OVERVIEW OF INDIAN CHEMICAL INDUSTRY - S. R. Lohokare

1. 1
Presentation on
Overview of Chemicals Industry in India
(12th October 2011)
S. R. LOHOKARE
Chairman – Western Region &
Chairman – Technical & Energy Expert Committee of
INDIAN CHEMICAL COUNCIL
UK TRADE & INVESTMENT (UKTI)
and
INDIAN CHEMICAL INDUSTRY

2. 2
INDIAN ECONOMY

3. 3
INDIAN ECONOMY
 INDIA’S GDP – US $ 1.53 TRILLION
 10TH LARGEST IN TERMS OF MARKET EXCHANGE RATE
 IN TERMS OF PURCHASING POWER PARITY (PPP)
 4TH LARGEST
 US $ 4.06 TRILLION
 AGRICULTURE – 16.1% OF GDP
INDUSTRY – 28.6% OF GDP
SERVICE SECTOR – 55.3% OF GDP
 2010 PER CAPITA INCOME
 US $ 1,265 IN TERMS OF MARKET EXCHANGE RATE
 US $ 3,339 IN TERMS OF PPP
 GDP GROWTH 8.8% DURING 2003 – 08
 GDP GROWTH 8.5% (2010-11)

4. 4
INDEX OF INDUSTRIAL PRODUCTION
(BASE 93-94 = 100)
Source : CSO, MOSPI
100.0
150.0
200.0
250.0
300.0
350.0
400.0
Year
Indices
Chemicals 105.3 117.1 122.7 140.4 149.7 164.6 176.6 185.0 191.8 208.4 241.9 261.6 286.1 315.2 332.4 361.8 370.2
Mining & Quarrying 109.8 120.5 118.2 126.4 125.4 126.7 130.3 131.9 139.6 146.9 153.4 154.9 163.2 171.6 176.0 193.4 204.9
Manufacturing 109.1 124.5 133.6 142.5 148.8 159.4 167.9 172.7 183.1 196.6 222.5 242.3 273.5 298.6 308.6 342.5 370.6
Electricity 108.5 117.3 122.0 130.0 138.4 148.5 154.4 159.2 164.3 172.6 181.5 190.9 204.7 217.7 223.7 237.1 250.5
General Index 109.1 123.3 130.8 139.5 145.2 154.9 162.6 167.0 176.6 189.0 211.1 227.9 255.0 277.1 286.1 316.2 341.0
1994-
95
1995-
96
1996-
97
1997-
98
1998-
99
1999-
00
2000-
01
2001-
02
2002-
03
2003-
04
2004-
05
2005-
06
2006-
07
2007-
08
2008-
09
2009-
10
2010-
11

5. 5

6. 6
INDIAN CHEMICAL INDUSTRY

7. 7
SIZE OF INDIAN CHEMICAL INDUSTRY
 12TH LARGEST – VOLUME
 3RD LARGEST IN ASIA
 INDUSTRY SIZE - US $ 76 BN IN 2009-2010
 5% OF INDIA’S GDP
 EXPECTED TO GROW AT 10% - DOUBLE THE GROWTH
RATE OF THE GLOBAL INDUSTRY

8. 8
Chemical clusters in India
CHEMICAL CLUSTERS ARE CONCENTRATED IN THE WEST
States Share of
production
Gujarat 53%
Maharashtra 9%
Madhya
Pradesh
5%
Uttar Pradesh 6%
Tamil Nadu 6%
Punjab 4%
Others 17%
Jamnagar,
Thane, Pune , Chiplun
Ahmedabad
Hyderabad
Vadodara
Cochin
Haldia
Bangalore
NCR
Chennai
Bharuch, Hazira, Vapi
Baddi
Dera Bassi
Panipat
Nagda
Vishakhapatnam,
Kakinada
Cuddalore, Pondicherry
Mangalore
Source: Working Group of Chemicals, Planning
Commission (11th Five Year Plan)

