Indian Pharma & Specialty Chemical

Industry
An Overview & Opportunities

**Source: CII/KPMG Study

Index

 Indian Pharma Industry

 Overview
 Specialty Chemical Industry
 Overview
 Opportunities
 Government Initiatives
 Pharma & Specialty Chemicals Industry
 Focus Chemistries & Technologies
 Environment & Safety

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Indian Pharma Industry: Overview

 With every passing decade since 1970, India’s pharmaceutical industry has gone from
strength to strength in terms of broadening of scope, to deepening its prowess across the
industry value chain. In a short span of time, the industry has rightfully gained the epithet
‘pharmacy to the world.’
 The growth of the industry has been fueled by adopting global standards and setting up
large scale plants while leveraging the inherent competitive advantage that India offers in
terms of its talent pool.
 Currently, India has highest number of US FDA approved plants (665) outside of the US as
well as 44 per cent of global abbreviated new drug applications (ANDA).
 India fulfils 20% of global demand for Generic Medicines in terms of volume and supplies
over 60% of the global demand for Various vaccines and Antiretroviral (ARV) drugs.
 The backbone of Indian pharmaceutical industry is the bulk drugs industry.
 Opportunity – With GOI’s Make In India and looking at Indian Pharma Industry, India needs
a well-developed bulk drugs manufacturing sector which ensures that India remains self-
dependent for its Intermediates and Active Pharmaceutical Ingredients (APIs) this creates
one of the biggest opportunities for manufacturers in Indian as currently many of
Intermediates and APIs are imported in India.
 The Government of India has recently made big announcements to launch schemes for the
bulk drug industry. These schemes will help in supporting domestic manufacturing as well
as exports.

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Indian Pharma Industry: Overview
 Indian Bulk Drug Market & Industry Structure

Indian pharmaceutical Market

~INR 374600 Crore

Bulk Drugs
Formulations
(APIs and intermediates)
INR 2,80,200 Crore
INR 96300 Crore

Domestic Exports Domestic consumption Exports

INR 1,57,800 Crore INR 1,20,400 Crore INR 66,000 Crore INR 30,300 Crore

Regulated Regulated
INR 68,300 Crore INR 13,400 Crore

Semi-regulated Semi-regulated
INR 52,100 Crore INR 16,900 Crore

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Indian Pharma Industry: Overview
 Indian API Market Size (Indicative – Rs. Crore)

1,20,000 1,10,900

1,00,000
Value (INR Crore)

79,800
80,000 73,500
67,600
62,300
57,400
60,000

40,000

20,000

0
2016 2017 2018 2019 2020E 2024E
Year

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Indian Pharma Industry: Overview
 Presence of Indian & Chinese Bulk Drug Manufacturers in Domestic & Regulated Market
against Commodity API’s and High Potency API’s.

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Indian Pharma Industry: Overview
 India’s import of Bulk Drugs totally:

 India imports around 68% from China

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Indian Specialty Chemicals Industry: Overview
 India’s specialty chemicals industry has clocked 12% growth over FY07–18. In spite of rising
environmental concerns and sharpening cost focus, the sector has sufficient dry powder to
sustain this pace led by:
 Burgeoning underlying demand from end-user industries;
 Outsourcing opportunity from the West; and
 Emerging export and import substitution opportunities due to the clampdown on
chemicals manufacturing in China.
 While these drivers create a conducive environment for the entire chemicals universe, it is
argued that specialty chemicals players – owing to strong entry barriers and high growth
visibility (10–15% end-user industry growth) – are poised to benefit the most. Moreover,
the industry has, in order to capture the promising potential, prudently increased capex by
60%-plus cumulatively over FY19–21 versus FY16–18, which is believed would pay rich
dividends.
 Key factors for the Indian Specialty Chemical Industry are as below:
 Strong structural growth opportunity
 Burgeoning outsourcing opportunities: China’s pain is India’s gain
 Specialty chemicals: Promising USD87bn opportunity by FY25E
 Strong entry barriers and aggressive capex ensure sustainable growth

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Indian Specialty Chemicals Industry: Overview
 The size of Global Specialty Chemical Industry vs Indian Specialty Chemical Industry

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Indian Specialty Chemicals Industry: Overview
 India’s chemical industry, valued at USD163bn in FY18, contributes ~3.5% to the global
chemical industry. India is one of the fastest-growing countries in the chemical industry with
9.3% CAGR over FY18-25E versus 5.5% globally. It not only benefits from burgeoning export
opportunities, but will also benefit from stability in prices on account of lower dumping
from China and replacement of imports. Further, faster end-user industry growth and low
penetration of specialty chemicals are likely to bolster growth.
 India’s large economy is under-represented in chemical space therefore there is an
opportunity for Chemical Industry.

