Chemicals - Sector Update - 03 Oct 22

SECTOR UPDATE
Chemicals
Demystifying “Europe plus 1” opportunities
03 October 2022
Archit Joshi Viral Shah

Research Analyst Research Analyst
[email protected] [email protected]
+91-22-4031 7127 +91-22-4031 7000
SECTOR UPDATE
Chemicals
Demystifying “Europe plus 1” opportunities

Unavailability of gas in Europe has sent ripples through the supply and value chain across industries.
Unlike what we witnessed in the past, due to environmental crackdowns in China, the current supply
side disruption may not necessarily create pricing tailwinds as demand takes a plunge too. We also
anticipate demand led challenges amidst an inflationary environment and may weigh heavy on quasi-
consumption chemical producers. We believe that Bulk Chemicals (GNFC, GACL, Tata Chemicals, GHCL,
Deepak Nitrite) and Contract manufacturers would continue to be in flavour. In our opinion, multinational
companies may look at India as the next best (after China) manufacturing destination as they grapple
with high-cost structures. Companies having existing manufacturing presence like BASF India may stand
to benefit. In this report, we have identified certain pockets in the Chemicals industry which may benefit
from – 1) relative cost advantage in the near to medium-term and 2) shift in manufacturing base/more
outsourcing initiatives from European companies. We maintain our positive stance on SRF, Navin Fluorine
International and BASF India; and upgrade Gujarat Fluorochemicals to Buy. We are structurally positive on
Aarti Industries and Atul; however, anticipate near-term demand led challenges.
Our framework for identifying winners due to EU gas crises
Source: B&K Research
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SECTOR UPDATE
Chemicals
Basic Chemicals
Basic Chemicals are building blocks for downstream chemical manufacturing. They’re characterised
as power intensive and involve 1 or 2 steps in their synthesis. As power (electricity) costs keep soaring in
Europe, Indian bulk chemical maker’s cost competitiveness is expected to be far better and should benefit
not just from cost advantage but also from export opportunities. Indian companies are largely import
dependent in this category; thus, we see no challenge from demand perspective.
We have analysed the per-tonne economics of certain chemicals viz. Phenol & Acetone, Caustic Soda,
Soda Ash, TDI, Acetic Acid and PTFE keeping variability in power and raw material costs in perspective. As
power costs in Europe are more than 4x of Indian power costs, companies like GNFC, GACL, Tata Chemicals,
GHCL, Deepak Nitrite and Gujarat Fluorochemicals are expected to benefit from their competitive position
and may be able to command short-term pricing power in the exports market. Also, with prices of key
raw materials like Methanol, Toluene, Benzene and Propylene coming off, crude oil spreads could further
benefit.
Total capacity versus Europe capacity
(’000 tonne) Soda Ash Caustic Soda Phenol PTFE TDI

Global capacity 71,000 86,446 12,970 200 3,508
Europe capacity 13,200 12,152 2,665 56 850
As a % of total 18.6 14.1 20.5 28.0 24.2
Source: Bloomberg, B&K Research
Germany power baseload forward contract in EUR per kWh

900
800
700
600
(EUR/kwh)
500
400
300
200
100
-
28-01-2020
27-05-2020
08-03-2020
24-09-2020
15-08-2020
26-06-2022
05-08-2022
22-01-2021
22-05-2021
10-08-2021
08-12-2021
01-07-2021
06-07-2020
17-01-2022
17-04-2020
17-05-2022
26-02-2022
07-04-2022
14-09-2022
13-12-2020
12-04-2021
19-09-2021
03-11-2020
03-03-2021
29-10-2021
Source: Bloomberg
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SECTOR UPDATE
Chemicals
Plant economics
We have identified unit economics of six chemicals which may benefit from relative cost advantage.
Note: All the assumptions made are based on power being bought from the grid and are applicable to Indian
companies. As many companies have their own captive power plant which we are not accounting for.
1) Caustic Soda
Sensitivity of EBITDA to power cost: The chlor-alkali chain has the highest exposure to power. Every tonne
of Caustic Soda manufactured consumes ~2,300 kWh of power. Europe currently has ~14% of Caustic Soda
capacity and currently seems in doldrums. Caustic Soda prices have reached Rs 68/kg, up by ~39% YoY
and ~13% MoM. As per our calculations, even in the current scenario of higher realisations, plant economics
become unviable at Rs 25/kWh. European power costs currently stands at Rs 44/kWh.
Caustic Soda – Assumptions Caustic Soda – P&L (Rs mn)

Plant Capacity 300 TPD Sales 5,513
Plant Capacity 105,000 TPA COGS 788
Capacity utilisation 75 % Gross profit 4,725
Working days per year 350 Gross profit margin (%) 85.7
Production per day 225 TPD Electricity/Power 1,963
Production/year 78,750 Opex 394
Energy Requirement EBITDA 2,368
For Membrane option 2,266 (kWh/Tn) EBITDA (%) 43.0
Electricity costs 24,926 (Rs/Tn) Depreciation 276
Depreciation rate 5 % EBIT 2,093
Tax rate 25 % EBIT margin (%) 38.0
Interest rate 7 % Interest 193
Capex 150 (Rs/TCD) PBT 1,900
Capex 52,500 (Rs/TPA) Tax 474.9
Total Capex 5,513 Rs mn PAT 1,425
Caustic prices (Today) 70 RoIC (%) 25.8
NaCL quantity for Caustic 50 Kg/qty of
soda Caustic Soda
NaCL 5,000 Rs/Tn
Other chemicals 5,000 Rs/Tn
Opex 5,000 Rs/Tn
Sensitivity of EBITDA to power cost and ECU realisations
EBITDA (Rs mn) Change in ECU realisations (Rs)

2,368 -20 -10 -5 0 5 10 20
-5 1,686 2,473 2,867 3,261 3,654 4,048 4,836
Change in cost of power
-3 1,329 2,116 2,510 2,904 3,297 3,691 4,479

-1 972 1,759 2,153 2,547 2,941 3,334 4,122
(Rs/kWh)
0 793 1,581 1,975 2,368 2,762 3,156 3,943

1 615 1,402 1,796 2,190 2,584 2,977 3,765
3 258 1,045 1,439 1,833 2,227 2,620 3,408
13 (1,526) (739) (345) 49 442 836 1,624
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SECTOR UPDATE
Chemicals
2) Soda Ash
Sensitivity of EBITDA to power cost: Europe has ~18.6% of global capacity and expect new capacity
addition only if Soda Ash can be classified as a chlor-alkali and consumes power to the tune of ~1,500 kWh/
tonne. As per our calculations, plant economics become unviable at Rs 17/kWh.
Soda Ash – Assumptions Soda Ash – P&L (Rs mn)

Capex 35,000 (Rs mn) Sales 21,000
Interest rate 7 % COGS 5,985
Depreciation rate 5 % Electricity cost 8,250
Tax rate 25 % Opex 2,000
Capacity 500,000 TPA EBITDA 4,765
Capex 14,286 (Rs/Tn) EBITDA margin (%) 22.7
Soda Ash Price 42,000 (Rs/Tn) Depreciation 1,400
Energy Requirement EBIT 3,365
Power 1500 (kWh/Tn) EBIT margin (%) 16.0
Power cost 11 (Rs/kWh) Interest 1,138
Soda ash 42,000 (Rs/Tn) PBT 2,228
Salt 1.700 Per Tn of Soda ash Tax 557
Limestone 1.600 Per Tn of Soda ash PAT 1,671
Ammonia 0.002 Per Tn of Soda ash RoIC (%) 4.8
Coke 0.116 Per Tn of Soda ash
Coal 0.529 Per Tn of Soda ash
Prices of raw material
Salt 1,855 (Rs/Tn)
Limestone 1,726 (Rs/Tn)
Ammonia 61,620 (Rs/Tn)
Coke 51,000 (Rs/Tn)
Other expense 4,000 (Rs/Tn)
Sensitivity of EBITDA to power cost and spreads of Soda Ash
EBITDA (Rs mn) Change in spreads of Soda Ash (Rs/Tn)