9. 9
CHARACTERISTICS OF INDIAN CHEMICAL INDUSTRY
 HIGH DOMESTIC DEMAND POTENTIAL, AS THE INDIAN
MARKETS DEVELOP AND PER CAPITA CONSUMPTION LEVELS
INCREASE;
 HIGH DEGREE OF FRAGMENTATION AND SMALL SCALE OF
OPERATIONS;
 LIMITED EMPHASIS ON EXPORTS DUE TO DOMESTIC MARKET
FOCUS AND SMALLER SCALE OF OPERATIONS;
 LOW COST COMPETITIVENESS AS COMPARED TO OTHER
COUNTRIES DUE TO HIGH COST OF FEEDSTOCK & POWER,
TAXATION STRUCTURE AND COST OF CAPITAL;
 LOW FOCUS ON R&D DESPITE INITIATIVES TO INNOVATE
PROCESSES TO SYNTHESISE PRODUCTS COST EFFECTIVELY

10. 10
TRANSFORMING INDIAN CHEMICAL INDUSTRY
 LARGE PETROCHEMICAL CAPACITIES
 TREND TOWARDS OUTSOURCING OF DIFFERENT
CHEMICAL INTERMEDIATES TO INDIA
 DOMESTIC COMPANIES MOVING UP THE VALUE CHAIN
 STRINGENT ENVIRONMENTAL LAWS AND PRACTICES
LEADING TO SHIFTING OF PLANTS TO INDIA

11. 11
SIZE OF CHEMICAL INDUSTRY IN INDIA
US $ BN %
BASIC CHEMICALS
Inorganic Chemicals 2.00 2.64
Fertilizers 18.51 24.45
Organic Chemicals 0.77 1.02
Petrochemicals 14.94 19.74
Total Basic Chemicals 36.22 47.84
SPECIALITY CHEMICALS 16.25 21.47
KNOWLEDGE CHEMICALS 23.23 30.69
75.70 100.00

12. 12
SEGMENTS OF INDIAN CHEMICAL INDUSTRY
Speciality
21.47%
Knowledge
30.69%
Basic
47.84%
Basic
Speciality
Knowledge

13. 13
Segment Share of
market
Market
growth
Market segments
Organic Chemicals Inorganic Chemicals
Basic 48% 8.82%
 Petrochemicals – Basic
(Ethylene, Propylene etc)
 Fertilizers
 Petrochemicals – Polymers  Chlor Alkali
 Other organic chemicals –
Benzene based, alcohol
based, others
 Other inorganic
chemicals
Specialty 21% 10.00%  Paints and varnishes
 Dyes and Intermediates
 Textile Chemicals
 Others
Knowledge 31% 11.60%  Pharmaceuticals
 Biotechnology
 Agrochemicals
THE INDIAN CHEMICAL INDUSTRY - THREE KEY SEGMENTS

14. 14
Organic
chemicals
Basic
chemicals
(48%) Inorganic
chemicals
SUB SEGMENTS ACROSS THE CHEMICALS VALUE CHAIN ARE
EXPECTED TO RECORD DOUBLE DIGIT GROWTH
Specialty
chemicals
(21%)
Paints
Textile Chemicals
Knowledge
chemicals
(31%)
Pharma
Agrochemicals
Biotech
Growth – FY 10 to 12
15%
4%
3%
3%
11%
6%
12%
29%
8%
Polymers
Soda Ash
Caustic Soda
Fertilizers

15. 15
Government
Initiatives
GOVERNMENT OF INDIA IS PROMOTING GROWTH THROUGH
INVESTMENTS FROM BOTH DOMESTIC AND FOREIGN PLAYERS
R&D
FDI
1
3
PCPIRs
International
trade
4
2
► Breaks on R&D
► Weighted average deduction of 200% to chemical
companies
► Setting up of PCPIRs to promote investment
► Each PCPIR will contain petrochemical units,
associated logistics and infrastructure
► 100% FDI in the chemicals sector allowed
► Delicensed the manufacture of most chemical products
► Incentives to boost chemical exports include:
► Duty exemptions
► Special duty-free zones for manufacturing units
► Export-promotion zones
► Advanced Licensing Scheme for procurement
of raw materials
Sources: Ernst & Young TP report on General Chemicals
Petroleum, Chemicals
and Petro chemical
Investment Regions

