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Reengineering Chemistry for better tomorrow
Knowledge Paper by Tata Strategic Management Group
December 2013
This is a confidential document solely for the use of client personnel. No part of it may be circulated, quoted, or reproduced for distribution outside the client organization without prior written
approval from Tata Strategic Management Group.
Indian Chemical Industry
• Need for IGC&E Practices
• Transitioning to IGC&E Practices
• Opportunity & Way Ahead
• About Tata Strategic
2
Indian Chemical Industry stands at ~ $ 110 Billion in 2012
India’s Chemical Industry,FY12 (% of total)
Petrochemicals
21%
Specialty chemicals
19%
Fertilizer17%
Pharmaceuticals
29%
Agrochemicals
3%
Other base chemicals
11%
Total: $110 Bn
OVERVIEW OF INDIAN CHEMICAL INDUSTRY
Source: Department of chemical, Analysis by Tata Strategic
Remarks
• India currently accounts for only 3.3 % of the total
global chemical market with a size of ~$3.7 trillion in
2013.
• Indian chemical industry accounted for ~13% of the
total India's exports.
• Indian chemical industry comprises both small scale
as well as large scale units.
• India's competence in this knowledge intensive
industry is increasing however the tapped potential
is very limited
3
110
259
358
Indian chemical industry has a potential to cross USD 350 Billion by FY21
Growth Drivers
• Trends
– End use industry growth
– Low per capita consumption; expected to increase
– Import substitution potential
– Faster implementation of PCPIRs
• Improved manufacturing competitiveness to increase
export potential
• Large investments could help meet the growing demand
• The new manufacturing policy targets to increase
manufacturing sector's share in GDP to 25% by 2025 from
the present 16%
Growth projections ($ Bn)
Source: Planning Commission, Government of India, Analysis by Tata Strategic
X% CAGR
FY 21 (P)
10%
14%
I IIScenario
I Base case scenario
II High growth scenario
Scenario
INDIAN CHEMICALS INDUSTRY
FY12
Indian Chemical Industry
Need for IGC&E Practices
• Transitioning to IGC&E Practices
• Opportunity & Way Ahead
• About Tata Strategic
5
Who do we owe this planet to?
Source: Analysis by Tata Strategic
The Case of Cancer in Punjab
• Increasing use of pesticides
has resulted in cancer
incidents
Over 33,000 have died
in last five years
90 in population of 1
lakh suffer from cancer ?Water Crisis Maharashtra
• 12,000 villages in 16
districts under water crisis
• Shut down of Parli power
plant with installed capacity
of 1,130 MW
Two units were
shutdown in October
2012
All six units shut
down in January
2013
Lead Poisoning
• India becoming world capital of
lead poisoning
60% of samples for Atomic
Absorption spectroscopy detect
lead in content in human fluids
• 20% Children in Kolkata affected by lead
poisoning
Key sources: toys, lead pencils,
crayons, wall paints
SELECT ENVIRONMENTAL ISSUES
6
Feedstock issues, increasing costs and post consumption management challenges
will shape the future global chemical industry
Industry
sector
E-factor
(kg waste/kg product)
Volume of liquid
effluents
(billion liters)
COD
(100
thousands)
Toxicity
Pharma 50-100 10-15 1.5-2 Very high
Agro 40-60 10-15 1-1.5 Very high
Pigment 30-50 20-25 0.5-1 Medium high
Dyes 20-30 20-25 0.25-0.5 High
Key Factors
• Feedstock challenges
• Chemical Industry perceived as a
contributor in degradation of
environment.
• Stringent regulations, NGO’s and end
consumers are creating pressure for
chemical industry to go green.
• The Indian market is responsible for
approximately 20% of global liquid
effluents amounting to 15 to 20 billion
liters annually.
