STM Assignment Workbook INDUSTRY: CHEMICALS

Organization:Pidilite

Under Faculty: Prof. Brajaraj Mohanty

Presented by:

Section B Group: 2

UM15082: Imtiaz Zafar

UM15094: Pankaj Gandotra

UM15100: RaunakAvlani

UM15102: Rajat Agarwal

UM15109: Sekhar Suman Mohanty

Contents

1 Executive Summary ................................................................................................................................................. 4

2 Industry Overview .................................................................................................................................................... 5

2.1 Nature and Size of the Industry .............................................................................................................. 5

2.2 Key Growth drivers for the Industry...................................................................................................... 6

2.3 Identification of Critical Success Factors (CSF) ................................................................................ 6

2.4 Market Analysis based on CSFs............................................................................................................... 7

2.5 Industry Benchmarks .................................................................................................................................... 8

2.6 PESTEL Analysis .............................................................................................................................................12

2.7 Porter’s Five Forces Analysis ...................................................................................................................15

2.8 Strategic Group Mapping ........................................................................................................................17

2.9 Competitive Landscape .............................................................................................................................18

2.9.1 Low Cost ................................................................................................................................................18

2.9.2 New entrants must develop world-class capabilities ...............................................19

2.9.3 Incumbents must reappraise their opportunities and adapt...............................20

2.9.4 Riding the new market-growth waves ...............................................................................21

2.10 Market Segmentation ................................................................................................................................22

2.11 Buying Criteria Analysis of the Industry............................................................................................23

2.12 Key trends and future developments.................................................................................................24

3 Company Overview ...............................................................................................................................................25

3.1 Company background ...............................................................................................................................25

PIDILITE......................................................................................................................................................................25

3.2 Timeline with key milestones and their strategic impact.........................................................26

3.3 Vision, Mission, Goals, and Strategic Themes................................................................................29

3.4 Key Product and Service Portfolio .......................................................................................................30

3.5 Core Competencies of the firm .............................................................................................................30

3.6 Business Model of the organization ...................................................................................................31

3.7 3rd Generation Balanced Scorecard (Amalgamation of 1st Generation BSC and

Activity System Map) ................................................................................................................................................32

3.8 SWOT Analysis ...............................................................................................................................................33

3.9 Competitor Analysis (identify competitors) ....................................................................................35

3.9.1 Based on Critical Success factors................................................................................................35

3.9.2 Based on Financial indicators .......................................................................................................36

Future Growth Strategy for the organization ....................................................................................................39

4.1Portfolio Analysis ..................................................................................................................................................39

4.1.1Based on BCG Matrix..................................................................................................................................39

4.2 Company’s Strategic Roadmap for future .......................................................................................39

5. Reference

1 Executive Summary

The chemical industry in India is one of the earliest domestic industries, contributing

considerably to both the industrial as well as economic growth of the country since it

achieved independence. With around 70,000 commercial products, which range from

toiletries and cosmetics, to plastics and pesticides Chemical sector contributes around 7% of

Indian GDP today. The chemical sector has witnessed growth of 13-14% in the last 5 years.

Indian Government has recognized Chemical Industries as a key sector and allowed 100%

FDI.

With a growing market and purchasing power, the domestic industry is likely to growth at

over 10-13% in the coming years. Growing disposable incomes and increasing urbanization

are fuelling the end consumption demand for paints, textiles, adhesives and construction,

which, in turn, leads to substantial growth opportunity for chemicals companies

The Indian chemicals industry has a diversified manufacturing base that produces world-class

products. There is a substantial presence of downstream industries in all segments. Further,

this large and expanding domestic chemicals market also boasts of a large pool of highly-

trained scientific manpower. Chemicals constitute ~5.4% of India’s total exports. India

already has a strong presence in the export market in the sub-segments of dyes,

pharmaceuticals and agro chemicals. India exports dyes to Germany, the UK, the US,

Switzerland, Spain, Turkey, Singapore and Japan.

Indian chemical industry is rapidly growing industry and is estimated at $110 billion for fiscal

year 2015. Specialty chemicals have observed a high growth rate in the past and have grown

at 11.5% per annum since fiscal year 2007 when the market size was $13.5 billion. Here in

this report we have presented our findings based on the findings we have derived using a

number of strategic tools.

Pidilite Industries (Pidilite) is engaged in the development, manufacture and sale of

chemicals, adhesives and sealing materials. The company's products include adhesives and

sealants, art material and stationary, construction chemicals, automotive products, fabric care

products, and wood finishes and paints. Pidilite operates in Asia Pacific, the Middle East, the

US, Brazil, South Africa and Europe. It is headquartered in Mumbai, India, and employs

around 4,904 people.

The company recorded revenues of INR48,441 million (approximately $793.9 million) in the

fiscal year ended March 2015, an increase of 13.1% over 2014. The company's operating

profit was NR6,984.8 million (approximately $114.5 million) in fiscal 2015, an increase of 10%

over 2014. Its net profit was INR5,125.7 million (approximately $84 million) in fiscal 2015, an

increase of 14% over 2014.

The company’s industrial products segment includes organic pigments, industrial resins and

industrial adhesives. These products cater to industries such as packaging, textiles, paints,

printing inks, paper, and leather.

Pidilite’s others segment comprises manufacture and sale of speciality acetates.

The company's brands include Fevicol, Dr.Fixit, FeviKwick, m-seal, FeviStik, hobby ideas,

Rangeela, Fine Art, Prime, Holdtite, Cheetah glue, Kids Art, Fevi Gum, Ranipal, Fevibond,

Terminator, Steelgrip, Wudfin, Piditint, and Pulvitec, among others.

2 Industry Overview

2.1 Nature and Size of the Industry

Guidelines Brief Description of the industry segment or sub segment

History and Evolution of the Industry

Position of Industry depending on Industry Life Cycle (Introduction,

Growth, maturity, decline)

Size (% of National GDP) of the industry

History and Evolution of the

industry

The chemical industry in India is one of the earliest domestic

industries, contributing considerably to both the industrial as

well as economic growth of the country since it achieved

independence. With around 70,000 commercial products,

which range from toiletries and cosmetics, to plastics and

pesticides Chemical sector contributes around 7% of Indian

GDP today.The chemical sector has witnessed growth of 13-

14% in the last 5 years. Indian Government has recognized

Chemical Industries as a key sector and allowed 100% FDI.

Key Consumers of this

industry and their changing

needs

Chemicals are a part of every aspect of human life, right from

the food we eat to the clothes we wear to the cars we drive.

Chemical industry contributes significantly to improving the

quality of life through breakthrough innovations enabling pure

drinking water, faster medical treatment, stronger homes and

greener fuels. The chemical industry is critical for the economic

development of any country, providing products and enabling

technical solutions in virtually all sectors of the economy.

Stage in the Industry Life

cycle

There are Five stages in Industry lifecycle namely Development

Phase, Introduction Phase, Growth Phase, Maturity Phase and

Decline Phase. The Indian chemical industry has earned a

revenues in the range of $155-160 billion in 2013 and is

expected to grow at a rate of 11-12% in the next two to three

years according to Frost & Sullivan, a business consulting

group. This industry has also seen a CAGR of 13-14% which

indicates that this industry is in Growth phase of Industry

Lifecycle.

Total Available Market Size

(National and Global)

Indian chemical industry is rapidly growing industry and is

estimated at $110 billion for fiscal year 2013. Specialty

chemicals have observed a high growth rate in the past and

have grown at 11.5% per annum since fiscal year 2007 when

the market size was $13.5 billion.

Global chemical market size was estimated at $3.7 trillion in

fiscal year 2012 and is expected to grow at 4-5% per annum

over the next decade to reach $5.8 trillion by 2021.