16. 16
BASIC CHEMICALS

17. 17Source : Annual Report of respective Companies.
LEADING INDIAN COMPANIES IN BASIC CHEMICAL SECTOR - 2010-11
S
N
NAME OF THE
COMPANY
SALES
(net of
Excise)
EBIDTA PAT
FIXED
ASSETS
(GrossBlock)
US $ Bn US $ Bn % US $ Bn % US $ Bn
1 Reliance Industries 52.79 8.76 16.60 4.32 8.18 47.07
2 IFFCO 3.58 0.38 10.65 0.09 2.39 1.94
3 Tata Chemicals 1.32 0.20 15.37 0.09 6.55 0.84
4 National Fertilizers Ltd. 1.23 0.06 5.22 0.03 2.40 0.62
5 RCF 1.17 0.11 9.68 0.05 4.45 0.69
6 JBF Industries 0.76 0.09 12.03 0.03 3.68 0.33
7 Indo Rama Synthetics 0.59 0.09 15.06 0.03 5.01 0.65
8 Finolex Industries 0.42 0.05 11.53 0.02 3.84 0.33
9 Aarti Industries 0.31 0.04 13.57 0.01 4.61 0.16
10 Guj Alkalies & Chemicals 0.30 0.06 19.68 0.02 8.01 0.61

18. 18
PETROCHEMICALS
PRODUCER - FEEDSTOCK SOURCES
Company Unit Feedstock
Ethylene Capacity (KTPA) Propylene Capacity (KTPA)
Addition
ByExisting Additions Total Existing Additions Total
RIL –
Jamnagar,
Hazira,
Nagothane,
Gandhar,
Vadodara
Cracker /
PRU
Refinery
Naphtha /
Gas (C2-C3,
Propane)
1883* - 1883 2800 - 2800 -
OPaL,
Dahej
Cracker Naphtha - 1100** 1100 - 340** 340 2013
IOC,
Panipat
Cracker /
PRU
Refinery
Naphtha 857 - 857 600 - 600 -
Haldia Cracker Naphtha 700 - 700 320 - 320 -
Others –
GAIL,
BPCL,
HMEL,
MRPL
Cracker /
PRU
Refinery /
FCCU
Refinery
Natural Gas
(C2-C3)
/PRU-
Propylene
410 290 700 16 1240 956 2012/14
Total
Capacity
3850 1390 5240 3736 1580 5016
* RIL, Jamnagar is expected to set up a Cracker of 1.5 MT capacity using Refinery Gas by 2014-15
** OPaL’s 40% of production is required to be exported as it is a SEZ unit.

19. 19
INDIAN POLYMER DEMAND
0
500
1000
1500
2000
2500
3000
3500
4000
Year
KTA
HDPE 1279 1800 2152 2540
LLDPE 1252 1509 1730 1990
LDPE 323 358 378 398
PP 2212 2679 3143 3621
PVC 1707 1875 2065 2271
2009 2010 2011 2012
18%
10%
26%
17%
7%
Growth Rate
PP
PVC
HDPE
LLDPE
LDPE

20. 20
FUTURE DEMAND SUPPLY SCENARIO : POLYMERS
(in kT)
DEMAND CAPACITY REQUIRED
CAPACITY
YEAR 2010 2012 2010 2012
POLYMERS 8221 10820 7794 3079
LDPE 358 398 205 193
LLDPE 1509 1990
2663 1890
HDPE 1800 2540
PP 2679 3621 3605 16
PVC 1875 2271 1321 950

21. 21
FUTURE DEMAND SUPPLY SCENARIO : FIBRE
(in kT)
DEMAND CAPACITY
YEAR 2010 2012 2012
FIBRE 3525 4624 6540
PSF 941 1180 1429
PFY 2106 2848 4400
VSF 275 345 419
OTHERS 203 251 292

22. 22
FUTURE DEMAND SUPPLY SCENARIO : CHEMICALS
(in kT)
DEMAND DEMAND
CAGR
CAPACITY REQUIRED
CAPACITY
YEAR 2010 2012 2012/2010 2012 2012
CHEMICALS 588 657 5.7% 670 -
LAB 432 478 5.2% 530 -
EO 156 179 7.1% 140 39

23. 23
INORGANIC CHEMICALS

24. 24
FERTILIZER INDUSTRY
SNAPSHOT
INVESTMENT US $ 5.53 BN
NUMBER OF PLANTS TOTAL 128 OF WHICH
UREA – 31 (28 OPERATIONAL)
COMPLEX FERTILIZERS – 19
(INCLUDING 11 DAP PLANTS)
SSP – 66
OTHERS (AMM. SULPHATE ETC) -12
CAPACITY (2009-10) N – 12.05 MILLION TONNES
P – 5.63 MILLION TONNES
PRODUCTION OF FERTILIZER
NUTRIENTS (2009-10)
N – 11.90 MILLION TONNES
P – 4.32 MILLION TONNES
K – IMPORTED
 STAGNATION IN INDIGENOUS CAPACITY, PRODUCTION
 STEEP RISE IN COSTS OF IMPORTED RAW MATERIALS AND INTERMEDIATES
Source for Tonnage : Annual Report 2009-10, Department of Fertilizers, Government of India