Sources: Industrial Symbiosis and Green Chemistry, James Clark, Indicative approximations by Newreka
CHANGING INDUSTRIAL LANDSCAPE
7
Industries are expected to be impacted by water scarcity going ahead
Notes : 1) Water stress benchmark is defined as 1,700 cum/year on a per capita basis
2) CuM/Year : Cubic Metre/Year
Situation in certain Rajasthan, Gujarat and parts of Andhra Pradesh and
Maharashtra are more anaemic than others
• Water demand in India is poised to
exceed water availability by 2050
Wide variations in regional
water availability
• Current pricing of water and utilisation
pattern not sustainable in future
• Increasing controls on water
withdrawals, water use efficiency and
pollutants
• Pricing Reforms and new regulations
likely in future
0
500
1,000
1,500
2,000
2,500
1990 2000 2010 2020 2030 2040 2050Per
Cap
ita
Wat
er A
vail
abil
ity
(Cu
M/y
ear)
Year
Water Stress Benchmark (1,700 Cubic Metre)
Per Capita Water Availability (Cubic Metres)
Projections for Per Capita Water Availability (1991-2050)
WATER SCENARIO IN INDIA
Source: Analysis by Tata Strategic
8
Fundamental changes are occurring in the Energy Sector in India
HISTORICAL GROWTH IN ENERGY PRICES
Fuel Price & Electricity Index
115113107106106105103100
169
148
132135
121121
114
100
FY12FY11FY10FY9FY8FY7FY6FY05
Solar & Grid Electricity Prices (Rs/ kWh)
8
1012
16
19
22
11-12
9.6
6.78.28.68.7
FY15FY13FY11FY9
Fuel Feedstock prices have risen
Backlog in electricity price adjustment
Cost of in-citu solar generation is competitive,
thanks to hikes at BEST
Source: Office of the Economic Adviser, CARE Research
7%
2%
Fuel
Electricity
Solar
CAGR
BEST HT1 Tariff
Notes : 1) High Tension
99
THE NEED FOR GREEN CHEMISTRY
Transition to green chemistry practices can help chemical industry develop
sustainable businesses
Present Chemistry
Green Chemistry
Feedstock challenges
• Dependence on non-renewable
feedstock from politically unstable
nations
• Supply problems
• Price volatility
Increasing costs
• Energy costs
• Waste disposal
costs
Improved profits
Increased
product yield
Improved
environmental
footprint
Improved brand
imageRising pressure on
Chemical industry due to
• Increasing regulations
• Customer demand
1
2
3
Poor perception of
Chemical industry1
4
Notes : 1) Chemical Industry ranked 6th amongst 8 industries as per Cefic led public perceptions survey of EU chemical
industry in 2010. The industries ranking were - 1st: Electronics, 2nd : Food, 3rd: Automobile, 4th:Pharmaceuticals,
5th: Electricity, 6th: Chemicals, 7th: Petrol/Oil, 8th: Nuclear
Competitive
advantage
How can companies
transition to IGC&E
practices?
Indian Chemical Industry
Need for IGC&E Practices
Transition to IGC&E Practices
• Opportunity & Way Ahead
• About Tata Strategic
1111
METRICS
Companies can plan to transition to IGC&E by looking at their business through
four lenses
Metrics
Material Efficiency Energy Efficiency Reduced Hazards Holistic Design
• Atom economy
• Reduce
derivatives
• Catalysis
• Maximize material
efficiency
• Output-pulled vs.
