Privi Speci. Management Discussions



The global economy is showing signs of resilience in 2023 after a turbulent year. However, economic growth remains historically low in 2023, as persistent inflationary pressures, tighter monetary conditions and the prolonged war between Russia and Ukraine weigh on economic activity. Inflationary pressures are eroding real incomes, triggering a global cost-of-living crisis and substantially weakening investment growth. Further, the global banking crisis in the United States has raised concerns over macroeconomic stability across the markets and an impending global recession. With the central banks efforts to curb inflation by tightening monetary policy, global inflation is projected to decrease from 8.7% in 2022 to 7.0% in 2023 and 4.9% in 2024. Key factors in the improvement in economic activity and sentiment in 2023 are the rebounding of Chinas economy, the gradual unwinding of supply chains and the recent decline in energy and food prices.

Notwithstanding the headwinds, the real Gross Domestic Product (GDP) grew in the United States, the European Union and major emerging market and developing economies. The real GDP of the United States grew at 2.1% in 2022 on the back of increased private investment and consumer spending. It is projected to grow at 1.6% in 2023 and 1.1% in 2024. The European economy recorded 2.7% growth in 2022 and is projected to grow at 0.8% in 2023 before rising to 1.4% in 2024.

The International Monetary Fund (IMF) has projected global GDP growth to decline from 3.4% in 2022 to 2.8% in 2023 and rise to 3.0% in 2024. The growth of Advanced Economies (AEs) is projected to decline sharply from 2.7% in 2022 to 1.3% in 2023 before rising to 1.4% in 2024. Economic prospects for Emerging and Developing Economies (EMDEs) are on average stronger than for Advanced Economies. EMDEs grew at 4.0% in 2022 and are expected to grow at 3.9% in 2023 and 4.2% in 2024. Asia-Pacific will be the most dynamic of the worlds major regions in 2023, predominantly driven by the buoyant outlook for China and India, which will be the major contributors to global economic growth in 2023.


India continues to be among the fastest growing economies in the world. Despite the spillovers of the global slowdown, the Indian economy is exhibiting resilience and overall economic activity remains strong. As per the second advance estimates released by the National Statistical Office (NSO), Indias GDP growth is estimated at 7% in FY 2022-23 as against 9.1% in FY 2021-22. Further, despite the weakening external demand, the merchandise exports have registered the highest-ever annual exports of USD 447.46 Billion with 6.03% growth during FY 2022-23 surpassing the record exports of USD 422.00 Billion in FY 2021-22.

Domestic economic growth is gaining strength and further traction in 2023. As per the IMF, Indias GDP per capita at current prices is USD 2,600 in 2023, leading to a surge in household consumption. The economic growth rate is projected to decline to 5.9% in FY 2023-24 due to inflationary pressures. Higher inflation remains a challenge and the Reserve Bank of India (RBI) increased the repo rate by 250 basis points in FY 2022-23 to tame inflationary pressures. As a result, Indias CPI inflation rate eased to 5.66% in March 2023 from 6.95% in March 2022.

India has a long runway for growth and as per the IMF, the Indian economy is expected to grow at 6.3% in FY 2024-25. Factors such as a conducive domestic policy environment, various dynamic reforms undertaken by the government such as higher capital expenditure, production-linked incentives (PLI) scheme and Atmanirbhar Bharat, thrust on domestic manufacturing and infrastructure development, strong domestic demand, export growth, technology-enabled development and energy transition among others will stimulate growth in FY 2023-24.


The global aroma chemicals market is valued at USD 6.56 Billion in 2022 and is projected to reach a value of USD 10.3 Billion by 2030, growing at a compound annual growth rate (CAGR) of 5.8% from 2022 to 2030. The expansion of the aroma chemicals industry can be attributed to increased demand from the end-user industries, growing customer base and increased penetration in emerging markets among other factors. Enhanced consumption of packaged food and personal care products in developing economies, surge in demand for natural aroma chemicals, technical advancement in the manufacturing process and increased R&D activities are expected to further propel the market growth of the aroma chemicals market.

Aroma chemicals including terpenoids, musk chemicals, and benzenoids are used to prepare fragrance formulations for consumer goods like fine fragrances, cosmetics and toiletries, food and beverages, soaps and detergents, home care and cleaning products, medicines, etc. Aroma chemicals form the backbone of ingredients in these products as they provide flavour and fragrance. With increasing consumer sentiments towards sustainability, manufacturers are focussing on the sustainable production of eco-friendly aroma chemicals to reduce emissions and gain a competitive advantage.