4,765 (10,000) (5,000) (1,000) – 1,000 5,000 10,000
-5 3,515 6,015 8,015 8,515 9,015 11,015 13,515
-3 2,015 4,515 6,515 7,015 7,515 9,515 12,015

-1 515 3,015 5,015 5,515 6,015 8,015 10,515
(Rs/kWh)
0 (235) 2,265 4,265 4,765 5,265 7,265 9,765

1 (985) 1,515 3,515 4,015 4,515 6,515 9,015
3 (2,485) 15 2,015 2,515 3,015 5,015 7,515
5 (3,985) (1,485) 515 1,015 1,515 3,515 6,015
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SECTOR UPDATE
Chemicals
3) Phenol and Acetone

Spreads over Benzene and Propylene: We note that operating utilisations in China have dropped and
supply situation remains tight, as a big Chinese company undergoes maintenance shutdown. Phenol
spreads have reached US$ 820/tonne as on date, average quarterly spreads are now at US$ 568/tonne
(up 7.5% QoQ). At a relatively low level, the first phase of Zhejiang Petrochemical’s 650,000 tonne/year
phenol ketone plant was shut down for tower washing on the 6th and restarted for a week. In addition, the
typhoon weather in East China in the middle of the year affected the time of cargo ships and arrival at the
port, and it was difficult to replenish the source of imported goods. Also, Europe has a significant portion
of installed capacity of Phenol and Acetone. Europe controls ~21% of global Phenol capacity.
Sensitivity of EBITDA to power cost: Phenol is made using Cumene which uses Benzene and Propylene as
key feedstocks. As per our calculations, at current spreads, phenol plants in Europe should start reporting
operating losses at Rs 20 kWh/tonne of power costs.
Phenol spreads – Over the years Phenol spreads – One-year trend

2,000 1,200
1,000
1,500
US$/MT 800
US$/MT
1,000 600
400
500
200
0 0 23/Oct/21
23/Jan/22
23/Mar/20
23/Mar/22
23/Nov/21
23/Jul/22
23/Aug/22
23/Sep/20
23/Mar/21
23/Feb/22
23/Mar/22
23/May/22
23/Jun/22
23/Sep/21
23/Sep/22
23/Sep/22
23/Sep/21
23/Apr/22
23/Sep/15
23/Mar/16
23/Sep/16
23/Mar/17
23/Mar/18
23/Sep/18
23/Mar/19
23/Sep/17
23/Sep/19
23/Dec/21
Phenol Spreads Phenol Spreads
Source: Bloomberg, B&K Research
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SECTOR UPDATE
Chemicals
Phenol Acetone – Assumptions Phenol Acetone – P&L (Rs mn)

Phenol capacity 200,000 (TPA) Sales 34,140
Acetone capacity 160,000 (TPA) Gross Profit 23,642
Capex 16,000 Rs mn Gross Profit (%) 69.3
Interest cost 7 (%) Total Power Cost 11,000
Depreciation rate 5 (%) Other Expenditure 4,000
Tax rate 25 (%) EBITDA 8,642
Capex 80,000 (Rs/Tn) EBITDA margin (%) 25.3
Benzene 1,114 (Rs/Tn) Depreciation 800
Propylene 994 (Rs/Tn) EBIT 7,842
Phenol 1,487 (Rs/Tn) Interest 560
Acetone 809 (Rs/Tn) PBT 7,282
Spreads 1,478 (Rs/Tn) Tax 1,821
Energy requirement PAT 5,462
Power 5,000 (kWh/Tn) RoIC (%) 25.6
Power Cost 11 (Rs/kWh)
Opex 20,000 (Rs/Tn)
Benzene 89,154 (Rs/Tn)
Propylene 79,508 (Rs/Tn)
Phenol 118,942 (Rs/Tn)
Acetone 64,695 (Rs/Tn)
Spreads 118,210 (Rs/Tn)
Sensitivity of EBITDA to power cost and Phenol spreads
EBITDA (Rs mn) Change in Phenol spreads (Rs/tonne)

8,642 (40,000) (20,000) (5,000) – 5,000 20,000 40,000
-5 5,642 9,642 12,642 13,642 14,642 17,642 21,642
-3 3,642 7,642 10,642 11,642 12,642 15,642 19,642

-1 1,642 5,642 8,642 9,642 10,642 13,642 17,642
(Rs/kWh)
0 642 4,642 7,642 8,642 9,642 12,642 16,642

1 (358) 3,642 6,642 7,642 8,642 11,642 15,642
3 (2,358) 1,642 4,642 5,642 6,642 9,642 13,642
5 (4,358) (358) 2,642 3,642 4,642 7,642 11,642
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SECTOR UPDATE
Chemicals
4) TDI
Spreads over Toluene: Toluene and Nitric acid are key raw material used in the production of TDI. TDI spreads
have been largely range-bound despite an increase in price of TDI (as toluene prices too inched up).
TDI – Toluene spreads

350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
Aug/18 Dec/18 Apr/19 Aug/19 Dec/19 Apr/20 Aug/20 Dec/20 Apr/21 Aug/21 Dec/21 Apr/22 Aug/22
TDI Prices (INR/tn) TDI Spreads
TDI Unit – Assumptions TDI Unit – P&L (Rs mn)

Capacity 50,000 (TPA) Sales 12,839
Capex 11,000 (Rs mn) Gross profit 6,579
Interest cost 7 (%) Gross profit (%) 51.2
Depreciation rate 5 (%) Total Power cost 1,064

Other expenditure 2,000
Tax rate 25 (%)
EBITDA 3,515
Capex 220,000 (Rs/Tn)
EBITDA margin (%) 27.4
TDI prices 257 (Rs/kg)
Depreciation 550
TDI spreads 132 (Rs/kg)
EBIT 2,965
Energy Requirements
Interest 385
Power 1,934 (kWh/Tn)
PBT 2,580
Power 11 (Rs/kWh) Tax 645
TDI Spreads 132 (Rs/kg) PAT 1,935
Opex/ton 40 (Rs/Tn) RoIC (%) 17.6
Sensitivity of EBITDA to power cost and TDI spreads
EBITDA (Rs mn) Change in TDI spreads (Rs/kg)

3,515 (100) (50) (20) – 20 50 100
-5 (1,002) 1,498 2,998 3,998 4,998 6,498 8,998
-3 (1,195) 1,305 2,805 3,805 4,805 6,305 8,805

-1 (1,388) 1,112 2,612 3,612 4,612 6,112 8,612
(Rs/kWh)
0 (1,485) 1,015 2,515 3,515 4,515 6,015 8,515

1 (1,582) 918 2,418 3,418 4,418 5,918 8,418
3 (1,775) 725 2,225 3,225 4,225 5,725 8,225
5 (1,969) 531 2,031 3,031 4,031 5,531 8,031
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SECTOR UPDATE
Chemicals
Supply demand in TDI remains tight with no new capacity addition till 2023 end
5) Acetic Acid
Spreads over Methanol: Acetic acid prices and spreads have contracted due to lack of demand coming
from Vinyl Acetate Monomer (VAM) coupled with rising Methanol costs. Acetic acid is a significant product
for GNFC. Spreads are down by ~52% YoY and 13.7% MoM.
Sensitivity of EBITDA to power cost: Acetic acid does not consume a lot of power; however, its raw material
Methanol is a gas-based output. Hence, unavailability of gas and subsequently of Methanol can put
spreads of European manufacturers under stress.
Acetic Acid Prices and Spreads