Total Serviceable Market

Size (National and Global)

National: 11 US Billion Dollar

Global: 5.12 Trillion US dollar

Source: Annual Reports of Top 5 Companies in Chemical Sector.

2.2 Key Growth drivers for the Industry

Key Growth drivers Rationale

1.Huge growth potential in

domestic market

2.Rise in GDP and

Purchasing power

3.Low cost manufacturing

4.Policies supporting FDI

100% FDI has been granted by Indian Government in Chemical

sector. This boosts the confidence of foreign investor to carry

out their business in India. Easy availability of factor of

production is one of the key reason why it is always preferable

to set up industry in our country. Also industries enjoy low

operating and manufacturing cost here.

2.3 Identification of Critical Success Factors (CSF)

Critical Success Factor

identified

Rationale

CSF 1 : Developing market

in India

The developing market of India is taking a lot of steps to make

India better place for industry friendly by allowing FDI.

CSF 2: Cost advantage by

investing in production for

export and in R&D

Low Unit cost of production and export friendly policies in

India help investors to set up industries in India.

CSF 3: Growth in associated

(chemical dependent)

Dependence on agriculture, pharmaceutical, plastic, polymer

and cosmetics is contributing to the critical success factors for

sector the chemicals industry

CSF 4: Availability of

reliable and competitive

feedstock supply

Availability of abundant raw materials across the countries

helps industries run smoothly.

2.4 Market Analysis based on CSFs

Region

CSF 1: Developing

market

CSF 2: Cost

advantage by

investing in

production for

export and in R&D

CSF 3: Growth in

associated sector

CSF 4:

Availability of

reliable and

competitive

feedstock

supply

India

The main feedstock

for the chemical

industries are

natural gas for

fertilizers, coal for

power and naphtha

for petrochemicals.

More than half of

production of

natural gas is done

by ONGC and OIL3.

ONGC has

significant presence

in western region of

India and several

sites of OIL is

present in Assam (

i.e. North east

India). The main

naphtha

manufacturing

centres are India RIL

(Baroda), HPL

(Haldia) and IOC

Cracker (Panipat)

and these sites are

spread out all

Research and

development

opportunities in

India are limited

but it is expected

to grow above the

rate of 2% thereby

bridging the

competitive gap

with China and

other countries to

a certain extent.

India has a vast

pool of scientists

which can be

leveraged to set

up R&D centres in

India. Major

specialty chemical

companies

including BASF,

DuPont, DSM and

Dow Chemical

have already set

up R&D or

technology centres

in India.5

Indian

manufacturers have

been developing

market access quite

strongly with

increased

understanding of

regional needs and

more focus on

brand development.

Consumption of

major chemicals has

also witnessed 6%

CAGR between

2009 and 20131.Bulk

chemicals form the

largest sub-

segment of Indian

chemical industry

with 40% market

share whereas

specialty chemicals

with ~19% market

share is the fastest

growing segment.

Moreover India has

a very strong

outlook for the key

Speciality

chemicals

have gained

great

importance in

the local

market. The

domestic

market is

achieving

critical

economies of

scale. Product

sophistication

is forcing an

equivalent

chemical

usage. The

local

production

has been

positively

influenced by

these trends.

across the nation.

end user industries

Note: Use data for the year 2013-14

2.5 Industry Benchmarks

Size of industry: 11 US Billion Dollar

Category

Indicator

Industry Average of Top 5 Firms or

players serving 75-80% of the

market

Market Leader

2011-

12

2012-

13

2013-

14

2014-

15 (till

Q3)

2011

-12

2012

-13

2013

-14

2014-

15 (till

Q3)

Industry

Level

(National)

Market Size

4976.41 5533.17 5728.

73

4963.

04

7987

.28

8529

.87

8725

.26

8689.6

4

Size as % of

GDP

.035 0.049607

0.050868

0.041732

.041 .044 .041 .070 .076 .077 .073

Activity

Ratios

Inventory

turnover

13.058 11.734 11.08 NA 6.38 9.2 10.7

2

5.71

Receivables

turnover

8.138 7.628 6.756 NA 7.64 5.22 4.84 NA

Payables

turnover

NA

Asset

turnover

1.158 1.13 1.056 NA 0.8 0.79 0.8 1.15

Liquidity

Ratios

Current

ratio

1.99 1.736 1.744 NA 1.21 1.53 2.02 1.78

Quick ratio 1.404 1.176 1.142 NA 0.83 1.25 1.68 1.2

Cash ratio NA NA

Debt-to-

assets ratio

.341 .326 .368 NA .332 .326 .368 .308

Debt-to-

capital ratio

NA NA

Category

Indicator

Industry Average of Top 5 Firms or

players serving 75-80% of the

market

Market Leader

2011-

12

2012-

13

2013-

14

2014-

15 (till

Q3)

2011

-12

2012

-13

2013

-14

2014-

15 (till

Q3)

Solvency

Ratios

Debt-to-

equity ratio

1.546 2.503 1.586

6

1.987 0.49 0.46 0.53 .44

Interest

coverage

ratio

10.50 15.41 19.38 20.33 5.00

6

5.14

8

5.00

6

6.6

Profitability

Ratios

Gross profit

margin

10.01 9.354 8.726 8.89 9.99 9.75 8.85 8.39

Operating

profit

margin

12.265 11.778 11.02 11.68 12.8 12.2

6

10.6

7

10.30

Net profit

margin

6.42 6.47 4.69 5.63 7.06 7.23 4.9 6.32

Return on

assets

(ROA)

.0700 .06587 .0699

7

.067

0.07

2835

0.07

4845

0.10

4629

0.0973

23

Return on

equity

(ROE)

15.992 16.17 7.156 8.69 12.1

2

12.5

6

7.94 10.55

Valuation

Ratios or

Price Ratios

Price to

Earnings

(P/E)

18.69 18.43 19.61 17.25 15.0

1

12.7

7

16.7

6

17.8

PEG Ratio =

(P/E Ratio) /

Projected

Annual

Growth in

Earnings

per Share

NA NA NA NA NA NA NA NA

Price to

Cash Flow

-14.032 -7.024 -2.952 -3.68 -

46.9

1

-

12.8

1

-39 -25.3

Price to

Book (P/B)

2.58 2.76 3.052 3.001 1.78 1.55 1.29 1.48

Price to

Sales

1.37 1.41 1.48 1.25 1.1 .979 .84 .88

Dividend

Yield

1.79 2.322 1.614 2.63 2.89 3.1 3.49 3.6

Category

Indicator

Industry Average of Top 5 Firms or

players serving 75-80% of the

market

Market Leader

2011-

12

2012-

13

2013-

14

2014-

15 (till

Q3)

2011

-12

2012

-13

2013

-14

2014-

15 (till

Q3)

Dividend

Pay-out

Ratio

29.656 30.446 28.03 29.63 43.4

3

39.6 58.4

2

49.31

Enterprise

value (EV is

market

capitalisatio

n plus debt

minus

cash)/

EBITDA

10.84 11.22 12.77

6

13.45 8.47 7.68 8.47 8.55

Competitiv

e Ratios

Staff

Turnover or

Industry

Attrition

Rate

NA NA NA NA NA NA NA NA

Staff Cost/

Salary as

percentage

of Sales

0.05184

3

0.05262

3

0.051

266

.0058

7

0.02

8598

0.03

0823

0.02

917

.02854

Operating

Expenses as

percentage

of Sales

0.2068 0.20205 0.209

5

.2156 0.21

04

0.22

47

0.20

82

.2092

Depreciatio

n as

percentage

of Sales

0.026 0.025 0.029 .0035 0.03

2

0.03

4

0.03

2

.0033

Fixed Assets

to Sales

Revenue

0.428 0.405 0.407 .458 0.50

50

0.51

5

0.52

0

.522

Advertising

as

percentage

of Sales

.51 .61 .75 .78 1.7 2.2 2.7 2.45

In case you come across other benchmark ratios used in particular Industry, then please

include them as well.

