GLOBAL ECONOMY
The chemical industry is expected to continue to contend with
disruptions to oil, gas and feedstock caused by a new era marked by instability. These
transformations are characterized by weaknesses in global governance, a rise of conflict,
and mounting backlashes to multilateralism and free trade. The rise of a multipolar, less
globalized world has been accelerated by the global pandemic and the war in Ukraine. With
growing geopolitical tensions, more friction in supply chains could become the norm. And
as labour costs rise in less developed economies and changes in production methods in some
industries favor a more localized presence, there may also be less impetus for companies
to seek production sites further afield, causing globalization to be on the retreat. All
this could see inflationary pressures remaining more elevated over the longer term.
The combination of supply chain bottlenecks, generous government
spending, tight labor markets and a commodity shock triggered by the Russian invasion of
Ukraine caused inflation to shoot well above central banks targets across many developed
economies.
The disruption of 2022 has helped the chemical industry position itself
to lead the coming materials transformation. But with macroeconomic indicators such as
volatile energy prices, higher costs, and the fracturing of trading patterns signaling
uncertainty in the global economy, how can companies plan to overcome potential headwinds
and position themselves for a bright long-term future? Our 2023 chemical industry outlook
explores four trends that are top of mind for business leaders in the year ahead.
The global dyes and pigments market size was valued at USD 38.2 billion
in 2022 and is expected to expand at a compound annual growth rate (CAGR) of 5.3% from
2023 to 2030. Increasing demand from various application industries such as textiles,
paints & coatings, construction, and plastics is expected to drive the market growth.
Major producers are actively venturing into enhancing their products by utilizing advanced
technologies for the efficient removal of hazardous pollutants during the manufacturing
process. Manufacturers are likely to experience varied production costs due to volatility
in the prices of raw materials, such as benzene. A wide distribution network in the market
is achieved through both brick & mortar stores and online retailing.
Materials transformation is coming—2023.
Materials transformation is coming—2023 could set the stage.
The racecourse on which US chemical companies run has been dramatically
altered in 2022, setting the trajectory for the next major change and greater
sustainability in the chemical industry. This evolution will likely continue in 2023 amid
an emerging new industrial policy in the United States, evolving consumer preferences,
supply chain challenges, and economic uncertainty. But chemical companies have stewarded a
good "war chest" for these uncertain times. As an industry, businesses in the
United States have performed well in recent years.
Chemical producers can play a crucial role in effectively tackling
climate change. Chemicals and materials are ubiquitous in a modern-day lifestyle, and for
chemical producers to operate in an evolving global geopolitical landscape, there will be
a strong need to make fundamental changes, either proactively or reactively. In the coming
year, chemical companies will likely have to plan for challenges—from global
inflation to oil price volatility. This combination could make 2023 an important year for
a strategic shift. Explore the four trends below that will likely influence the direction
of the industry over the next 12 months.
The availability of products on e-commerce platforms has increased the
client base of market participants. Rapid growth in the global construction industry has
also been a key growth-driving factor for the overall market. Countries, such as U.S.,
U.K., China, Indonesia, India, Saudi Arabia, and UAE, exhibit significant growth potential
in the global construction sector.
The reactive dyes segment dominated the market with a revenue share of
more than 57% in 2022. These products are composed of highly colored organic substances
and have primary applications in tinting textiles. They have a high resistance to fading
and are available in a range of bright shades, which makes them suitable for coloring
cotton and rayon. Moreover, they can form a covalent bond with fibers during the process
of dyeing. It also includes a parent dye, a linking group, and an active group. These
advantages enable them to inhibit characteristics, which are superior and preferable over
other dyes used in cellulose fibers. The segment is estimated to expand further at the
fastest CAGR from 2023 to 2030.
Inorganic pigments earned a higher share in the market as compared to
organic pigments due to properties, such as good wetting, darker color, and leanness.
However, the organic pigments segment is anticipated to register the fastest CAGR of 5.7%,
in terms of revenue, from 2023 to 2030. Stringent regulations affecting the inorganic
pigments demand are also likely to provide positive scope for organic pigments through
internal substitution of the product.
INDIAN ECONOMY:
Indias thriving chemical industry owes its success to escalating
demand and supportive government policies. Indias chemical sector is ranked the
sixth-largest globally by output and third in Asia. Contributing a substantial seven
percent to Indias GDP, the chemical industry is a key supplier to diverse industries like
textiles, pharmaceuticals, and agrochemicals. Government initiatives, including chemical
development schemes, and plastic parks, are fueling investment opportunities. Notably, the
chemical industry allows 100 percent FDI through the automatic route, except for select
hazardous chemicals.
