Indian Institute of Management, Sambalpur

Submitted To:

Prof. Rihana Shaik

In Partial Fulfilment of Course Requirement of

Written Analysis and Communication

Submitted by:

Abhilash Ambadkar 2023MBA002

Aditya Pande 2023MBA003
Aritra Mukherji 2023MBA011
Ritika Chakravarty 2023MBA053
Subhasish Chakraborty 2023MBA067

On

December 7th, 2023

 Letter of Transmittal

December 5, 2023

Prof. Rihana Shaik

Written Analysis and Communication

Indian Institute of Management, Sambalpur

Subject: Submission of Industry Analysis Report

Dear Ma’am,

As per the guidelines provided by you during the classroom discussion, we hereby submit a
report on the Chemical Industry Analysis Report. This report has been prepared after going
through the entire data collected from the resources mentioned and carefully scrutinizing the
facts and assumptions. The report contains relevant information and analysis on the chemical
industry overview, market analysis, challenges, and aftermath of COVID-19.

We request to kindly evaluate the same and provide your valuable input.

Kind Regards,

Abhilash Ambadkar (2023MBA002)

Aditya Pande (2023MBA003)

Aritra Mukherji (2023MBA011)

Ritika Chakravarty (2023MBA053)

Subhasish Chakraborty (2023MBA067)

Indian Institute of Management, Sambalpur.

 Table of Content

1. Industry Overview
1.1. Industry’s History……………………………………………………………1
1.2. Size…………………………………………………………………………..2
1.3. Products……………………………………………………………………...2
1.4. Geographic Scope of the Industry…………………………………………...2
1.5. World view of the Industry…………………………………………………..3
1.6. Life cycle stage: emerging, growing, shaking out, maturing, declining……..3
1.7. Contribution to the GDP / Economy…………………………………………3
2. Market Analysis
2.1. Product and Technology……………………………………………………..4
2.2. Factors influencing competition……………………………………………..5
2.3. Competitive Landscape (Major Competitors)……………………………….5
3. Framework
3.1. Porter’s Five Force Model…………………………………………………...6
3.2. PESTEL ……………………………………………………………………..7
4. Challenges for the Respective Industry……………………………………………...8
5. Aftermath of COVID-19……………………………………………………………..8
6. References…………………………………………………………………………..10
1. Industry Overview

Third in Asia and sixth worldwide, India's chemical industry makes a substantial contribution
to many different industries. Its growth exceeds GDP, making it the fourth-largest
agrochemical manufacturer in the world. By 2025, it expects a significant expansion with an
INR 8 lakh crore investment. At $178 billion in value, the industry is still a major participant
in the world, with exports to more than 175 countries, accounting for 13% of India's overall
export revenue.

1.1. History

The Indian Chemical Council (ICC), formerly the Indian Chemical Manufacturers
Association, was established in 1938 by visionaries Acharya P. C. Ray and Rajmitra B. D.
Amin, alongside industry leaders, to nurture India's nascent chemical industry. Today, the
ICC now represents the robust $187 billion chemical sector in India, comprising both local
entities with global reach and international company branches.

The industry's history unfolds in five distinct phases. The first phase (1950-72) prioritized
meeting basic needs through the production of agrochemicals, fertilizers, and
pharmaceuticals.

The Establishment phase (1972-80) witnessed the creation of 5 public sector companies by
the government.

The Consolidation phase (1980-92) saw a fragmented industry shielded by protective

measures such as artificial tariffs and non-tariff barriers, resulting in significant profit
margins.

The Liberalization phase (1992-95) marked the removal of tariffs, attracting multinational
corporations and exposing domestic industries to global competition.

The subsequent Expansion phase (1995 onwards) involved major investments, particularly
in petrochemicals, driven by end-use segment growth, reflecting efforts to maintain market
share amid challenges from low-cost manufacturing countries like China.