Aroma chemicals can be obtained from synthetic or natural sources. In recent times, almost 90-95% of the raw materials used in fragrance creation are synthetics and only 5-10% are of natural origin. The synthetic chemical is the most lucrative segment due to the rising utilisation of synthetic products in cosmetics, personal care, and food and beverage industries owing to easy availability and low cost of production.

The global natural aroma chemicals market is anticipated to witness a CAGR of 6.8% from 2022 to 2030. Growing environmental concerns, regulatory bans on certain molecules and some synthetic flavours, consumer awareness regarding the harmful effects of chemicals on health and preference for organic and sustainable products are bolstering the demand for natural aroma chemicals, which are extracted from natural sources such as various parts of plants and occasionally from animals. Surging demand for herbal and natural products in food and beverages, personal care, cosmetics and pharmaceutical industries is anticipated to fuel the demand for natural aroma chemicals in the global market. The major challenges for the growth of natural aroma chemicals are high manufacturing costs and their inability to blend in with other fragrances, resulting in higher prices of the finished product.


• Terpenes and terpenoids

The terpenes and terpenoids segment has been gaining popularity with a volume share of 37.50% in 2021 owing to its natural availability and medicinal properties. This segment is expected to grow at a CAGR of 4.7% from 2022 to 2030. Terpenes are used in various applications such as perfumery, alternative medicines like aromatherapy, food and beverages, personal care products, etc. The surge in demand for fragrances in hand wash and sanitisers and the large consumption of terpene in pharmaceutical and nutraceutical applications will fuel its growth.

• Musk chemicals

Musk chemicals are extracted synthetically as well as naturally. Natural musk is extracted from plants, roots, seeds and some animals like musk deer. Musk chemicals are used in different applications such as perfumes, cosmetics, and personal care products. Increasing demand for cosmetics, fine fragrances and aromatic personal care products are the major growth drivers for this segment.


The North American aroma chemicals market is poised to surpass USD 2 Billion by the end of 2027. The North American market covers the United States, Canada and Mexico. The United States holds the highest market share, attributing to the growth in the personal care, cosmetics and FMCG industry. Despite the challenges in 2023, the aroma chemicals market will grow steadily in North America owing to the presence of major vendors of aroma chemicals, a large number of end-user industries in the region and high demand for premium personal care products, especially in the United States and Canada. Further, the Comprehensive Economic & Trade Agreement (CETA) between Canada and the European Union is predicted to remove the customs duty on food

and agricultural products and several other industrial products. The agreement is further intended to propel the trade of essential oils between Europe and North America, thereby providing a significant growth opportunity for the essential oils & floral extracts industry players in North America.

The aroma chemicals market in Europe exhibited substantial growth backed by the rising demand for fragrances in personal care and cosmetic products, soaps, detergents, food and beverages, etc. There is a huge demand for luxury premium fragrances and cosmetics in UK, France, and Germany. Furthermore, personal care and cosmetics companies are introducing new products in the region to attract new customers.

The global market is projected to grow exponentially due to higher demand for fragrant intensifiers, odorants and flavours and their growing applications in key end-user industries. The market for aroma chemicals is concentrated in Europe, USA and China. Growth in the retail sector across emerging economies has made the availability of products easier and contributed to the growth of the aroma chemical industry.


Asia Pacific dominated the global industry in 2022 and accounted for the highest share of more than 31.40% of the overall revenue. The aroma chemicals market is witnessing growth in the region due to the shift in choices of consumers towards nutritional and healthy foods and beverages in most populated countries like India and China and high consumption of flavours and fragrances in China, India and Japan. China dominates the Asia-Pacific market as it has the largest personal care and food and beverage market in Asia-Pacific. Rising disposable income in emerging economies like India and China coupled with population growth is expected to augment the demand for personal care and cosmetic products in the industry.

Asian flavours and fragrances have also gained popularity in the major regions of Europe and North America. Indonesia, India, China, and Vietnam are among the prominent food flavours markets in the region of Asia Pacific. Multiple manufacturing companies are focussing on the expansion of their business and investments in R&D facilities in the Asia Pacific region. Factors, such as government subsidies, tax benefits, and high per capita income, are attracting global companies to expand and start their operation in this region.

The synthetic flavours and fragrance segment accounts for the highest market share. The development of the pharmaceutical industry in the Asia Pacific region is also expected to provide traction for the market. Advancements in manufacturing techniques, availability of skilled workforce, higher production capacity, and favourable business models of export and import are the key reasons for the growing popularity of the developing countries of Asia Pacific for supplying chemical products.


India is one of the leading consumers and exporters of speciality chemicals including aroma chemicals in the Asia Pacific region owing to rising demand from end-user industries. Speciality chemicals constitute 22% of the total chemicals and petrochemicals market in India. The speciality chemicals industry is projected to reach USD 65-70 Billion by 2025.