Input pushed
• Minimize material
diversity
• Design for energy
efficiency
• Design for
separation
• Maximize energy
efficiency
• Integrate material
and energy flows
• Prevention/
inherently safer
chemistry
• Less hazardous
chemical synthesis
• Safer solvents and
Auxiliaries
• Real time analysis
for pollution
prevention
• Durability over
immortality
• Use of renewable
feedstock
• Design for
degradation/
commercial
afterlife
• Conserve
complexity
• Meet needs,
minimize excess
Source: Primary interactions, Analysis by Tata Strategic
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Companies face five key implementation barriers when transitioning to IGC&E
practices
Technology
• Focus on traditional chemistry routes
• Lack of training in new technologies
• Lack of knowledge availability
• Lack of sharing of intellectual propertyRegulatory
• Regulations focused on risk control
• Sector specific regulations
• Unfavourable government policies
Economic Feasibility
• Tied up capital
• Scale-up issues
Financing
• Lack of funds to switch to pilot/
commercial scale
• Perception of risky technologies and
chemistry
• Lack of information for risk evaluation
• Inability to make quick returns
Awareness
• Lack of awareness amongst
employees/ customers
• Preference to functional benefits
over organization benefits
• Price sensitive customers
BARRIERS
IMPLEMENTATION BARRIERS
Source: Primary interactions, Analysis by Tata Strategic
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KEY ACTIONS TO OVERCOME BARRIERS
An ecosystem which brings industry, academia and government/regulatory
bodies in sync is required to overcome barriers
Strategies
• Support from top management
• Incorporate green chemistry from the design stage
• Involve investors right from the project planning phase
• Investment in R&D
• Life cycle analysis of costs and benefits
• Training employees & vendor client collaboration
• Organize industrial round tables
1 Role of Industry
• Government funding to MSMEs. e.g. Credit Guarantee Fund Scheme
• Taxes / penalties on truly polluting chemistries
• Financial aid to academia
• Develop universities / research agencies for low cost IP
• Regulations focused on risk prevention instead of risk control
3 Role of government / regulatory bodies
• Incorporate green chemistry into academic curriculum
• Develop multidisciplinary teams
• Develop green centers of excellence
• Focus on applied knowledge over theoretical knowledge
• Regular assessment of educational and training programs
2 Role of Academia
Source: Primary interactions, Analysis by Tata Strategic
1
Industry
3
Government
2
Academia
Ecosystem
14
Transition: From here to tomorrow
GREEN CHEMISTRY IMPLEMENTATION STRATEGIES
Source: Primary interactions, Analysis by Tata Strategic
Short term
6 months to 2 years
Medium term
(2 years to 4 years)
Immediate term
(1 to 6 months)
1 2 3
1. Sustainable
recycling solutions
2. Zero Liquid
Discharge (ZLD)
3. COD Reduction
Long term
(4 years to 10 years)
4
1. Solvent recovery
practice
2. Green solvents
3. Bio-catalysts
4. Alternate additives
1. Microreactor
Technology
2. Supercritical fluids
3. Organic solvent
free process
1. Developing bio-
based chemicals
2. Biomimicry of
nature’s best ideas
3. Setting up an
industrial
ecosystem
Associated risks
Resources required
High Low
Indian Chemical Industry
Need for IGC&E Practices
Transition to IGC&E Practices
Opportunity & Way Ahead
• About Tata Strategic
16
Green Chemistry –
The Way Ahead
1
4 2
3
Academia support
Industry initiatives
• Perform 3D audit of existing products
/processes
• Invest in R&D activities
• Rigorous support from top management
• Organize industrial roundtables
• Promote technopreneurs through angel
investments
• Build green chemistry related academic
programs
• Collaborate with industry for R&D activities
• Promote green chemistry through academic
events
• Support technopreneurs in testing and scaling
up green chemistry ideas
Govt./Regulatory bodies support
• Develop green chemistry rating system to
evaluate industry performance
• Promote green chemistry initiatives through
subsidies and investment support to MSMEs
and technopreneurs
• Implementation of regulations and policies in
principle as well as in practice
• Promote green chemistry as means of CSR
Role of end users
• Demand for green products
• Focus on overall benefits, not just costs alone
The Way Ahead
GREEN CHEMISTRY ECOSYSTEM
Source: Primary interactions, Analysis by Tata Strategic
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The India Advantage
Oleochemicals
•Leading producer of castor oil 74% global market
share
•Major producer of High Eurucic content rapeseed
oil
Natural Dyes
•Historically India has been the manufacturer of Prominent
natural dyes: Lac, Harda, Indigo Blue, Kamala dye, Manju
Phal, Madder
Rich Biomass
• 141 Mn hectares of arable land
• 1.5 billion MT/year of food and agri residues are
produced
• Potential for short cycle cellulosic biomass
1
2
3
The Indian
Opportunity
Biopesticides
• Only 4.2% of overall Indian pesticide market
• 10%growth rate is expected in next 10 years
4
API Industry
• Constitutes 30% of the USD 32 Bn pharma
industry
• 50% solvent recovery in API Industry could save
USD 1.8 billion by FY17
5
Indian Chemical Industry
Need for IGC&E Practices
Transition to IGC&E Practices
Opportunity & Way Ahead
About TATA Strategic
19
Tata Strategic is the largest Indian owned management consulting firm
AN OVERVIEW
Founded in 1991 as a division of Tata Industries Ltd.