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1.2. Size

The Indian chemicals market grew at a 4.1% CAGR from 2017 to 2022, when it was
estimated to be worth $115.9 billion. Globalization and better trade relations propelled India's
strong 6.5% growth in 2022, accounting for 4.5% of the Asia-Pacific chemical industry. The
industry, which plays a major role in agricultural and commodity chemicals, is expected to
grow significantly and reach a $300 billion market size by 2025. The Indian chemicals and
petrochemicals industry, currently valued at $215 billion, is anticipated to expand even more
with the help of government programs like the production-linked incentive (PLI) scheme for
agrochemicals.

1.3. Products

The Chemical Industry is split into 5 major categories, which are as follows:

1) Bulk Chemicals: This category includes chemicals that are manufactured on a large
scale and are further divided into Organic, Inorganic, and alkali chemicals.
2) Petrochemical & Polymers: These chemicals are derived from various chemical
compounds; The two most common petrochemical classes are olefins and aromatics.
3) Fertilizers: These are nutrients that support plant growth, and are categorized as
organic or inorganic, and natural or synthetic. They are further classified into
phosphate, potassium, and nitrogenous.
4) Speciality Chemicals: These are special chemicals created for specific uses, derived
from basic chemicals. Examples; paints, adhesives, electronic chemicals, oilfield
chemicals, etc.
5) Agrochemicals: These chemicals safeguard crops from insects and pests,
encompassing items like fungicides, herbicides, and insecticides.

1.4. Geographic Scope of Industry

The Indian chemical industry exhibits a widespread geographical presence, with

manufacturing facilities dispersed across the nation. Gujarat stands as the largest chemical
manufacturing hub, housing major refineries and petrochemical complexes, along with
numerous specialty chemical producers. Following closely is Maharashtra, the second-largest
chemical producer, focusing on the pharmaceutical and agrochemical sectors. In addition to

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these major regions, several other states have a significant presence in the Indian chemical
industry. These include Uttar Pradesh, Tamil Nadu, Madhya Pradesh, Punjab, etc.

1.5. World View of the Industry

The worldwide chemical industry is predicted to grow by 2.0% in 2023, a minor decrease
from the previous year. Advanced economies may face a 3.0% drop in output, compared to a
2.9% drop in 2022. Emerging markets are expected to grow at a somewhat slower rate of
4.4% in 2022, down from 4.8% in the previous year. China, the world's largest chemical
market, expects a 5.9% increase. Due to rising energy costs, the European Union is
anticipated to see a 5.2% decrease in chemical production. The US economy is expected to
contract by 2.0%, although export demand from Europe may give positive momentum. South
America's chemical production growth is predicted to be slower.

1.6. Life Cycle Stage

The chemical industry is still growing in India as per the data and the analysis given below.

1.7. Contribution to the GDP/Economy

The chemical sector is crucial to India's economy and it accounts for 7% of the country's
GDP.

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2. Market Analysis

India's chemical industry plays a major role in employment and GDP growth, making it an
important sector of the national economy. India is the sixth-largest chemical manufacturer in
the world, with a market size of USD 178 billion in 2021, USD 178.4 billion in 2022, and
USD 192.5 billion in 2023. It is anticipated to keep growing and achieve a valuation of USD
290–310 billion by 2027. This growth is driven by factors such as:

 Growing domestic demand: India's burgeoning middle class and expanding

population drive up demand for chemicals in a variety of industries, including
consumer products, construction, agriculture, and pharmaceuticals.
 Supportive government policies: The Indian government has put in place measures to
encourage the development of the chemical industry, including the National Chemical
Policy 2019 and the Production Linked Incentive (PLI) program for specialty
chemicals.
 Developing chemical clusters and industrial corridors are just two of the ways India is
bolstering its manufacturing infrastructure to help the chemical industry.

2.1. Products and Technology

The Indian chemical industry produces a wide range of products, including:

 Basic chemicals: They serve as the fundamental building blocks for a variety of
goods and are the cornerstone of the Indian chemical industry. Examples include both
organic and inorganic substances, such as methanol, ethylene, and sulfuric acid, as
well as caustic soda, chlorine, and sulfuric acid.
 Specialty chemicals: These are more complex chemicals designed for specific
applications, such as agrochemicals, dyes, pigments, and pharmaceuticals. The
demand for specialty chemicals from industries such as consumer products,
medicines, and agriculture is driving the sector's rapid growth in India.
 Fine chemicals: These are extremely specialized substances that are frequently
utilized in cutting-edge technology like semiconductors and medicine. Although the
Indian fine chemicals industry is still in its infancy, there is a great deal of room for
expansion.