The Indian chemical industry is expected to reach US$304 billion by
2025, registering a compound annual growth rate (CAGR) of 9.3 percent. The chemical
industry in India is valued at a substantial US$220 billion and experts predict that it
could reach an astonishing US$1 trillion by 2040.
By 2025, the demand for chemicals in India is expected to grow by 9
percent per annum, and the chemical industry is anticipated to contribute US$383 billion
to Indias GDP by 2030. This increase is expected due to the rise in demand in the
end-user segments for specialty chemicals and petrochemicals segment.
According to Invest India, the market size of the chemical and
petrochemical sector in India is US$178 billion. The Indian chemical industry covers
around 80,000 commercial products, employees over two million people, and makes up 3.4
percent of the global chemical industry.
The production of Total Major Chemicals and Petrochemicals in 2022-23
(up to September 2022) is 26570 thousand MT. CAGR in production of Total Chemicals and
Petrochemicals during the period 2017-18 to 2021-22 is 4.61%.
INDUSTRY TRENDS
Outlook:
The disruption of 2022 has helped the chemical industry position itself
to lead the coming materials transformation. But with macroeconomic indicators such as
volatile energy prices, higher costs, and the fracturing of trading patterns signaling
uncertainty in the global economy, how can companies plan to overcome potential headwinds
and position themselves for a bright long-term future? Our 2023 chemical industry outlook
explores four trends that are top of mind for business leaders in the year ahead.
Company Overview:
The Company operates through three verticals- Specialty chemicals, Agro
chemicals and Chemical intermediaries. Through its subsidiary company K.P International
Limited Company is having manufacturing facility at GIDC, Dahej. After successfully
started production from June-2021, Company has gained domestic client network and also
increased their Export. For further expansion and to achieve attractive future growth,
Company is currently working on Phase-III Production. The company is having potential
export market in various countries like USA, Spain, Turkey, Brazil, Thailand, Korea,
Mexico, Japan and Indonesia. FY 2021-22 ended on a good note despite of having temporary
disruption and adverse microeconomic situation, the Company managed to have healthy
revenue growth as well as it continues to meet the commitments. With the vision of
expansion of Capacity, the Company have worked for the best Results.
Internal Controls:
The company has adequate systems of internal control in place, which is
commensurate with its size and the nature of its operations. The IT system and
infrastructure are continuously examined and improved with appropriate and timely
upgradation.
Internal Audit function plays a key role in providing to both the
operating management and to the Audit Committee of the Board, an objective view and
reassurance of the overall control systems and effectiveness of the Risk Management
processes across the Company and its subsidiary. Internal Audit also assesses
opportunities for improvement in business processes, systems and controls and provides
recommendations designed to add value to the operations.
The Audit Committee meets on a quarterly basis to review and discuss
effectiveness of the internal control system. The Audit Committee also meets the Statutory
Auditors separately to ascertain their views on the adequacy and efficiency of the
internal control systems.
GOVERNMENT INITIATIVES
Chemicals industry occupies a pivotal position in meeting basic needs
and improving quality of life. The industry is a key enabler for industrial and
agricultural development of the country and provides building blocks for several
downstream industries, such as textiles, papers, paints, varnishes, soaps, detergents, and
pharmaceuticals. It is also among the most diversified industrial sectors and covers over
80,000 commercial products.
The government permits 100% foreign direct investment (FDI) in this
sector under the automatic approval route. Manufacturing of most chemical products
inter-alia covering organic/inorganic, dyestuff and pesticides is de-licensed. Factors
such as boost to speciality and agrochemicals chemicals due to rapid development in
construction and agricultural sector, inadequate per capita consumption and strong demand
from paints, textiles and diversified manufacturing base shall aid towards the development
of Indian chemicals sector, the same is expected to grow at around 9% per annum and touch
US$ 304 billion by 2025.
Government of India has launched several schemes and initiatives to
encourage growth of the sector which include:
Petroleum, Chemical and Petrochemical Investment Region (PCPIR) scheme:
concept of PCPIR is cluster approach to promote petroleum, chemicals and petrochemical
sectors in an integrated and environmentally friendly manner on a large scale. PCPIRs have
already received investments worth US$ 24.68 billion till now, these PCPIRs are expected
to attract investment in the tune of US$ 117.42 billion approximately. PCPIRs are being
developed in Andhra Pradesh, Gujarat, Odisha and Tamil Nadu and have already generated
direct and indirect employment for 0.2 million people with total potential of 3.4 million.