Source: http://www.gurufocus.com/, http://www.moneycontrol.com/

2.6 PESTEL Analysis

Category Description Key factors for

analysis

Rationale

Political Chemical sector is

greatly influenced

by the political

forces. There is a

change in policies

every time the

government

changes. The

business decisions

are steered to a

great extent based

on the individual

preferences of the

new leadership.

100 per cent FDI is

permissible

government has

been encouraging

R&D in the sector

Setting up of

PCPIRs

The cumulative FDI for the

period April 2000–February

2014 stood at USD9.5

billion Procedures relating

to FDI have been simplified;

and most of the items in the

chemicals sector fall under

the automatic approval

route for FDI/NRI/OCB

investment up to 100 per

cent The government is

continuously reducing the

list of reserved chemical

items for production in the

small-scale sector, thereby

facilitating greater

investment in technology

up-gradation and

modernisation.Policies have

been initiated to set up

integrated Petroleum,

Chemicals and

Petrochemicals Investment

Regions (PCPIR).

Economic The economic

boom in India

particularly in the

last one decade

has played a

significant role in

charting the

success of the

company. Lot of

Industrialization

has been brought

about, which has

always been a

catalyst for

sectorial sprinting

growth

Increase in GDP

growth Rate

Increase in

Global player

Liberal economic

policies

Ease of doing

business in the

country

Chemical industry

contributes 5 per cent of

nationalGDP. It is 3rd

largest chemical industry in

Asia, preceded by China

and Japan. 10.1 per cent of

Overall Industrial Index

Production (IIP).

13 per cent of total exports

and 8 per cent of total

imports.20 per cent

contribution to national tax

Revenue. Strong growth

outlook for the Indian

chemicals industry which

grew at a CAGR of 13.7%.

Increasing investments by

foreign players in India

through mergers &

acquisition and joint

ventures

Social In India the whole

country and its

people are poised

for a giant leap

towards economic

growth and

prosperity. People

have realized how

important it is for

the economy to

develop for their

own betterment.

Levels of

awareness have

gone up

drastically and

people are much

more open to

industrial growth.

Growth in

dependant sectors

Huge growth

potential for the

domestic market

Low-cost

manufacturing

A large population,

dependence on agriculture,

and strong export demand

are the key growth drivers

for the chemicals industry

Polymers and

agrochemicals industries in

India present immense

growth opportunities

Per-capita consumption of

chemicals in India is lower

relative to Western peers

and there exists a large

latent demand

Technological Chemical Sector in

India is to a great

degree driven by

technological

developments and

innovations and

has its earnest

efforts directed

towards improving

its technological

prowess to meet

the changing

requirements of a

growing economy.

Introduction of

Green Chemistry

R&D for new

production

methodology for

pesticides

Partnership with

foreign institution

for symbiotic

development

A new methodology for

creating product or service

in a way to reduce waste

and hazardous substance is

now in practice which is

termed as Green chemistry.

Indian institutions like CIPET

and CSIR are now making

partnership with global

institutions for sustainable

development. R&D is

developing constantly in

chemical sector. We have

successfully tested the pilot

project of a new production

technique in Odisha.

Environmental Providing safe and

healthy working

Possibility of

environmental

Majority of by-products

from the chemical industries

environment to all

its stakeholders is

one of the most

important aspects

of chemical

industries. The

depleting water

and energy

resources are a

cause of concern

for all. Yet with

advancements the

authority trying to

check the

environment

degradation.

damage

Waste

Management and

clean

development

mechanism

Introduction of

carcinogenic and

related diseases

Location of the

production unit

are responsible for

environmental degradation,

damaging air, water, soil.

Ultimately human race is

the sufferer of the entire

phenomena. Chemical

industries are. Few chemical

industries contribute to the

reason for carcinogenic and

pulmonary diseases. Not to

mention, the country has

not yet forget the Bhopal

Gas Tragedy. Yet, now

adopting technology for

waste management and

clean development in order

to reduce environment

damage. Location of the

production unit is also a

major concern when the

authority fails to control the

hazardous by-products.

Legal These days no

company wants to

be unethical in its

activities and be

on the wrong side

of the law books,

as the media in

India is very active

and the smallest

of irregularities

noticed and

reported by them

can ruin the image

of the company

hugely.

High regulation in

chemical sector

Increase in legal

expenditure

Comprehensive

Legal instruments

for process safety

Speedy resolution

in IPR issues in the

legal system

The company has to adhere

to the scores of legal rules

and regulations, the acts,

particularly the Companies

Act 1956, The Factories Act,

the Environmental

Protection Act, and Sale of

Goods Act etc. There exists

a high regulation in Indian

chemical sector. Process

safety has been a priority

for all the production unit.

This was taken much

seriously after Bhopal gas

tragedy. Here in India we

have speedy resolution of

IPR issues which favours the

process of industrialisation.

2.7 Porter’s Five Forces Analysis

Porter’s Five

Forces

Description Key factors for analysis Rationale

Buyer Power

Here we ask

how easy it is

for buyers to

drive prices

down. If one

deal with few,

powerful

buyers, then

they are often

able to dictate

terms to it.

multiple sources

of supply

long-term

contracts

pricing power

Customers have multiple

sources of supply. Chemical

companies are bound by

long-term contracts. Niche

specialty chemicals have

some pricing power

Supplier Power

Here we assess

how easy it is

for suppliers to

drive up prices.

The fewer the

supplier

choices one

has, and the

more one need

suppliers' help,

the more

powerful one’s

suppliers are.

Dependencies on

supplies from

larger plants

Not easily

substituted

Small chemical companies

rely on supplies from larger

plants, or petrochemical units

Inputs for a chemical plant

cannot be easily substituted

Existing

Competition

What is

important here

is the number

and capability

of competitors.

If one has

many

competitors,

and it offer

equally

attractive

products and

services, then

it will most

likely have

Total No of firms

(Listed as well as

Unlisted):111

No of large

firms:17

Highly

fragmented

industries

Stiff competition

from foreign

competitors

low price

sensitivity

Chemical sector is highly

fragmented with intense

rivalry amongst companies.

Since, 100 per cent FDI is

allow hence domestic

companies face stiff

competition from foreign

competitors as well.

International companies may

also dump chemicals at low

price

little power in

the situation.

Threat to new

entrants

Power is also

affected by the

ability of

people to

enter our

market. If it

costs little in

time or money

to enter

market and

compete

effectively, if

there are few

economies of

scale in place,

or if there

exists little

protection for

key

technologies,

then new

competitors

can quickly

enter our

market and

weaken our

position.

Entry/ Exit

barriers and costs

Huge capital

requirements

Other barriers

Here exists Entry/ Exit

barriers and costs. Huge

capital requirements and

patent protection are

significant barriers. Other

barriers include - R&D and

personnel requirements

Threat to

substitutes

This is affected

by the ability

of customers

to find a

different way

of doing what

you do. If

substitution is

easy and

substitution is

viable, then

this weakens

the power.

Specific chemical

requirements

No direct

substitutes

Buyers tend to have specific

chemical requirements .There

are no direct substitutes for a

specific chemical

requirement.