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The Indian chemical industry is continuously adopting new technologies to enhance and
increase output, boost effectiveness, and reduce environmental impact. Key technological
trends include:

 Automation and digitalization: Indian chemical businesses are adopting digitalization

and automation to boost decision-making, streamline supply chain management, and
optimize production operations.
 Sustainability: Indian chemical businesses are concentrating more on eco-friendly
product development, cleaner technology adoption, and sustainable operations.
 Green Chemicals: Manufacturing of chemicals considering environmental conditions
and implementing green processes with no carbon emission, better recyclability of
waste, more efficient processes to ensure no by-product is wasted, production of
Green Hydrogen, etc.

2.2. Factors Influencing Competition

The competitive landscape of the Indian chemical industry is shaped by issues such as raw
material quality, cost efficiency, and environmental compliance, and it is subject to fierce
competition from both domestic and global competitors. To be competitive and sustainable, a
company must control expenses, guarantee high-quality products, invest in R&D for
innovation, and follow environmental standards.

2.3. Competitive Landscape (Major Competitors)

The Indian chemical industry is dominated by a mix of large domestic players and established
multinational companies. Major competitors in the Indian chemical industry include:

 Domestic players: Reliance Industries, Tata Chemicals Limited, Gujarat

Fluorochemicals Ltd (GFL), Deepak Nitrite, Aarti Industries Limited, UPL, SRF Ltd,
Atul Ltd, Pidilite Industries, Vinati Organics Limited, GACL, etc.
 Multinational companies: BASF, Dow Chemical Company, DuPont, INEOS,
Eastman Chemical Company, Solvay, Huntsman Corporation, Wacker Chemie AG,
Sabic, etc.

These businesses have a wide range of products and robust distribution networks, giving
them a significant market share in India. They keep spending money on R&D to stay ahead of
the competition and take advantage of new chances.

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3. Framework Analysis of The Chemical Industry in India

3.1 Porter’s Five Force Model

 Competition: The competition is high. It is extremely difficult for a manufacturer to

differentiate itself from its rivals. Because of the high degree of competition, prices can
fall, and enterprises must explore ways to supply value-added services if they wish to
achieve greater price realizations.
 Threat of New Entrants: Global chemical manufacturing is reshaped by factories
located in regions that produce hydrocarbons. Threats from new competitors necessitate
robust R&D, effective operations management, and improved marketing networks.
 Bargaining Power of Buyers: Purchasers of chemicals have many choices. Online
portals are being used more often by buyers to investigate providers. When a company
needs chemicals, a website that gives access to vendors can be quite helpful.
 Bargaining Power of Suppliers: A large number of suppliers reduces bargaining
strength. Global access is provided by B2B portals, however, specialized products may
restrict possibilities and prevent the opening of new production facilities.
 Substitute Products: Strong R&D and an awareness of the client's process are
necessary for creating alternatives. Innovative, reasonably priced products provide a
provider with a competitive advantage.

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3.2. PESTEL

 Political Effect: The government's "Make in India" and "Atmanirbhar Bharat"

initiatives are well-suited to foster growth in the chemicals and petrochemical industries
in the nation.
 Economic Effect: Exports of chemicals were 10.8% in 2022–2023 and 11.7% in 2021–
2022. India's $215 billion chemicals industry is expected to grow to $300 billion by
2025.
 Social Effect: India's chemical industry improves living conditions, provides
necessities, and drives industrial and agricultural growth by supplying vital raw
materials.
 Technological Effect: Chemical processes are improved by technology, with data
analysis (35%) and integration (30%) being the three high-potential areas of study.
 Environmental Effect: The production of chemicals can hurt ecosystems, wildlife,
human health, and greenhouse gas emissions in addition to contaminating soil.
 Legal Effect: Obtaining many licenses, permits, and certificates in multiple domains is
necessary to establish a chemical production unit, which presents significant
compliance issues.