140
120
100
80
Rs /kg
60
40
20
0
Apr-21
Apr-22
Dec-21
July-21
Jan-22
Oct-21
Nov-21
Feb-21
Mar-21
Feb-22
Mar-22
Jul-22
May-21
May-22
Jun-21
Aug-21
Sept-21
Jun-22
Aug-22
Sep-22
Acetic Acid Prices (Rs/kg) Acetic Acid Spread (Rs/kg)
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SECTOR UPDATE
Chemicals
Acetic Acid Unit – Assumptions Acetic Acid Unit – P&L (Rs mn)
Capacity 100,000 (TPA) Sales 5,400
Capex 15,000 (Rs mn) Gross profit 2,800
Interest cost 7 (%) Gross profit (%) 51.9
Depreciation 5 (%) Total Power cost 196

Other expenditure 648
Tax rate 25 (%)
EBITDA 1,956
Capex 150,000 (Rs/Tn)
EBITDA margin (%) 36.2
Acetic Acid price 54 (Rs/kg)
Depreciation 750
Acetic Acid spreads 28 (Rs/kg)
EBIT 1,206
Energy Requirement
Interest 525
Power 179 (kWh/Tn) PBT 681
Power 11 (Rs/kWh) Tax 170
Acetic Acid price 54 (Rs/kg) PAT 510
Acetic Acid spreads 28 (Rs/kg) RoIC (%) 3.4
Sensitivity of EBITDA to power cost and Acetic Acid spreads

EBITDA (Rs mn) Change in Acetic Acid spreads (Rs/kg)
1,956 (20) (10) (5) - 5 10 20
-5 45 1,045 1,545 2,045 2,545 3,045 4,045
Change in cost of
-3 9 1,009 1,509 2,009 2,509 3,009 4,009

power (Rs/kWh)
-1 (27) 973 1,473 1,973 2,473 2,973 3,973

0 (44) 956 1,456 1,956 2,456 2,956 3,956
1 (62) 938 1,438 1,938 2,438 2,938 3,938
3 (98) 902 1,402 1,902 2,402 2,902 3,902
5 (134) 866 1,366 1,866 2,366 2,866 3,866
6) PTFE
Sensitivity of EBITDA to power cost: Gujarat Fluorochem is fully integrated and benefits from manufacturing
its in-house R-22. We estimate cost of making R-22 to be Rs 156/kg (weighted average of chloroform and
Hydrofluoric acid). While power costs in PTFEs case may not have a material impact on operations – large
manufacturers of PTFE in Europe may operate at lower utilisations due to unavailability of gas.
PTFE Prices and Spreads

1,200
1,000
800
Rs /kg
600
400
200
0
Nov-20
Feb-20
Aug-20
Nov-21
Nov-18
Nov-19
May-20
Feb-21
Aug-21
Feb-22
Aug-22
May-21
May-22
Feb-18
Aug-18
Feb-19
Aug-19
May-18
May-19
PTFE (Rs/kg) Spreads (Rs/kg)
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SECTOR UPDATE
Chemicals
PTFE Unit – Assumptions PTFE Unit – P&L (Rs mn)

Capacity – PTFE 4,000 TPA Sales 3,814 (Rs mn)
Capacity – R22 10,000 TPA Gross profit 1,185 (Rs mn)

Gross profit 31.1 (%)
Capex 4200 Rs mn
For Integrated manufacturers
Debt 2100 Rs mn
Cost of making R22 154 (Rs/kg)
Equity 2100 Rs mn
COGS 1,560 (Rs mn)
Interest cost 7 (%)
Gross profit 2,255 (Rs mn)
Depreciation rate 5 (%)
Gross profit margin 59.1 (%)
Tax rate 25 (%) Total Power 21,600,000 (kWh)
Capex 300,000 (Rs/Tn) Total Power cost 238 (Rs mn)
PTFE Realisations 954 (Rs/kg) Other expenditure 600 (Rs mn)
Energy requirement – for integrated PTFE plant EBITDA 1,417 (Rs mn)
Power 5400 (kWh/Tn) EBITDA 37.2 (%)

Depreciation 210 (Rs mn)
Power 11 (Rs/kWh)
EBIT 1,207 (Rs mn)
Spreads over R22 156 (Rs/kg)
Interest 147 (Rs mn)
Opex 150 (Rs/Tn)
PBT 1,060 (Rs mn)
Tax 265 (Rs mn)
PAT 795 (Rs mn)
RoIC 18.9 (%)
Sensitivity of EBITDA to power cost and COGS

EBITDA (Rs mn) Change in COGS (Rs/kg)
1,417 (300) (200) (100) – 100 200 300
-5 325 725 1,125 1,525 1,925 2,325 2,725
Change in cost of
-3 282 682 1,082 1,482 1,882 2,282 2,682

power (Rs/kWh)
-1 239 639 1,039 1,439 1,839 2,239 2,639

0 217 617 1,017 1,417 1,817 2,217 2,617
1 195 595 995 1,395 1,795 2,195 2,595
3 152 552 952 1,352 1,752 2,152 2,552
5 109 509 909 1,309 1,709 2,109 2,509
Fluoropolymers – The desirable plastics!

