Indian Chemical Firms Expand R&D to Strengthen Supply Chains

Indian chemical firms are strategically growing their manufacturing plants, dedicating significant resources to R&D, and obtaining agreements to enhance supply chain security. At the moment, China holds a majority share of more than 40 per cent in the worldwide chemical market, while the U.S. and the European Union each have a contribution of 13-15 per cent.

India currently holds a 4 per cent market share which is expected to increase significantly as global supply chains shift away from China. This places them favorably to take advantage of the worldwide trend toward outsourcing. Indian companies are stepping up to fill the void as European companies seek to decrease reliance on China due to high costs.

In the last ten years, the top 20 chemical companies in India, which operate in specialty and bulk sectors, have greatly increased their capital expenditures (capex). The yearly capex saw an increase from around Rs 33 billion between FY12-15 to Rs 70 billion in FY19-21, and then to Rs 116 billion in FY22-24.

This uptick has been seen in both specialty and commodity chemical firms, with capital expenditures in fiscal year 2024 nearly matching the total investment made in fiscal years 2012-2015. Internal earnings have mainly backed the aggressive growth, maintaining stable financial positions and effective management of working capital.

During FY22-24, chemical companies experienced a higher compound annual growth rate (CAGR) of 21-23 per cent for gross block, compared to the 10-15 per cent CAGR in the previous period (FY12-18). Specialty chemical companies, specifically, saw a near doubling of their fixed assets from FY20-24 due to increased international commodity prices, resulting in improved asset efficiency.

Indian chemical companies are putting in focused attempts to enhance their Research and Development teams, adopting fresh chemical methods, and broadening their range of products.