Specialty Chemicals - The next sunshine industry: M. P. Aggarwal, Promoter, Sajjan India

Specialty Chemicals - The next sunshine industry: M. P. Aggarwal, Promoter, Sajjan India

Having emerged as a strong alternative to China, Indian specialty chemicals industry could have a clear edge albeit promising policies and diversification by key players

  • By M. P. Aggarwal , Promoter, Sajjan India | June 17, 2022

In the last couple of years, the specialty chemicals business in India has garnered a lot of positive attention due to its enormous potential. As a matter of fact, most of the experts would agree that the biggest export opportunity for the Indian chemical industry lies in specialties.

The sector has witnessed healthy revenue growth during FY2021 and has largely bucked the adverse impact of COVID-19. The growth trend has continued in the current fiscal also, although the profit margins are expected to witness some moderation due to sharp increase in feedstock prices, while remaining healthy. In the medium term, while relatively mature segments like agro chemicals, dyes and pigments etc. are expected to have moderate growth of 7-8% per annum, segments like construction chemicals and fluorochemicals are expected to have higher growth.

If we look at various reports, the global market for specialty chemicals is anywhere between US$ 750 to US$ 800 billion. Growing at 16% CAGR, it is expected to reach about US$ 1000 billion by 2025. In India where US$ 32 billion specialty chemicals constitute 22% of the total chemicals and petrochemicals market, this niche industry is expected to be US$ 64 billion strong by 2025.

While the exports at just around 4% might look dismal as compared to China that has around 15% of the market, there is a positive outlook about demand for specialty chemicals growing at a 12% CAGR. A revival in domestic demand and robust exports could spur a considerable increase in the capex of specialty chemicals manufacturers.

Market experts are predicting revenue growth of 19-20% in FY 2022, up from 9-10% in FY 2021, owing to the recovery in domestic demand and higher realisations owing to rising crude oil prices and better exports.  


Specialty chemicals are low-volume, high-value products used in a large number of consumer-facing sectors. These are value added products targeting specific applications, which entails relatively high research and development investment. Some of the key specialty chemical segments are agrochemicals, dyes and pigments, surfactants, flavors and fragrances, fluorochemicals, construction chemicals, and water chemicals. The industry has a mix of organized and unorganized players, with segments like agrochemicals and dyes and pigments having several large players, who have scaled up over the years, while other segments have relatively few large players.

Specialty chemicals industry in India has been deriving almost equal revenue from exports and domestic sales. But that might change soon as China has been losing its cost-competitiveness of late owing to increased environmental costs and reduced government sops. There is a strong possibility that Indian industry will outpace its Chinese counterpart and double its share in the global market to 6% by 2026 from 3-4% in fiscal 2021. This, along with pandemic-induced disruptions, has forced customers to diversify their supplier base. India, with its cost-competitive manufacturing and technical expertise, is well set to seize the opportunity. Additionally, the cost-plus pricing model of Indian players is likely to minimize the impact of the sharp increase in raw material prices this year. Raw materials such as benzene, ethylene and toluene, which are crude derivatives, form around 55% of the overall cost structure. Raw material prices are also expected to remain elevated in the near term due to the ongoing Russia-Ukraine war. However, downside risk to operating profitability is limited given players’ ability to pass on cost increases, though with a lag of a few weeks.

There are certain challenges which need to be addressed to leverage the opportunities, like high dependence on imported feedstock, lack of scale, increasing environmental regulatory requirements, and low R&D spend. The good news is that many of these issues are being addressed backed by industry initiatives and government policies. Several recent measures including rationalization of duties on feedstock, trade protection steps including both tariff and non-tariff measures for several chemicals, and support for cluster-based development approach through plastic parks and revised PCPIR (Petroleum, Chemicals and Petrochemicals Investment Region) policy, should aid in increasing domestic feedstock capacity and reduce import dependence in the medium term.

The future growth will be powered by two ingredients – strong tailwinds in exports due a shift in global supply chain driven by the China+1 policy of vendors and demand recovery in domestic end-user segments.

Meanwhile, resurgence in demand has spurred players to ramp up their capacity expansion plans. Existing players like Sajjan India, ISO[1]9001, 14001, 45001 certified, a leading contract manufacturer with expertise in large scale production of Active Ingredients, Inter[1]mediates and specialty chemicals that have a proven track record, and which can handle complex reactions, multiple step chemical processes and hazardous raw materials are witnessing encouraging opportunities. With the experience we have gained over the period of time and the fantastic team we have created; we see ourselves being able to perform very efficiently to the satisfaction of our foreign partners. With 40+ years of strong business associations with global multinationals, the company has been actively contributing to the growth of the sector. We have two Unit – Unit 1 have five plants and Unit 2 have 1st plant is under commissioning and the production is going to start by end of April’22 and 2nd plant building is ready for the new products.

With a total installed capacity of 12,500 TPA and reactors primarily in the range of 12-25 kl. Having signed more than 100 CDAs of the products, the company has maintained quality consistency and quick adaptation to more stringent specifications with utmost focus on Environment, Health and Safety. Being a zero-debt company, we are in extremely financially strong position to invest significant capital for new potential opportunities.

As a results of process optimization and de[1]bottlenecking, we have reasonable capacity available to grab new opportunities/products and ensure quick scale-up.


While currently, the per capita consumption of specialty chemicals is low, it is expected to grow in the medium term driven by changes in consumption patterns, economic growth, expanding middle class and adoption of global practices by consumers and industry. Further, there is significant export opportunity, which will be further supported by the supply chain diversification trend adopted by global chemical majors under the “China+1” strategy. The above factors coupled with some of the advantages like availability of low cost and skilled labor, established relationship with global players in several specialty sub segments, favorable intellectual property rights (IPR) policies and government policies like ‘Atmanirbhar Bharat’ and ‘Make in India’ should drive multi-year growth for the sector.

With focus on increasing domestic manufacturing further favorable policy measures are expected for the chemical sector, which includes further rectification of anomalies in duty structure and expansion of trade protection measures, fiscal incentives for infra[1]structure additions and policies and support for better ESG compliance and registration of products for export. Making the supply chain more robust, announcement of Production Linked Incentive (PLI) scheme and taxation benefits for this industry are necessary to make our country more attractive as a manufacturing destination.

 Apart from the government initiatives, the industry has also been scaling up and increasing R&D investments. The larger players in the organized sector have scaled up through both organic and inorganic routes, including acquisition of overseas entities or domestic units of MNCs. The drivers for M&A include portfolio expansion, technology absorption, new market entry and scaling up of size. The sector is currently in the midst of a capex cycle and several companies have raised funds through IPO or from private equity investors to support the capex. A sizable portion of this spend will be for backward integration, import substitution, and to meet increased demand for exports. Healthy cash generation will keep reliance on incremental debt to fund capex and working capital low, help[1]ng improve credit profiles. It would be highly prudent for the industry to now look for bigger markets such as automotive, electronics, feed, nutraceuticals, aerospace and defense industries.

 On its part, industry should have a clear focus on sustainability and reduction in environmental footprint, making specialty chemicals safe for consumers. To bring finance and more efficiency, we need to create value for the products and make them more valuable for the end users. Moving on a bit from conventional route of contract manufacturing, we now need to accelerate our innovation efforts, file more patents and ensure close coordination between industry and academia. It is also a high time that the special[1]ty chemical companies pay due attention to their downstream portfolio. The focus should be to become the solution partners of value.

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