Polytetrafluoroethylene (PTFE) is a chemically inert flexible elastomer known for its strong carbon-fluorine
bond (regarded as the strongest organic chemical bond). PTFE provides a strong thermal resistance and a
low di-electric constant which makes it a durable thermoplastic. PTFE is known to provide great electrical
insulation and minimises a great degree of transmission loss. PTFE’s high chemical resistance makes it
insoluble in any solvent. Given the versatility in properties of PTFE, the applications that it can be used in
too are diverse. PTFE is self-lubricating, non-sticky and biologically inert. The inertness of PTFE makes it fit
to be used in medical applications like plastic surgery, artificial blood vessels etc.
Automotive – O-rings, gaskets, valve stem seals, shaft seals, linings for fuel hoses, power steering and
transmission.
Chemical Industry – Coatings for heat exchangers, pumps, diaphragms, impellers, tanks, reaction
vessels, autoclaves.
11
SECTOR UPDATE
Chemicals
Electrical & Electronics – Electrical insulation, flexible printed circuit boards, semi-conductor parts.
Engineering – Seats and plugs, bearing, non-stick surfaces, coatings for pipes, fittings, valve and pump parts.
PTFE is produced using free radical polymerisation of its monomer – Tetrafluoroethylene (TFE). The two-
step process involves making TFE and then polymerising TFE. TFE is made by heating hydrofluoric acid
and chloroform in a chemical reaction chamber, which is then heated to the temperature of around
600-900ºC. Upon producing Dichlorofluoromethane (HCFC-22) and heating the same in absence of
air (also called Pyrolysis) in the first step, yields TFE. TFE is a highly explosive gas and thus it’s prudent to
manufacture on-site than to transport/import. TFE is then polymerised using suspension polymerisation,
controlled emulsion polymerisation, and dispersion polymerisation that results in granular, fine powder
and water-based polymer, respectively.
What is exciting about PTFE? – High frequency cables are required to minimise the loss of information
through transmission in order to be qualified as a secure networking system. In the communication
industry, the frequency of electromagnetic waves used in high-frequency communication is generally 1
GHz above. The higher the communication frequency, the more bandwidth resources can be used, and
the more information can be transmitted. According to the relevant theory, the signal transmission loss
is related to the communication frequency and the dielectric loss factor of the insulating material (Dk) is
proportional. Therefore, in high-frequency communication, in order to minimise the signal transmission
loss, it is necessary to use insulating materials with extremely low dielectric loss coefficients. PTFE thus can
be widely used in printed circuit boards (PCBs) and co-axial cables.
Importance of having low dielectric constant – Materials with low dielectric constants are good insulators
but poor conductors. Usually, Metals/Metal oxides are considered to be good conductors of electricity
but do a poor job of insulation. PTFE exhibits a low dielectric constant – meaning that it won’t hold an
electrostatic charge which may be responsible for loss in transmission. The same property makes PTFE
an ideal choice for its use co-axial cables (which transmit high frequency waves in 5G). PTFE makes an
excellent insulator on copper clad laminates of co-axial cables, conventionally epoxy resins were used
which are now not conducive to handle high frequency transmission.
Teflon PCB of Dupont co-operation PTFE insulation in co-axial cables
Source: Dupont website
12
SECTOR UPDATE
Chemicals
PTFE capacity as on 2021 – Capacity addition in PTFE is progressing well in China, we do not foresee
supply-demand imbalance in the near to mid-term. Capacity addition is in line with demand creation
from new applications like 5G.
China is a low-grade PTFE manufacturer and depends on imports for high grade PTFE used in 5G, Co-axial cables,
etc. DuPont, Daikin, Solvay and 3M are specialty PTFE manufacturers and are key exporters of this resin. Gujarat
Fluorochemicals too, is yet to announce any expansion plans of PTFE grades which may find applications in
specialty sunrise sectors. PTFE supply is sufficient and more than the demand on a global scale. We witnessed
some disruption in PTFE supply owing to Russia-Ukraine war, from Halopolymer (a Russian fluoropolymer maker).
Polyvinylidene Difluoride (PVDF)
PVDF is a semi-crystalline, high purity thermoplastic fluoropolymer. PVDF is known to have piezo-electric
(convert mechanical energy into electrical energy) and pyro-electric (converts thermal energy into
electrical energy) properties. PVDF grades manufactured in India and China are largely suitable for
injectable moulding applications. However, increasing use of PVDF as a cathode binder in Lithium ion
batteries and back-pane of Solar Panels.
As a binder of cathode, PVDF helps in holding together active material particles in contact with current
collectors (Aluminium or Copper foils). Binders form a vital part of lithium-ion batteries as they provide a
connection between electrodes, thus enabling electronic conductivity.
PVDF also finds applications in the back-pane of solar modules. This outer layer surface ensures excellent
weather resistance, fouling/dirt resistance, extended reflectivity, chemical resistance and outstanding burn/
smoke resistance. 2 PVDF layers on the outer side cover an inner layer of pigmented fluoropolymer alloy.
PVDF battery binder of Solvay PVDF in Solar back-pane of Arkema
Source: Industry, Arkema, Solvay website, B&K Research
PVDF is made by free radical polymerisation of Vinylene Difluoride. A key raw material required to make
Vinylene Difluoride is R142b, R142b is a HCFC which is known to undergo capacity cuts globally pursuant to
Montreal protocol. Being a critical raw material for PVDF manufacturing, its shortage, especially in China
created ripples in the supply chain causing PVDF prices to increase. Companies who were not backward
integrated witnessed compressed margins early-on; however, were able to pass on later. PVDF battery
grade prices were trading at ~US$ 60/kg (a 3x jump from its average prices). Gujarat Fluorochemicals
(GFL) too was a beneficiary of favourable demand scenario for PVDF. GFL is in the process of setting up a
PVDF plant which will find applications in Solar panels. It is assumed that 1 GW of Solar panel capacity would
require ~100 MT of PVDF. The same will create a demand of ~30,000 tpa for PVDF in India itself by 2030. We
wish to call out that, companies not backward integrated with R142b would continue to make lower spreads
than the integrated companies with R142b. GFL recently commissioned their R142b capacity in Ranjitnagar.
13
SECTOR UPDATE
Chemicals
Contract Manufacturers (CRAMS)

Precedence for important sectors like life sciences and agriculture were set during Covid-19 as it rose
despite challenges related to Covid-19. We expect the same to continue irrespective of the gas crises
in Europe. Global agrochemical market grew from US$ 60 bn to US$ 75 bn between FY20 and FY22 led by
strong commodity prices, challenges related to logistics and supply chain disruptions. We do not see any
impact on PI Industries, SRF and Navin Fluorine International due to power shortages in Europe.
We currently are witnessing drought in key agrarian economies like USA (as of 20 September 2022, 41.02%
of the US and 48.91% of the lower 48 states are in drought), Europe (drought hazard has been rising most
notably in Belgium, France, Germany, Hungary, Italy, Luxembourg, Moldova, the Netherlands, northern
Serbia, Portugal, Romania, Spain, Ukraine and the UK) and China. Expected decline in closing stocks of
agri-commodities and fears pertaining to a drop in its production due to drought, commodity prices
are expected to stay on a higher side. We expect agrochemical consumption to grow irrespective of the
situation in Europe.
Corteva expects acreages and yields to improve through 2022-2032
Source: Corteva presentation, B&K Research
Corteva eyes for more strategic partnership
Source: Corteva presentation, B&K Research
14
SECTOR UPDATE
Chemicals
World crop production data

Declining to flattish stock-to-use ratios would keep agri commodity prices buoyant.
Wheat
FY19 FY20 FY21 FY22E FY23P

Area (mn ha) 215.5 216.5 220.2 222.2 221.4
Production (mn MT) 731.5 762.2 774.5 779.9 783.9
Consumption (mn MT) 734.3 745.9 782.2 794.8 791.0
Yield (MT/ha) 3.4 3.5 3.5 3.5 3.5
Ending Stock (mn MT) 282.5 298.2 290.6 275.7 268.6
Stock-to-use (%) 38.5 40.0 37.1 34.7 34.0
Source: USDA website, B&K Research
Rice

Area (mn ha) 162.6 160.6 163.0 166.7 164.8
Production (mn MT) 499.1 498.8 509.3 515.1 508.0
Yield (MT/ha) 4.6 3.1 3.1 3.1 3.1
Stock-to-use (%) 36.5 36.9 37.3 35.7 33.4
Soybean

Area (mn ha) 125.0 122.9 128.7 130.4 134.6
Production (mn MT) 361.1 339.9 368.4 353.2 389.8
Yield (MT/ha) 2.9 2.8 2.9 2.7 2.9
Stock-to-use (%) 40.1 31.9 29.7 29.8 31.8
Corn

Area (mn ha) 191.7 192.1 197.7 207.1 203.2
Production (mn MT) 1,123.7 1,119.7 1,129.3 1,219.8 1,172.6
Consumption (mn MT) 1,147.6 1,137.9 1,144.0 1,200.4 1,180.2
Yield (MT/ha) 5.9 5.8 5.7 5.9 5.8
Stock-to-use (%) 28.1 27.0 25.6 26.0 25.8
15
SECTOR UPDATE
Chemicals
Cotton

Area (mn ha) 33.5 34.8 33.4 32.3 32.7
Production (mn MT) 118.6 121.0 112.9 122.0 117.3
Yield (MT/ha) 3.5 3.5 3.4 3.8 3.6
Stock-to-use (%) 68.7 96.1 72.5 71.0 71.4
Coarse Grains

Area (mn ha) 327.4 331.2 337.7 345.5 340.0
Production (mn MT) 1,396.4 1,417.2 1,441.1 1,506.0 1,463.6
Consumption (mn MT) 1,423.9 1,434.3 1,455.6 1,490.3 1,472.6
Yield (MT/ha) 4.3 4.3 4.3 4.4 4.3
Stock-to-use (%) 24.7 23.5 22.2 22.7 22.4
Barley

