India - Chemicals
20 September 2022
Is “Europe+1” in the making?
In this report, we make an attempt to understand the implications of
the looming energy crisis in Europe on Indian Chemical industry. We
have scanned the landscape of energy-intensive chemicals, key
chemistries that are more prevalent in Europe, and highlight impact on
Indian Chemical companies. Some of our observations are as mentioned
below:
Cost curve inching higher: European Chemical players had the
advantage of low gas price, which led to setting up of large-scale
capacities of bulk chemicals that also helped it in scaling up of specialty
chemicals value chain. The entire economics is now under threat with
gas prices rising almost 2x-3x in the last one year (rose 10x over long
term historical average). Natural gas remains the key source for fuel,
steam generation and feedstock; hence resulting into sharp increase in
cost of production across all chemicals.
Would it be similar to “China+1”?: We believe “Europe+1” theme
would not be similar to “China+1” theme, as unlike China - who has
been a key competitor and hence the supply disruptions benefited
Indian players - Europe, in addition to being a competitor, is also a
large export destination (client). Therefore, any slowdown/curtailment
in operations is likely to have an impact in the near term. Also, unlike
China, demand slowdown in Europe remains a concern. Further, gas
availability and pricing would be critical for Indian players to benefit.
Collaboration/technology transfer could pick up: A prolonged
crisis (elevated gas price) would compel European companies to start
collaborating (technology transfer), to shift energy-/electricity-intensive
chemicals, and consequently, speciality chemicals out of Europe and/or
outsource more. Indian Chemical companies should benefit from such
initiatives in the medium to long term.
Indian players well equipped: Indian players are well equipped with
the required technology know-how, infrastructure, talent/workforce, and
are now willing to invest more to tap growth opportunities. This further
enhances growth visibility for the entire Indian Chemicals sector. Indian
Ranjit Cirumalla | ranjit.cirumalla@iiflcap.com Akul Broachwala | akul.broachwala@iiflcap.com
91 22 4646 4654 91 22 4646 4665
Update on Europe
players could explore setting up capacities in bulk chemicals like
Acid, Acrylic acid, Acrylonitrile, Acetic acid, Cyclohexane, etc.,
Nitric
while
DD MMM YYYY
increasing cost of production in specialty chemicals. This would drive
higher outsourcing opportunities for Indian speciality chemicals.
Discretionary demand more vulnerable: The energy crisis is forcing
European countries to rationalise usage of Natural gas, which is likely to
impact the discretionary industries first and critical industries like
pharmaceuticals and agrochemicals later. Therefore, Indian chemical
companies supplying to pharma and agrochemicals are likely to face
minimal impact. A similar trend was visible during Covid-19 times too.
We have analysed companies having Europe exposure in the following
buckets to highlight the ones that are likely to get benefited/ disrupted.
1) Energy-intensive chemicals: Natural gas is predominantly used in
Methane reformer that produces Methanol and Ammonia. Ammonia
is the most important intermediate chemical compound, used as
basis for almost all products.
2) Large capacities in Europe: The advantage of cheap Natural gas
costs has helped Europe to set up some large capacities of basic
chemicals. We highlight some of these capacities in Fig 23 and the
Indian companies exposed to these chemicals.
3) Leading chemical companies in Europe: Europe is home to some
of the large global chemical companies. Among the leading chemical
companies in Europe are BASF, Evonik, Lanxess, Solvay, Lonza,
Linde and Bayer. We highlight mgmt’s recent commentary on
Europe situation, and our take on them.
4) Chemicals trade between Europe and India: India exported
~Rs619bn to Europe while imports stood at Rs391bn in FY22. Bulk
chemical exports were low while organic chemicals exports were
high. Imported products comprise of carbonates, aluminium oxides,
formulated of pharmaceutical, biotech and nutrition markets.
5) Company specific exposure: Figure 33 & 34 highlights specific
exposure of some of the chemical companies to Europe in terms of
exports and imports.
Key risk to Europe+1 theme: Normalisation of geo-political situation
resulting into resumption of gas supply at cheaper rates.
Vidit Shah | vidit.shah@iiflcap.com
91 22 4646 4657
 India - Chemicals

Basic chemicals represent intensive energy manufacturing Supply of natural gas from Russia
As per OECD study, Basic Chemicals industry comprising of organic,
inorganic, chemical feedstock and agricultural chemicals (fertilisers) Figure 2: Nord stream 1 and 2 pipeline from Russia to Germany. Nord Stream 2 was not
are energy-intensive, in terms of manufacturing processes. These operationalized while the utilisation of Nord Stream 1 is currently zero.
chemicals require natural gas as a key feedstock for processing.
Contrary to the bulk chemicals and fertilisers, some of the specialty
chemicals and pharma products have low energy intensity for
manufacturing. OECD projects natural gas consumption to only rise
from existing levels, despite growth in the renewable energy.

Figure 1: OECD sector-wise energy consumption

Industry grouping
Energy-intensive manufacturing
Food
Pulp and paper
Basic chemicals
Refining
Iron and steel
Nonferrous metals
Non-metallic minerals
Non energy-intensive manufacturing
Other chemicals
Other industrials
Source: OECD, IIFL Research
Representative industries
Food, beverage, and tobacco product manufacturing
Paper manufacturing, printing and related support
activities
Inorganic chemicals, organic chemicals (e.g., ethylene
propylene), resins, and agricultural chemicals; includes
chemical feedstocks
Petroleum refineries and coal products manufacturing,
including coal and natural gas used as feedstocks
Iron and steel manufacturing, including coke ovens
Primarily aluminum and other nonferrous metals, such
as copper, zinc, and tin
Source: Gazprom, IIFL Research
Primarily cement and other non-metallic minerals, such
as glass, lime, gypsum, and clay products
Nord Stream 1: Nord Stream 1 is the biggest pipeline transporting
cheap natural gas between Russia and Europe via Germany. The
twin pipeline system of Nord Stream can transport 55 bcm of gas
Pharmaceuticals (medicinal and botanical), paint and from Russia to Europe through the Baltic Sea. In June 2022, Russia
coatings, adhesives, detergents, and other miscellaneous slashed the supply via Nord Stream to 40% and then in July, further
chemical products, including chemical feedstocks
reduced it to 20%. Finally, it has indefinitely shut down gas flows
All other industrial manufacturing, including metal-based from 2nd September citing maintenance work.
durables (fabricated metal products, machinery,
computer and electronic products, transportation
equipment, and electrical equipment)

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Figure 3: Pipeline from Russia to China – Line 1 has seen higher utilisation post Ukraine
– Russia war
Source: Gazprom, IIFL Research
Power of Serbia 1: The pipeline provided 10 bcm of Russian gas to
China in 2021, and the amount is expected to increase to 38 bcm
annually from 2025, according to the 30-year, $400-bn contract
signed by Russian gas giant Gazprom and China National Petroleum
Corp in 2014. The full China-Russia east route is a pipeline system
spanning over 8,000 km. It transmits natural gas from Siberia to 9
provincial-level regions in China from Heilongjiang's Heihe to
Changling to Yongqing in North China's Hebei Province, and finally to
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India - Chemicals
East China's Shanghai. Northern section was put into use in
December 2019, middle section in December 2020, while southern
section being under construction; expected to be completed and put
into operation in 2025.
Figure 4: Proposed gas pipeline from Russia to China – Line 2 through Mongolia is in
discussions currently
Source: Gazprom, IIFL Research
Power of Serbia 2: Construction of a Russian-Chinese natural gas
pipeline transiting through Mongolia is likely to begin in 2024. The
Power of Siberia-2 pipeline will deliver Europe-bound gas from
western Siberian fields to China, and is expected to go online in
2030. The planned capacity of the 2,600 km pipeline is 50 bcm.
3
 India - Chemicals

Figure 5: Nord Stream capacity utilisation - Russia slashed the supply via Nord Stream Figure 7: Netherlands TTF natural gas prices have rallied a lot - up 3x since August 2021.
to 40% and then in July, further reduced it to 20%. Finally, it has indefinitely shut down Though there has been correction from mid-August 2022, prices still remain at elevated
gas flows from 2nd September citing maintenance work levels