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Indian Specialty Chemicals Industry: Overview
 India’s current Specialty Chemical & Chemical consumption which we believe will change
with changing life style therefore the consumption will increase which possesses greater
opportunity for Indian Specialty Chemical Industry:

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Indian Specialty Chemicals Industry: Overview
 Rising environmental concerns and stringent government policies are triggering
consolidation and uncertainty in China’s chemical industry. This is compelling global
innovators to revisit their outsourcing strategies, entailing huge opportunities for Indian
players with unique business models.
 Globally, manufacturing is shifting East & India.
 MNCs are de-risking their sourcing arrangements and adding a Indian source.
 Key Consumers of Specialty Chemicals:
 Agrochemical Industry
 Pharmaceutical Industry
 Colorant Industry
 Construction Chemicals
 Flavors & Fragrances
 Food Additives
 Paints & Coating Industry
 Personal Care Industry
 Plastic Industry

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Opportunities: Government Indicatives

 Make In India to support local manufacturing.

 Ease Of Doing Business.
 Single Window Clearance.
 Fast Track Environmental Clearance.
 Flexibility in Environmental Clearance for swapping of products for urgent projects.
 Stricter Environmental Control Norms & Regulations supporting sustainability of Industries.
 New policies under “Best destination for Investment/Global Industrial Hubs”
 New Landbank allocation (upto 33000 Hectors) SEZ with plug and produce facilities
 Policy for new business with 7 days land allocation & 15 days other approvals
 Relaxation in Labor Laws apart from Minimum Wages and Labor compensation act till
1200 days of start up of industry.
 Separate desk with Nodal Officers for Industries coming from Abroad.

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Opportunities: Pharma & Specialty Chemical Industry
 The biggest opportunity for Indian Pharma Industry and potential new entrants in Pharma
Industry is to support the Industry by manufacturing the Bulk Drugs and their intermediates
thereby making the Indian Pharma industry self reliant.
 Among many Bulk Drugs and their intermediates imported in India, following are some of
the Bulk Drugs which are imported in India and posses greater opportunity of
manufacturing them in India:

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Opportunities: Pharma & Specialty Chemical Industry
 Below is the reference cost structure of Indian companies and Chinese companies.
Although the cost structure varies product to product:

 The major cost difference in the above is from the cost of Raw materials. Many of the raw
materials are imported in India and if Indian intermediate manufactures look to start
manufacturing those intermediates than it offers great opportunities.

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Opportunities: Pharma & Specialty Chemicals Industry
 Indicative pricing structures of some of the API’s where either the API’s or their
intermediates are imported in India which offers great opportunity for Indian Intermediate
industry:

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Opportunities: Pharma & Specialty Chemicals Industry
 Manufacturing capacities of some of the bulk drugs & Intermediates in India and China
which offers great opportunity for Indian companies if we are able to negate the import
dependencies:

Average capacity - Chinese Average capacity - Indian

APIs
company (Tons/Year) company (Tons/Year)

Gabapantene KSM CDA 14,000 3,000

Losartan 600 200

Pregablin 500 150

Simvastatin 500 150

Amoxycillin 14000 5000

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Opportunities: Focus Chemistries & Technologies

 The rising concerns on Supply Chain in Global Specialty Chemical & Pharmaceutical Industry
represents greater opportunity in following Chemistries:
 Chlorination
 Nitration
 Hydrogenation
 Fluorination
 Bromination
 Oxidation
 Focus On New Manufacturing Technologies:
 Continuous Manufacturing
 Flow Chemistry
 Green Chemistry

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Focus: Environment & Safety

 With greater opportunities in Chemical Industry, the responsibility on Environmental

Control and Safety is higher.
 Environmental Control:
 Green Manufacturing
 Focus on Zero Liquid Discharge
 Focus on new technologies which helps in minimizing by-products and residues.
 Safety:
 Employee - Behavior Based Safety
 Process Safety
 Transportation Safety

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