The largest Indian owned Management Consulting firm
About 70 member strong Consulting Team
Supported by a panel of domain experts
Growing client base outside India
500+ engagements, 100+ clients, across countries, across sectors
Increasing presence outside the Tata Group & India• 50+% revenue outside Tata Group • 20% revenue outside India
20
Tata Strategic offers a comprehensive range of solutions covering Direction
Setting, Driving Strategic Initiatives and Implementation Support
Support Implementation
Drive Strategic Initiatives
• Organization Structure• Corporate Center Design• Roles & Decision rules• Culture Transformation• Performance Management• Capability Assessment • Talent Management
Organization Effectiveness
• Revenue Enhancement• Product Innovation• Market Share Growth –
Rural/Urban• Dealer Effectiveness • Sales Effectiveness
Marketing & Sales
• Supply Chain Optimization • Throughput enhancement • Superior Fulfillment• Project Excellence• Procurement Transformation• Strategic Cost Reduction• Energy/Water Management
Operations
Set Direction
Strategy
• Vision
• Market insights
• Growth Strategy/Business Plans
• Scenario Planning
• India Entry
• Alliance & Acquisition Planning
• Strategic due diligence
• Manufacturing Strategy
• Implementation Plan
• Program Management
• Refinements/Course Corrections
Implementation
21
Tata Strategic is organized as multiple Industry domains and Functional areas
Retail
Organizational Effectiveness
Auto
Durables
Strategy Sourcing
Healthcare
Sustainability
Infrastructure& EPC
FMCG Chemicals
Education
Logistics
Technology
Hospitality & Tourism
TATA STRATEGIC
Industry Domains
Functional Areas
Engineering
DeliveryExcellence
Energy
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Tata Strategic has experience of working on all major segments within the
Chemical domain
• High Performance Chemicals
• Fine Chemicals
Knowledge ChemicalsSpecialty Chemicals
• Petrochemicals
• Agrochemicals
• Fertilizers
Bulk Chemicals
• Pharmaceuticals
• Bulk Drugs/ APIs
EXPERIENCE IN CHEMICALS SUB-VERTICALS
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VALUE CHAIN
Tata Strategic is adequately equipped to assist companies in carrying out
comprehensive Energy Management activities
Energy
Auditing
Planning &
DocumentationTraining
ISO
Certification
Energy Cost Reduction &
Performance Improvement
Accredited
EAs
Free Lance
Certification
Agencies
TSMGProvide
assistance
Comprehensive offering
24
Tata Strategic' Water Management Offering
1
Scope and
Coverage
4
Response
Formulation
2
Water Footprint
Accounting
3
Sustainability
Assessment &
Risk Profiling
5
Long-term Strategy
Identification
of locations /
geographies
• AS-IS water
footprint -
Direct/Indirect,
Blue/ Green
/Grey
• Identification of
risks and
scenarios
• Prioritization of
issues
• Sustainability
assessment
• Impact analysis
for alternate
scenarios
• Water footprint
abatement curve
• Water strategy for
Supply side
management
Usage pattern
Regulatory
compliance
Stakeholder
management
• Sustainability risk and
business implications
• Integration of sustainability
parameters in business
strategy, esp
Processes / technology
Realignment of supply
chain
Product mix & design
Locations
Existing Operations Future Strategy
ILLUSTRATIVE
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We track ~50 specialty chemical segments and ~500 companies regularly and
could provide M&A support, if needed
Proprietary Database on Specialty Chemicals- M&A Support
Company Description Customer Reach