(%) Nord Stream AG - Capacity utilization ($/mmbtu) Netherlands TTF natural gas
120% 100
100% 80
80%
60
60%
40% 40
20% 20
0% 0
Dec-21
Dec-21

Apr-22
Apr-22
May-22
Oct-21
Oct-21

Jun-22
Jan-22

Mar-22

Aug-22
Nov-21

Feb-22
Feb-22

Jul-22
Jul-22

Sep-22

Apr-18

Apr-19

Apr-20

Apr-21

Apr-22
Jan-18

Jan-19

Jan-20

Jan-21

Jan-22
Oct-18

Oct-19

Oct-20

Oct-21
Jul-18

Jul-19

Jul-20

Jul-21

Jul-22
Source: Bloomberg, IIFL Research Source: Bloomberg, IIFL Research

Figure 6: ICE UK natural gas price are up 2x since August 2021. Though there has been Figure 8: RasGas price largely represents India’s gas cost that has nearly doubled since
correction from mid-August 2022, it still remains at elevated levels August 2021

($/mmbtu) ICE UK natural gas ($/mmbtu) Ras Gas price trend

80 16
70 14
60 12
50 10
40 8
30 6
20 4
10 2
0 -

Dec-17

Dec-18

Dec-19

Dec-20

Dec-21
Mar-18

Mar-19

Mar-20

Mar-21

Mar-22
Jun-18

Jun-19

Jun-20

Jun-21

Jun-22
Sep-17

Sep-18

Sep-19

Sep-20

Sep-21

Sep-22
Apr-18

Apr-19

Apr-20

Apr-21

Apr-22
Jan-18

Jan-19

Jan-20

Jan-21

Jan-22
Oct-18

Oct-19

Oct-20

Oct-21
Jul-18

Jul-19

Jul-20

Jul-21

Jul-22

Source: Bloomberg, IIFL Research Source: Bloomberg, IIFL Research

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Figure 9: UK electricity price trends gas pricing and have shot up in-line with higher gas Figure 11: Germany electricity price trends gas pricing and have shot up in-line with
price higher gas price

(€/MWh) UK electricity prices (€/MWh) Germany electricity prices

1000 1200
800 1000
800
600
600
400
400
200 200
0 0
May-20

May-21

May-22

May-20

May-21

May-22
Jan-20
Mar-20

Jan-21
Mar-21

Jan-22
Mar-22

Jan-20
Mar-20

Jan-21
Mar-21

Jan-22
Mar-22
Jul-20

Nov-20

Jul-21

Nov-21

Jul-22

Jul-20

Nov-20

Jul-21

Nov-21

Jul-22
Sep-20

Sep-21

Sep-22

Sep-20

Sep-21

Sep-22
Source: Bloomberg, IIFL Research. Source: Bloomberg, IIFL Research.

Figure 10: EU-27 chemical output index* has been falling, thereby indicating lower Figure 12: Germany chemical output index* has also been falling, thereby indicating
production lower production

EU-27 chemical output index Germany chemical output index

108.0 105.0
106.0
100.0
104.0
102.0 95.0
100.0 90.0
98.0
85.0
96.0
94.0 80.0
Apr-21
May-21

Apr-22
May-22
Mar-21

Dec-21
Aug-21

Mar-22
Jan-21

Jun-21

Oct-21
Nov-21

Jan-22

Jun-22
Feb-21

Jul-21

Sep-21

Feb-22

Jul-22

Apr-21

Dec-21
May-21

Oct-21

Apr-22
May-22
Jan-21

Mar-21

Jun-21

Aug-21

Jun-22
Nov-21

Jan-22

Mar-22
Feb-21

Jul-21

Sep-21

Feb-22

Jul-22
Source: Bloomberg, IIFL Research. *2015=100 Source: Bloomberg, IIFL Research. *2015=100

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Figure 13:*Europe chlorine production also a key indicator for caustic soda production;
has been declining since January 2022 Figure 15: Imports into Europe have been rising gradually….
Chlorine Production (tons) Capacity utilisation (%)
Imports into Europe (Euro m)
2021 2022 YoY (%) 2021 2022
January 860,636 851,956 -1.0% 86.7% 85.8% 36,000
February 795,244 775,241 -2.5% 88.7% 86.4% 34,000
32,000
March 806,041 737,568 -8.5% 81.2% 74.3%
30,000
April 769,948 708,577 -8.0% 80.1% 73.7% 28,000
May 800,808 748,474 -6.5% 80.7% 75.4% 26,000
June 805,944 682,760 -15.3% 83.9% 71.1% 24,000
22,000
July 853,210 689,241 -19.2% 85.9% 69.4%
20,000
August 842,456 83.7%

Apr-22

May-22
Dec-21
Aug-21

Jan-22

Mar-22
Oct-21

Jun-22
Nov-21

Jul-22
Sep-21

Feb-22
September 733,017 76.9%
October 763,414 77.5%
November 797,149 83.6% Source: IIFL Research
December 826,160 83.9%
Source: Bloomberg, IIFL Research. *Includes EU27 + Norway/Switzerland/UK Figure 16: …while exports from Europe have been moderating

Figure 14: Caustic soda inventory levels in *Europe were higher MoM in July, thereby Exports from Europe (Euro m)
indicating weaker demand 55,000
Caustic soda inventory (tons) 2021 2022
50,000
January 233,430 226,493
February 254,122 250,434 45,000
March 206,381 210,522 40,000
April 207,497 192,315 35,000
May 192,193 193,168
30,000
June 174,122 193,054

Dec-21

Mar-22

May-22
Oct-21

Apr-22
Aug-21

Jun-22
Nov-21

Jan-22
Sep-21

Feb-22

Jul-22
July 194,704 205,352
August 213,080
September 195,943 Source: IIFL Research
October 176,245
November 185,862
December 191,536
Source: Bloomberg, IIFL Research. *Includes EU27 + Norway/Switzerland/UK

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 India - Chemicals

Figure 17:Production disruptions across Europe

Source: ICIS new article (https://bit.ly/3xtVZdQ), IIFL Research

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 India - Chemicals

Energy-Intensive chemicals: Value chain

Natural gas is a naturally-occurring mixture of gaseous hydrocarbons, primarily of methane, besides various smaller amounts of other higher
alkanes. Natural gas is a fossil fuel and non-renewable resource that can be burned for heating and electricity generation. It is also key
feedstock in the manufacture of various chemicals.

Figure 18: Natural gas-based chemical value chain

Source: IIFL Research

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 India - Chemicals

Methane Reformer – Value Chain Figure 20: Ammonia value-chain

Natural gas is predominantly used in Methane reformer that gives out

Methanol and Ammonia. Ammonia is the most important intermediate
chemical compound, used as basis for almost all products. It is majorly
used in the nitrogenous fertiliser production and other nitrogen-
compounds like Nitric Acid, Caprolactum and Acrylonitrile, which are
then converted/used to make various downstream products. Ammonia
is also used in the process of manufacturing energy intensive chemical
like soda ash. Methanol too is widely used to make basic chemicals like
MTBE, formaldehyde, Acetic acid and Chloromethane that finds wide
applications.

