platforms/schemes by the government can drive innovation.Government schemes for specialty chemicals that cater to sunrise industries can also help propel their production capabilities to compete against large international comp

95、anies.With an uptick in consumer sentiments towards sustainability,specialty chemical companies also need to focus on structuring their climate goals,particularly in manufacturing.Sustainability should be considered imperative for long term value creation rather than a compliance parameter.Governmen

96、t initiatives can also influence adoption of sustainability reporting,setting methodology-based targets and developing roadmaps for decarbonisation.R&D spendingScaling upOutbound M&AFocus on sustainability Government push1.Indian Specialty Chemical Industry,Avendus,September 20202.Specialty Chemical

97、s,Motilal Oswal,June 202121Key strategies adopted by companies within the sector062222 2022 KPMG Assurance and Consulting Services LLP,an Indian Limited Liability Partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited,a pr

98、ivate English company limited by guarantee.All rights reserved.22 2022 KPMG Assurance and Consulting Services LLP,an Indian Limited Liability Partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited,a private English company

99、 limited by guarantee.All rights reserved.As we analyse the growth drivers and inhibitors for the specialty chemicals sector,we must also look at the fundamental constituents of the sector.In this section,we will delve into the strategies that companies have adopted to grow,diversify,innovate,reinve

100、st and continue in a virtuous growth cycle.6.1 Case study 1A diversified chemicals conglomerate engaged in the manufacture of industrial intermediates maintains a portfolio of chemicals which are used in varied application,such as tyres to air conditioners,mines to cricket grounds,automotive to hous

101、ehold appliances,food packaging to raw materials for pharmaceuticals.Its business segments include technical textile business(TTB),chemical business(CB),packaging film business(PFB)and others.It exports to more than 75 countries.The company entered specialty chemicals business in early 2000s,as a su

102、pplier of fine chemicals to the agrochemicals and pharmaceuticals industry.It has been expanding its investment in specialty chemicals,which contributes 60 per cent of its chemical segmental revenue.As a result,the chemical business,which formed 30 per cent of the companys 2015 revenue,generated 40

103、per cent of its 2021 revenue.Further scale up in revenue is expected in the coming years,on back of monetisation of growth opportunities in specialty chemicals and agrochemicals.6.1.1 Strategies that have worked for the companyExtended focus on specialty chemicals Investing in research and developme

104、nt(R&D)Long-term partnerships and client relationshipsOver the years,the company has turned its focus towards specialty chemicals segment.It intends to continue with the strategy,through re-investment of the cash flow from other business segments into the chemicals business.It has also deployed dedi

105、cated facilities catering to specialty chemicals.The company places strong emphasis on innovation,having established several R&D centres.2 per cent of its revenue is dedicated to product and process innovation.It has commercialised more than 100 molecules,has over 100 global patents granted and more

106、 than 300 patents applied for.It also employs over 400 people engaged in the area of R&D,engineering and scale-ups.The companys primary clients are global market leaders in the chemical industry,and this contributes to over 50 per cent of its specialty chemical revenues.Strong network with market le

107、aders has led to collaboration in terms of innovation and research,thereby benefitting the overall business of the company.23 2022 KPMG Assurance and Consulting Services LLP,an Indian Limited Liability Partnership and a member firm of the KPMG global organization of independent member firms affiliat

108、ed with KPMG International Limited,a private English company limited by guarantee.All rights reserved.6.2 Case study 2The company is one of Indias leading manufacturers of specialty chemicals and pharmaceuticals APIs with a global footprint.It expanded its portfolio to 200 products and caters to var

109、ious end-user industries such as pharmaceuticals,polymer additives,pigment and dyes,rubber chemicals,among others.6.2.1 Strategies that have worked for the company6.3 Case study 3Indias emergence as one of the fastest growing specialty chemicals markets has attracted various multinational companies

110、to invest in the country.One of the global leaders in the industry has established a joint venture in India for clean specialty derivatives.The joint venture was established with a prominent Indian company in the market.The joint venture will be utilising the production facilities of the domestic co

111、mpany,while also using the facilities across geographies such as Sri Lanka,Bangladesh and Nepal.The key aim of the joint venture is to drive innovation to add value through sustainability and be a leading supplier of renewable materials to the rapidly growing consumer care market in India and neighb

112、ouring countries.Indias geographical position has been strategically beneficial for catering products to its neighbouring countries.Multinational companies targeting multiple markets in Asia have availed joint venture opportunities with Indian companies.They collaborate on their capabilities and dri

113、ve growth by penetrating into other markets.Due to high entry barriers of specialty chemicals in India,joint ventures prove to be a critical passage into the market.The low cost of labour,and other favourable macro factors attract multinational companies to the country.The company has diversified it

