Reengineering Chemistry for better tomorrow

Knowledge Paper by Tata Strategic Management Group

December 2013
This is a confidential document solely for the use of client personnel. No part of it may be circulated, quoted, or reproduced for distribution outside the client organization without prior written 0
approval from Tata Strategic Management Group.
 Indian Chemical Industry

• Need for IGC&E Practices

• Transitioning to IGC&E Practices

• Opportunity & Way Ahead

• About Tata Strategic

 Indian Chemical Industry stands at ~ $ 110 Billion in 2012

OVERVIEW OF INDIAN CHEMICAL INDUSTRY

India’s Chemical Industry,FY12 (% of total) Remarks

• India currently accounts for only 3.3 % of the total

Other base
chemicals global chemical market with a size of ~$3.7 trillion in
Agrochemical 11%
s 2013.
3%
Petrochemica • Indian chemical industry accounted for ~13% of the
ls
21% total India's exports.

Pharmaceutic Specialty • Indian chemical industry comprises both small scale

als chemicals
29% 19% as well as large scale units.

Fertilizer • India's competence in this knowledge intensive

17%
industry is increasing however the tapped potential
Total: $110 Bn is very limited

2
Source: Department of chemical, Analysis by Tata Strategic
 Indian chemical industry has a potential to cross USD 350 Billion by FY21

INDIAN CHEMICALS INDUSTRY

Growth projections ($ Bn) Growth Drivers

• Trends
X% CAGR
– End use industry growth
358
14%
– Low per capita consumption; expected to increase
259
– Import substitution potential
10%

110 – Faster implementation of PCPIRs

• Improved manufacturing competitiveness to increase

export potential
Scenario I II
FY12 FY 21 (P) • Large investments could help meet the growing demand

• The new manufacturing policy targets to increase

Scenario I Base case scenario
manufacturing sector's share in GDP to 25% by 2025 from
II High growth scenario
the present 16%
3
Source: Planning Commission, Government of India, Analysis by Tata Strategic
 Indian Chemical Industry

 Need for IGC&E Practices

• Transitioning to IGC&E Practices

• Opportunity & Way Ahead

• About Tata Strategic

 Who do we owe this planet to?

SELECT ENVIRONMENTAL ISSUES

The Case of Cancer in Punjab Water Crisis Maharashtra

• Increasing use of pesticides • 12,000 villages in 16
has resulted in cancer districts under water crisis
incidents
• Shut down of Parli power

?
 Over 33,000 have died plant with installed capacity
in last five years of 1,130 MW
 90 in population of 1  Two units were
lakh suffer from cancer shutdown in October
2012
Lead Poisoning  All six units shut
down in January
• India becoming world capital of
2013
lead poisoning
 60% of samples for Atomic
Absorption spectroscopy detect
lead in content in human fluids
• 20% Children in Kolkata affected by lead
poisoning
 Key sources: toys, lead pencils,
crayons, wall paints
5
Source: Analysis by Tata Strategic
 Feedstock issues, increasing costs and post consumption management challenges
will shape the future global chemical industry
CHANGING INDUSTRIAL LANDSCAPE

Key Factors

• Feedstock challenges

• Chemical Industry perceived as a

contributor in degradation of
environment.

• Stringent regulations, NGO’s and end

consumers are creating pressure for
chemical industry to go green.

Industry E-factor Volume of liquid COD Toxicity

• The Indian market is responsible for
sector (kg waste/kg product) effluents (100 approximately 20% of global liquid
(billion liters) thousands)
Pharma 50-100 10-15 1.5-2 Very high effluents amounting to 15 to 20 billion
Agro 40-60 10-15 1-1.5 Very high
liters annually.
Pigment 30-50 20-25 0.5-1 Medium high
Dyes 20-30 20-25 0.25-0.5 High

6
Sources: Industrial Symbiosis and Green Chemistry, James Clark, Indicative approximations by Newreka
 Industries are expected to be impacted by water scarcity going ahead
WATER SCENARIO IN INDIA

Projections for Per Capita Water Availability (1991-2050)