Caustic soda and chlorine manufacturing is electricity intensive as one

tone of caustic soda typically requires ~2,750 units of power. Source: IIFL Research

Figure 19: Methanol value-chain

Figure 21: Key bulk chemicals manufactured using natural gas

Source: IIFL Research

Source: IIFL Research

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 India - Chemicals

Figure 22: Energy-intensive chemicals - Value chain: Exposure of key Indian companies
Chemicals Consumers Producers
Methanol and its downstream
Methanol Alkyl Amines, Balaji Amines, SRF, Gujarat Fluorochemicals GNFC*
MTBE Vinati Organics
Formaldehyde Resin manufacturers GSFC, SMEs
MDI BASF India
Olefins, Propylene Deepak Nitrite
Acetic Acid Laxmi Organics, Jubilant Ingrevia GNFC
Vinyl acetate monomer Pidilite Inds
Terephtalic acid SRF Reliance Inds and other companies
Acetic Anhydride GNFC, Laxmi Organics, Jubilant Ingrevia
Ethyl Acetate GNFC, Laxmi Organics, Jubilant Ingrevia, India Glycol
SRF, Gujarat Fluorochemicals, Gujarat Alkalies, DCM Shriram, Meghamani
Chloromethanes Navin Fluorine and most Chemical companies
Finechem
Methylamines Alkyl Amines, Balaji Amines
Methyl Methacrylate Paint companies
Ammonia and its downstream
Ammonia Fertiliser companies
Ammonium Sulphate Fertiliser companies
Ammonium Phosphate Fertiliser companies
Urea Fertiliser companies
Nitric Acid Aarti Industries, Deepak Nitrite Deepak Fertilisers, RCF and GNFC
Ammonium Nitrate Coal India, Solar Industries Deepak Fertilisers, RCF and GNFC
Caprolactum GSFC
Nylon Resins GSFC
Acrylonitrile Vinati Organics, Apcotex Inds, Bhansali Eng, Ineos Styrolution
ABS/SAN Bhansali Eng, Supreme Petrochem and Ineos Styrolution
Chlor alkali and its downstream
Grasim, Gujarat Alkalies, DCM Shriram, Meghmani Finechem, Gujarata
Caustic Soda Almost all chemical companies
Fluorochem, Atul, Chemplast Sanmar, DCW
Grasim, Gujarat Alkalies, DCM Shriram, Meghmani Finechem, Gujarata
Chlorine Aarti Industries, Deepak Nitrite, Valiant Organics,
Fluorochem, Atul, Chemplast Sanmar, DCW
Epichlorohydrin Meghmani Finechem
EDC Chemplast Sanmar
VCM Chemplast Sanmar and all PVC manufacturers
PVC Chemplast Sanmar. DCM Shriram
Soda Ash Tata Chemicals, GHCL
Source: Company, IIFL Research

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 India - Chemicals

Large capacities in Europe

The advantage of cheap natural gas costs has helped Europe to set up some large capacities of basic chemicals in its region. A prolonged crisis has the
potential to impact utilisation rates of these capacities; so, could disrupt supplies. We highlight some of these capacities below and the Indian
companies that are exposed to these chemicals.
Figure 23: Chemical products: Global and Europe capacities
000 MT Global capacity European capacity % of global capacity Consumers Producers
Used in variety of application such as
2-Ethylhexanol 5,617 810 14.40%
plasticizers, acrylate and nitrate
ABS 11,436 865 7.60% Bhansali Eng, Ineos Styrolution
Acrylic acid 8,717 1,426 16.40% Rossari Biotech
Vinati Organics, Apcotex Inds, Bhansali
Acrylonitrile 7,107 670 9.40%
Eng, Ineos Styrolution
Benzene 70,370 11,473 16.30% Aarti Inds
Bhansali Eng, Apcotex Inds, Ineos
Butadiene 16,130 3,253 20.20%
Styrolution
Grasim, Gujarat Alkalies, DCM
Shriram, Meghmani Finechem,
Caustic Soda 86,446 14,040 16.20% Almost all chemical companies
Gujarata Fluorochem, Atul,
Chemplast Sanmar, DCW
Grasim, Gujarat Alkalies, DCM
Shriram, Meghmani Finechem,
Chlorine 76,987 13,221 17.20% Almost all chemical companies
Gujarata Fluorochem, Atul,
Chemplast Sanmar, DCW
Cumene 17,446 3,498 20.10% Deepak Nitrite
Cyclohexane 8,788 1,037 11.80%
DMT 1,105 380 34.40%
EDC 49,230 11,289 22.90% PVC manufacturers
Ethylene 190,515 25,257 13.30% Chemplast Sanmar
Ethylene Oxide 37,922 3,153 8.30% Rossari Biotech
HDPE 51,251 6,135 12.00%
Deepak Nitrite, Deepak
Isopropanol 3,473 490 14.10%
Fertilisers
LLDPE 46,377 3,790 8.20%
Low Density Polyethylene 26,722 6,111 22.90%
Methanol 162,169 4,080 2.50% Alkyl Amines, Balaji Amines

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000 MT Global capacity European capacity % of global capacity Consumers Producers

Mixed-Xylene 94,235 5,049 5.40%
Mono Ethylene Glycol 40,357 1,382 3.40% India Glycol
PTA 87,064 3,747 4.30% SRF
Chemplast Sanmar, DCM
PVC 54,876 7,193 13.10%
Shriram
Para-Xylene 65,815 2,347 3.60% IG Petro, Thirumalai Chem
Phenol 12,970 2,665 20.50% Clean Science Deepak Nitrite
Polystyrene 14,402 2,025 14.10% Supreme Petrochem
Polystyrene (EPS) 11,963 2,023 16.90%
Propylene 128,243 16,804 13.10% Deepak Nitrite
Propylene Oxide 10,970 2,819 25.70%
SB Rubber 7,428 1,149 15.50% Apcotex Inds
Bhansali Eng, Supreme Petrochem,
Styrene 36,681 5,555 15.10%
Ineos Styrolution, Apcotex Inds
VCM 54,630 7,490 13.70% Chemplast Sanmar
Iso-Butanol 985 104 10.60%
n-Butanol 6,112 724 11.90%
TDI 3,176 860 27.10% GNFC
Soda Ash 70,000 15,100 21.60% Tata Chemicals, GHCL

PTFE 156 NA NA Gujarat Fluorochemicals

Caprolactam 7,201 NA NA GSFC

Dharmasi Morarji and other
Sulphuric acid 259,620 20,000 7.70%
chemical companies
Acetic acid 9,070 1,000 11.00% Laxmi Organics, Jubilant Ingrevia GNFC
GNFC, Laxmi Organics, Jubilant
Acetic anhydride 2,800 NA NA
Ingrevia
Urea 215,377 31,386 14.60% Fertiliser companies
Ammonia 226,554 52,398 23.10% Fertiliser companies
Ammonium Nitrate 60,980 32,581 53.40% Coal India, Solar Industries Deepak Fertilisers
Source: Bloomberg, Industry data, IIFL Research

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Leading chemical companies in Europe

Europe is home to some of the large global chemical companies. Among the leading chemical companies in Europe are BASF, Evonik, Lanxess, Solvay,
Lonza, Linde and Bayer. We highlight mgmt’s recent commentary on Europe situation. We also highlight our take on the likely impact on Indian
chemical companies, if operations in their facilities in Europe were to get curtailed, due to ongoing energy crisis.