25. 25
PRODUCTION, CONSUMPTION AND IMPORT / GAP OF UREA AND DAP
2008-09 TO 2009-10 (ACTUAL)
(in MMT)
YEAR PRODUCTION CONSUMPTION IMPORT
UREA DAP UREA DAP UREA DAP
Actual
2008-09 19.92 2.99 26.65 9.23 5.67 6.19
2009-10 21.12 4.24 26.45 10.15 5.21 5.77
Source : Fertilizer Association of India (FAI)

26. 26
TURNOVER OF FERTILIZER SECTOR
YEAR US $ BN
2006-2007 11.14
2007-2008 13.23
2008-2009 28.49
2009-2010 18.51
Source : Fertilizer Association of India (FAI)

27. 27
CAUSTIC SODA INDUSTRY IN INDIA
FY 10
MMTPA
CAPACITY 3.20
PRODUCTION 2.31
DEMAND 2.57
 DEMAND GROWTH IN ALUMINA IS EXPECTED TO DRIVE CAUSTIC
SODA DEMAND
 35 UNITS
 SIZE OF CAUSTIC / CHLORINE INDUSTRY IN FY 10 - US $ 0.79 BN

28. 28
MAJOR PRODUCERS OF CAUSTIC SODA IN INDIA
PRODUCERS INSTALLED
CAPACITY
(As on
31.03.2010)
PRODUCTION
IN 2009-10
SALES
IN 2009-10
KTPA KTPA KTPA
ADITYA BIRLA GROUP 454 418 340
GUJARAT ALKALIES &
CHEMICALS
429 414 382
DCM SHRIRAM
CONSOLIDATED
275 182 182
Source : Annual Report 2009-10 of Respective Companies

29. 29
SODA ASH INDUSTRY IN INDIA
FY 10
MMTPA
CAPACITY (GROSS) 2.99
PRODUCTION (GROSS) 2.09
DEMAND 2.32
 FLAT GLASS AND DETERGENT SECTORS WILL REMAIN KEY
DEMAND DRIVERS
 SIZE IN FY 10 – US $ 0.64 BN

30. 30
STATISTICS OF SODA ASH INDUSTRY
(in KT)
PRODUCER ANNUAL
CAPACITY
PROD
FY 10
SALES
FY 10
GROSS GROSS
NIRMA +SAUKEM 1015 602 529
TATA CHEMICALS 918 696 675
GUJARAT HEAVY
CHEMICALS
850 676 657
OTHERS 211 113 103
TOTAL 2,994 2,087 1,964
IMPORTS 643
EXPORTS (290)
DEMAND 2,317
Source : Annual Report of respective Companies.

31. 31
OTHER INORGANIC CHEMICALS – 2009-10
KT % by
Volume
US $ BN % by
Value
CARBON BLACK 419 80.81 0.44 77.19
TITANIUM DIOXIDE 61 11.78 0.10 17.54
OTHERS 38 7.34 0.03 5.26
TOTAL 518 100.00 0.57 100.00
Source for Tonnage : Annual Report 2009-10, Department of Chemicals and Petrochemicals,
Government of India

32. 32
SPECIALITY CHEMICALS

33. 33
Source : Annual Report of respective Companies.
LEADING INDIAN COMPANIES IN
SPECIALITY CHEMICALS SECTOR- 2010-11
S
N
NAME OF THE
COMPANY
SALES
(net of
Excise)
EBIDTA PAT
FIXED
ASSETS
(Gross
Block)
US $ Bn US $ Bn % US $ Bn % US $ Bn
1 Asian Paints 1.41 0.26 18.68 0.16 11.73 0.34
2 Pidilite Industries 0.50 0.10 20.03 0.06 12.90 0.19
3 Atul Industries 0.33 0.04 13.11 0.02 6.20 0.21