• Water demand in India is poised to

2,500
Per Capita Water Availability

exceed water availability by 2050

2,000
 Wide variations in regional
(CuM/year)

1,500
water availability
1,000
• Current pricing of water and utilisation
500 pattern not sustainable in future
0 • Increasing controls on water
1990 2000 2010 2020 2030 2040 2050
withdrawals, water use efficiency and
Year
pollutants
Water Stress Benchmark (1,700 Cubic Metre)
• Pricing Reforms and new regulations
Per Capita Water Availability (Cubic Metres)
likely in future

Situation in certain Rajasthan, Gujarat and parts of Andhra Pradesh and

Maharashtra are more anaemic than others

Notes : 1) Water stress benchmark is defined as 1,700 cum/year on a per capita basis 7
2) CuM/Year : Cubic Metre/Year
Source: Analysis by Tata Strategic
 Fundamental changes are occurring in the Energy Sector in India

HISTORICAL GROWTH IN ENERGY PRICES

Fuel Price & Electricity Index Solar & Grid Electricity Prices (Rs/ kWh)

169 22
CAGR
7%
Fuel 19
Solar
148 16
135 132 12
10 11-12
121 121
114 Electricity 8
2% 9.6
8.7 8.6 8.2
100 113 115 6.7
105 106 106 107 BEST HT1 Tariff
100 103

FY05 FY6 FY7 FY8 FY9 FY10 FY11 FY12 FY9 FY11 FY13 FY15

Fuel Feedstock prices have risen Cost of in-citu solar generation is competitive,
Backlog in electricity price adjustment thanks to hikes at BEST

Notes : 1) High Tension 8

Source: Office of the Economic Adviser, CARE Research

 Transition to green chemistry practices can help chemical industry develop
sustainable businesses
THE NEED FOR GREEN CHEMISTRY

Improved profits
1 Feedstock challenges
• Dependence on non-renewable
feedstock from politically unstable Increased
nations product yield

• Supply problems
• Price volatility Improved
Green Chemistry environmental
footprint
2 Increasing costs
• Energy costs
• Waste disposal Present Chemistry Competitive
costs advantage
Improved brand
3 Rising pressure on image
Chemical industry due to
• Increasing regulations
• Customer demand
How can companies
4 Poor perception of transition to IGC&E
Chemical industry1 practices?

Notes : 1) Chemical Industry ranked 6th amongst 8 industries as per Cefic led public perceptions survey of EU chemical
9
industry in 2010. The industries ranking were - 1st: Electronics, 2nd : Food, 3rd: Automobile, 4th:Pharmaceuticals,
5th: Electricity, 6th: Chemicals, 7th: Petrol/Oil, 8th: Nuclear
 Indian Chemical Industry

 Need for IGC&E Practices

 Transition to IGC&E Practices

• Opportunity & Way Ahead

• About Tata Strategic

 Companies can plan to transition to IGC&E by looking at their business through
four lenses
METRICS

Metrics

Material Efficiency Energy Efficiency Reduced Hazards Holistic Design

• Atom economy • Design for energy • Prevention/ • Use of renewable

• Reduce efficiency inherently safer feedstock
derivatives • Design for chemistry • Design for
• Catalysis separation • Less hazardous degradation/
• Maximize material • Maximize energy chemical synthesis commercial
efficiency efficiency • Safer solvents and afterlife
• Auxiliaries • Conserve
• Output-pulled vs. Integrate material
and energy flows • Real time analysis complexity
Input pushed
for pollution • Meet needs,
• Minimize material
prevention minimize excess
diversity
• Durability over
immortality

11
Source: Primary interactions, Analysis by Tata Strategic
 Companies face five key implementation barriers when transitioning to IGC&E
practices
IMPLEMENTATION BARRIERS

Financing Economic Feasibility

• Lack of funds to switch to pilot/ • Tied up capital
commercial scale
• Scale-up issues
• Perception of risky technologies and
chemistry
• Lack of information for risk evaluation
• Inability to make quick returns
BARRIERS