Figure 24: Comments on global companies with large exposure in Europe

Companies Comments provided by the companies IIFL remarks
BASF is a conglomerate in chemicals and also is a large client for some of the Indian chemical
BASF is monitoring the natural gas market closely and could cut production further,
companies. However, exposure of companies like SRF etc., is limited only to agrochemicals; hence is
if needed, after Russia suspended deliveries through its main gas pipeline to
BASF less likely to get impacted. On the contrary, we expect some of the key starting material companies to
Germany. BASF is reducing production of ammonia, which relies heavily on natural
benefit as supplies would get curtailed. BASF is also a leader in HALS that bodes well for Clean Science
gas, and sourcing some it its ammonia needs from outside Europe.
(plant getting commissioned soon).
The company reckons the energy challenges to prevail and accelerate in 2HCY22.
Evonik is making energy supply at its German sites significantly less dependent on
The company is a large player in speciality additives that finds application in tyres, mattresses and
natural gas. The most significant measure is being implemented at Evonik's largest
Evonik many more. Any supply disruptions in the additives that find applications in tyres is likely to benefit
German site in Marl. In the new gas-fired power plant, liquefied petroleum gas
OCCL.
(LPG) will be used, instead of natural gas, to generate energy. The natural gas
volumes are available to replenish Germany’s natural gas storage facilities.
Core business of LANXESS is the development, manufacturing and marketing of Some of these products compete with the likes of Aarti Inds and Deepak Nitrite; therefore likely to
Lanxess
chemical intermediates, additives and consumer protection products. benefit them. Lanxess is also present in rubber chemicals that bode well for NOCIL.
Solvay consumes natural gas at 32 of its 45 sites in the Europe region, to power
production processes, for producing electricity, and to a small extent, as a raw
Solvay is a leading global player in Soda Ash. Rising cost curve hence bodes well for soda ash prices,
Solvay material. Solvay's European sites have developed contingency plans to mitigate
and is likely to benefit Tata Chemicals and GHCL.
business continuity challenges. With plans underway, Solvay is confident of
ensuring business continuity with up to 30% gas curtailments.
Ineos Styrolution is the leading, global styrenics supplier with a focus on styrene Disruption in styrene supply would impact production of ABS and Polystyrene. Bhansali Eng, Supreme
Ineos
monomer, polystyrene, ABS Standard and styrenics specialties. Petrochem and Ineos Styrolution India have exposure to ABS and PS in India.
Lonza is the preferred global partner to the pharmaceutical, biotech and nutrition
SRF and Navin Fluorine should be benefit from rising opportunities in CRAMS and cGMP
markets. It provides a wide range of services and products from early phase
Lonza manufacturing while any disruption in the acetyl chemicals is likely to benefit Laxmi Organics and
discovery to custom development and manufacturing of active pharmaceutical
Jubilant Ingrevia.
ingredients.
Clariant expects the high inflationary environment with regard to raw material, Clariant has divested its key chemicals business viz. pigments and others and therefore is not of much
Clariant
energy, and logistics cost as well as supply chain challenges to persist. significance.
Heubach Group is a leading manufacturer of pigments, pigment preparations, dyes While supply disruption should benefit Sudarshan Chemicals, demand slowdown amid high gas price
Heubach
and specialty materials. remains a concern even for Indian pigment players.
Moderating demand and elevated costs for feedstocks and energy are likely to
compress margins across most of the company's businesses in the third quarter. LyondellBasell Industries N.V. is a multinational chemical company incorporated in the Netherlands
LyondellBasell Potential benefits from China's reopening could provide tailwinds for the with US operations headquartered in Houston, Texas, and offices in London, UK. The company is the
Industries businesses toward the end of 2022. The company is carefully monitoring impacts largest licensor of polyethylene and polypropylene technologies. It is one of the largest plastics,
from inflation, supply chain challenges and slowing economic conditions while chemicals and refining companies in the world.
positioning businesses appropriately.

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Contd
Companies Comments provided by the companies IIFL remarks
As a result of record-high gas prices in Europe, Yara is implementing
curtailments that will take its total European ammonia capacity utilisation to
around 35%. With this, Yara will have curtailed an annual capacity equivalent
of 3.1m tons ammonia and 4m tons finished products (1.8m ton urea, 1.9m Government of India has been absorbing inflation through higher subsidies, and has been
Yara
tons nitrates and 0.3m tons NPK) across its production system in Europe. Yara shielding the Indian fertiliser company’s profitability. Hence, we do not expect any adverse
International
will use its global sourcing and production system to optimise operations and impact on Indian fertilisers Companies.
meet customer demand, including continued nitrate production using
imported ammonia when feasible. Yara will continue to monitor the situation
and adapt to market conditions, going forward.
CF Fertilisers UK (CF) temporarily halts ammonia production at the Billingham
Complex due to market conditions. CF intends to use the site’s capability to
import ammonia, to enable it to continue to run its ammonium nitrate (AN)
and nitric acid upgrade plants. The company expects to fulfill all Ammonia and Disruptions in ammonia have been benefiting Deepak Fertilisers as the spreads of Ammonium
CF Fertilisers
Nitric Acid contracts and all orders of AN contracted for delivery in the coming Nitrate and Nitric acid have widened.
months. At current natural gas and carbon prices, CF’s ammonia production is
uneconomical, with marginal costs above £2,000/ton and global ammonia
prices at about half that level.
While demand across some end markets, including agriculture and personal
care, is demonstrating resilience, demand has slowed more than expected in Eastman Chemical Company is an American company primarily involved in the chemical industry
Eastman
August and September, particularly in the consumer durables and building and has recently slashed its 3Q earnings guidance citing weakness in demand.
construction end markets, and the European and Asian regions.
The energy costs only accounted for ~3% of the total cost of goods sold in
2021. Bayer has realigned its processes to significantly reduce its dependence
on natural gas, which involves switching to alternate sources of energy and Though we expect the agrochemicals demand to remain stable, the rising costs of manufacturing
Bayer AG launching programs to save energy. At the same time, Bayer is expanding its can lead to higher outsourcing. Indian players like PI Inds, SRF, Navin Fluorine and others stand
network of suppliers and building up additional inventories where possible. to benefit.
Bayer does not see any material financial impact on the business owing to the
uncertain geopolitical situation and gas supplies.
Dow Dow Chemicals has reduced its natural gas consumption in Boehlen facility in
The rising cost of production should help make Indian player competitive.
Chemicals Germany.
Linde is witnessing a lot of traction from customers, helping them to improve
their processes by injecting oxygen and substituting/reducing their natural gas
The only company that seems to be benefiting from the prevailing situation and has provided
Linde consumption. Being a supplier of medical gases and safety critical process
positive commentary.
gases, the company does not foresee any production cuts or shutdown at its
Germany units.
Adama will have an advantage in gaining market share from the European
Adama Indian companies supplying to Adama stand to benefit.
competitors for the active ingredients and formulations.
Source: Company, IIFL Research

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 India - Chemicals

BASF’s Ludwigshafen site: Largest chemical complex globally Figure 25: BASF's Ludwigshafen site snapshot

Ludwigshafen site covers approximately 10 square kilometres and is BASF Group revenues (€ mn) 78,598 Transport
the world’s largest integrated chemical complex. There are about BASF SE revenues (€ mn) 25,041 Barges (daily) 15
200 production plants on the site manufacturing thousands of % of total revenues 31.9% % of total transport 40%
different products. Trucks (daily) 1,900
Site area (sq km) 10 % of total transport 32%
It is also home to the company’s headquarters and exemplifies its
Total number of buildings 2,000 Rail cars (daily) 400
Verbund concept, where manufacturing facilities, energy flows and
logistics are at one place, linked together to use resources as Production plants 200 % of total transport 28%
efficiently as possible. Production facilities 125
Pipelines (kms) 2,850 Energy demand
The Verbund concept originated at Ludwigshafen, and later Electricity (MWh) 5,998,140
replicated at 5 other Verbund sites in Europe, the United States and Sales volume (mn tons) 8.1 Steam (tons) 19,510,149
Asia by BASF. Fossil fuel power plants (MWh) 17,802,367
Employees
BASF is the largest employer in the region and the Ludwigshafen site
BASF Group employees 111,047 Water
is responsible for about a third of the company’s total workforce,
representing approximately ~39,000 people. Ludwigshafen site employees 38,371 Water use (mn cubic meters) 1,186
Water use for production (mn
139
Clearly, the site is too large, so the disruption at Ludwigshafen site is cubic meters)
likely to have a significant repercussion in the entire chemicals value Air
Water used for cooling (mn
2,089
chain. cubic meters)
Emission of air pollutants
8,288
It is difficult to get the entire chemicals that are being manufactured (tons)
at this site, since it has above 200 plants and generates 8.1 mn tons Emissions of greenhouse gases
of volumes. We have therefore analysed the chemicals that BASF as (mn tons of carbon dioxide 7.2 Waste
group manufacturers, and believe most of them would have been equivalent)
also manufactured at Ludwigshafen site. The list of chemicals is Total waste generation (tons) 777,130
populated in Figure 26. Recycling rate (including
47%
thermal recovery)
Source: Company, IIFL Research