34. 34
KEY SEGMENTS – OPPORTUNITIES & CHALLENGES
Source : Tata Strategic Management Group, ISP Estimates
SEGMENTS OPPORTUNITIES CHALLENGES
Construction
Chemicals
•Increase in infrastructure &
Construction
•Highly Competitive;
•Low value product technologies;
•Limited margins;
•Exports are limited and have to
comply with REACH Regulations
Paints &
Coatings
Chemicals
•Quality upgrade to move
closer to international
standards;
•Increased per capita paint
consumption
•Competition from Chinese
ingredient imports;
•Highly fragmented &
unorganized sectors
Water Treatment
Chemicals
•Rapid industrialization
leading to huge demand for
effluent treatment;
•Increasing awareness of
recycling water;
•Stricter Government
regulations in industrial
and institutional domains -
scope for increased usage
•Current lack of stricter
regulations which will be
implemented;
•Commodity technologies highly
prevalent
Contd…

35. 35
KEY SEGMENTS – OPPORTUNITIES & CHALLENGES
Source : Tata Strategic Management Group, ISP Estimates
SEGMENTS OPPORTUNITIES CHALLENGES
Textile
Chemicals
•Established manufacturing
hub based on low cost
manpower;
•Equipments and availability
of rich pool of scientists
•High input costs; Raw material
sensitive;
•Low profit margins;
•Competition from other low cost
locations (Bangladesh, Vietnam
etc.)
Personal Care
Ingredients
•Rising consumer awareness;
•Increasing middle class
disposable incomes;
•Growth of local formulating
& import replacement;
•Huge export potential due to
India's vast experience in
producing natural products
•Stiff competition from Chinese
ingredients;
•Limited affordability for
sophisticated formulations.

36. 36
INDIAN SPECIALITY CHEMICALS : OVERVIEW
Source : Tata Strategic Management Group, ISP Estimates
At an estimated $16.25 Bn India’s Specialty Chemicals Market
represented roughly 4% of the Global Market in 2008

37. 37
KNOWLEDGE CHEMICALS

38. 38
Source : Annual Report of respective Companies.
LEADING INDIAN COMPANIES IN
KNOWLEDGE CHEMICALS SECTOR- 2010-11
SN NAME OF THE
COMPANY
SALES
(net of
Excise)
EBIDTA PAT
FIXED
ASSETS
(Gross
Block)
US $ Bn US $ Bn % US $ Bn % US $ Bn
1 Cipla 1.31 0.29 22.58 0.20 15.65 0.84
2 Ranbaxy Laboratories 1.20 0.39 32.47 0.24 20.35 0.61
3 Dr. Reddy's Laboratories 1.10 0.28 25.77 0.19 17.21 0.64
4 Lupin Labs 0.95 0.21 22.31 0.17 18.05 0.40
5 Aurobindo Pharma 0.88 0.21 23.85 0.13 14.38 0.42
6 United Phosphorus 0.65 0.10 15.32 0.03 5.20 0.35
7 Cadila Healthcare 0.46 0.16 35.52 0.13 27.99 0.37
8 Bayer CropScience 0.46 0.05 11.22 0.03 6.17 0.12
9 Glaxo Smithkline 0.45 0.19 41.51 0.12 26.54 0.07
10 Sun Pharmaceuticals 0.41 0.32 78.58 0.29 71.60 0.27

39. 39
PHARMACEUTICAL INDUSTRY IN INDIA
 SIZE OF PHARMACEUTICAL INDUSTRY IN INDIA
 PROJECTED GROWTH - 11.6% PER ANNUM
 US $ 20 BN DOMESTIC MARKET BY 2015
 US $ 30 BN DOMESTIC MARKET BY 2020
 ACUTE THERAPY
 VALUE CONTRIBUTION – 71%
 GROWTH - 16.3%
 CHRONIC THERAPY - 18.7% GROWTH
Source : Dept of Pharmaceuticals, Govt. of India
Rs. Crores US $ BN
DOMESTIC 62,055 8.79
EXPORTS 42,154 12.94
TOTAL 1,04,209 21.73

40. 40
INDIAN AGROCHEMICALS INDUSTRY
 DOMESTIC MARKET : > US $ 1 BILLION
 EXPORTS :> US $ 0.5 BILLION
 MARKET SHARE OF MNCs : 50% +
 THE BALANCE IS SHARED BETWEEN
 BASIC MANUFACTURING COMPANY
 FORMULATORS / REPACKERS / MARKETING COMPANIES
Source : The Third India Chemical Industry Outlook Conference

41. 41