Specialty Chemical Industry in India is one of the few industries that has managed to gain in these tough scenarios of outbreak of COVID-19 pandemic. Specialty chemical companies have announced a gain of around 3.5 percent backed by soaring demand and slacked cost of raw materials. Propelling demand for hygiene products has kept stocks of major companies like Galaxy Surfactants and Fine Organics in uptrend. Whereas other specialty chemical companies such as SRF, Aarti Industries and PI Industry gained from increment in demand for medicines and disinfectants from agro-chemical and pharmaceutical sector. Another silver lining for the specialty chemical manufacturers is the chance for indulging in trade activities as the largest exporter, China is being boycotted by several countries on blame resentment for Coronavirus outbreak. Specialty chemical on witnessing much needed gains amid gloomy times of Coronavirus has turned out to be one of the few leveraged sectors for the Indian economy. Hence, where revenue and employability of other industries is crashing, specialty chemical has braced financial intakes with upscaled production and blooming sales.
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Specialty sector has seen a rapid turnaround after the announcement of lockdown in the country. Major players such as Aarti Industries, SRF Limited, PI Industries, Galaxy Surfactants, Vinati Organics Limited etc. have seen improvement in their financial performance, thus, upping their game in the equity market. These companies have a balanced cash reserve and low leveraged capital structure, leaving a significant amount of liquid cash in hand to meet their fixed costs and other current liabilities. Most of these players have started production either partially or fully and now are targeting the export market. Once the logistics sector starts full-fledged operation, the specialty chemical industry would be leading the Indian market and be the next game changer after technology. With Chinese industry losing out on capturing international market after being pointed out as the breeding ground for the virus and global players reducing their dependency on china as a trade partner, this is the right time for the Indian players to ramp up production and seize the opportunity. Targeting just the export volume, India can increase its share in global Specialty chemicals market by 7 per cent. Foreign Direct Investments is likely to flow from the Chinese market to India as the country poses a fertile ground for these investors.
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The specialty chemicals industry is expected to record a minimal job- and revenue-loss and therefore, has been outperforming the other segments in India. Attractive export volumes of essential chemicals that largely fall under specialties category ensure the silver lining for the industry is still intact. Revenue loss to the industry is estimated at just a little over INR 3000 cr. and layoffs not more than 35 thousand for the industry.
Although the domestic players might have an impact to their earning in Q1FY2021, some companies have reported higher margins on account of increased capacity utilization, increase in exports and greater contribution of higher value products with revenue from specialty segment anticipated to grow at a CAGR of more than 23 per cent from FY2016-FY2021E. The company has expanded product mix thus realizing better margins in the business. Similarly, SRF Limited has better cash flows and lower debts to manage, thus leading to higher profitability amidst the coronavirus outbreak. Orders for specialty chemicals are being booked from across the globe but supplying them remains a major hurdle for the manufacturers.
Even though the supply chain disruptions have affected the specialty chemicals industry’s business , order flows have been consistent and the industry is likely to recoil from the effects of lockdowns and plant shutdowns, battling out the logistical challenges by the end of the second quarter of 2021.
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Source: ChemAnalyst