As per export statistics provided by CHEMEXCIL, the USA contribution is the highest at 17.73% to the overall chemical exports, especially essential oils and inorganic chemicals from India. Indias Cosmetics, Soap & Toiletries exports to the USA were the highest among all the key export destinations from India. The export of aroma chemicals, organic essential oils and end- user products like cosmetics and toiletries experienced substantial growth in the last two years.


Volume in M.T. & Value in USD Million

Chapter No./Panel

2020-21 (Actual)

2021-22 (Actual)

% Growth

2022-23 (Provisional)

% Growth

Volume Volume Volume Volume Volume Volume Volume Volume Volume Volume
(33) Cosmetics, (34) Toiletries 0.00 1,618.88 7,46,170.32 1,973.96 0.00 21.93 7,64,203.94 2,408.34 0.00 22.01
(33) Essential Oils 11,459.57 234.04 15,497.86 310.64 35.23 32.73 12,734.31 306.27 -17.83 -1.41
(15) Castor Oil 7,34,336.46 917.24 7,15,209.56 1,175.50 -2.60 28.16 6,45,816.15 1,265.64 -9.70 7.67

(Source: DGCI&S)

India continues to invest in research and development, scale and the capacity to deliver quality products at lower costs to achieve a competitive edge. The reduction in the basic customs duty on several chemicals and petrochemicals products will further boost the growth of the chemical industry and create lucrative opportunities for the aroma chemicals industry.

Aroma chemical companies in India will be benefited from China- plus-one strategy and the governments campaigns Make in India and Self-reliant India to boost domestic manufacturing and promote Indian products in the global markets. Global players are evaluating viable alternative manufacturing countries like India to reduce their reliance on China and diversify supply risk, thereby improving export opportunities for Indian players. India is well positioned to expand its global market share and emerge as a viable alternative hub for speciality chemical manufacturing by leveraging its strength of low-cost manufacturing, advanced processing capabilities, availability of skilled and cheaper labour and favourable government policies. Furthermore, the Indian aroma chemical industry benefits from less-stringent environmental norms as compared to China.


The global flavours and fragrances (F&F) market size was valued at USD 29.15 Billion in 2022 and is anticipated to grow at a CAGR of 5.4% from 2023 to 2030. The global perfumes market was valued at USD 50.85 Billion in 2022 and is expected to register a CAGR of 5.9% from 2023 to 2030 owing to the growing trend of personal care and the rising consumption of fragrance across various end-use products. However, high inflation may impact demand for non-essential products such as fine fragrances as consumers will prioritise essentials like soaps, detergents, etc.

The key market players are focussing on producing natural fragrances, due to the consumer preference for natural fragrances and concerns regarding synthetic fragrances due to health risks. India has become a prominent global supplier of natural fragrant raw materials such as essential oils of menthol mint, sandalwood, jasmine and spices. Fine fragrances have evolved into a significant business in the cosmetics and personal care industry. Factors, like increased affordability for luxury products, a shift in consumer preference for premium cosmetics and fragrances, growth in the retail sector and e-commerce, rising awareness of hygiene, personal grooming trends and the therapeutic benefits of fragrances are driving the overall market growth. The growing demand for perfumes with higher fragrance concentrations and customisable and niche fragrances are driving the sales of perfums (pure perfume) with 15%-40% fragrance concentration. The key players are making significant investments in R&D and advertising to influence consumer purchase decisions.


The aroma chemicals industry involves strict regulations due to the Safety, Health and Environment concerns and the harmful effects of the toxicity pertaining to the use of synthetic chemicals. The F&F industry has strict safety norms, restricting the use of many chemicals, either due to governmental regulations or due to self-regulation by the industry itself. For example, some fragrance ingredients are not permitted for use on grounds of safety, while some others are restricted in their level of use in fragrances, depending on the intended end-use. IFRA (International Fragrance Association) guides the F&F industry by providing guidelines for fragrance ingredients as defined and published in the IFRA safety standards. Regulations on emissions of wastewater, air, etc. are getting more stringent for environmental protection and the manufacturers are required to comply with these norms.


• Growing trend in personal care and cosmetics industries

Demand for personal care and cosmetics products has increased due to factors like increased awareness of personal hygiene and self-care, rising disposable income, urbanisation, changing lifestyle and growing penetration in smaller cities. Personal care products and cosmetics have become an integral part of the day-to-day life of millennials. Consumption patterns of cosmetics among teenagers also increased substantially. A shift in consumer preferences will create lucrative prospects for the aroma chemicals market.

