As India marches toward its centenary in 2047, the vision of transforming the nation into a US $2 trillion chemical economy stands as both an ambitious goal and a critical necessity. Yet, to reach this ambitious milestone, a paradigm shift is required, one that calls for unprecedented levels of investment, innovation, and strategic collaboration. 

In this context, the leading experts discussed strategies to attract investment and drive growth of the chemical industry at the 4th edition of NextGen Chemical and Petrochemical Summit 2024 organized by the Indian Chemical News in Mumbai on July 11-12, 2024.   

The fourteenth session, ‘Inviting Investment to achieve US $2 Trillion Chemical Economy by 2047’ was moderated by Mahesh “Deal” Singhi, Founder & Managing Director, Singhi Advisors. 

Setting the tone of the discussion, Singhi outlined, “The last two years have been extremely good for the chemical sector but couple of months or two three quarters has been really bad, at least perception wise in a chemical sector. This was just a cleaning up phase and the market is back to the game again. Currently, India has about US $250 billion worth of chemical industry and we believe that just with a 10% compounded growth, by 2047, we will absolutely become a 2 trillion chemical economy.” 

Sharing a positive outlook for chemicals, Mukesh Malhotra, Country Manager & Managing Director, Syensqo India said, “The chemicals are here to stay. During Covid pandemic, the only businesses running were the chemical one and I think that is when the general public at large realized how essential the chemicals are to our living. I think ups and downs will be there and that is kind of cyclical. The consumption goes up and down but overall trajectory, especially in India is going to stay. It is going upwards and we are going to look at India, It is whole geopolitical environment where today the focus is produced locally for local needs you aren't looking anywhere at the the moment to look for exports. Today we export majority of products produced in India, a market which is growing. So you look at the potential of what's needed tomorrow without compromising on the scale. So you put up a plant and service in India and whatever is surplus is exported out. This approach is going to continue. It is very unlikely that we will see India as a pure export hub especially after the experience of China. The Chinese companies burned their fingers in Russia after the war. If China goes to war with Taiwan, the players with large stakes will need to derisk out and India is so far managing it well. It is neutral but we have our own issues too so could we get dragged into that ball as people are cautious. On the other hand, our own infrastructure is still not a place to do business with and I think that perception still hangs for us. For example, one of the major hurdles is we don't have a dispute resolution mechanism as it takes anywhere between 7-10 years and it is very difficult to fight a case with the government.”

Nilesh Kulkarni, Director - Commercial, Gharda Chemicals Limited calls the chemical industry hazardous yet highly important for daily life. He lays thrust on partnership between industry, academia and government to propel the sector and create Indian MNCs.  

Sharing his detailed outlook, Kulkarni said, “The ability to quickly adapt to new technologies around the world brings tremendous amounts of ability, capability and knowledge. The ability to actually put that knowledge into action and convert that into products which are salable across the world. About 44% of China’s GDP comes from the chemical industry and in India it is about 7%. There is a lot of scope to grow and if you look at the last 10 years, the chemical industry has grown in India. If the government, industry and academia actually sit together and work together I see no dearth in the amount of potential that is available in India to create a brand new Indian multinational and a global institution. If we look at the agrochemical business, as an example UPL is the fifth largest agrochemical company in the world today, although through acquisitions. The kind of opportunity that it provides to India is that the entire manufacturing base which is in the west moves has the ability to move down to India. It means that the government and the entire system should make itself more industry friendly as the latter can't grow without streamlined policies and incentives. No doubt the industry is for profit but its growth means enormous job creation. While we have chemical zones across the country, the problem is that there are no buffer zones around it. I think it is the administration which is responsible to take care of it. In terms of technology development, we must make sure to commercialize our indigenous research output and also ensure enough growth that is available.”

Sharing his thoughts on availability of capital for chemical SMEs, Shitij Kale, Senior Director – Investments, India Resurgence Fund (IndiaRF) opined that since India has improved in terms of economy, there is no dearth of private capital and how investment at the right time could do wonders for aspiring companies.  