114、s product portfolio,and its clientele to more than 700 domestic and 400 export customers.Moreover,its top 10 customers contribute to more than 20 per cent of its revenue.It also has low dependence on imports from countries like China,as its key raw material has abundant domestic availability.The com

115、pany has various plans of capacity expansion FY22-24,with INR15 billion likely to be invested in existing product lines and over INR30 billion in new products.These projects are expected to double the companys revenue growth by FY27(versus FY21).The company operates on a cost-plus business model,whe

116、rein margins are safeguarded as volatility in rawmaterial cost is passed on to customers.The company has invested in scaling up its capabilities to operate complex processes,which has improved both product portfolio and margins,leading to a competitive edge.De-risking through diversificationInvestme

117、nt in capacityEfficient business model01020324 2022 KPMG Assurance and Consulting Services LLP,an Indian Limited Liability Partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited,a private English company limited by guarant

118、ee.All rights reserved.6.4 Key learnings The leading companies within the Indian ecosystem maintain a diversified portfolio with the aim of de-risking during unfavourable conditions or unforeseen events,such as COVID-19.Companies are dependent on end-user markets;hence,keeping a diverse portfolio sa

119、feguards them from uncertainties and possible demand dips in any specific end-user market.Many companies in the industry are focused on investing in scaling up their capabilities,as Indias macro-economic factors have presented it as a viable business opportunity for international investors.Entry bar

120、riers in the industry are relatively high,so opportunities lie in creating a position in the market and strengthening it further.To stay ahead of the competition,innovation is key-several major Indian specialty chemical companies made significant investments towards their R&D initiatives and also to

121、wards setting up global innovation centres.Value for eco-friendly manufacturing has also been garnering attention which is leading to companies re-assessing strategies to develop products through a sustainable process.25Key takeaways07262626 2022 KPMG Assurance and Consulting Services LLP,an Indian

122、Limited Liability Partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.26 2022 KPMG Assurance and Consulting Services LLP,an Indian Limited Liability Par

123、tnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.The specialty chemicals industry is going through a growth phase,and conducive factors can drive the in

124、dustry to emerge as one of the worlds major markets.Domestic companies taking advantage of factors such as China plus one strategy along with Indian Government pushing for self sufficiency by promoting domestic manufacturing can benefit in the long term as global manufacturing giants are evaluating

125、viable alternative manufacturing locations.However,it has to be understood that China became a global hub of chemical manufacturing through years of focus and investment in developing infrastructure,capabilities and efficiencies translating to cost leadership.Hence,specialty chemical industries in I

126、ndia would need to step up their game to be seen as globally competitive in terms of quality,cost,and agility.The future looks bright for the specialty chemicals sector in India,with many companies well-placed as long as they address key growth considerations over the coming years,and focus on custo

127、mer,enhance their global tie-ups,along with capacity and supply chain ramp-ups.Considerations for specialty chemical industry stakeholders to make India a global manufacturing hubTarget growth in domestic demand segments01Enhance scale of operations02Identification of right product mix03Build effici

128、encies in supply chain04Leverage technology05Consumption of specialty chemicals in the country is low per capita,compared to global average.Given the potential,Indian companies have the opportunity to expand their market,target key segments&states for demand-creation and build a dominant position fo

129、r themselves in the market.Majority of the specialty chemical manufacturers in India operate at a significantly lower scale,severely impacting their ability to be cost competitive with their Chinese counterparts there is need to focus on capacity expansions to right-size and for right products and g

130、et economies of scale.Specialty chemicals is a diverse space and margins vary across sub-segments-there is need to focus on growth segments like electronics,food additives,fragrance and flavours,among others,and hence it is important to invest in the right portfolio.India needs to re-look at traditi

131、onal logistics across inbound and outbound movement for both domestic and global market,as well as strengthening the secondary channel network and create efficiencies to have cost leadership.India is well positioned with existing digital and startup ecosystem favourable for innovation across new tec

132、hnologies and business models.These factors can provide significant opportunities to the sector in order to access the growth potential and deliver to the markets.27Acknowledgements:Research Reshma Pai Aanchal Behl Rohan A.Barua Anukriti Sah Damini Sharda Design and Compliance Nisha Fernandes Lata R

133、athod Venkatesh R Darshini Shah Sector/service line teams Aman Sethi Hemant Vinod Raaj KimothiWe are sincerely grateful to the following people from the ecosystem who have helped in the preparation of this report.2022 KPMG Assurance and Consulting Services LLP,an Indian Limited Liability Partnership

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140、000,Fax:+91 22 3983 6000.2022 KPMG Assurance and Consulting Services LLP,an Indian Limited Liability Partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited,a private English company limited by guarantee.All rights reserved.The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization.This document is meant for e-communication only.020_THL1122_RV_DShome.kpmg/in home.kpmg/in/socialmedia