Effect of

Complementors

2.8 Strategic Group Mapping

We have taken the first 10 listed companies out of the 94 companies in chemical sector to

construct strategic map. We have taken production category breadth in horizontal axis and

extent of market presence in the vertical axis to plot the companies in a 2 dimensional graph.

The size of the bubble represents the relative market share of the particular industry in the

segment.

Here is the detail representation.

Company Name Net Sales Product category breadth Market Presence(Scale of 1 to 5)

Tata Chemicals 8689.64 10 5

UPL 4968.27 1 5

BASF 4429.89 5 4

PidiliteInd 3878.24 5 3

India Glycols 2885 3 3

AartiInd 2632.78 7 2

Phillips Carbon 2277.46 2 3

Guj Heavy Chem 2224.21 2 1

Guj Alkali 1896.06 1 1

Linde India 1428.46 3 1

Inference from the Strategic Map:

[CELLRANGE][CELLRANGE]

[CELLRANGE]

[CELLRANGE][CELLRANGE]

[CELLRANGE]

[CELLRANGE]

[CELLRANGE][CELLRANGE][CELLRANGE]

0

1

2

3

4

5

6

-2 0 2 4 6 8 10 12

Ma

rket

Pre

sen

ce

Product Category Breadth

Tata Chemicals

UPL

BASF

Pidilite Ind

India Glycols

Aarti Ind

Phillips Carbon

Guj Heavy Chem

Guj Alkali

Linde India

1. Guju Heavy Chem, Guj Alkali and Linde India are having lower breadth and relatively

lower market segment. Hence they can be clubbed together in one competition

segment.

2. Similarly Philips carbon, India glycol, Pidilite, BASF and AratiInd can be considered

into another competition segment.

3. UPL is having high market presence and low product category breadth. No other

industry has the same composition and hence is enjoying absolutely no competition

in its place.

4. Tata chemical being the market leader is having both high product category breadth

and market share. Similar to UPL it is enjoying absolutely no competition in the

market.

2.9 Competitive Landscape

Value propositions ( Low Cost, Differentiation, Niche)

With significant cash reserves on hand, many global chemical companies are developing or

launching new products and services – and appear optimistic about increasing revenue in

the short term. A major shift in the competitive landscape of the worldwide chemical

industry is under way as new players from oil- and gas-producing countries and the high-

growth developing markets of China and India join the industry’s top ranks in sales. The

new players focus on resource monetization and economic development, in contrast to the

classic shareholder value-creating goals that have historically informed the strategies of top

players.Not only are these newcomers playing by different rules, but they are also better

placed to benefit from two of the key dynamics driving the industry’s future: control of

advantaged feedstock in a high-oil-price world, and privileged access to the most attractive

consumer-growth markets. If the newcomers want to establish themselves as industry

leaders in the coming decades and fully realize the industry’s wealth-creating and society-

supporting potential, they must evolve rapidly. They should move beyond simply

monetizing their cost- and market-advantaged positions to build capabilities that will put

them on more equal footing with incumbents when it comes to management, innovation,

and marketing performance. At the same time, to assure continuing success in this new

landscape, incumbents must reconsider their position in the industry and adapt their

strategies and priorities accordingly. Newcomers and incumbents that can take these steps

will be well positioned to ride the global chemical industry’s continuing profitable growth

trajectory.

2.9.1 Low Cost

Coming out of the financial crisis and economic slowdown of the past two years, the global

chemical industry is seeing major changes. The first relates to energy-price dynamics. The

chemical industry is confronting unprecedented hydrocarbon price volatility. In addition,

energy prices are significantly higher than they have been for the past two decades—and

they are higher than they were coming out of previous recessions. While there is little

progress on climate-change regulation, which could add carbon tax–related costs for

chemical companies in certain regions, the industry is nevertheless seeing increasingly

pronounced divergences in gas and electric power prices among regions. Overall, the

degrees of cost advantage and disadvantage among regions have increased.

Second, the economic downturn has highlighted the accelerating shift in the growth of

global chemical demand from developed economies to the developing world.

The industry’s leading incumbents have operated for the past two decades with similar goals:

striving to increase shareholder value based on their technology portfolio and asset base,

and making opportunistic excursions from traditional home markets to tap emerging-market

growth.

In contrast, for governments and their production subsidiaries from hydrocarbons-rich

countries, chemical manufacturing represents an opportunity to monetize advantaged

feedstock resources and build industries that will provide jobs for their rapidly expanding

populations—even if it will have a detrimental effect on industry structure and profitability.

For leading companies based in fast-growing major emerging markets, chemical production

is seen as a necessity to provide the products needed for continued economic expansion.

Lower labor costs in these countries translate into competitive capital -investment and

operating costs for these companies, many of which are owned by the state or by families

that have close ties to the government. These companies can establish production to capture

local market growth, and they are little concerned about any resulting global supply-demand

imbalances for the chemicals in question.

Importantly, both groups of newcomers include many government-backed companies. As a

result, these companies can invest on a scale that is much greater than even the largest

traditional chemical-industry players.

These changes have been building for years, but their importance is hard to overstate. In

summary, incumbents that have ridden growth in developed and developing markets are

now undercut by powerful new rivals with access to cheap feed stocks and the most

attractive growth markets.

The new competitive dynamics pose important questions for both newcomers and

incumbents about the steps they must take to assure their continued success. For the

newcomers, the choices are arguably more straightforward than for the incumbents, which

have large legacy businesses to reposition.

2.9.2 New entrants must develop world-class capabilities

For new producers—whether based in feedstock-rich countries or high-growth emerging-

market countries with low labor costs—market entry has been built on production, taking

advantage of their lower cost base to establish a presence based on price in their export

markets. This is a logical approach and a natural entry point. But it tends to result in the

commoditization of the market and a strict focus on the lowest price, and it therefore risks

destroying a lot of the value that exists in the market for the new entrants as well as for

existing players.

There have been numerous examples of competition from new low-cost producers that has

reduced prices well below the level that would assure them a foothold in developed markets,

in products as varied as polyethylene terephthalate and fluorochemicals. Similarly, Chinese

specialty-chemical products are often sold in developed markets in North America and

Europe on a specification basis through third parties, which means that the Chinese

producers are cut off from customers and have limited insights into market dynamics.

As new players build their presence in the industry, they must develop capabilities to sustain

their growth and look more ambitiously at the kind of profile they want to create. As a first

step, they must establish their own R&D and innovation capabilities, which will enable them

to offer differentiated products and make them less dependent on incumbents for

technology.

Second, new producers must start to build marketing capabilities that will enable them to

move beyond selling simply on low price and reap the full economic benefits from their

products. They must develop expertise in approaches such as dif ferentiated marketing,

transactional pricing and value pricing, and sales-force management. This is a need shared

by all new producers, whether they are manufacturing for export or meeting surging demand

in home markets.

Developing these capabilities will help new producers get better returns from their current

product range and avoid leaving money on the table from selling at unnecessarily low prices.

Doing so will become even more pressing as new producers expand their portfolios to

include more sophisticated and higher-value-added products, from which they will want to

extract maximum value.

Becoming worldwide suppliers will require new producers to establish marketing and sales

capabilities in developed markets that are sophisticated enough to support this type of

product. Many of these products will require a completely different type of sales approach—

one that is capable of dealing with product-approval registrations, gaining intimacy with

customers’ product-development programs, and getting products specified for these

programs.

2.9.3 Incumbents must reappraise their opportunities and adapt

Chemical industries will have to take steps to adapt to lower overall demand-growth rates

for chemicals in their home markets. Clearly, there are segments of the industry in mature,

developed markets that continue to enjoy good prospects and that are relatively safe in the

new competitive landscape. These divide into two main areas, upmarket and down-market,

where there will be niches that are relatively impregnable.

