Exports offer hope for specialty chemicals units: CRISIL SME Tracker

India’s chemical exports logged a compound annual growth rate (CAGR) of about 13 per cent between 2015 and 2019, compared with about 7 per cent for China
Specialty chemicals manufacturers have been left bleeding, as demand from most end-user industries has dried up in the wake of the Covid-19 pandemic.

Small and medium enterprises (SMEs), which make up as much as 30-35 per cent of the industry, have been hit particularly hard.

Many SMEs have reduced capacity utilisation as downstream demand fell, and are expected to see realisation decline amid lower crude oil prices. Additionally, SMEs are having difficulties in accessing working capital, and may face a liquidity crunch. While the world is slowly opening up, there has been no major recovery in demand from key end-user industries such as automobiles, electronics and textiles. We expect demand from the food-packaging and health care segments to sustain, though.

In this milieu, exports offer a ray of hope. India’s chemical exports logged a compound annual growth rate (CAGR) of about 13 per cent between 2015 and 2019, compared with about 7 per cent for China. The key sub-segments likely to benefit from higher exports would be colourants and agrochemicals, with export shares of 45-50 per cent and 50-55 per cent, respectively.
Furthermore, significant capacity addition in other sub-segments, such as polymer additives, would help reduce the country’s import dependence.

Other key demand opportunities for India’s specialty chemicals players, including SMEs, could arise from the deteriorating relations between the United States and China, and closure of manufacturing units in China on environmental concerns.

Besides, global players are trying to diversify their supply chains and reduce their dependence on China. India, with its competitive labour cost, can emerge as a viable alternative.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel