The Indian chemical industry generated USD 42 billion in revenue in fiscal year 2009, growing 11.5% in 2009-2010. It is the third largest chemical industry in Asia, yet only accounts for 2% of the global chemical industry. The industry consumes 1/3 of its production and contributes 13% to exports, 13% to industrial output, 7% to GDP, and 20% to tax revenues. The industry is cyclical and driven by demand from customer segments, but players often add new capacity at the end of growth phases, leading to excess capacity when business cycles decline. Petrochemicals such as olefins and aromatics make up over 60% of the basic chemical industry by revenue. Companies must pursue strategies

1. Rahul Ajit

2. USD 42 BN for FY09, growing by 11.5% in FY 09-10 3 rd largest in Asia after China and Japan, yet only 2% of global chemical industry Roughly consumes 1/3 rd of its production Contributes 13% of the total export, 13% of the total industrial output, 7% of the GDP and 20% of the tax revenues

3. A cyclical industry, driven by the business cycles of the end customer segments However, the cyclicity is compounded by imbalances of demand and supply, due to inappropriate capacity additions Most players tend to add capacities at the end of a growth phase, when the existing capacity has been fully utilized Hence, additional capacity remains unutilized as the business cycle goes into a trough Companies generate continuous output to recover costs, leading to over supply and poor price realization

5. Also known as commodity chemicals, with no differentiation between products Petrochemicals (Olefins and aromatics) form the backbone of basic chemical industry with more than 60% share by revenue Companies have to strategize around either being well entrenched in the market (domestic or global) or have a global scale or have access to low cost feedstock or a combination of these to sustain competitive advantage

7. Also known as Performance Chemicals Low in volume, but high in value Market size – USD 860 MN, growing at 10 -12% pa Consists of Paint, Adhesives, Electronic Chemicals, Water Management Chemicals, Flavors and fragrances, Sealants and Coatings, Catalysts, Industrial Cleaners and Fine Chemicals

10. Domestic pharma market was estimated to be USD 7.5 BN in FY2009 and have a CAGR of 14.0% during the period FY 2008-09 to FY2013-14. Besides domestic sales, export of generic drugs and active pharmaceutical ingredients by Indian companies adds another USD 11 to12 BN to the pharma market. Similarly the domestic agrochemical market was estimated to be USD 900 MN in FY2008-09 with another USD 300-400 MN exports. The domestic agrochemical market is expected to have a modest CAGR of 7.5% during the next four-five years.