The first area is chemical-industry segments in markets that require customer intimacy and a

high level of service support. Examples include flavours-and-fragrances companies that have

developed superior customer insights and exclusive manufacturing know-how to support

customer demands; coating companies that manage the painting of automobiles within the

production line; leather chemicals, where the producer works closely with luxury-goods

makers; and water-treatment and construction chemicals. In all these cases, customer

intimacy makes them less vulnerable to inroads from low-cost offshore competitors. The

second area is a group of basic chemicals where the low prices mean that importation is not

viable; this includes such products as sulphuric acid, hydrogen peroxide, industrial gases,

and, to an extent, caustic soda. These are, and will continue to be, regional markets.

Where incumbents must look especially carefully is at the many market segments between

the two poles. In many of these segments, lower demand growth is likely to translate into the

consolidation of players in certain sectors and capacity closures.

Companies must bear in mind that as the industry landscape shifts, the relative attractiveness

of products will change, with some more vulnerable to the trends in the industry than others.

They must look at their portfolios accordingly. Established markets are becoming net

importers of a growing range of chemicals, as new feedstock-advantaged producers can

profitably serve these markets. While imports frequently lead to lower prices and reduced

margins in the short term, this is not always the case in the long run, particularly if

incumbents are willing to shut part of their capacity. Imports are rarely able to cover all

domestic demand volumes, and for the surviving incumbents that can manufacture

domestically at below the cost of imports, this evolution can be positive if it results in a more

clearly structured and disciplined market with pricing based on import-price parity.

2.9.4 Riding the new market-growth waves

The chemical companies must look beyond their home markets and consider how they can

ride the dynamics that are transforming the industry—the rise of chemical production in

feedstock-advantaged countries and the shift in demand growth to emerging markets.

Incumbents must ask themselves how they can join up with the new players, whether by

establishing a presence in a resource-rich country or by building capacity in China and other

high-growth markets—or by doing both.

They must then consider what they can do to enhance and maintain their attractiveness as a

partner. Many incumbents operate broad portfolios of businesses; these companies must

think about how they can clarify and best articulate the value proposition that they bring to

their potential partners. High on any list will be innovation—creating new technologies and

products—which has always been a route to profitable growth in the chemical industry and

remains an area of strength for incumbent chemical companies. Companies that have

technology that is needed by oil-producing countries to use in their new petrochemical

plants will be best placed in any contest to participate in joint ventures. And companies with

know-how that is much in demand in rapidly growing emerging markets will be of grea ter

interest to those countries’ governments; they are thus better placed to gain access to such

markets.

The number of exceptionally resource-advantaged countries is finite, and major emerging

markets such as India and China may pursue a policy of favouring domestic champions.

Incumbents should use any momentum gained from recovery in their traditional businesses

to advance their positions in the new industry landscape.

Competitive Strength Assessment (Normal and Weighted)

Tata Chemicals UPL India Glycol Pidilite BASF

Measures/Strength Weight

Rating

Score

Rating

Score

Rating

Score

Rating

Score

Rating

Score

Product performance 0.15 8 1.2 8 1.2 6 0.9 7

1.05 8 1.2

Brand Image 0.1 9 0.9 8 0.8 8 0.8 5 0.5 6 0.6

Manufacturing capability 0.1 7 0.7 7 0.7 6 0.6 6 0.6 7 0.7

Technological skills 0.1 7 0.7 8 0.8 7 0.7 7 0.7 7 0.7

Distribution channel 0.1 8 0.8 7 0.7 5 0.5 8 0.8 5 0.5 New product innovation 0.1 6 0.6 5 0.5 6 0.6 6 0.6 7 0.7

Financial resources 0.2 8 1.6 7 1.4 6 1.2 7 1.4 8 1.6 Relative cost position 0.1 7 0.7 6 0.6 5 0.5 8 0.8 6 0.6

Customer service capability 0.05 8 0.4 6.5

0.325 8 0.4 7

0.35 7

0.35

Sum of weights 1

Overall strength rating 7.6

7.025 6.2 6.8

6.95

Rating Scale: 1 = very weak; 5 = average; 10 = very strong

2.10 Market Segmentation

Key Products and/or Services Sub-Segment

Pharmaceuticals

Prescription and over-the-counter drugs; in-vitro and

other diagnostic substances, vaccines; serums, plasmas

and other biological products; and vitamins and other

pharmaceutical preparations for both human and

veterinary use.

Basic chemicals/Commodity

Chemicals

Inorganic chemicals, bulk petrochemicals, organic

chemical intermediates, plastic resins, synthetic rubber,

man-made fibers, dyes and pigments, printing inks,

Specialty chemicals Paint, adhesives, electronic chemicals, water

management chemicals, oilfield chemicals, flavours &

fragrances, rubber processing additives, paper

additives, industrial cleaners, and fine chemicals.

Agricultural chemicals Fertilizers and crop protection chemicals, i.e., pesticides

Consumer products Soap, detergents, bleaches, laundry aids, toothpaste

and other oral hygiene products, shampoos and other

hair care products, skin care products, cosmetics,

deodorants and other body care products, and perfume

and cologne, among others

2.11 Buying Criteria Analysis of the Industry

Parameter Details End-user Segments Significance

Attached (Low,

Medium, High)

Consumption Pattern

It describes the

consumption pattern

of consumers.

Consumption pattern

depends upon

proximity,

demographic and

behaviour of the user

Individual

Customers

SMEs

Corporate

High

Low

Low

Credit Policy

It describes the

purchase policy of

customer. In case of

B2B sales this is a

consideration for a

number of

companies.

Business User

Retailers

High

Low

Quality It describes the

quality of the product

and service provided

by the vendor to the

end user.

Everyone Medium

Impact of buying criteria on consumer choices

Listing of key buying criteria for different consumer segments

The impact of the buying criteria is graded on the basis of the intensity and duration of

their impact on the current market landscape. The magnitude of the impact has been

categorized as described below:

Low - Negligible or no impact on the market landscape

Medium - Medium-level impact on the market

High - Very high impact with radical influence on the growth of the market

2.12 Key trends and future developments

Key Trend Impact on Industry (Low,

Medium, High)

Certainty of Impact (Low

probability, medium

probability, high probability)

Competitive Price High High

Product line extension High Medium

Diversification High High

Analysis of Trends with High Impact and High Certainty to be carried out

Impact on strategies or business models to be highlighted

3 Company Overview

3.1 Company background

PIDILITE

Pidilite Industries Limited is the largest adhesive manufacturer in India. It also has

worldwide presence in adhesives, art material, construction chemicals and other industrial

chemicals. The company was founded in 1959Pidilite Industries was incorporated in 1969 is a

well-known name in adhesives market. Pidilite is the market leader in adhesives and sealants,

construction chemicals, hobby colours and polymer emulsions in India. Its brand name

Fevicol has become synonymous with adhesives to millions in India and is ranked amongst

the most trusted brands in India. Fevicol, the premier brand of the company ranked among

the Top 15 Indian brands by FE Brandwagon Year Book 1997. The Company's product range

includes Adhesives and Sealants, Construction and Paint Chemicals, Automotive Chemicals,

Art Materials, Industrial Adhesives, Industrial and Textile Resins and Organic Pigments and

Preparations. Pidilite was the first company in India, which started production of violet

pigment in the year 1973. In 1984, the company's consumer product division was born and

on 1989 entered into fevicryl acrylic colours transform fabric and multi-surface painting

market. The Company made its maiden public offering of equity shares in the year 1993.