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 India - Chemicals

Figure 26: Chemicals manufactured by BASF globally

Chemicals Sub-segment Product categories Materials Sub-segment Product categories
Rigid polyurethane foam
Petrochemicals Crackerproducts Light olefins, C4 products, Heavy cracker products Performance materials systems
Industrial gases Argon, Carbon dioxide, Hydrogen, Krypton-Xenon, Nitrogen Melamine resin foam
Alkylene oxides and Ethylene oxide, Propylene oxide, N-Butylene oxide 1,2, Ethylene glycols,
Cellasto
glycols Propylene glycols
Thermoplastic
Alcohols and solvents Alcohols and aldehydes, Glycol ethers, Glycol ether acetates, Esters Polyurethane
Plasticizers Polybutylene
Terephthalate
Specialty monomers Acrylate monomers, Methacrylate monomers Polyphthalamide
2-Ethylhexyl Acrylate (2-EHA), Glacial acrylic acid (GAA), Butyl Acrylate
Acrylic monomers (BA), Ethyl Acrylate (EA), Glacial Methacrylic acid (GMAA), Methacrylic Specialty polyamide
acid technical (MAA), Methyl Acrylate (MA)
Styrenics Expandable polystyrenes, Extruded polystyrene, Polystyrene, Styrene Polyamides raw materials Extrusion
Intermediates Alcohols, diols and Diols and Polyols, Mono Alcohols Fibers
polyols
Acid-, Alkyl Chlorides
Acid Chlorides, Aliphatic chlorides, Chloroformates PA-Intermediates
and Chloroformates
Aldehydes, Acetals and
Ketones DMF-DMA, Glyoxal 40% Polyamide 6.6

Amino alcohols Alkylamino alcohols, Ethanolamines, Isopropanolamines, Other amino Monomers Alcoholates for biodiesel
acids
Hydrogen Chloride,
Hydrochloric acid,
Nitric acid,
Hydrogen Chloride, Potassium Sulfite
Carboxylic acids and Bulk Chemicals Hydrochloric acid, Nitric solution, Soda ash,
derivatives acid, Sodium Hypochlorite Sodium Bisulfite
solution, Sulfuric acid solution, Sodium
Hypochlorite
solution, Sulfiric
acid
Carbonates, Imidazoles and Pyrazoles, Lactones and Lactams,
Heterocyclic compounds Morpholines, Other heterocycles, Oxiranes, Piperazines, Piperidines, Hydrosulfite
Pyrrolidines
Optically active Chiral amines Isocyanates and polyols
compounds
Vinyl compounds and Polyamides and
ethers intermediates
Amides, Imines, Ionic liquids, Nitriles, Organic Phosphines, Urea Sodium Nitrate for
Further products Derivatives, OASE gas treatment, Hydroxcarbons Solar chemicals solar thermal plants

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 India - Chemicals

Contd
Chemicals Sub-segment Product categories Materials Sub-segment Product categories
Alkylamino alcohols, Ethanolamines, Isopropanolamines, Other amino Technical salts, Sodium
Amino alcohols acids Nitrate, Sodium Nitrite
Carboxylic acids and Caprolactam
derivatives
Carbonates, Imidazoles and Pyrazoles, Lactones and Lactams,
Heterocyclic compounds Morpholines, Other heterocycles, Oxiranes, Piperazines, Piperidines, Propylene Glycol
Pyrrolidines
Optically active
compounds Chiral amines
Source: Company, IIFL Research

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 India - Chemicals

Trade statistics - Chemicals trade between Europe and India Figure 28: European Union (27 countries) trade split region-wise

We have analysed trade statistics for exports and imports of organic,

inorganic and miscellaneous chemical products between India and
the World. Asia (excluding China) and Europe constitute >50% of
total chemical exports from India. Other geographies such as North
America, Latin America and China also have fair share of exports. In
case of imports, India is largely dependent on China (33% of total
chemical imports in India). India also imports significantly from
other Asian countries.

Figure 27:India trade split region-wise

Source: Cefic Facts and Figures 2022, IIFL Research

Source: Ministry of Commerce and Industry, IIFL Research

We have also analysed European Union’s trade statistics with the

globe. The trade with rest of the Europe (countries which are not
part of the European Union) constitutes highest share of trade.
NAFTA and China are two regions, which cumulatively account for
>30% of EU’s total chemical exports and imports.

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 India - Chemicals

Figure 29: India's export of key chemicals to Europe India has an export trade of close to ~Rs619bn (FY22) with Europe.
Rs m FY18 F19 FY20 FY21 FY22 Based on data summarised in Fig 29, India has fairly low levels of
Inorganic chemicals 16,253 23,576 17,959 18,318 26,014 exports for bulk chemicals to Europe. India is a large exporter of organic
Carbonates 613 880 940 844 1,062 chemicals to Europe. These chemicals are largely downstream products
Chlorates 574 614 688 686 972
and intermediates manufactured in India. As a part of contract
Carbon black 718 598 630 546 878
Caustic soda 263 64 53 370 837
manufacturing opportunity, India also supplies intermediates through
Sulphur 742 770 663 674 717 long-term supply contracts entered with European customers. In terms
Others 13,342 20,650 14,985 15,198 21,549 of products, India exports heterocyclic compounds like pyridine and
Organic chemicals 268,589 339,912 359,454 420,346 512,936 pyrimidine-based derivatives. Acetic acid (along with downstream
Heterocyclic compounds with nitrogen 57,332 72,371 81,739 99,089 111,946 derivatives) and amine-based compounds also form a significant portion
- Phenazone (Antipyrin) and its derivatives 1,237 2,422 4,830 6,721 3,264 of exports to Europe.
- Pyridine derivatives 11,701 16,710 20,210 24,900 29,615
- Pyrimidine ring / Piperazine ring 8,152 9,568 10,892 14,633 15,822 Figure 30: India's export of key chemicals to Germany
- Melamine - - - 304 1,315 Rs m FY18 F19 FY20 FY21 FY22
- Lactams 3,035 3,252 4,254 5,934 7,013
Inorganic chemicals 1,722 1,935 1,974 2,458 3,293
- Others 33,207 40,418 41,553 46,597 54,917
Saturated acyclic monocarboxylic acids 13,721 14,800 14,824 14,691 22,508
- Salts of formic acid 671 571 663 666 805 Organic chemicals 37,687 50,614 50,049 60,067 62,860
- Acetic acid 2 107 12 132 766 Heterocyclic compounds with nitrogen 8,432 10,804 10,560 14,019 14,994
- Acetic anhydride 802 1,229 1,065 1,317 2,218 - Pyridine derivatives 2,247 3,460 3,163 5,599 5,166
- Ethyl acetate 2,801 3,672 2,608 2,939 6,358 - Pyrimidine ring / Piperazine ring 1,163 1,278 1,127 1,419 1,863
- Esters of acetic acid 1,808 2,452 2,435 2,549 3,212
- Others 5,023 6,066 6,270 7,001 7,966
- Others 7,638 6,770 8,040 7,088 9,149
Amine-based compounds 9,972 13,079 11,793 14,498 18,827
- Methylamine 1,012 1,270 1,180 1,354 1,571 Amine-based compounds 1,681 2,864 2,281 2,999 4,188
- Polyamines and its derivatives 966 1,308 1,177 998 2,705 - Polyamines and its derivatives 59 120 42 137 1,553
- Aniline and its salts 471 479 369 418 444 - Aniline derivatives and its salts 614 811 603 866 776
- Aniline derivatives and its salts 1,829 2,955 2,934 3,376 4,474
- Phenylenediamine 214 405 468 733 567
- Toluidines and its derivatives 294 627 717 801 811
- 1-Naphthylamine 2-Naphthylamine 644 1,188 437 1,543 2,071
- Others 794 1,528 1,168 1,263 1,293
- Phenylenediamine 654 891 1,158 2,010 1,718 Organic sulphur compounds 1,805 2,394 2,960 3,935 2,850
- Others 4,102 4,362 3,820 3,999 5,032 Chloride-based compounds - - - 1,429 2,002
Sulphonamides 3,813 5,252 8,243 8,134 9,574 Phenol 1,499 1,756 1,869 1,993 1,920
Phenol 5,566 5,825 6,176 7,097 8,762 - Phenol and its salts 112 97 72 75 129
- Phenol and its salts 562 368 332 704 2,304
- Cresols and its salts 909 1,016 1,005 717 857
- Cresols and its salts 1,606 1,671 1,713 1,050 1,463
- Monophenols 711 606 1,013 1,811 1,398 - Monophenols 127 108 174 311 254
- Resorcinol and its salts 1,054 1,063 1,308 988 1,407 - Others 352 535 619 890 680
- Others 1,632 2,117 1,810 2,543 2,190
Others 178,186 228,586 236,679 276,837 341,319 Others 24,269 32,795 32,378 35,693 36,907
Source: Ministry of Commerce and Industry, IIFL Research Source: Company, IIFL Research