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4. Challenges for the Chemical Industry

The chemical industry has numerous challenges, including stringent regulatory compliance
and an emphasis on product quality, safety, and environmental impact. There is increasing
demand for environmental sustainability, including calls for more ecologically friendly
production methods and reduced carbon emissions. Natural catastrophes and geopolitical
upheavals, like the COVID-19 pandemic, have the potential to upset supply chains, affecting
the availability of raw materials and raising prices. The dynamics of the market, technological
developments, and the constant need for fresh product innovation necessitate large
investments. Additionally, there are serious cybersecurity risks as the globe grows
increasingly digitalized. Talent management is a demanding sector that always needs skilled
workers. The public's perspective and the uncertainty surrounding the global economy
exacerbate the already complex terrain of the sector. Chemical firms must overcome these
obstacles to prosper in a market that is both competitive and socially conscious.

5. Aftermath of COVID-19

In the aftermath of India's COVID-19 lockdown, the chemical sector displayed short-term
volatility, presenting both challenges and opportunities. This section analyzes the immediate
and future factors shaping the Indian chemical industry post-pandemic.

India's chemicals sector ranks 6th globally, witnessing robust growth in recent years. Despite
a significant decline in capital markets in March 2020, the essential nature of the chemical
sector facilitated a moderate recovery for listed companies post-lockdown. Pre-COVID,
chemical manufacturing operations were shifting from China to India, a trend expected to
accelerate due to COVID-19. The decline in crude oil prices further impacts raw material
pricing in the short to medium term.

Long-Term Opportunities

1. Global Reshoring Trends

Ongoing relocation of chemical manufacturing operations from China to India due to

trade measures and COVID-19 risks. Favorable labor cost structure in India compared
to a significant increase in China's average labor cost from 2005-2015.

2. Government Initiatives and Financial Investments

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 The closure of 130+ plants in China creates an opportunity for India, reducing China's
revenue share in global specialty chemicals. Financial investments by the Indian
government to promote domestic manufacturing contribute to the sector's growth.

Fig. 5.1.

Short-Term Impacts

1. Financial Performance and Market Dynamics

COVID-19-related disruptions impacted the 2020 financial performance until

economic stability is restored. Companies with strong balance sheets and low debt-to-
equity levels were better equipped to navigate uncertainties.

2. Operational Challenges and Impact on Unorganized Players

Strict social distancing guidelines affected unorganized players' ability to resume

operations. The significant loss of business for unorganized players took place as
large entities adhered to guidelines more effectively.

3. Resilience of Specific Sectors

Essential sectors like Specialty Chemicals, Agrochemicals, and Pharma Intermediates

experienced limited impact, ensuring steady demand.

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References
1. anand, K. (2023, 8 8). India’s Chemical Industry Expected to Reach US$304 Billion by
2025. Retrieved from India-Briefing: https://www.india-briefing.com/news/indias-
chemical-industry-expected-to-reach-us304-billion-by-2025-29206.html/

2. Chemical Sector. (n.d.). Retrieved from Invest India:

https://www.investindia.gov.in/sector/chemicals

3. Chemicals. (n.d.). Retrieved from Makeinindia:

https://www.makeinindia.com/sector/chemicals

4. Concentration of the chemical industry across India in 2018, by state. (n.d.). Retrieved
from Statista: https://www.statista.com/statistics/1062442/india-chemical-industry-share-
by-state/

5. History. (n.d.). Retrieved from Indian Chemical Council:

https://www.indianchemicalcouncil.com/history.htm#:~:text=History%20%3A
%20Indian%20Chemical%20Council%20(ICC,of%20the%20nascent%20chemical
%20industry.

6. Outlook for the Chemical Industry. (2023, Feb 24). Retrieved from BASF:
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chemical-industry.html

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https://www.in.kpmg.com/pdf/KPMG_Chemtech_Report.pdf

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11. The shifting landscape of chemicals and materials. (n.d.). Deloitte Insights.
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