During the year 1995, plants of the company in Mumbai and Vapi acquired an ISO 9001

certification. Also the plant at Mahad received an ISO 9002 certification in the same year. In

1999, Pidilite had acquired 'Ranipal', leading brand of optical whitener and subsequently

acquired 'M-Seal', leading brand of epoxy compounds in the year of 2000. In the identical

year of 2000 itself, Fevicol campaign won the Silver ABBY for the Campaign of the Century in

India. The Company had launched Dr.Fixit range of Construction Chemicals in the year 2001

and had acquired 'Steelgrip', leading brand of PVC insulation tape in India during the year

2002. Pidilite had again acquired the Roff' brand of Construction Chemicals in the year of

2004. A wholly-owned subsidiary in Singapore, under the banner 'Pidilite International Pte

Ltd was incorporated by the company in the year 2005 for i ts international operations,

encompassing the acquisition of overseas companies and joint ventures. Also in the same

year 2005, Pidilite had acquired Chemson Asia Pte Ltd, an existing Singapore-based in the

business of manufacturing waterproof coating and emulsion paints, thereby adding to its

existing, and rapidly-growing construction chemicals and paints range and the company had

took over Jupiter Chemicals in Dubai. During the identical year of 2005, the company had

incorporated a subsidiary, namely 'Pidilite Do BrasilDesenvolvimento De Negocios Ltd', in

Sao Paulo, Brazil and 'Pidilite Middle East Limited', as an offshore company in the Jebel Ali

Free Zone of Dubai. During the year 2006, Pidilite had acquired Tristar Colman brand and

business, Tristar Fine Art, is a market leader in brushes for drawing and painting and Bamco

Thailand, a Construction Chemical company. Also Pidilite had acquired the business and

assets of Sargent Art Inc through a subsidiary Pidilite USA Inc, Delaware. The Company had

established its R&D centre in Singapore under the banner 'Pidilite Innovation Centre Pte Ltd.'

Pidilite had de-merged VAM manufacturing unit at Mahad of Vinyl Chemicals (India) Ltd into

the company with effect from 2007. During 2007-08, Fevicol 1K PUR and FevicolKwikgrab

were introduced by the company to take care of special applications in building construction

segment. Pidilite with its wholly-owned subsidiaries had acquired assets and business of

branded sealants and adhesives from Hardcastle&Waud Manufacturing Co. Ltd and

associates. The Company had acquired Bhimad Commercial Co. and Madhumala Traders by

investing Rs 170,000 each in February of the year 2008. Fevicol has been ranked No. 1 in

Household Care Segment in June 2008.

3.2 Timeline with key milestones and their strategic impact

Year Pidilite

1959 Founded in 1959

1969 The Company was incorported as a private limited company on 28th July under the

name of Parekh Dychem Industries Pvt. Ltd., to acquire and take over on a going

concern the business carried on by a partnership firm M/s. Parekh Dychem Industries

established in 1961 and having a factory in Mumbai. The Company was promoted by

BalvantrayKalyanji Parekh along with his brothers. The brand names, are being

Fevicol, Fevibond, Fevigum, Pidifix, Pidivyl, Pidicryl, Acrolise, etc.

- The Company undertook to set up synthetic resin project with a capacity resin

project with a capacity of 3000 TPA at Mahad

Industrial area in Raigad district, Maharashtra. Also undertook to set up a

constructions chemicals project at Taloja industrial area,

Taloja, Maharashtra.

1984 Three other companies in the same group viz., Kodivita Pvt. Ltd., erstwhile Pidilite

Industries Ltd., and Triveni Chemicals Ltd. were amalgamated with the Company

effective 1st July, 1st April 1989 and 1st April 1992 respectively.

- Effective 1st July, Kondivita Pvt. Ltd. amalgamated with the Company after

necessary approvals. The shareholders of erstwhile

Kondivita Pvt. Ltd., were allotted 41,000-15% preference share of Rs 10 each and

19,500 shares of Rs 10 each.

- 54,000 I and II Pref. - 4% shares allotted to promoters. 26,000 No. of equity shares

allotted to promoters originally: 26,000 Rights

Shares issued in prop. 1:1 in 1980, 52,000 bonus shares issued in prop. 1:1 in 1981.

1985 I & II Pref. 4% shares redeemed. 12% redeemable shares upgraded to 15%. 19,500

No. of equity shares and 41,000-15% Pref. shares allottee to Kondivita Pvt. Ltd. on

amalgamation. 54,000-15% Pref. shares allotted to promoters & in lieu of 1st and 2nd

4% Pref. shares.

1986 The Name of the Company was changed to PDI chemicals private limited on 1st July,

and then to PDI chemicals limited, on 28th October, 1988. Name was once again

changed to Pidilite Industries Ltd., on 21st February, 1990.

1989 Effective 1st April, Pidilite Industries Ltd. was amalgamated with the Company. As per

the scheme of amalgamation, 1,93,500 No. of equity shares of Rs 10 each and 72,000-

15% preference shares of Rs 10 each were allotted to the shareholders of erstwhile

Pidilite Industrial Ltd.

1992 As per the Scheme of Amalgamation approved by High Court of Mumbai, Triveni

Chemicals Ltd., (TCL) was merged with the Company effected 1st April. Accordingly

90588 No. of equity shares of Rs 10 each and 40,000-15% preference shares of Rs 10

each were allotted to the erstwhile shareholders of TCL. 38,49,034 shares allotted in

prop. 72:10 to promoters on 29.1.93.

1993 15,36,378 shares issued at a premium of Rs 100 per share in October. Of which

1,50,000 shares issued on preferential allotment basis to Viny Chemicals India Ltd.

(only 1,35,000 shares taken up). Balance 13, 86, 378 shares along with 1,50,000 shares

not taken up were issued to the public (all were taken up).

1994 The projects for SBR Latices, AZO Pigments and CarbazoleDioxiene Violet Pigments

were commissioned.

- Apuraj Chemicals Ltd., was amalgamated with the Company. As per the scheme of

amalgamation, 66,000 No. of equity shares of Rs 10 each were allotted to the

shareholders of erstwhile Apuraj Chemicals Ltd.

- Vapkon Finance & Industries Ltd., Fevicil Adhesives & Chemicals Ltd. and Pidifin

Finance and Investment Ltd., are subsidiaries of the Company.

- 60,000 No. of Equity shares of Rs. 10 each to be issued and allotted to equity

shareholders of the erstwhile Apuraj Chemicals

Ltd. pursuant to the scheme of amagalamtion.

1995 Expansion project at Taloja was commissioned with an overall plant capacity of 2400

TPA of construction chemical.

- The Company's technical collaboration agreement with Schomburg& Co., KG.

Germany for transfer of technical process know-how and specifications of the plant

etc., was extended till 8th September.

1996 The first phase of grass root plant for manufacture of synthetic resins of various types

was commissioned in March at Mahad with a capacity of 7800 TPA. In the second

phase, a loop process plant for continuous emulsion polymerisation was to be

commissioned.

- Introduction of several new products in technical collaboration with M/s. Crown

Berger Ltd., U.K.

- The Company allotted 61,17,200 No. of equity shares of Rs 10 each as bonus shares

in the ratio of 1:1. 3,800 shares were kept in

abeyance due to dispute relating to the title of the same.

1997 1997

600 bonus shares allotted from Bonus Share Issue Suspence Account.

- The company has set up three wind mills of 230 kv each at Village Pransla near

Dhank In Gujarat.

- The Pedilite Industries Limited, manufacturer of the popular Fevicol brand of

adhesives, is actively scouting around for buyers

For its chemical and specially resins business. The company has been in talks with

several international players in a bid to either sell

Off the business or enter into a joint venture.

1998 Triveni Chemicals, another group company was also merged with PIL in 1992. PIL's

consumer products division was set up in 1984.