The Indian chemical industry has received the much-needed boost in the
past 4 to 5 years. The Government is taking strict measures to cut down on the challenges
that the industry is facing. It is also coming up with new projects and plants to leverage
all the opportunities to the maximum. In fact, the Governments new "Make in
India" initiative would also play a pivotal role in boosting the growth of the Indian
chemical industry. Other favourable Government initiatives such as "Aatmanirbhar
Bharat and the Production-Linked Incentive Scheme", are likely to boost the
manufacturing sector, and thereby indirectly benefit the industry and the Company.
EASE OF DOING BUSINESS
One of the main drivers of Indias economic growth is the countrys
strong domestic consumption, which is supported by a sizable and expanding middle class. A
major factor in maintaining the nations economic momentum has also been the governments
initiatives to encourage ease of doing business and draw foreign investment. According to
the National Statistical Offices (NSO) second advance estimate, Indias GDP growth is
projected to be 7% in FY 2022-23 compared to 9.1% in FY 2021-22. The bilateral trade also
reached a record high of USD 447.46 billion with 6.03% growth during FY 202223, surpassing
the previous high of USD 422.00 billion in FY 2021-22, despite the weakening external
demand.
CHINA PLUS ONE STRATEGY
The global agrochemical industry is dominated by China. Due to growing
environmental concerns, many specialty chemical companies in China have ceased their
activities, and industries that rely on specialty chemicals are diversifying to different
countries. Consequently, Indian manufacturers are looking at expanding their portfolio
with value-added products. Rising demand from domestic as well as overseas companies for
Indian agrochemicals brings an immense opportunity for growth in the coming years.
IMPORT SUBSTITUTES
The Indian Speciality Chemicals Industry is heavily dependent on
imports. The government is nudging domestic producers to fulfil this demand. The situation
has been exacerbated by the war impeding imports. This can push Indian producers to meet
domestic demand.
THREATS
LACK OF AVAILABILITY OF SKILLED MANPOWER: -
Despite having a favourable demographic profile, labour and skill
shortage continues to be one of the key concerns for the Indian chemical industry. The
Government along with Industry bodies are putting their best foot forward to have
education and vocational training institution arming the manpower with appropriate skill
set.
CHEAP IMPORTS: -
Structural shifts in the Chinese market arising from over capacity
coupled with weakening prices are threatening the Indian players. As China threat was
partly getting managed through the anti-dumping duty route, we now have Russian problem.
Russia is a key producer of steel and as its currency has hit rock bottom, the Indian
market can see cheap imports.
COMPETITION: -
Our government has allowed 100% FDI in Chemical Sector. This has
resulted in domestic players facing stiff competition from foreign multinationals, capable
of exerting strong price pressure on local markets. Yash Chemex Limited views this as a
health indicator of further thriving and leveraging on its attributes. Better pricing,
quality products, high volumes and strategic locations, compared to its peers are some of
the factors that places the Company in a better position to face this competition.
HUMAN RESOURCE DEVELOPMENT / INDUSTRIAL RELATIONS:
The employee strength of the Company as on 31st March, 2023 was 3. The
relations with the employees of the Company remained cordial and harmonious.
The Company encourages the employees to upgrade their knowledge and
skills. The training sessions on various working parameters are conducted in routine apart
from allowing employees for outside specialized training, wherever required.
ACCOUNTING TREATMENT:
Audited Financial Statements for the year ended 31st March, 2021 are in
compliance with the Indian Accounting Standards (Ind-AS) prescribed under section 133 of
the Companies Act, 2013.
FINANCIAL PERFORMANCE (CONSOLIDATED) (Rs. In Lakhs):
|
2022-23 |
2021-22 |
Reason for decline |
| Revenue from Operations |
9141.91 |
9977.87 |
-Lower demand -Increase in Financial Cost and Depreciation
-Fluctuations in Prices of Chemicals |
| EBITDA |
472.27 |
458.95 |
|
| Profit after Tax |
381.59 |
341.23 |
|
| Earnings Per Share (EPS in Rs.) |
2.73 |
3.33 |
|
CAUTIONARY STATEMENT:
Statements in "Management Discussion and Analysis" describing
the Companys objectives, projections, estimates, expectations or predictions are forward
looking statements within the meaning of applicable security laws or regulations. These
statements are based on certain assumptions and expectations of future events. The actual
results might differ materially from those expressed or implied depending upon factors
such as climatic conditions, global and domestic demand-supply conditions, finished goods
prices, raw materials cost and availability, foreign exchange market movements, changes in
Governmental regulations and tax structure, economic and political developments within
India and the countries with which the Company has business.
Therefore, the Company assumes no responsibility in respect of forward
looking statements herein which may undergo change in future on the basis of subsequent
developments, information or events.
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