• Increasing consumption of toiletries and home care products

The rising concerns regarding disinfestation and maintaining a hygienic environment post COVID-19 have led to a surge in the requirement for surfactants and emulsifiers in home care products and toiletries. An increase in demand from these segments resulted in the growth of the aroma chemicals industry.

• Growing demand for convenience food and beverages

The growth of the food processing and beverages market due to consumer preferences for packaged food and low calories and non-alcoholic beverages will lead to increased demand for aroma chemicals as they are used to enhance the flavour and act as preservatives in edible items.

• Favourable government initiatives

Governments initiatives such as the exemption of basic customs duty on denatured ethyl alcohol and reduction of customs duty on several chemical products, the Make in India campaign and PCPIR (Petroleum, Chemicals and Petrochemicals Investment Regions) policy to attract an investment of Rs.20 Lakh Crore by 2035 will boost the growth of the chemical sector, including aroma chemicals sector. Other initiatives such as the Chemical Promotion and Development Scheme (CPDS) to facilitate the growth of the chemical industry including the speciality chemical sector and the Production Linked Incentive (PLI) Scheme for chemicals, which is in the development stage, will further boost domestic production and exports of chemicals, directly benefiting the aroma chemical industry.

• Increasing investment in R&D and product development

Increasing investment in R&D and product development will enable manufacturers to produce new aroma chemical products. With companies focussing on product diversification, consumers will have wider options to choose from a variety of personal care and skin care products in different price ranges which is expected to aid the growth of the aroma chemicals market.


Privi Speciality Chemicals Limited is Indias leading manufacturer, supplier, and exporter of aroma and fragrance chemicals and a globally trusted partner and supplier of bulk aroma chemicals. Privi started manufacturing aroma chemicals in 1992 with only two products, which gradually expanded to a range of over 50 products today, having a capacity of over 55,000 tonnes per annum. Privi also develops and produces custom-made aroma chemicals as per the specific requirement of the customers. The research specialists at the in-house R&D centre continuously thrive to develop new products and processes.

Privi has state-of-the-art integrated manufacturing facilities situated at Mahad in Maharashtra and Jhagadia in Gujarat. The facilities are equipped with expertise and capacity to perform critical reactions. Privi enjoys a competitive edge and economies of scale in its product segments.

Privi has a total production capacity of - 55,000 TPA spread across Amber fleur, Acetates, Dihydromyrcenol, Ionones, Nitriles, Sandalwood derivatives and Speciality chemicals and a Crude Sulphate Turpentine (CST) / Gum Turpentine Oil (GTO) capacity of - 36,000 TPA (Backward integration for captive a & p Pinenes).

Privi is ISO 9001:2015 and ISO 14001:2015 certified for its Environmental Management System (EMS) and also has ISO 45001:2018 standard certification accredited by Bureau Veritas Occupational Health & Safety Management System (OHSMS) for all its manufacturing units in Mahad.


Your Company is engaged in supplying aroma chemicals to global companies for over two decades and has significant in-house expertise and knowledge of the olfactive requirements of various global and regional customers.

Further, your Company continues to apply backward integration to use waste generated from pulp mills - CST. These factors provide a distinct competitive advantage to your Company against the new entrants or existing aroma chemical manufacturers. Your Company has done research on various components of the CST and keeps working on producing value-added products.

RISK MANAGEMENT Foreign exchange rate risk:

Fluctuations in exchange rates including the exchange rate between the Indian Rupee and the U.S. Dollar due to adverse global developments may impact the operations of your Company.

While your Company depends on over 70% of the raw materials by imports, it also exports over 70% of the finished goods. Therefore, your Company continues to have a natural hedge against the depreciation of the Indian Rupee against the US Dollar, after accounting for some of the borrowings which are denominated in dollars.

Pricing and availability of raw materials:

The pricing of key raw materials also varies considerably during the year and the recent uncertainties pose even more challenges than ever.

Your Company, as a strategy, continues to enter into half-yearly or annual contracts with suppliers for raw materials and finished products to mitigate the risks.

Market risk:

Your Company has enhanced the capacities of key products as well as installed new capacities for certain niche speciality aroma chemicals to stay ahead of the competition.

Your Company continues to be a dominant producer globally in three flagship products: Dihydromyrcenol, Amber Fleur, and Pine Oil. All these products are developed in fully integrated manufacturing facilities of your Company, starting from the CST to the finished products and essential ingredients in the manufacture of fragrances. Your Company continues to be the largest single CST processing site in Asia.

Your Company has started to manufacture Galaxmusk (Galaxoalide) and Camphor. As your Company has started to sell these new products, the same over a period of time will enhance the overall revenue.