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 India - Chemicals

India’s chemical export to Germany is ~Rs66bn (FY22). Similar to trade Contd..

with Europe, India exports pyridine and pyrimidine derivatives to Rs m FY18 F19 FY20 FY21 FY22
Germany. Sulphur and amine-based compounds also constitute fair- - Mannitol 639 722 1,298 1,204 1,105
portion of export trade with Germany. - Unsaturated acyclic terpene
1,011 1,098 1,112 1,459 1,234
alcohols
- Others 4,408 3,870 3,648 5,112 5,365
Figure 31: India's import of key chemicals from Europe
Rs m FY18 F19 FY20 FY21 FY22
Amine-based compounds 9,120 8,703 7,254 9,632 10,586
Inorganic chemicals 34,431 51,106 60,720 57,292 58,453
- Ethylenediamine 3,243 2,537 2,016 2,237 2,984
Carbonates 7,265 10,095 9,179 4,893 5,603
- Polyamines and its derivatives 853 806 762 1,283 1,548
- Disodium carbonate 6,153 8,607 7,565 3,214 3,801
- Aniline and its salts 1,205 1,432 281 1,130 1,548
- Sodium Bicarbonate 206 124 287 291 215
- Toluidine and its derivatives 315 373 432 517 398
- Potassium Carbonate 465 567 515 535 643
- Others 3,503 3,554 3,763 4,464 4,109
- Calcium Carbonate 177 266 295 233 315
- Lithium Carbonate 113 280 254 213 389
- Others 151 251 262 407 240 Saturated acyclic
6,449 9,290 7,159 7,358 8,202
monocarboxylic acids
- Esters of acetic acid 705 826 966 1,047 1,513
Aluminium oxide & aluminium
3,687 4,475 4,632 3,563 4,664 - Butyric acid / Valeric acid 225 462 245 442 990
hydroxide
- Palmitic acid / Stearic acid 727 756 789 1,365 935
- Aluminium oxide 2,591 3,261 3,484 2,361 2,975
- Others 4,793 7,246 5,158 4,503 4,765
- Aluminium hydroxide 1,073 1,193 1,134 1,163 1,623
- Others 24 20 14 38 66
Nitrile-based compounds 5,359 10,104 8,599 7,254 6,904
- Acrylonitrile 4,445 8,678 6,864 4,404 3,961
Carbon black 1,509 1,492 1,012 1,388 2,080
- Others 914 1,426 1,735 2,850 2,943
Phosphinates 1,280 1,631 1,684 1,639 1,854
Chloride-based compounds 1,139 1,823 1,519 1,806 1,844
Ammonia 5 2,031 4,728 3,500 14 Others 93,826 120,697 122,755 133,477 136,804
Others 19,546 29,559 37,967 40,503 42,395 Source: Ministry of Commerce and Industry, IIFL Research

Organic chemicals 142,446 179,266 175,850 193,822 202,041 From imports perspective, India imports sizeable amount of bulk
Heterocyclic compounds with
16,945 20,128 19,605 22,063 22,537 chemicals from Europe, which constitutes ~Rs58bn of trade. These
nitrogen products comprise of carbonates, aluminium oxides, etc. In case of
- Pyridine derivatives 1,708 1,966 2,331 2,374 2,242 organic chemicals, India imports formulated and certain key
- Pyrimidine ring / Piperazine
4,239 3,757 3,547 3,606 3,989 downstream products from Europe. Organic chemical imports from
ring
- Melamine 677 1,326 1,233 1,215 814 Europe stand at Rs202bn. India imports chemicals worth Rs53bn from
- Caprolactam 1,476 2,106 1,530 1,027 806 Germany, of which, bulk chemicals are ~Rs20bn and organic chemicals
- Others 8,846 10,974 10,964 13,840 14,685 are ~Rs33bn.

Acyclic alcohols 10,747 10,343 10,478 14,039 17,008

- Propyl and Isopropyl alcohol 706 608 577 1,716 819
- Butanols 590 797 480 1,274 1,286
- Monohydydric alcohol 3,392 3,248 3,364 3,273 7,199

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 India - Chemicals

Figure 32: India's import of key chemicals from Germany

Rs m FY18 F19 FY20 FY21 FY22
Inorganic chemicals 10,514 8,045 7,911 14,013 19,860
Aluminium oxide & aluminium hydroxide 1,986 1,251 1,442 1,183 1,445
- Aluminium oxide 991 889 859 753 950
- Aluminium hydroxide 987 358 574 414 462
Others 8,528 6,794 6,469 12,829 18,415

Organic chemicals 40,712 29,230 30,122 33,034 33,424

Heterocyclic compounds with nitrogen 3,672 3,636 3,936 3,407 3,916
- Pyridine derivatives 709 515 346 485 501
- Pyrimidine ring / Piperazine ring 460 151 248 264 691
- Melamine 424 986 946 634 794
- Others 2,080 1,984 2,396 2,024 1,930

Acyclic alcohols 6,263 2,632 2,321 4,096 3,055

- Monohydydric alcohol 2,852 950 815 2,019 1,414
- Unsaturated acyclic terpene alcohols 540 467 349 945 620
- Others 2,872 1,214 1,157 1,132 1,021

Nitrile-based compounds 468 680 852 1,439 1,458

-1-Cyanoguanidine (Dicyandiamide) 101 244 170 607 617
- Others 366 437 683 832 840

Others 30,309 22,282 23,012 24,091 24,995

Source: Company, IIFL Research

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Company specific exposure

The following table highlights the specific exposure of some of the chemical companies to Europe in terms of exports and imports.
Figure 33: India Chemicals: Exports to Europe and Germany
Exports to % of Agchem & Pharma
Exports to Total exports FY22 % of exports
Rs m Europe exports exposure (% of total IIFL comments
Germany FY22 from India FY22 revenue Germany
FY22 Europe revenues)
Aarti’s product portfolio is likely to get impacted owing to
Aarti Industries 909 6,059 25,361 68,653 3.6% 23.9% ~35% its exposure to discretionary end-uses. However, it would
benefit significantly from curtailed operations at Lanxess.
Exposure to Agrochemicals makes it secure. Likely to
Anupam Rasayan 2 2,870 6,197 10,660 0.0% 46.3% 100%
benefit from increased outsourcing.
Exposure to Agrochemicals makes it secure. Likely to
Astec Lifesciences 0 741 4,497 6,766 0.0% 16.5% 100%
benefit from increased outsourcing.
Atul has exposure to Europe. While agchem & pharma
Atul 1,756 5,657 23,687 49,928 7.4% 23.9% 30% segment would benefit, other segments such as Aromatics
and Colours might face headwinds.
Camlin sources some of its raw materials from Italy and
Camlin Finesciences 466 546 4,495 6,811 10.4% 12.1% NA
therefore is likely to face headwinds.
Though it has exposure to Europe and likely to face
Clean Science and Technology 66 921 4,792 6,849 1.4% 19.2% ~10%
headwinds, the commissioning of HALS is likely to benefit it.
Deepak Nitrite should largely remain unaffected; given
Deepak Nitrite 1,166 4,774 10,310 25,111 11.3% 46.3% ~40%
most of its products cater towards import substation.
Fine Organics 474 2,491 11,692 18,584 4.1% 21.3% NA Continues to benefit as key competitors in Europe struggle.
Has been benefiting from high PTFE and other
Gujarat Fluorochemicals 4,110 8,154 17,210 38,131 23.9% 47.4% ~20%
fluoropolymers which are consumed in Europe.
Likely to benefit from higher outsourcing and cGMP
Navin Fluorine 1,719 4,480 7,528 13,983 22.8% 59.5% 55%
opportunities from global agchem and pharma innovators.
Likely to benefit from higher outsourcing and cGMP
Neogen 19 372 1,369 4,873 1.4% 27.2% ~80%
opportunities from global agchem and pharma innovators.
Likely to benefit from higher outsourcing and cGMP
PI Industries 1,525 4,092 38,031 52,995 4.0% 10.8% 100%
opportunities from global agchem innovators.
Likely to benefit from higher outsourcing and cGMP
SRF 4,607 24,640 51,007 99,534 9.0% 48.3% 30%
opportunities from global agchem and pharma innovators.
Likely to be impacted owing to soft demand and challenges
Sudarshan 11 2,419 9,527 19,014 0.1% 25.4% 0%
in the end-use applications such as plastics.
User industry is diversified and should help it to tide over
Vinati Organics 327 2,732 6,552 16,155 5.0% 41.7% ~35%
any near term headwinds.
Coromandel 729 746 9,529 190,883 7.7% 7.8% 100% Largely unaffected from Europe crisis.
Rallis - 573 7,270 26,039 0.0% 7.9% 100% Largely unaffected from Europe crisis.
Source: Company, IIFL Research

