An overview of Indian Chemical IndustryRoyal Society of Chemistry

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)

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SIZE OF INDIAN CHEMICAL INDUSTRY

12th largest in terms of volume

3rd largest in Asia

Industry size - US $ 76 billion in 2009-2010

5% of india’s GDP

Expected to grow at 10% - double the growth rate of the global industry

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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

BaddiDera Bassi Panipat

Nagda

Vishakhapatnam, Kakinada

Cuddalore, Pondicherry

MangaloreSource: Working Group of Chemicals, Planning Commission (11th Five Year Plan)

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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 synthesize products cost effectively

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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

Speciality 21.47%

Knowledge 30.69%

Basic 47.84%

Basic

Speciality

Knowledge

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SEGMENTS OF INDIAN CHEMICAL INDUSTRY

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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

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Source : Annual Report of respective Companies.

SL no Top ten companies Revenue (US $ billion )

1 Reliance Industries 52.79

2 IFFCO 3.58

3 Tata Chemicals 1.32

4 National Fertilizers Ltd. 1.23

5 RCF 1.17

6 JBF Industries 0.76

7 Indo Rama Synthetics 0.59

8 Finolex Industries 0.42

9 Aarti Industries 0.31

10 Guj Alkalies & Chemicals 0.30

TOP TEN BASIC CHEMICAL COMPANIES

FERTILIZER INDUSTRY SNAPSHOT

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Investment US $ 5.53 bn

Number of plants Total 128 of whichUrea – 31 (28 operational)Complex fertilizers – 19 (including 11 dap plants)SSP – 66Others (amm. Sulphate etc) -12

Capacity (2009-10) N – 12.05 million tonnesP – 5.63 million tonnes

Production of fertilizer nutrients (2009-10)

N – 11.90 million tonnesP – 4.32 million tonnesK – 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

INDIAN SPECIALITY CHEMICALS : OVERVIEW

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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

PHARMACEUTICAL INDUSTRY IN INDIA

Size of pharmaceutical industry in India.

Projected growth - 11.6% per annumUS $ 20 billion domestic market by 2015US $ 30 bilion domestic market by 2020

Acute therapy Value contribution – 71%Growth - 16.3%

Chronic therapy - 18.7% growth

US $ bn

Domestic 12.94

Exports 8.79

Total 21.73

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Source : Dept of Pharmaceuticals, Govt. of India

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High GDP growth rates, rising population numbers and, as a result, a growing middle class are the drivers of India's pharmaceutical market.

Strong and well developed chemistry R&D and manufacturing infrastructure

Majority of the Indian firms comply with cGMP standards and India has the largest number of US FDA approved manufacturing sites (about 80) outside the US.

India’s cost arbitrage: Manufacturing costs are 30-40% lower, labour costs are 1/7th of US, production costs are 40-50% lower while R&D costs are 20-30% lower when compared to other developed nations

Over USD 50 bn and 2 bn Euro worth of patented drugs will go off patent in US and Europe by the end of year 2010, which would encourage more outsourcing activity to India.

Offer value added services including data management, biostatistics etc.

Pharma in India: Key Strengths

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Price regulation: The NPPA (National Pharma Pricing Authority), decides the various pricing parameters and sets prices of different drugs, which leads to lower profitability for the companies.

Continuous rise in R&D expenditure (from 2% to nearly 8-10%) increases pressure on the industry to enhance productivity

Shortfall of over 800 trained professionals per annum for the pharma industry owing to the burgeoning growth of the sector and the increasing focus on R&D.

India is not yet a part of the eco system of academic research, VC community, key opinion leaders

Inadequate strength in early discovery Low risk appetite – VC & PE funding availability

Pharma in India: Weaknesses

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Source : Annual Report of respective Companies.

Sl No Top ten companies Revenue(US $ Bn)

1 Cipla 1.31

2 Ranbaxy Laboratories 1.20

3 Dr. Reddy's Laboratories 1.10

4 Lupin Labs 0.95

5 Aurobindo Pharma 0.88

6 United Phosphorus 0.65

7 Cadila Healthcare 0.46

8 Bayer CropScience 0.46

9 Glaxo Smithkline 0.45

10 Sun Pharmaceuticals 0.41

LEADING INDIAN COMPANIES IN KNOWLEDGE CHEMICALS SECTOR- 2010-11

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Top Pharmaceutical companies in India

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INDIAN AGROCHEMICALS INDUSTRY

Domestic market : > US $ 1 billion

Exports :> US$ 0.5 billion

Market share of multinationals : 50% +

The balance is shared between

Basic manufacturing company

Formulators / repackers / marketing companies

Source : The Third India Chemical Industry Outlook Conference

India and the future

• By 2050- 61% of Indian population in working group (15-59 yrs)= 900 m

• 18 % of world’s working age population• 1 in 6 persons of global workforce will be an

Indian• India could have the second largest economy in

the world (larger than the US) of $36 trillion, and a per capita income of about $22,000 by 2039

Mashelkar, 2010

Acknowledgments/Sources:

• Indian Chemical Council• UK Trade & Investment• Science & Innovation Network• British High Commission, India