Area (mn ha) 48.8 52.3 52.5 48.6 47.3
Production (mn MT) 139.4 157.8 160.9 145.4 147.7
Yield (MT/ha) 2.9 3.0 3.1 3.0 3.1
Stock-to-use (%) 14.3 13.9 12.9 11.9 11.6
16
US$/5,000 bushels US$/5,000 bushels US$/5,000 bushels
400
600
1,600
900
1,400
600
300
400
200
500
800
1,000
1,200
200
700
800
600
1,800
2,000
1,400
1,600
800
1,000
1,200
02/Jan/13 02/Jan/13
Corn price
02/Jan/13
Chemicals
Wheat price
02/Jul/13 02/Jul/13 02/Jul/13
Source: Bloomberg
Source: Bloomberg
Source: Bloomberg
SECTOR UPDATE
02/Jan/14 02/Jan/14 02/Jan/14

Soyabean price
02/Jul/14 02/Jul/14 02/Jul/14

02/Jan/15 02/Jan/15 02/Jan/15
02/Jul/15 02/Jul/15 02/Jul/15
02/Jan/16 02/Jan/16 02/Jan/16
Key crop price trend
02/Jul/16 02/Jul/16 02/Jul/16

02/Jan/17 02/Jan/17 02/Jan/17
02/Jul/17 02/Jul/17 02/Jul/17
02/Jan/18 02/Jan/18 02/Jan/18
02/Jul/18 02/Jul/18 02/Jul/18
02/Jan/19 02/Jan/19
Corn Price
02/Jan/19
Wheat Price
02/Jul/19 02/Jul/19 02/Jul/19
Soyabean Price
02/Jan/20 02/Jan/20 02/Jan/20
02/Jul/20 02/Jul/20 02/Jul/20
02/Jan/21 02/Jan/21 02/Jan/21
02/Jul/21 02/Jul/21 02/Jul/21
02/Jan/22 02/Jan/22 02/Jan/22
02/Jul/22 02/Jul/22 02/Jul/22
17
US$/112,000 lbs US$/5,000 lbs US$/2,000 cwt
5
10
15
20
25
120
20
70
170
600
1,600
1,100
2,600
2,100
02/Jan/13 02/Jan/13
Rice price
02/Jul/13 02/Jan/13
Sugar price
02/Jul/13
Cotton price
02/Jan/14 02/Jan/14 02/Jul/13

02/Jul/14 02/Jul/14 02/Jan/14
02/Jan/15 02/Jan/15 02/Jul/14
02/Jul/15 02/Jan/15
02/Jul/15
02/Jan/16 02/Jul/15
02/Jan/16
02/Jul/16 02/Jan/16
02/Jul/16
02/Jan/17 02/Jul/16
02/Jan/17
02/Jan/17
02/Jul/17 02/Jul/17
02/Jul/17
02/Jan/18 02/Jan/18 02/Jan/18
02/Jul/18 02/Jul/18 02/Jul/18
02/Jan/19 02/Jan/19
Sugar Price
Rice Price
02/Jan/19
Cotton Price
02/Jul/19 02/Jul/19 02/Jul/19

02/Jan/20 02/Jan/20 02/Jan/20
02/Jul/20 02/Jul/20 02/Jul/20
02/Jan/21 02/Jan/21 02/Jan/21
02/Jul/21 02/Jul/21 02/Jul/21
02/Jan/22 02/Jan/22 02/Jan/22
02/Jul/22 02/Jul/22 02/Jul/22
SECTOR UPDATE
Chemicals
Multinational companies listed in India

Bayer CropScience, BASF India and Sumitomo Chemical India are the three major Chemical and
Agrochemical multinationals listed on the Indian stock exchanges. Out of the three, we believe BASF India
could be a long-term beneficiary of the changing cost structures of its parent (BASF AG).
BASF India invested Rs 10.0 bn in building manufacturing assets in Dahej (India) between FY13 and FY15; and
identified India as the next best manufacturing destination after China. BASF has not infused significant
capex after FY15 in their Indian arm (cumulative capex between FY16-22: Rs 4.85 bn). BASF India improved
their manufacturing footprint slowly and sales from manufactured products today accounts for ~45%
of their total sales. That being said, the balance 55% sales are largely merchandising-based (trading),
wherein BASF India buys finished products from its group entities and sells it in the domestic market at
a premium. The trading business uses negligible assets, more working capital and delivers single-digit
trading margins. Consequently, BASF India’s RoE profile is largely a function of net profit margins. In FY21
and FY22, net margin improvement was led by tailwind in realisations of Chemicals across categories
which may not be sustainable.
BASF India’s DuPont analysis

(%) Mar 11 Mar 12 Mar 13 Mar 14 Mar 15 Mar-16 Mar 17 Mar 18 Mar 19 Mar 20 Mar 21 Mar 22
RoE 25.2 10.4 11.4 11.6 (7.1) (25.6) (5.3) 7.4 (3.3) 4.3 16.7 28.6
Net margin 3.8 2.9 3.1 3.1 (1.8) (6.0) (1.1) 1.6 (0.7) 0.7 2.6 4.5
Asset turns (x) 3.4 1.8 1.6 1.3 1.2 1.2 1.3 1.4 1.6 1.7 1.9 2.3
Leverage factor (x) 1.9 2.1 2.4 3.0 3.4 3.5 3.6 3.3 2.9 3.4 3.4 2.8
In our opinion, if BASF India were to focus more on capex led growth and reduce dependence on related
party merchandising (via group entities) RoE’s can be more robust with improvement in margin profile as
well. We thus would like to keep an eye on the commentary of BASF India’s parent-based in Ludwigshafen,
Germany to evaluate how they thwart challenges of high-cost structures.
We understand from Corteva Agriscience’s investor day that the company will be making conscious efforts
to reduce their own manufacturing footprint and move towards outsourcing as a model. We believe one
of the reasons behind changing the approach is high-cost structures. Thus, we would like to keep an eye
on commentary of MNC’s to identify any structural shifts like the above.
18
SECTOR UPDATE
Chemicals
MNC companies commentary – Recent global commentary indicates sluggish demand
Company Commentary
Dow We’re definitely seeing the margin compression because of the higher energy costs and the demand
destruction that higher energy cost is happening. 65% of our manufacturing assets are in USA, our
largest integrated facility is in the Netherlands. Number two is in Spain. We do have assets in Germany.
Huntsman Huntsman is experiencing the same pressure as others in the industry, as we are being impacted by
persistent and extraordinary cost of energy in Europe, together with lower-than-expected demand
across segments in our portfolio, primarily within Polyurethanes and Performance Products. The economy
in China continues to lag our expectations due to continued Covid-related lockdowns. While the United
States remains our most resilient market, demand in residential housing has witnessed slowdown.
Eastman There are three main factors negatively impacting our volume and product mix in the third quarter,
said Mark Costa, Board Chair and CEO. “While demand across some end markets, including agriculture
and personal care, is demonstrating resilience, demand has slowed more than expected in August
and September, particularly in the consumer durables and building & construction end markets and
the European and Asian regions.
Kureha Speaking of risks, Kureha believes there is a possibility of slower market growth surrounding electric
vehicles and Li-ion batteries. In reaction to that, the company has reduced PVDF and carbon fibre
production due to prolonged lockdown in China. The company has increased prices to counter raw
material inflation.
Daikin Air Conditioning
China: Since July, we have been working to recover production and achieve the full year sales plan.
While operating profit has been impacted by soaring raw material prices and semi-conductor
shortages, we have maintained a high profitability levels until now through sales expansion of high
value-added products, cost reductions and suppression of fixed costs.
Asia: In the residential market, sales significantly grew in India by strengthening dealer relationships
and capitalising on demand from a heat wave.
Europe, Middle East and Africa: A severe business environment was the result of higher energy
and logistics costs due to situation between Russia and Ukraine along with tight supply from the
Shanghai lockdown.
Olin Scott Sutton, Chairman, President, and Chief Executive Officer, said, “We have seen global economic
conditions worsen faster than expected with an accelerated deterioration in both European and
North American demand particularly in epoxy and vinyls intermediates, which has been aggravated
by increased Chinese exports precipitated by continuing weak Chinese domestic demand. Core
electrochemical unit (ECU) pricing for merchant chlorine and caustic soda continues to move higher.”
Lyondell Trends are weak in EU/Asia for polymer solutions, intermediates and derivatives of petrochemicals.
Basel Demand for refining of crude derivatives is strong in Americas.
FMC “We continue to benefit from a robust market backdrop and customer demand for our innovative
products and solutions. Strong pricing and demand through the second half of the year are expected
to more than offset cost inflation and currency headwinds,” said Douglas.
BASF The management admits of being in crises and is evaluating how to diversify their energy requirements.
Bayer Based on the strong first half year performance and the continued positive business environment,
we raise our full year guidance for Crop Science. We now expect currency and portfolio adjusted
sales growth of ~13%, up from our previous estimate of ~7%. The improved growth outlook assumes a
sustained favourable market environment for glyphosate pricing into the second half of the year.
Corteva Today, we’re about 25% internal manufactured only. So in other words, 25% of our products are only
made in our own plants. We’ll shift that to about 10%. But what that means is we’re going to be more
dual-sourced which is going to give us better flexibility around the world to deliver this new model.
19
SECTOR UPDATE
Chemicals
Demand pangs to hurt quasi-consumption chemicals basket

