CRISIL Research expects India’s specialty chemicals industry — including dyes and pigments, and agrochemicals — to log robust growth this fiscal year as the strong tailwind from China continues.

This augurs well particularly for small and medium enterprises (SMEs), which have a strong presence in this export-oriented industry. These players are clustered around Gujarat, Maharashtra and the Delhi-NCR region, with Gujarat alone housing over 400 chemical units.

China’s specialty chemicals market has seen a downturn in recent years due to various factors, the most prominent being the introduction of stringent environmental norms, which have led to the shutdown of several chemical plants.

This was a major reason for the strong growth logged by Indian specialty chemicals manufacturers in fiscal 2019. The industry also got a fillip from the US-China trade war, which impacted exports from China and benefited India. Higher realisations supported a 10-12 per cent year-on-year revenue growth for the industry, given strong demand from key end-user industries such as textiles, paints, plywood and personal care.

Research expects domestic demand for specialty chemicals to remain robust, driven by key end-user industries.

However, realisations could be impacted due to lower prices of crude oil and other inputs. Given stiff competition among SME players in the domestic market, the fall in input prices will need to be passed on to the end-users.

In the export market, though, India will continue to gain share, supported by the ability to manufacture at a lower price compared with its western counterparts.

All the same, exchange rate fluctuations, volatility in input prices, increasingly stringent government regulations relating to environmental pollution, and aggressive imports would be among the monitorables.

Published On : 05-08-2019

Source : Business Standard