The larger opportunity lies in feedstock to the upcoming and new age industries such as electronics, e-mobility, battery, and semiconductors
India is emerging as a preferred manufacturing hub for specialty chemicals for domestic and export markets. Approximately 20% of the total chemicals market in India, the specialty chemicals sector has been playing a pivotal role in driving the chemicals industry’s growth. The sector provides essential building blocks and raw materials for many industries, including agrochemicals, pharmaceuticals, textiles, paper, paints, and soaps.
The industry leaders discussed the current scenario and way forward for the specialty chemicals sector at the ninth session, ‘Specialty Chemicals: Driving the Growth’ of NextGen Chemical and Petrochemical Summit 2023 organized in Mumbai by the Indian Chemical News on July 13-14, 2023.
The session was moderated by Pravin Prashant, Editor, Indian Chemical News.
“The specialty chemicals industry as I see it is a sunrise industry, poised to grow in India. The world is looking at us. What I see is a lot of interest not only for the China+1 strategy but also into the specialty chemical industry which can win the world market. With factors such as the Ukraine war, energy crisis in Germany, rising inflation, skilled manpower in India and the push by the government, the opportunity is immense. The opportunities are across the spectrum, flavors and fragrances, electronic chemicals, construction, home and personal and pharma specialty have a huge scope for growth. We need to further consolidate. There are still a lot of feedstocks such as polyamides, polyurethanes, maleic anhydride that are raw materials for us, and continue to be imported in a big way. There is also a lot of M&A activity happening athe global front. The Indian specialty chemicals have yet not come of age vis a vis global players and the consolidation is the way forward to become stronger and win global markets," said Sunil Chari, Co-Founder & Managing Director, Rossari Biotech.
"In the last six months, we have seen a big number of inbound enquiries. Companies around the world are coming and wanting to make investments in India, either greenfield projects or make acquisitions. As we all know that there are many factors driving it including China+1 strategy. Given the good relations between Japan and India, it was assumed that Japanese investors will look at India positively. When we checked with the players there, we were told that India is a good market but not from a manufacturing perspective. In a recent meeting, a German investor told us that we see India everyday in the newspapers. So what’s changing? China’s Ukraine policies or its attitude towards entrepreneurs has created a negative sentiment against it in the global markets and they all are saying that they would like to grow with a democracy. India with its good English speaking skilled workforce is a natural choice," said Raj Shroff, Founder & Director, Aarayaa Advisory Services.
"I believe that while there might be short-term market undercurrent from investment and long-term trade arrangements, the people are alert and agile to those opportunities. Talking about large Indian companies, they want quality products that come at competitive prices. There is a lot of consolidation happening in the Indian market. In most of the specialty chemical segments and sub-segments, India is still a net importer. I think the lowest hanging fruits are those adjacent or complementary to existing offerings. Therefore, if the economy has to grow, then we need new segments such as electronics, food additives, cosmetic additives are going to be added. These areas are new sunrise industries and if they want to attract good customers, sustainability and green aspects need to be thought of,” added Shroff.
"While the overall R&D spend has been increasing over the last few years, that spend has been purely a function of the growth of the chemical companies. If you look at the R&D spend as a percentage of sales, it either remains the same or has gone down. It has remained 3-5% or it has actually come down as a percentage of sales but I think what is more important than just a quantum of R&D spend is what it is spent on? Is it really aligned with your vision or your business model? And third is whether you have the right tools to measure the ROI on that R&D spend? When you look at what this quantum is spent on, you clearly see that most of the Indian companies spend on development rather than research. Again if you put this into three categories: Product development, Process development, and Applications development,” said Radhesh R. Welling, Managing Director, Navine Fluorine International.
“Traditionally, Indian companies have been spending more on process development than product development or application development. It is rather the development of existing processes than developing completely new ones. Also, a lot of R&D spend is driven by incoming inquiries rather than proactively spending money on R&D and that leads to innovation. There will have to be tremendous shifts and significant investment for development of new platforms. There will be a need for teams working on five areas, namely process development, application development, blockbusters, new chemistry platforms and manufacturing. While capital is not a bottleneck, the strategic approach is. We also need consumer insights through the marketing team and it will help us to develop the products as per their expectations,” added Welling.
“Our oil companies are looking at producing downstream chemicals and providing a lot of basic chemicals that are currently being imported. We will, therefore, see a lot of such plants come up and see our basic chemicals industry grow. However, the larger opportunity lies in feedstock to the upcoming and new age industries such as electronics, e-mobility, battery, and semiconductors. With these feedstocks coming up, it provides us with wide space to get into these industries. Pharma and agro have been there and those industries have been traditionally growing and continue to grow but these feedstocks are a lot more specialized where the price variation really doesn’t matter. Let’s take the example of Japan where the chemical industry continues to depend heavily on China. Yet they have more than 70 chemical companies with billion dollars of revenue. If Japan can do it, I see no reason why it can’ be done in India where the small amount of price arbitrage won’t really matter,” said Harshvardhan Goenka, Executive Director of Strategy and Business Development at Laxmi Organic Industries.
“India was traditionally strong in sugar. We have been a strong alcohol based green chemical industry historically but economics and technology of petrochemical plants overtook that and killed that industry. Today we are reinventing ourselves. The world is talking about green chemistry but we are stil not willing to pay for it. It will be a matter of time when governments will get together to evolve a policy of green credits and incentivize users. I believe it will be a gradual shift,” added Goenka.
"Sustainability provides the specialty chemicals industry an opportunity to innovate and develop such products which would be not only profitable for the organization but also sustainable. c. Not only will we bring down our own carbon footprint but also the carbon footprint and scope 3 emissions of our consumers. As an organization, you need to have clear sustainability objectives followed by communicating clearly with all employees and customers on the need to implement . Proper matrices must be there within the organization to support your sustainable interventions,” said Nitin Sharma, CEO & GM, Clariant IGL Speciality Chemicals Ltd.
“At Clariant, we are looking at reducing our Scope 1 and Scope 2 emissions by nearly 40% by 2040, reduction of Scope 3 emissions by 15%, water usage reduction by 30% by 2030 and it’s not just a global phenomena, let’s come to India itself. The JV that we have done with India Glycol, we are talking of a completely green feedstock. We have come up with a whole range of green surfactants which are green ethanol coming from molasses and sugarcane or from foodgrains. This has to be first communicated, imbibed by the organization and then you explain its benefits to the customers," added Sharma.
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