Soaring electricity costs, shortage of feedstock and inflationary environment has hit the consumer
sentiment in developed markets. Demand pangs are prevalent even in the domestic market, our channel
checks suggest that demand usually starts brewing up a month prior to the festive season. However, the
buying activity has been sub-par as manufacturers are striving to push the high-cost inventory while
traders and dealers await price volatility to settle.
We have identified end user industries more prone to slowdown as consumer sentiment weakens in
developed countries due to inflationary environment. Indian chemical companies, catering to more
industries where a demand slowdown is anticipated could witness tepid volume growth. Also, we have tried
to map which companies have more country-wise exposure to important contributors to European GDP.
Company’s exposure to various industries

(%) Agchem Pharma Paints/ Textiles Const. Plastics Autos/ Industrials Oil & Food FMCG/ Diversified
Coatings/ Chem. Aerospace gas Personal (except all
Ink Care mentioned
segments
Aarti Industries 25 25 20 10 20
Atul 20 5 16 28 31
Deepak Nitrite 12 8 80
Fine Organics 70 30
Navin Fluorine Int’l 15 40 27 18
PI Industries 100
SRF 20 5 15 40 20
Vinati Organics 20 35 15 30
Clean Science 28 60 12
Galaxy Surfactants 100
Tatva Chintan 47 52 1
Sudarshan Chemical 55 25 5 15
Gujarat Fluorochem 10 60 30
Neogen Chemicals 70 20 10
Source: Company, B&K Research. Note: Approx as a % of total sales. Represents impact Represents no impact.
Exposure of companies in EU countries

Belgium Finland France Germany Italy Netherlands Norway Poland Spain Sweden Switzerland United
Kingdom
Aarti Industries
Atul
Camlin Fine Science
Clean Science and Tech.
Deepak Nitrite
Fine Organics
Galaxy Surfactants
Gujarat Fluorochem
Navin Fluorine
Neogen Chemicals
PI Industries
SRF
Sudarshan Chemical
Vinati Organics
Source: Company, B&K Research High Exposure Medium Exposure Low Exposure Minute to No Exposure
20
SECTOR UPDATE
Chemicals
Channel Checks
Broad-based commentary on the demand environment has been sluggish with pricing largely range-
bound. Seasonally, demand picks up a month before the festive season; however, dealers and distributors
struggled to get rid of high-cost inventory. Demand in Textiles, API/Pharmaceuticals, Agrochemicals was
seen under pressure.
A few commodities gained in pricing purely due to supply demand mismatch, as companies sold basic
chemicals in the exports market at higher realisations. We note that customers are worried about the
prevailing volatility and are planning their inventory accordingly.
Phthalic Anhydride and Benzoic Acid prices increased by 6.9% and declined by 4.3% MoM, respectively.
However, spreads have improved as O-xylene prices have cooled off.
Surfactants prices declined during the month have been largely flattish (marginally negative MoM). SLS/
SLES is down 2.2/2.8% MoM.
Caustic Soda Flakes prices rose by 13.2% to Rs 60/kg due to supply imbalances caused due to high power
costs in Europe. Soda Ash prices are range-bound at Rs 40/kg (down by Rs 2/kg MoM).
Phenol and Acetone spreads have risen due to tightness in Phenol supplies in China coupled with falling
prices of Benzene and Propylene (key raw material). Spreads are now at US$ 820/tonne, up by 48% MoM.
Average monthly spreads are at US$ 768/tonne, up 38% MoM.
Note: These prices are as indicated by dealers and are inclusive of taxes in some cases and hence the
prices would tend to vary with the company specific ex-factory gate prices.
Channel Checks
Chemicals Std Last Sep 21 Aug 22 Sep 22 YoY (%) MoM (%) Companies having exposure
Updated
Rs/kg 28/09/2022 25 42 40 57.5 (4.8) Tata Chemicals, GHCL

Soda Ash
Prices remain strong on the back of tight demand-supply situation.
SLS Rs/kg 27/09/2022 197 278 272 38.1 (2.2) Galaxy, Aarti Surfactants, Ultramarine
Pigments
Rs/kg 27/09/2022 56 72 70 25.0 (2.8) Galaxy, Aarti Surfactants, Ultramarine

SLES Pigments
Prices corrected due to steep decline in fatty alcohol prices (key raw material)
LABSA Rs/kg 27/09/2022 129 192 192 48.8 – Galaxy, Aarti Surfactants, Ultramarine
Pigments
Vinyl Acetate Rs/kg 27/09/2022 145 140 130 (10.3) (7.1) Pidilite Industries (RM)
Monomer
R-134A Rs/kg 27/09/2022 450 450 400 (11.1) (11.1) SRF
R-22 Rs/kg 27/09/2022 470 510 550 17.0 7.8 SRF, Navin Fluorine, Gujarat Fluoro
R-410 Rs/kg 27/09/2022 400 570 580 45.0 1.8 SRF, Navin Fluorine, Gujarat Fluoro
R-407 Rs/kg 27/09/2022 675 480 480 (28.9) – SRF, Gujarat Fluorochemicals
Rs/kg 27/09/2022 405 410 390 (3.7) (4.9) SRF, Gujarat Fluorochemicals
R-32
Prices remain broadly flat on the back of steady demand environment.
Phenol Rs/kg 27/09/2022 121 123 125 3.3 1.6 Deepak Nitrite
Acetone Rs/kg 27/09/2022 70 62 66 (5.7) 6.5 Deepak Nitrite
Iso Propyl Alcohol Rs/kg 27/09/2022 86 86 90 4.7 4.7 Deepak Nitrite, Deepak Fertilizers
21
SECTOR UPDATE
Chemicals
Chemicals Std Last Sep 21 Aug 22 Sep 22 YoY (%) MoM (%) Companies having exposure
Updated
MDI Rs/kg 28/09/2022 220 220 220 – – BASF
Rs/kg 28/09/2022 105 155 160 52.4 3.2 Phillips Carbon Black, Himadri Speciality
Carbon Black Chemicals
Prices recover on the back of recovery in Auto sector.
CPC Blue Rs/kg 27/09/2022 390 370 370 (5.1) – Meghmani Organics, Sudarshan Chemical
Industries
Beta Blue Rs/kg 27/09/2022 510 460 460 (9.8) –
Alpha Blue Rs/kg 27/09/2022 490 450 460 (6.1) 2.2
Pigment Rs/kg 27/09/2022 630 540 540 (14.3) -