In addition to the above-mentioned large volume flagship products, your Company also manufactures several speciality aroma chemicals, some of which are made from the side streams generated during manufacturing. Your Company believes in promoting a "Waste to Wealth" philosophy. Thus, apart from consolidating the market share in the large volume products, your Company is also working on increasing customer share by supplying other aroma chemicals.

New customers under which samples are under evaluation are Unilever (India) and Christian Dior (France).


Your Company continues to engage in research and development in respect of technology and process improvement. This will result in improved, cleaner processes for existing as well as new products. The following initiatives are under review:

• Green chemistry

• Implementing sustainable solutions at plant scale for units 1, 2 and 3 for Zero Liquid Discharge (ZLD)

• Renewable Resource Research & Development

Your Company is a member of the Carbon Disclosure Project (CDP). It not only discloses its carbon emission data but also works on specific projects to lower the carbon emissions from its operational activities.

Your Company score for CDP stands at B- grade and for EcoVadis stands at Silver for the year 2022 which is considered to be very effective according to global standards. However, your Company will strive to work towards getting better each day and moving one notch up.


EU / EEA - Registration, Evaluation, Authorization and Restriction of Chemicals (REACH):

Requirements: To place any product in European Economic Area in qty > 1 MTPA, the product is required to be registered within REACH Regulation (EC Regulation 1907/2006).

Your Companys status: So far, your Company has registered 26 products under EU REACH Regulation, through its Sweden- based representative. This will allow your Companys EU/EEA customers and its Netherlands office to import the products into EU/EEA.

Key Post-Registration Obligations: After the European Chemical Agency (ECHA) evaluates the registration dossier, additional animal or product test data is to be provided or corrections to be made if ECHA finds any information missing or incorrect.


Requirements: EU REACH ceased to apply in Great Britain on January 1, 2021, as a consequence of the United Kingdoms effective withdrawal from the European Union. GB manufacturers, importers, distributors and downstream users of chemical substances must now comply with UK REACH, to place any product in GB-market in qty > 1 MTPA after Calendar Year 2021, need to submit a Downstream User Import Notification (DUIN) to HSE (Health and Safety Executive).

Your Companys Status: So far, your Company has registered 20 products under DUIN, as a result of which it has got an extension of the registration deadline till December 2027. This will allow your Companys GB customers to import the products into GB-market without any registration until December 2027.


Requirements: To place any product in Turkey in qty > 1 MTPA after the calendar year 2020, the product is required to be preregistered under Turkey REACH Regulation (KKDIK regulation) by December 2020. The product is required to be registered by December 2023.

Your Companys Status: So far, your Company has pre-registered 26 products under KKDIK, as a result of which it has got an extension of the registration deadline up to December 2023. This will allow your Companys Turkish customers to import the products into Turkey without any registration until December 2023.


Most of your Companys manufacturing facilities are ISO 9001:2015, ISO 14001:2015 & ISO 45001:2018 certified, Kosher and Halal certified. The ISO certifications have been issued by a globally renowned certification body Bureau Veritas whose certification process involves stringent audits.


Your Company is geared to capture the huge demand opportunities in aroma chemicals and drive significant growth as soon as the global recovery begins.

Your Company has made further inroads into the developing markets (Nigeria, Egypt, UAE, South Africa, Saudi Arabia, Kuwait and Korea) by seeking more customers as well as additional market share through existing customers.


Your Company has achieved marginal growth on Top Line and the Bottom Line has been eroded mainly on account of the current market situation which is subdued due to factors like the ongoing war between Russia and Ukraine, lack of demand, inflation, loss of employment, economic uncertainties, etc.

With the continued existence of your Companys 100% subsidiary in the USA, its market share continues to grow year on year. The USA business is witnessing a positive growth momentum.

Your Company is witnessing a slowdown and is beginning to feel the impact of the same coming from the key accounts.

Your Company continues to sell value-added products from backward integrated feedstocks which are contributing to its revenue.

Your Company continues to establish strategic long-term business relations with global leading companies in the F&F industry such as Givaudan, Firmenich, IFF, Symrise, MANE, Robertet, Takasago, etc. and with global leading FMCG producers such as P&G, Henkel and Reckitt Benckiser.


Statements in the Management Discussion and Analysis may be forward-looking statements within the meaning of applicable laws and regulations. Actual results might differ substantially or materially from those expressed or implied. Important factors that could make a difference to the Companys operations include, among others, economic conditions affecting demand/supply, price conditions in the domestic and overseas markets in which the Company operates, changes in the Government regulations, tax laws and other statutes and incidental factors such as Force Majeure Contributors.