Awareness Technology
• Lack of awareness amongst
• Focus on traditional chemistry routes
employees/ customers
• Lack of training in new technologies
• Preference to functional benefits
over organization benefits • Lack of knowledge availability
Regulatory
• Price sensitive customers • Lack of sharing of intellectual property
• Regulations focused on risk control
• Sector specific regulations
• Unfavourable government policies

12
Source: Primary interactions, Analysis by Tata Strategic
 An ecosystem which brings industry, academia and government/regulatory
bodies in sync is required to overcome barriers
KEY ACTIONS TO OVERCOME BARRIERS
1 Role of Industry
• Support from top management
• Incorporate green chemistry from the design stage
• Involve investors right from the project planning phase
1
• Investment in R&D
• Life cycle analysis of costs and benefits
Industry
• Training employees & vendor client collaboration
Strategies
• Organize industrial round tables

2 Role of Academia
• Incorporate green chemistry into academic curriculum
Ecosystem • Develop multidisciplinary teams
3 2 • Develop green centers of excellence
• Focus on applied knowledge over theoretical knowledge
Government Academia • Regular assessment of educational and training programs

3 Role of government / regulatory bodies

• Government funding to MSMEs. e.g. Credit Guarantee Fund Scheme
• Taxes / penalties on truly polluting chemistries
• Financial aid to academia
• Develop universities / research agencies for low cost IP
• Regulations focused on risk prevention instead of risk control
13

Source: Primary interactions, Analysis by Tata Strategic

 Transition: From here to tomorrow

GREEN CHEMISTRY IMPLEMENTATION STRATEGIES

1 2 3 4
Immediate term Short term Medium term Long term
(1 to 6 months) 6 months to 2 years (2 years to 4 years) (4 years to 10 years)

1. Sustainable 1. Solvent recovery 1. Microreactor 1. Developing bio-

recycling solutions practice Technology based chemicals
2. Zero Liquid 2. Green solvents 2. Supercritical fluids 2. Biomimicry of
Discharge (ZLD) 3. Bio-catalysts 3. Organic solvent nature’s best ideas
3. COD Reduction 4. Alternate additives free process 3. Setting up an
industrial
ecosystem

Resources required

Associated risks

14
High Low
Source: Primary interactions, Analysis by Tata Strategic
 Indian Chemical Industry

 Need for IGC&E Practices

 Transition to IGC&E Practices

 Opportunity & Way Ahead

• About Tata Strategic

 The Way Ahead

GREEN CHEMISTRY ECOSYSTEM

1 Industry initiatives
• Perform 3D audit of existing products
/processes
• Invest in R&D activities
• Rigorous support from top management
• Organize industrial roundtables
• Promote technopreneurs through angel
investments
4 Role of end users Academia support 2
Green Chemistry – • Build green chemistry related academic
• Demand for green products programs
The Way Ahead
• Focus on overall benefits, not just costs alone • Collaborate with industry for R&D activities
• Promote green chemistry through academic
3 Govt./Regulatory bodies support events
• Develop green chemistry rating system to • Support technopreneurs in testing and scaling
evaluate industry performance up green chemistry ideas
• Promote green chemistry initiatives through
subsidies and investment support to MSMEs
and technopreneurs
• Implementation of regulations and policies in
principle as well as in practice
• Promote green chemistry as means of CSR

16

Source: Primary interactions, Analysis by Tata Strategic

 The India Advantage
1
Oleochemicals
•Leading producer of castor oil 74% global market
share
•Major producer of High Eurucic content rapeseed
oil

5 2
API Industry Rich Biomass
• Constitutes 30% of the USD 32 Bn pharma • 141 Mn hectares of arable land
industry • 1.5 billion MT/year of food and agri residues are
• 50% solvent recovery in API Industry could save produced
USD 1.8 billion by FY17 The Indian • Potential for short cycle cellulosic biomass
Opportunity

4 3
Natural Dyes
Biopesticides
•Historically India has been the manufacturer of Prominent
• Only 4.2% of overall Indian pesticide market
natural dyes: Lac, Harda, Indigo Blue, Kamala dye, Manju
• 10%growth rate is expected in next 10 years
Phal, Madder

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 Indian Chemical Industry

 Need for IGC&E Practices

 Transition to IGC&E Practices

 Opportunity & Way Ahead

 About TATA Strategic

 Tata Strategic is the largest Indian owned management consulting firm

AN OVERVIEW

Founded in 1991 as a division of Tata Industries Ltd.

The largest Indian owned Management Consulting firm

About 70 member strong Consulting Team

Supported by a panel of domain experts

Growing client base outside India

500+ engagements, 100+ clients, across countries, across sectors

Increasing presence outside the Tata Group & India

• 50+% revenue outside Tata Group
• 20% revenue outside India

19
Tata Strategic offers a comprehensive range of solutions covering Direction
Setting, Driving Strategic Initiatives and Implementation Support

Strategy
• Vision • India Entry
• Market insights • Alliance & Acquisition Planning
Set Direction • Growth Strategy/Business Plans • Strategic due diligence
• Scenario Planning • Manufacturing Strategy

Organization Effectiveness Marketing & Sales Operations

• Organization Structure • Revenue Enhancement • Supply Chain Optimization

• Corporate Center Design
Drive Strategic • Roles & Decision rules
Initiatives • Culture Transformation
• Performance Management
• Capability Assessment
• Talent Management
• Product Innovation
• Market Share Growth –
Rural/Urban
• Dealer Effectiveness
• Sales Effectiveness
• Throughput enhancement
• Superior Fulfillment
• Project Excellence
• Procurement Transformation
• Strategic Cost Reduction
• Energy/Water Management

Implementation
Support • Implementation Plan
Implementation • Program Management
• Refinements/Course Corrections
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 Tata Strategic is organized as multiple Industry domains and Functional areas

TATA STRATEGIC
Auto Engineering Infrastructure Technology Education Healthcare
& EPC

Industry
Domains

Hospitality &
Durables FMCG Retail Chemicals Energy
Tourism

Organizational Delivery
Strategy Logistics Sourcing Sustainability
Effectiveness Excellence
Functional
Areas

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 Tata Strategic has experience of working on all major segments within the
Chemical domain
EXPERIENCE IN CHEMICALS SUB-VERTICALS

Bulk Chemicals

• Petrochemicals
• Agrochemicals
• Fertilizers

Specialty Chemicals Knowledge Chemicals

• High Performance Chemicals • Pharmaceuticals

• Fine Chemicals • Bulk Drugs/ APIs

22
Tata Strategic is adequately equipped to assist companies in carrying out
comprehensive Energy Management activities
VALUE CHAIN

Energy Planning & ISO Energy Cost Reduction &

Training
Auditing Documentation Certification Performance Improvement

Accredited
EAs 

Free Lance
  

Certification
Agencies   

Provide
TSMG
   assistance 
Comprehensive offering
23
Tata Strategic' Water Management Offering

ILLUSTRATIVE

Existing Operations Future Strategy

1 2 3 4 5
Scope and Water Footprint Sustainability Response Long-term Strategy
Coverage Accounting Assessment & Formulation
Risk Profiling

Identification • AS-IS water • Identification of • Water footprint • Sustainability risk and

of locations / footprint - risks and abatement curve business implications
scenarios
geographies Direct/Indirect, • Water strategy for • Integration of sustainability
• Prioritization of
Blue/ Green  Supply side parameters in business
issues
/Grey management strategy, esp
• Sustainability
 Usage pattern  Processes / technology
assessment
 Regulatory  Realignment of supply
• Impact analysis
for alternate compliance chain
scenarios  Stakeholder  Product mix & design
management  Locations

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 We track ~50 specialty chemical segments and ~500 companies regularly and
could provide M&A support, if needed
INTELLECTUAL PROPERTY
Proprietary Database on Specialty Chemicals- M&A Support
Company Description Customer Reach
Year Company
Sl. No. Name Segments & Products Distribution network Key clients Exports
established description