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Figure 34: India Chemicals: Imports from Europe and Germany

Imports from % of imports
Imports from % of imports
Rs m Germany Total imports from Key imports from Germany Key imports from Europe
Europe FY22 from Europe
FY22 Germany
Catalysts, Bromofluoromethane, Aniline, Benzene, Catalysts, Ethyl Hexanol,
Aarti Industries 3.6% 9.7%
425 1,132 11,661 Toluidine Ortho Dichlorobenzene
Anupam Rasayan 9 1,281 2,000 0.5% 64.1% Not material Dichlorotoluene, Hydrazine Hydrate
Chloromethyl Trimethylsilane, 1,2 Chloromethyl Trimethylsilane, 1,2
Astec Lifesciences 8.8% 10.2%
278 321 3,147 Pentanediol, Chlorobenzaldehyde Pentanediol, Chlorobenzaldehyde
Vestamin, Polychloroprene rubber, Date palm plants, Hexane, Chloroprene
Atul 1.1% 2.9%
131 342 11,893 Ethylamine rubber, Tetraethylenepentamine
Camlin Finesciences 90 578 1,651 5.4% 35.0% Toluene, Butanol Hydroquinone, Catechol, Toluene, Butanol
Clean Science and Technology 3 49 759 0.4% 6.5% Not material Cyclohexylamine
Deepak Nitrite 185 421 2,038 9.1% 20.6% Meta Cresol, Cyanuric Chloride Hexanol, Cresol, Cyanuric Chloride
Behenic acid, Polyglycerol, Vegetable
Fine Organics 1.4% 6.3% Polyglycerol, Erucic acid, Nouracid
64 287 4,554 diglycerine
Dichlorobenzonitrile, Paraffin wax, Chloroform, Benzotrichloride,
Gujarat Fluorochemicals 4.2% 11.9%
343 975 8,198 Polytetrafluoroethylene Dichlorobenzonitrile
Dichlorobenzonitrile, Diethylether, Dichlorobenzonitrile, Tetrafluoroethane,
Navin Fluorine 4.1% 5.0%
182 222 4,454 Trifluoromethylsilane, Isobenzofuran Diethyaminotrimethysilane
Crbnt Tech, Isobutryic acid, Lithium Hydroxide, Crbnt Tech, Isobutryic
Neogen 3.1% 8.3%
53 144 1,731 Hexanediol acid
Chlorovaleryl Chloride, Amine Chlorovaleryl Chloride, Hydrazine Hydrate,
PI Industries 3.3% 20.1%
561 3,454 17,145 Hydrochloride, Norbornene Bicyclo Amine Hydrochloride
Acetone, Pyrrolidine, Potassium
Acetone, Hydrazine hydrate,
SRF 5.3% 10.6% Methoxide, Vinyl ether, Hydrazine hydrate,
Pyrrolidine, Potassium Methoxide
1,604 3,184 30,027 Triethyamine
Ortho Phthalodinitril, Para Toluidine. Carbazole, Hydrogenated Rosin,
Sudarshan 1.4% 3.9%
68 183 4,666 Ferric Chloride Phtalodinitrile
Vinati Organics 3 165 4,006 0.1% 4.1% Not material Acrylonitrile liquid
MOP, Ethylenediamine, Phosporus
Coromandel 0.0% 10.6% Not material
16 15,904 149,478 Pentasulphide, Sodium Lignosulphonate
Rallis 65 113 6,637 1.0% 1.7% Sodium Methylate Solvent, Dithyl Ketone, Triethyamine
Source: Company, IIFL Research

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 India - Chemicals

Valuation matrix

Figure 35: Valuation comparable – Farm Inputs

EPS CAGR Price Performance (%)
Company Price (LC) Mcap (US$ m) Reco* TP (Rs) FY23E P/E (x) FY24E P/E (x) (FY22-24E) FY23E P/B (x) FY23E RoE (%) 1-mth 3-mth 6-mth 12-mth
Domestic agrochemicals
PI Industries 3,136 5,962 ADD 2,945 44.0 35.7 26% 6.7 16.4 (7.4) 23.9 15.0 (9.0)
Rallis India 228 545 BUY 240 25.6 20.3 15% 2.5 9.9 0.6 19.8 (6.7) (21.1)
Bayer CropScience /India 4,822 2,730 ADD 5,390 31.8 27.4 14% 9.0 27.6 (10.0) (5.1) 10.7 (9.4)
Dhanuka Agritech 684 399 NC - 15.9 13.8 14% 2.8 21.9 0.3 0.3 (3.5) (17.4)
Insecticides (India) 1,002 248 NC - 19.6 14.4 31% 2.0 14.3 (4.2) 25.0 59.3 35.7
Astec Lifescience 1,917 477 BUY 2,320 39.0 29.3 19% 7.7 21.7 0.9 9.6 14.9 38.4
Anupam Rasayan 756 931 ADD 990 39.1 26.5 37% 4.0 10.6 1.3 28.8 (14.5) 2.0
Sumitomo Chemical India 522 3,262 NC - 49.4 40.1 25% 11.0 24.0 9.1 21.9 32.0 27.5
India Pesticides 304 439 NC - 20.6 17.8 12% 4.3 23.2 8.2 41.3 10.9 (5.2)
Heranba Industries 561 281 NC - 10.5 9.0 15% 2.5 23.4 0.5 5.4 (13.5) (28.6)
Global agrochemicals
UPL 703 6,699 BUY 1,040 11.0 9.5 22% 1.9 18.1 (10.8) 4.3 (5.2) (5.4)
Nufarm /Australia 5 1,364 - - 17.2 17.6 6% 1.0 5.8 0.2 8.5 (6.6) 23.2
FMC Corp 106 13,337 - - 15.6 14.3 11% 4.2 28.3 (6.9) 2.4 (15.3) 10.8
Bayer AG 52 50,718 - - 8.3 6.6 14% 1.4 16.6 (3.7) (15.3) (5.2) 18.4
BASF SE 42 38,057 - - 6.2 6.6 -12% 0.9 12.4 (7.5) (9.4) (19.8) (31.9)
Corteva Agriscience 61 44,498 - - 28.7 24.1 20% 1.8 6.6 (1.2) 13.8 12.6 45.6
Domestic seeds
Kaveri Seed Co 459 336 BUY 710 10.1 8.5 22% 2.0 20.1 (1.7) (13.7) (11.4) (22.7)
Domestic fertilisers
Coromandel International 1,014 3,736 ADD 1,070 18.1 16.8 8% 4.0 23.8 (6.2) 10.0 27.5 23.3
Gujarat State Fertilizers & Ch 141 676 REDUCE 145 9.4 9.4 -19% 0.5 4.9 (11.4) 8.0 1.0 29.9
Chambal Fertilizers 342 1,787 ADD 365 10.1 9.4 -2% 1.9 20.3 0.9 15.2 (14.2) 9.0
Others
Godrej Agrovet 519 1,255 BUY 690 22.5 18.1 18% 3.9 18.5 2.1 2.6 11.4 (19.5)
Avanti Feeds 488 834 NC - 25.6 17.7 38% 3.0 18.5 5.6 23.2 19.3 (9.3)
Apex Frozen Food 320 125 NC - 22.6 13.2 65% 1.8 14.7 (2.8) 32.6 19.0 7.6
Global fertilisers
Mosaic Co/The 52 18,023 - - 10.3 3.9 46% 1.4 38.7 (3.8) 2.8 (8.8) 56.2
Yara International ASA 396 9,811 - - 6.8 4.1 10% 1.2 31.0 (3.6) (8.9) 0.3 3.6
Nutrien 86 46,411 - - 14.1 5.1 54% 1.7 34.9 (5.9) 1.6 (7.3) 39.5