- The Board of Directors gave their approvals for the amalgamation of PGP

Engineering works Ltd and Pidilite Finance Ltd. with the company itself effective 1-4-

99. Also, Nebula Chemicals Ltd. manufacturers of certain grades of adhesives, was to

be amalgamated with the company subject to necessary approvals.

- 2,800 bonus shares kept in abeyance allotted.

1999 Pidilite Industries is re-engineering itself into a pure brand-oriented marketing

company and is hiving of its manufacturing

facilities into a joint venture with a strategic partner.

2000 The Company has acquired from Mahindra Engineering & Chemical Products Ltd

(MECP), subsidiary of Mahindra & Mahindra Ltd, their adhesives and sealants business

consisting of the brand M-Seal and Mr. Fixit along with goodwill of MECP's adhesives

and sealants business.

2001 Pidilite Industries Ltd has posted 5.76% lower net profit at Rs.12.76cr for the second

quarter as compared to Rs.13.54cr in the

same period last year.

2002 Income Tax Department has issued a notice to Pidilite Industries Ltd, for an additional

income tax liability of Rs.16cr.

-Pidilite Industries has taken over an insulation tape brand called Steel Grip, for Rs.8cr

from Bhor Industries.

-Pidilite Industries is expanding its presence in Fabric care, car care and stationery

segments as part of its strategy to broadbase

itsprodut portfolio.

2003 Pidilite Industries has tied up with ChotaJadugar, the 3D movie distributed by

Srinagar films to help its new launch AcronRangeelaColours

-Pidilite unveils new liquid pipe sealant

-Pidilite unveils Fevicol Marine

2005 Pidilite enters into snack market with 'Chikkers'

-Pidilite Industries has acquired Dubai-based company UCC, manufacturer of

construction chemical brand Probuild for an undisclosed amount.

-Company has splits its Face value of Shares from Rs 10 to Re 1

2006 Pidilite Industries Ltd has informed that the Board of Directors of the Company at its

meeting held on October 17, 2006 has noted the resignation of Shri Amit Roy,

Director and Whole time director with effect from December 31, 2006.

-Pidilite Industries Ltd has informed that the Board of Directors of the Company at its

meeting held on December 02, 2006, Shri. V S Vasan has been appointed as an

Additional Director and also as Whole Time Director of the Company with effect from

December 02, 2006.

2007 Pidilite Industries Ltd has appointed Mr.MandarM.Tambe as the Company Secretary,

Compliance Officer under Clause 47(a) of the Listing Agreement and Compliance

Officer under SEBI (Prohibition of Insider Trading) Regulations, 1992 in place of

Mr.P.C.Patel, who was holding the said position till 30/11/2007.

2008 Pidilite Industries Ltd has appointed Shri. Bharat Puri as an Additional Director of the

Company with effect from May 28, 2008.

2009 Pidilite Industries Ltd has informed that Shri. Debu Bhattacharya has been appointed

as an Additional Director of the Company with effect from February 26, 2009.

2010 Pidilite Industries has given the Bonus in the Ratio of 1:1

2011 -Ms. Savithri Parekh has been appointed as the Company Secretary and Compliance

Officer.

PidiliteInds - Appointment of Foreign Currency Convertible Bonds (Share Allotment).

-Shri Sanjeev Aga has been appointed as an Additional Director of the Company.

2012 Pidilite Industries Ltd has entered into a Joint Venture Agreement with Hybrid

Coatings for manufacture of construction chemicals and to establish a JointVenture

Company in India for this purpose.

-Pidilite Industries Ltd has the name of the Registrar & Share Transfer Agent (RTA) of

the Company has been changed from TSR

3.3 Vision, Mission, Goals, and Strategic Themes

Pidilite Vision

To Be The Most Innovative Research and Technical Competence Center for Sustaining

“Innovation-Driven” Growths for Pidilite Group of Companies globally.

Mission

Invite, invest, and embrace talented people and scientists for great challenges ahead

Support, serve, and satisfy all valuable customers with our innovative products and excellent

technical competency

Innovate with our customers to provide total product satisfactions and business growths

Goals

Be a business leader by promoting innovation and achieving Global Standards.

Delight customers by offering quality products and services.

Instill a 'Can Do' attitude, nurture team spirit, learn continuously and achieve a high level of

employee satisfaction.

Adopt ethical, safe and environment-friendly practices.

Strategic themes

To enable industrial product like Fevicol to carve out its niche as a consumer brand. To focus

on future outlook of the company to retain its dominating position in the Indian market in

light of increasing competition from multinationals and the unorganized sector.

3.4 Key Product and Service Portfolio

Pidilite: The product portfolio of Pidilite is:

Adhesive and Sealants

Construction and Paint chemicals

Art materials and others

Industrial resins

Industrial Adhesives

Organic pigment and preparations

3.5 Core Competencies of the firm

Pidilite: Pidilite Industries, one of the biggest companies in the adhesives industry, has stuck

to its core competency of manufacturing various kinds of adhesives used across different

industries. With a portfolio of brands including Fevicol, Dr Fixit, M-seal and Fevistik, the

company has been able to carve out a market share of close to 45% in the adhesives and

sealant market.

3.6 Business Model of the organization

Key Partners:

1. Vendors

2. Inventory

intelligence

agency

3. Distributor

s

4. Retailors

5. Customers

(MSMEs

and

Standalone

)

Key Activities:

1. Vendor

Base

developm

ent

2. Customer

Base

developm

ent

3. Market

based

developm

ent

4. Quality

check

5. Marketing

(Digital

and Social

Media)

Value

Propositions:

1. Single

stop

point

or

portal

for all

MRO

needs.

2. Qualit

y

checke

d

produ

cts

which

helps

mainta

in

contin

uity of

service

or

manuf

acturin

g

proces

s.

3. Less

hassle

acquiri

ng

items,

less

paper

work,

cost

Customer

Relationships:

1. Face- to-

face

interactio

n

2. Customer

complaint

redressal

team

3. Online

Customer

Segments:

1. MSMEs

a. Manufa

cturing

b. Ancillary

2. Standalone

customers

Key Resources:

1. Sales

Team

2. Warehous

e or store

3. Vendors

4. Website

5. Variety of

products

offered

6. Procurem

ent team

Channels:

1. Website

2. Sales

Team

3. Suppliers

4. Retailers

5. Distributo

rs

Cost Structure:

1. Web hosting costs

2. Marketing and sales costs

3. Quality check costs

4. Vendor development costs

5. Administrative costs

6. Delivery Costs

7. Warehousing cost

8. R&D Cost

Revenue Streams:

1. Offline sales(Mainly bulk)

2. Online sales (Bulk and single)

3. Personalised product sales

3.7 3rd Generation Balanced Scorecard (Amalgamation of 1st Generation

BSC and Activity System Map)

Aspects GOAL MEASURE Target

Key

Stakeholder

Perspective

Expand Sales

by 50%

Increase in IMC Spending 50%

Increase in Customization Level 20%

No of new market Penetration per year 5

Customer

Perspective

Retain

Customer

Increase in Annual After Sales Expenses 10%

Increase in Amount for Discount and

Promotion 10%

Build to Order Implement

Learning and

Growth

Product

Enhancement

Flexible Manufacturing System Implement

Increase in R&D Spending 20%

Increase in Market Research Spending 20%

Internal

Perspective

Improve

Margin and

Cash Flow

Increase in Cost Cutting 20%

Increase in Resource utilisation 20%

decrease in Employee Attrition rate 5%

3.8 SWOT Analysis

SWOT Analysis:Pidilite Strength 1. The advertising and marketing of Pidilite has been very strong, especially

the Fevicol ads have become a viral hit among the masses.