Green Prices continue to correct due to weak demand from key user segment.
Acetic Acid Rs/kg 27/09/2022 89 50 48 (46.1) (4.0) GNFC
TDI Rs/kg 27/09/2022 215 265 270 25.6 1.9 GNFC
ABS Rs/kg 28/09/2022 277 190 200 (27.8) 5.3 INEOS Styrolution, Bhansali Engineering.
Rs/kg 27/09/2022 49 60 68 38.8 13.3 Grasim Industries, Gujarat Alkalies, DCM

Shriram, Meghmani Finechem, TGV SRAAC,
Caustic Soda
DCW, Chemplast Sanmar, Gujarat Fluoro,
Flakes
Atul
Prices have risen due to tight supply situation globally
Chloroform Rs/kg 27/09/2022 35 55 55 – – SRF, Meghmani Finechem, GACL
Acrylonitrile Rs/kg 28/09/2022 260 182 180 (30.8) (1.1) Vinati Organics, Apcotex, Bhansali
Engineering, INEOS (RM)
Ethyl Acetate Rs/kg 27/09/2022 112 120 120 – – GNFC, Laxmi Organics, Jubilant Ingrevia
Vinyl Sulphone Rs/kg 28/09/2022 380 255 260 (31.6) 2.0 Bodal, Shree Pushkar, Bhageria, Kiri
Rs/kg 28/09/2022 600 440 420 (30.0) (4.5) Bodal, Shree Pushkar, Bhageria, Kiri
H Acid
Dye intermediate prices have corrected recently due to slowdown in Textiles sector.
Paste PVC Rs/kg 28/09/2022 240 170 170 – – Chemplast Sanmar
Polystyrene Rs/kg 27/09/2022 151 125 115 (23.9) (8.0) Supreme Petro, INEOS Styrolution
Phthalic Rs/kg 27/09/2022 88 102 109 23.9 6.9 IG Petro Chemicals, Thirumalai Chemicals
Anhydride
Maleic Rs/kg 27/09/2022 215 115 110 (48.8) (4.3) IG Petro Chemicals, Thirumalai Chemicals
Anhydride
Benzoic Acid Rs/kg 27/09/2022 98 120 114 16.3 (5.0) IG Petro Chemicals, Thirumalai Chemicals
DASDA Rs/kg 27/09/2022 NA 530 480 NA (9.4) Deepak Nitrite
Aniline Rs/kg 27/09/2022 NA 180 183 NA 1.7 GNFC
Morpholine Rs/kg 27/09/2022 NA 300 300 NA – Balaji Amines
Nitric Acid Rs/kg 27/09/2022 NA 50 50 NA – GNFC, Rashtriya Chemicals
22
SECTOR UPDATE
Chemicals
Monthly price tracker of July 2022

Below is the monthly price tracker of some of the key chemicals for the month of July 2022. We have
segregated the relevant chemical prices company-wise. These are the export and import prices which
are relevant for these companies and are taken from DGCIS.
Aarti Industries
Chlorination and Nitration chemistries combined accounts for ~25% of FY21 specialty chemicals revenues
(~25% in FY20). Some of the products that fall under these chemistries are as follows:
• O – Di Chloro Benzene – Rs 155/kg (up 149.7% YoY, up 26.0% MoM).
• P – Di Chloro Benzene – Rs 103/kg (up 40.8% YoY, down 11.4% MoM).
• Di Nitro Chloro Benzene – Rs 136/kg (up 4.9% YoY, down 7.6% MoM).
Some of the value-added products:
• Meta Phenylene diamine – Rs 423/kg (down 2.3% YoY, down 14.5% MoM).
• Di Chloro Aniline – Rs 529/kg (up 51.3% YoY, down 3.4% MoM).
• O – Nitro Toluene – Rs 131/kg (up 132.9% YoY, down 12.4% MoM).
Atul
• P-Cresol – Rs 303/kg (up 65.7% YoY, up flat MoM).
• Resorcinol – Rs 809/kg (down 6.3% YoY, up 8.7% MoM).
• Epoxy Resin – Rs 311/kg (down 13.1% YoY, down 4.1% MoM).
• Reactive Dyes – Rs 337/kg (up 25.4% YoY, flat MoM).
• Sulphur Black – Rs 130/kg (up 8.2% YoY, down 17.8% MoM).
• Vat Dyes – Rs 1,436/kg (up 39.8% YoY, down 28.4%).
• 2,4 D – Rs 264/kg (up 29.0% YoY, flat MoM).
SRF
Technical Textiles
• Nylon Tyre Cord Fabric (NTCF) (import realisation) – Rs 142/kg (down 1.8% MoM).
Refrigerants
• R22 – Rs 293/kg (up 50.9% YoY, up 3.6% MoM).
Packaging Films
• BoPET – Rs 169/kg (up 25.6% YoY, up 1.7% MoM).
• BoPP – Rs 193/kg (up 9.6% YoY, down 3.6% MoM). BoPP – PP spreads – Rs 82/kg (up 12.4% YoY, down 3.8%
MoM).
Gujarat Fluorochemicals
• PTFE – Rs 954/kg (up 23.0% YoY, down 2.3% MoM).
23
SECTOR UPDATE
Chemicals
Realisations of key chemicals

Aarti Industries – Commodity Grade products Aarti Industries – Value-added products
250 1,200 180
230
210
190 130
700
Rs / kg
170
Rs/ kg
150 80
Rs/ kg
130
110 200
90 30
70
50 (300) (20)
30
Jan-20
Jan-22
Nov-20
Jan-21
Nov-21
Mar-20
Jul-20
Mar-22
Jul-22
May-20
Sep-20
Mar-21
Jul-21
May-22
Nov-19
May-21
Sep-21
Jul-19
Sep-19
Jan-20
Jan-22
Nov-20
Jan-21
Nov-21
Mar-20
Jul-20
Mar-22
May-20
Sep-20
Mar-21
Jul-21
May-22
Sep-21
Jul-22
Nov-19
May-21
Jul-19
Sep-19
Meta Phenelyene diamine

Monochloro benzene Ortho Di Chloro benzene
3,4 Di Chloro Aniline
Para Di Chloro benzene Di Nitro Chloro Benzene O- Nitro toluene (RHS)
Source: DGCIS, B&K Research
Atul – Key product realisations

1,200 180 3,500
3,000
130
700 2,500
Rs / kg
Rs/ kg
80 2,000
Rs/kg
200 1,500
30
1,000
(300) (20)
500
Jan-20
Jan-22
Nov-20
Jan-21
Nov-21
Mar-20
Jul-20
Mar-22
Jul-22
May-20
Sep-20
Mar-21
Jul-21
May-22
Sep-21
Nov-19
May-21
Jul-19
Sep-19
0
Jan-20
Jan-22
Nov-20
Jan-21
Nov-21
Mar-20
Jul-20
Mar-22
May-20
Sep-20
Mar-21
Jul-21
May-22
Jul-22
Nov-19
May-21
Sep-21
Jul-19
Sep-19
Meta Phenelyene diamine

