Speciality chemical manufacturers that benefit from demand from end-user industries and government initiatives
Investment Rationale
- Speciality chemicals are specific items that are used in low quantities for the production of high-value goods in variety of industries viz, textiles, Tyre, adhesives, pharmaceuticals, agro-chemicals.
- Indian middle class is leading a dramatic change in demand for items like food, clothing and transportation, which is primarily driving demand for speciality chemicals
- Production of speciality chemicals allows customer stickiness and leads to high revenue predictability.
- Since price of speciality chemicals is determined through negotiations, increase in raw material costs can also be passed on to protect margins
- The downturn in China's chemicals and specialty chemicals market in the recent years, has come as a boon for the Indian chemicals and specialty chemicals industry.
- China's specialty chemicals market has seen a downturn in recent years, for more reasons than one, most prominent being the introduction of stringent environmental norms, which has led to the shutdown of several chemical plants.
- Over the last five years, the labour cost in China has more than doubled compared with India, rendering Chinese manufacturers' uncompetitive vis-à-vis India in labour cost.
- This smallcase comprises companies manufacturing speciality chemicals that are used in a wide range of industries like automobiles, pharma, textiles, food processing, agro chemicals, etc
smallcase is played out