2. The name Fevicol has become synonymous with adhesives and has almost

become a generic for anything that sticks. This also has helped other brands

of Pidilite such as Fevistik, Fevikwik, etc. in their sales.

3. Fevicol and M-seal alone account for more than 50% of the total revenue

of Pidilite, which eases the pressure on the sales of other brands and

businesses.

4. Brand recall and value are extremely strong for Pidilite and have become

the star attraction for many television commercials.

5. Fevicol ads have also won accolades and awards at major advertising

award festivals and shows.

6. Strong R&D center to cater to the growing need for innovative products

and services.

Weakness 1.Acquisition of the Cyclo brand of car care products is a weak factor as India

exhibits a very fragmented market for the same with very little customer

loyalty.

2. Revenue generation is over dependent on Fevicol and M-seal which results

in reduced investments on other brands and businesses.

Opportunity 1.Pidilite organizes many creative competitions for students and young

scholars, such as the 'International Creative Contest' where approx. 800,000

students from 3000 schools participate.It also helps in promoting the brand

very well.

2. The chemical industry in the world in growing very strongly and focus on

emerging economies in other parts of the world such as Brazil, South Africa,

China, Singapore, Thailand and East Africa is a great opportunity to establish

stronghold in the international market.

Threats 1. The manufacturing cost of Pidilite’s products is largely dependent on crude

oil and petroleum prices which are fluctuating by the minute.

2. Competitors are equally hard pressed on delivering innovative products

and services.

3.9 Competitor Analysis (identify competitors)

3.9.1 Based on Critical Success factors

1. Developing market in India

Pidilite

Analysis

Net sales of the Company grew by 13.5%. Sales of Consumer & Bazaar products grew by

15% while growth in Industrial Products was slower at 6.6%. Margins were impacted in the

first half of the year due to the steep increase in prices of key inputs like VAM. Selective price

increases were taken during the year and with input prices softening in the second half,

margins in the fourth quarter were higher than the rest of the year. Due to the slowdown in

the sales growth, the Company undertook several cost conservation initiatives so as to limit

the increase in costs. Consequently “EBIDTA” (earnings before interest, taxes, depreciation,

exceptional items and foreign exchange differences) excluding non-operating income grew

by 12.5%

2. Cost advantage by investing in production for export and in R&D

Pidilite

1. Specific areas in which R&D is carried out by the Company

R&D activities are continued for development of new products, improvement of existing

products in the category of Adhesives, Art Materials, and Construction Chemicals for water

proofing, flooring and surface coating solutions, Synthetic Resins, Sealants, Pigments and

Pigment Dispersions, Intermediates, Surfactants, Coatings, Fabric Care Products,

Maintenance Chemicals, Emulsions Polymers etc.

2. Benefits derived as a result of the above R&D

Increase in sales due to product improvements and introduction of new products, reduction

in cost due to formulation, optimisation, process improvements and cycle time reduction.

3. Future Plan of Action

Future R&D efforts will continue along present lines.

4. Expenditure on R&D (in million)

Year ended 31st March 2014 Year ended 31st March

2013

I) Capital 28.82 9.44

ii) Recurring 199.95 164.17

Total 228.77 173.61

iii) Total R&D Expenditure as a Percentage of total turnover 0.56 0.49

3.9.2 Based on Financial indicators

STANDALONE Dec'15 Sep'15 Jun'15 Mar'15

Net Sales 1,169.93 1,158.61 1,298.36 962.44

Other Income 8.22 11.98 9.41 7.80

PBDIT 286.80 280.56 327.84 139.25

Net Profit 185.70 182.76 219.54 77.22

Balance Sheet

Mar'15

(In Rs Cr)

Total Share Capital 51.27

Net Worth 2,349.45

Total Debt 5.78

Net Block 827.84

Investments 690.49

Total Assets 2,355.25

3.1 Balance Sheet of Pidilite Industries ------------------- in Rs. Cr. -------------------

Mar '15 Mar '14

12 mths 12 mths

Sources Of Funds

Total Share Capital 51.27 51.26

Equity Share Capital 51.27 51.26

Share Application Money 0.00 0.00

Preference Share Capital 0.00 0.00

Reserves 2,298.18 1,988.25

Networth 2,349.45 2,039.51

Secured Loans 5.78 7.68

Unsecured Loans 0.00 0.00

Total Debt 5.78 7.68

Total Liabilities 2,355.23 2,047.19

Mar '15 Mar '14

12 mths 12 mths

Application Of Funds

Gross Block 1,416.98 1,102.32

Less: Revaluation Reserves 0.00 0.00

Less: Accum. Depreciation 589.14 491.03

Net Block 827.84 611.29

Capital Work in Progress 460.31 431.09

Investments 690.49 573.80

Inventories 534.72 508.20

Sundry Debtors 514.58 453.60

Cash and Bank Balance 58.10 145.18

Total Current Assets 1,107.40 1,106.98

Loans and Advances 181.04 166.05

Fixed Deposits 0.00 0.00

Total CA, Loans & Advances 1,288.44 1,273.03

Deferred Credit 0.00 0.00

Current Liabilities 689.51 637.92

Provisions 222.32 204.09

Total CL & Provisions 911.83 842.01

Net Current Assets 376.61 431.02

Miscellaneous Expenses 0.00 0.00

Total Assets 2,355.25 2,047.20

Contingent Liabilities 222.33 168.93

Book Value (Rs) 45.83 39.78

Source : Dion Global Solutions Limited

Future Growth Strategy for the organization

4.1Portfolio Analysis

4.1.1Based on BCG Matrix

4.2 Company’s Strategic Roadmap for future

Pidilite Near Term (<- 2

years)

Mid Term (2-5 years) Long Term (5-10

years)

Growth Areas

Operational

Efficiency

Corporate

Governance

Sustaining the

strength of its

contents and getting

grip over newer

channels

High Level Tasks

Develop the ability to

keep the cost under

check coupled with

sound sales

strategies.

Adhere to the

highest levels of

transparency,

accountability and

ethics in all its

operations, at the

same time fully

realizing its social

responsibilities.

Changing with time,

timely identification

of need gap of

customers and

embracing the

technology.

Strengthening the

digital presence.

Adhesives and Sealants

Organic Pigments

Industrial Adhesive

Construction & Pa int Chemical

Industrial Resins

Construction & Paint Chemical

Product Portfolio: Pidilite

CASH COWDOG

STARQUESTION

Potential Benefits to

be achieved

Improved circulation

mix, better control

on costs of sales,

control over

newsprint cost

fluctuations could be

established.

Improved Trust and

better returns to

shareholders,

satisfied customers

and better business.

Competitive

advantage from

peers, by sustaining

the strength of its

contents and brand

and always be a

winner.

Improved ranking

and market position

Rewards

Average Revenue per

User

Business model

innovativeness,

Churn rate, Core

technology

innovativeness

5. References

http://profit.ndtv.com/stock/

http://economictimes.indiatimes.com/pidilite-industries-

ltd/infocompanyhistory/companyid-10460.cms

http://www.moneycontrol.com/annual-report/pidiliteindustries/PI11/2015

http://www.pidilite.com/

https://en.wikipedia.org/wiki/Pidilite_Industries

http://www.fundsindia.com/

http://articles.economictimes.indiatimes.com/2012-12-19/news/35912506_1_cash-

flows-pidilite-industries-net-profits

https://hbr.org/1999/03/competing-with-giants-survival-strategies-for-local-

companies-in-emerging-markets

http://www.investindia.gov.in/chemicals-sector/

http://ficci.in/spdocument/20325/India%20chem.pdf