Kale explained his point of view: "We believe India is a growth story and we invest in mid-market Indian companies which have transformation potential with a control mindset across 15 or 16 sectors, largely industries. We firmly believe that while India is a market has an opportunity in domestic consumption, it also has huge export potential, whether it is active pharmaceutical ingredients or bromine that we owned and we just recently exited, getting into flavors and fragrances. I think we do see a lot of opportunity there from our perspective. The capital is a means to end so while we invest across debt and equity that's just a solution provider for us. From a capital standpoint, we provide it either for last mile or it could be expansion or it could just be under investment. In a special situation, we invest in assets which have a potential to transform and are a limited investment that has happened in the past. For us mid-market is very exciting. We have invested about $850 million across 11 investments in nine sectors and chemicals and pharma being among  four of 11 portfolio companies. We continue to be extremely bullish. From a capital standpoint, I think there is availability of  foreign direct investment because we manage money for overseas investors. As a private Capital provider I think there is a lot of money now available especially in the past 15 years 10-15 years. We have seen India improve as an economy as well as from a regulatory standpoint to enable a stable environment to invest and we are seeing a lot of inflows happening in the country. I think the opportunity is large but whether it will be 2 trillion, 1 and a half trillion, or 1 trillion, only time will tell but there is definitely growth in the theme. There is a reasonably good manufacturing base  and manpower available and from our perspective, the focus really must be about partnering with the right people.” 

Outlining the criteria for funding aspiring startups, Nidhi Ghuman, Ex - Sr. EVP, 360 One AMC opined: "We try to understand the Founder, his vision, leadership skills and readiness to work with the community. Apart from funding, as a value addition, we work with them closely to align our common interests and rework on strategies." 

Ghuman elaborated further: “I come from a growth PE mindset and the chemical sector has demonstrated value creation for investors over the last two decades. The India's chemistry skills which have been created in pharmaceuticals must be replicated in the chemical sector as well. Before making the investment, for us the founder becomes very very critical and we spend a lot of time trying to understand his vision, leadership skills, style and most importantly his capacity to work with institution investors. That becomes very important for us when we are looking to invest into any company. At 360 One AMC, I invested into Ather Industries and what attracted us to them were the founders with exceptional technocrat skills and the R&D team that they had built was the largest for any company of that segment in the chemical sector. They had demonstrated the ability to build very differentiated unique capabilities. I invest for a five to seven year time horizon and what is very important is secular growth consistency of returns, It is hard for us to invest into commodities because we only have a limited time horizon. We can't invest on hope but capabilities. We want to back specialty chemical companies that have  shown the capability to build unique chemistry skills, come up with multiple products, really demonstrate their chemistry skills at the core of it and gain and consolidate market shares. When we are looking to invest we do evaluate the founder on his openness, influence ability, his attitude towards good governance but I think where we also spend a lot of time in understanding what are the gaps. We would like to establish some kind of alignment with the founder before we invest to bridge the gaps between their and our expectations." 

The Summit was supported by DCM Shriram Chemicals as principal partner, Somaiya Vidyavihar University as academia partner, Cadmatic as platinum partner and Andhra Pradesh Economic Development Board (APEDB), Govt. of Andhra Pradesh as state partner.

Gold partners for NextGen Chemicals & Petrochemicals were Epsilon Carbon, Forbes Marshall, Gharda Chemicals, Indofil Industries, Ingenero, IPCO, Jaaji Technologies, Moglix, PIP, Port of Antwerp - Bruges, RIECO and Re Sustainability. Associate Partners are: HPCL and Nuberg EPC.

Supporting partners included Aarayaa Advisory Services, Archroma, India Glycols and Tata Steel Special Economic Zone and industry association partners are: ACFI, AMAI, CropLife India, Gujarat Chemical Association and PMFAI.