1) Specialty surfactants
Colgate Palmolive,
Leading manufacturer(Fatty Alcohol Sulfates, Sales spread over 70
Ecolab, Henkel, Diversey,
1 ABC Limited 1980 and marketer of Lauryl Alcohol Ethoxylates) countries; offices in Bangkok 50% (FY10)
L’Oreal, Reckitt
surfactants in India 2) … and New Jersey
Benckiser, Unilever

Financials Net sales ($ Mn) EBIT ($ Mn) PAT ($ Mn)

Latest Debt
Latest Latest Latest Latest Latest Latest Latest Latest Latest Latest Latest Latest Latest Latest Latest
Revenue breakup Year /Equity
Year year-1 year-2 year-3 year-4 Year year-1 year-2 year-3 year-4 Year year-1 year-2 year-3 year-4
(FY) ratio
- Organic surface
active agents: 81%
2010 1.1 90.8 85.5 58.7 49.6 41.5 10.9 7.8 6.7 6.2 2.8 6.2 4.1 4.1 3.9 0.9
- Specialty
chemicals: 10%

M&A related Information

Company Ownership Promoters' Market Potential Valuation
Recent news updates
structure structure background Capitalization ($ Mn) ($ Mn)
Key
1) Started the 1) New unit coming up at
subsidiaries: 1) Promoters:
company as … Jhagadia, Gujarat
1) A 75.2% XX YY
2) Looking out for a 2) Acquired XX and its 100%
2) B 2) Others: 24.8%
strategic partner subsidiary YY Inc.

25
Tata Strategic is supporting the Govt. of India to formulate the national chemical
policy

Chemical Task Force – Govt. of India

India Chemical Vision 2020 &
National Chemical Policy
• Study industry framework & challenges

• Draw learnings from international

experience

• Establish Chemical Industry Vision 2020

& National Chemical Policy
• Identify initiatives to be taken by the

industry/ government

• Formulate National Chemical Policy

• Create implementation/ communication

plan

Tata Strategic was also the knowledge partner for the chemicals subgroup set up by the Planning
Commission, Govt. of India, for the XIIth Five Year Plan

26
 Tata Strategic has worked with several leading Multi-national chemical
companies
INDICATIVE LIST OF CLIENTS CHEMICALS– INTERNATIONAL INDICATIVE

27
 Tata Strategic has worked with several leading domestic chemical companies

INDICATIVE LIST OF CLIENTS CHEMICALS – DOMESTIC INDICATIVE

28
Tata Strategic has an extensive experience of working with some of the leading
Indian corporates and Govt. bodies in water and energy sector
OUR CLIENTS : WATER & ENERGY PARTIAL LIST

The Economist IHCL

Investment
Intelligence Unit Commission of India
Deutsche Bank

29
Tata Strategic has worked with several logistics companies as well as
companies across industry sectors for logistics solutions
OUR CLIENTS : LOGISTICS AND SUPPLY CHAIN EXPERIENCE INDICATIVE

TM International
Logistics Ltd. Hayel Saeed Anam

Hayel Saeed
Anam Stolt-Nielsen

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Tata Strategic has helped several of small and medium scale enterprises (SMEs) in
growing their businesses
OUR CLIENTS : SMEs PARTIAL LIST

Chemverse Consultants

Sharad Agro
Processors

CtrlS Datacenters

31

Mumbai
Contacts : B - 1001, Marathon Futurex,
N.M. Joshi Road
Lower Parel (East),
Mumbai 400 013. INDIA
Tel:+91 22 66376789
Fax: +91 22 66376600
MANISH PANCHAL
PRACTICE HEAD – CHEMICAL & ENERGY
Phone: +91 22 6637 6713
Mobile: +91 98205 20303
e-mail: manish.panchal@tsmg.com
CHARU KAPOOR
ENGAGEMENT MANAGER – CHEMICALS
Phone: +91-22-66376756
Mobile: +91 98218 06071
e-mail: charu.kapoor@tsmg.com
Delhi
Level 12, Building No.8, Tower C
DLF Cyber City, Phase II
Gurgaon – 122002
Haryana, INDIA
Tel:+91 124 4696692
Fax: +91 124 4696970
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