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 India - Chemicals

Figure 36: Valuation comparable − Chemicals

EPS Cagr Price Performance (%)
Mcap (US$ FY23E P/E
Company Price (LC) Reco* TP (Rs) FY24E P/E (x) (FY22-24E) FY23E P/B (x) FY23E RoE (%) 1-mth 3-mth 6-mth 12-mth
m) (x)
Domestic chemicals
Tata Chemicals 1,106 3,520 BUY 1,290 13.3 13.1 32% 1.4 11.1 (1.5) 29.5 19.6 29.6
Deepak Fertilisers 889 1,342 BUY 1,005 10.2 12.4 11% 2.2 24.8 (1.2) 49.2 64.8 116.0
Deepak Nitrite 2,108 3,541 BUY 2,690 27.5 21.1 13% 6.7 27.5 0.6 14.9 (4.8) (13.6)
Atul 9,236 3,421 ADD 9,510 37.5 30.2 22% 5.4 15.4 (0.8) 17.1 (6.6) (4.9)
SRF 2,704 9,964 BUY 2,695 34.3 29.8 21% 7.5 24.3 8.4 23.8 9.7 19.8
Navin Fluorine International 4,624 2,877 ADD 4,430 63.5 42.1 44% 10.8 18.2 5.1 31.2 17.1 15.1
Aarti Industries 885 3,934 ADD 935 41.7 29.5 15% 4.9 12.3 6.5 28.1 3.1 (6.7)
Chemplast Sanmar 436 838 BUY 840 11.4 9.5 2% 3.1 30.5 (3.9) 6.3 (26.5) (21.6)
Sudarshan Chemical 452 389 ADD 460 30.7 19.1 12% 3.5 11.4 (2.4) 8.8 (16.1) (32.5)
Vinati Organics 2,221 2,792 NC - 68.8 49.6 34% 10.0 22.2 0.8 14.9 19.4 17.2
Neogen Chemical 1,483 463 NC - 74.1 57.6 35% 7.3 13.9 2.5 9.4 (6.2) 30.0
Alkyl Amines 2,964 1,897 NC - na 49.8 31% 12.4 27.4 (0.2) 14.8 5.1 (24.6)
Balaji Amines 3,558 1,445 NC - 32.1 24.4 26% 12.6 29.0 0.6 25.0 16.4 (27.1)
Fine Organic 6,921 2,659 NC - 108.5 44.8 47% 15.9 41.5 12.7 39.2 76.0 115.2
Galaxy Surfactants 3,165 1,406 NC - 51.5 34.3 29% 6.2 19.3 1.4 13.2 13.9 (4.0)
Camlin Fine Sciences 132 259 NC - 41.8 22.0 94% 2.0 11.4 10.4 24.0 (9.9) (26.8)
Hikal 349 539 NC - 21.4 30.3 12% 3.6 12.5 21.5 52.5 (8.9) (48.3)
Laxmi Organics 362 1,203 NC - 31.3 35.4 5% 6.3 18.7 13.0 15.0 (12.1) (35.3)
Jubilant Ingrevia 512 1,021 NC - 15.3 17.5 5% 2.9 16.4 3.7 11.8 1.7 (35.1)
Gujarat Fluorochem 3,661 5,040 NC - 52.1 34.8 30% 7.6 24.8 (2.3) 37.1 21.5 106.9
Rossari Biotech 975 673 NC - 48.7 36.8 34% 5.5 16.5 5.5 17.9 5.6 (34.0)
Clean Science & Technology 1,902 2,532 NC - 88.1 67.8 27% 19.7 34.0 14.9 15.7 (8.4) (2.8)
NOCIL 265 553 NC - 30.3 20.0 34% 2.7 14.3 (2.9) 10.3 25.9 (12.7)
Tatva Chintan 2,525 701 NC - 55.6 58.6 21% 9.8 18.1 5.0 16.8 10.4 14.7
Global chemicals
Chemours 31 4,885 - - 7.8 5.6 22% 3.8 74.9 (15.8) 0.2 10.6 5.6
Huntsman Corp 26 5,172 - - 7.3 6.3 6% 1.3 19.5 (16.5) (8.8) (34.1) (3.4)
Albemarle Corp 287 33,653 - - 71.0 13.6 147% 4.3 35.3 2.5 42.3 51.0 25.1
LyondellBasell 77 25,167 - - 4.2 4.8 -11% 1.9 42.1 (14.4) (14.3) (17.8) (9.6)
Novozymes 389 14,662 - - 34.2 30.5 8% 8.0 27.7 (13.7) (2.2) (6.1) (18.6)
DuPont de Nemours Inc 54 27,039 - - 12.8 16.0 -3% 1.0 6.2 (13.9) (4.4) (26.5) (22.2)
Koninklijke DSM NV 115 25,017 - - 22.5 23.9 0% 2.0 9.6 (20.0) (17.2) (25.5) (36.5)
Clariant AG 16 5,595 - - 19.0 14.3 18% 2.0 14.9 (9.0) (6.2) 5.0 (10.2)
Johnson Matthey PLC 1,984 4,139 - - 9.5 10.1 1% 1.4 13.7 (13.0) (0.7) 7.9 (23.7)
Solvay SA 80 8,488 - - 8.9 6.8 6% 0.9 13.4 (8.1) (2.3) (12.8) (22.7)
Evonik Industries AG 18 8,424 - - 9.1 7.7 2% 0.8 10.5 (13.7) (20.9) (25.3) (32.0)
Lanxess AG 33 2,844 - - 7.4 7.9 3% 0.7 8.5 (10.5) (12.6) (19.8) (47.7)
Source: Bloomberg, IIFL Research; As on September 16, 2022; *NC – Not Covered

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 India - Chemicals

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 India - Chemicals

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Name, Qualification and Certification of Research Analyst: Ranjit Cirumalla(B Tech), Akul Broachwala(Chartered Accountant), Vidit Shah(Chartered Accountant)

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Key to our recommendation structure

BUY - Stock expected to give a return 10%+ more than average return on a debt instrument over a 1-year horizon.

SELL - Stock expected to give a return 10%+ below the average return on a debt instrument over a 1-year horizon.

Add - Stock expected to give a return 0-10% over the average return on a debt instrument over a 1-year horizon.

Reduce - Stock expected to give a return 0-10% below the average return on a debt instrument over a 1-year horizon.

Distribution of Ratings: Out of 257 stocks rated in the IIFL coverage universe, 138 have BUY ratings, 8 have SELL ratings, 80 have ADD ratings, 1 have NR ratings and 30 have REDUCE ratings

Price Target: Unless otherwise stated in the text of this report, target prices in this report are based on either a discounted cash flow valuation or comparison of valuation ratios with companies seen by the analyst as
comparable or a combination of the two methods. The result of this fundamental valuation is adjusted to reflect the analyst’s views on the likely course of investor sentiment. Whichever valuation method is used there
is a significant risk that the target price will not be achieved within the expected timeframe. Risk factors include unforeseen changes in competitive pressures or in the level of demand for the company’s products. Such
demand variations may result from changes in technology, in the overall level of economic activity or, in some cases, in fashion. Valuations may also be affected by changes in taxation, in exchange rates and, in
certain industries, in regulations. Investment in overseas markets and instruments such as ADRs can result in increased risk from factors such as exchange rates, exchange controls, taxation, and political and social
conditions. This discussion of valuation methods and risk factors is not comprehensive – further information is available upon request.

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