Sl. No. NameYear
established
Company
descriptionSegments & Products Distribution network Key clients Exports
1 ABC Limited 1980
Leading manufacturer
and marketer of
surfactants in India
1) Specialty surfactants
(Fatty Alcohol Sulfates,
Lauryl Alcohol Ethoxylates)
2) …
Sales spread over 70
countries; offices in Bangkok
and New Jersey
Colgate Palmolive,
Ecolab, Henkel, Diversey,
L’Oreal, Reckitt
Benckiser, Unilever
50% (FY10)
Financials Net sales ($ Mn) EBIT ($ Mn) PAT ($ Mn)
Revenue breakup
Latest
Year
(FY)
Debt
/Equity
ratio
Latest
Year
Latest
year-1
Latest
year-2
Latest
year-3
Latest
year-4
Latest
Year
Latest
year-1
Latest
year-2
Latest
year-3
Latest
year-4
Latest
Year
Latest
year-1
Latest
year-2
Latest
year-3
Latest
year-4
- Organic surface
active agents: 81%
- Specialty
chemicals: 10%
2010 1.1 90.8 85.5 58.7 49.6 41.5 10.9 7.8 6.7 6.2 2.8 6.2 4.1 4.1 3.9 0.9
M&A related Information
Company
structure
Ownership
structure
Promoters'
backgroundRecent news updates
Market
Capitalization ($ Mn)
Potential Valuation
($ Mn)
Key
subsidiaries:
1) A
2) B
1) Promoters:
75.2%
2) Others: 24.8%
1) Started the
company as …
2) Looking out for a
strategic partner
1) New unit coming up at
Jhagadia, Gujarat
2) Acquired XX and its 100%
subsidiary YY Inc.
XX YY
INTELLECTUAL PROPERTY
26
Tata Strategic is supporting the Govt. of India to formulate the national chemical
policy
Chemical Task Force – Govt. of IndiaIndia Chemical Vision 2020 &
National Chemical Policy• Study industry framework & challenges
• Draw learnings from international
experience
• Establish Chemical Industry Vision 2020
• Identify initiatives to be taken by the
industry/ government
• Formulate National Chemical Policy
• Create implementation/ communication
plan
& National Chemical Policy
Tata Strategic was also the knowledge partner for the chemicals subgroup set up by the Planning
Commission, Govt. of India, for the XIIth Five Year Plan
27
Tata Strategic has worked with several leading Multi-national chemical
companies
INDICATIVE INDICATIVE LIST OF CLIENTS CHEMICALS– INTERNATIONAL
28
Tata Strategic has worked with several leading domestic chemical companies
INDICATIVE INDICATIVE LIST OF CLIENTS CHEMICALS – DOMESTIC
29
PARTIAL LIST
Tata Strategic has an extensive experience of working with some of the leading
Indian corporates and Govt. bodies in water and energy sector
OUR CLIENTS : WATER & ENERGY
The Economist Intelligence Unit
Investment Commission of India
IHCL
Deutsche Bank
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Tata Strategic has worked with several logistics companies as well as
companies across industry sectors for logistics solutions
INDICATIVE
TM International Logistics Ltd. Hayel Saeed Anam
Hayel Saeed Anam Stolt-Nielsen
OUR CLIENTS : LOGISTICS AND SUPPLY CHAIN EXPERIENCE
31
PARTIAL LIST
Tata Strategic has helped several of small and medium scale enterprises (SMEs) in
growing their businesses
OUR CLIENTS : SMEs
Chemverse Consultants
Sharad Agro Processors
CtrlS Datacenters
32
Mumbai
B - 1001, Marathon Futurex,
N.M. Joshi Road
Lower Parel (East),
Mumbai 400 013. INDIA
Tel:+91 22 66376789
Fax: +91 22 66376600
Delhi
Level 12, Building No.8, Tower C
DLF Cyber City, Phase II
Gurgaon – 122002
Haryana, INDIA
Tel:+91 124 4696692
Fax: +91 124 4696970
Contacts :
MANISH PANCHAL
CHARU KAPOOR
PRACTICE HEAD – CHEMICAL & ENERGY
Phone: +91 22 6637 6713
Mobile: +91 98205 20303
e-mail: [email protected]
ENGAGEMENT MANAGER – CHEMICALS
Phone: +91-22-66376756
Mobile: +91 98218 06071
e-mail: [email protected]