3,4 Di Chloro Aniline
O- Nitro toluene (RHS) Resorcinol Vat Dyes
SRF – Key product realisations
350 220
200
300 180
250 160
140
Rs/kg
Rs/kg
200 120
150 100
100 80
60
50 40
0 20
Jan-20
Jan-22
Nov-20
Jan-21
Nov-21
Mar-20
Jul-20
Mar-22
May-20
Sep-20
Mar-21
Jul-21
May-22
Jul-22
Nov-19
May-21
Sep-21
Jul-19
Sep-19
Jan-20
Jan-22
Nov-20
Jan-21
Nov-21
Mar-20
Jul-20
Mar-22
May-20
Sep-20
Mar-21
Jul-21
May-22
Jul-22
Nov-19
May-21
Sep-21
Jul-19
Sep-19
Nylon Tyre Cord Fabric* R22 BOPET BOPP BOPP Spreads
24
Rs /kg Rs /kg Rs /kg
60
130
110
100
120
70
80
90
350
150
100
300
250
200
600
300
400
0
100
500
200
700
Sep'19 July'20 May'20
Chemicals
Dec'19 Sep'20 July'20

SECTOR UPDATE

Price trend – TDI

Mar-20 Nov'20 Sep'20
Jan'21 Nov'20
June'20
Mar'21 Jan'21
H-acid
Sep'20
Mar'21
May'21
Dec'20 May'21
Jul'21
Mar'21 Jul'21
Sep'21
TDI
Price trend – Phthalic Anhydride
June'21 Sep'21
Channel Check price charts
Nov'21
Nov'21
Sep'21 Jan'22
Phthalic Anhydride
Jan'22
Price trend – H-Acid and Vinyl Sulphone
Dec'21 Mar'22 Mar'22

Mar'22 May'22 Vinyl Sulphone May'22
Jun'22 Jul'22 Jul'22
Sep'22 Sep'22 Sep'22
25
Rs /kg Rs/kg Rs /kg
30
10
50
70
90
140
290
110
260
50
230
20
170
80
200
400
600
0
1000
200
800
Sep'19
Sep'20 Sep'19
Dec'19 Nov'19
Nov'20
Jan-19
Mar-20
R32
Jan'21 Mar-20
R 410
R134a
June'20 Mar'21 May'20
Caustic Soda flakes

July'20
Sep'20 May'21
Sep'20
ABS
Jul'21
Price trend – Refrigerants
Dec'20 Nov'20
Sep'21 Jan'21
Mar'21 Mar'21
Nov'21
May'21
June'21
Jan'22 Jul'21
Price trend – ABS and Polystryrene
R 22
Sep'21
R-407
Mar'22 Sep'21
Caustic Soda Flakes

Nov'21
Dec'21 May'22
PS
Jan'22
Mar'22 Jul'22 Mar'22
China Fluorspar
Sep'22 May'22
Jun'22
Jul'22
5
25
45
(15)
Sep'22 Sep'22
60
110
260
210
60
110
260
160
210
160
150
300
0
50
100
250
200
(50)
Sept-20 Aug-19 Aug-19
Chemicals
Oct-20
Nov-19 Nov-19
SECTOR UPDATE
Nov-20

Dec-20
Jan-21 Feb-20 Feb-20
Feb-21
May-20 May-20
2,4 D – MCA spreads

Mar-21
Apr-21
Aug-20 Aug-20
Atul’s products spreads
May-21
Anisole – Phenol spreads

Jun-21
Nov-20 Nov-20
Anisole (Rs/kg)
July-21
Aug-21
Paracresol – Toluene spreads
Feb-21 Feb-21
Spreads of key chemicals
Sept-21
Oct-21
Clean Science products spreads

May-21 May-21
Nov-21
Dec-21 Aug-21 Aug-21
Jan-22
2,4 D Spread (Rs/ kg)

Feb-22 Nov-21 Nov-21
P Cresol - Toluene (Rs/ kg)

Mar-22
Apr-22 Feb-22 Feb-22
May-22
Jun-22 May-22 May-22
Spreads (Rs/Kg)
Jul-22
Aug-22 Aug-22 Aug-22
26
450
350
400
425
325
375
475
150
0
50
100
200
450
600
550
500
750
700
800
650
Sep-20 Aug-19 Aug-19

Oct-20
Nov-20 Nov-19 Nov-19
Dec-20
Jan-21 Feb-20 Feb-20
Guaiacol spreads
Feb-21
May-20
Epoxy Resin spreads
Mar-21 May-20
Apr-21
May-21 Aug-20 Aug-20
Jun-21
July-21 Nov-20 Nov-20
Aug-21
Resorcinol – Benzene spreads
Feb-21 Feb-21
Sept-21
Oct-21 May-21
Nov-21 May-21
Dec-21 Aug-21 Aug-21
Spreads (Rs/Kg)
Jan-22
Feb-22 Nov-21 Nov-21
Resorcinol Spread (Rs/ kg)
Mar-22
Epoxy Resin Spread (Rs/ kg)
Apr-22 Feb-22 Feb-22

May-22
Jun-22 May-22 May-22
Jul-22
600
300
400
0
100
500
200
700
800
350
450
(100)
150
350
150
300
400
100
300
500
250
250
200
200
Aug-18 Mar-20 Sep-20
Chemicals
R22 spreads
Nov-18 Oct-20
May-20
SECTOR UPDATE
Nov-20

Feb-19
July-20 Dec-20
May-19 Jan-21
Sept-20 Feb-21
Aug-19
Nov-20 Mar-21
Nov-19 Apr-21
Jan-21
R-32 Prices and Spreads

May-21
Refrigerant Gas spreads

Feb-20
Mar-21 Jun-21
May-20 July-21
R-32 Prices (Rs/kg)

Aug-20 May-21 Aug-21
July-21 Sept-21
Nov-20 Oct-21
Feb-21 Sept-21 Nov-21
May-21 Nov-21 Dec-21
Spreads (Rs/Kg)
Jan-22
R-22 Spreads (Rs/kg)

Aug-21 Jan-22 Feb-22
Butylated Hydroxyanisole (BHA) spreads
Nov-21 Mar-22 Mar-22

Apr-22
Feb-22 May-22 May-22
May-22 Jun-22
Jul-22
Spreads (Rs/kg)
Jul-22
Aug-22 Sep-22 Aug-22
27
400
600
0
1,400
200
400
600
800
1,000
1,200
0
200
800
1,000
1,200
(200)
290
150
230
170
210
250
190
270
Jun-18 Feb-18
Aug-18 Sept-20
May-18 Oct-20
Oct-18
Dec-18 Aug-18 Nov-20
Feb-19 Nov-18 Dec-20
Apr-19 Jan-21
Feb-19 Feb-21
June-19
Aug-19 May-19 Mar-21
Oct-19 Aug-19 Apr-21
PTFE Prices and Spreads
Dec-19 May-21
Nov-19
PTFE (Rs/kg)
Feb-20 Jun-21
R-134A Prices and Spreads

Apr-20 Feb-20 July-21
June-20 May-20 Aug-21
R-134A Prices (Rs/kg)

Aug-20 Sept-21
Oct-20 Aug-20
Oct-21
Dec-20 Nov-20 Nov-21
Feb-21 Feb-21 Dec-21
Spreads (Rs/Kg)
Apr-21 Jan-22
Jun-21 May-21
Feb-22
Aug-21 Aug-21
Oct-21 Mar-22
Nov-21 Apr-22
Dec-21
4 – MethoxyAcetoPhenone (4-MAP) spreads
Feb-22 Feb-22 May-22

Spreads (Rs/kg)
Apr-22 Jun-22
May-22
Spreads (Rs/kg)
Jun-22 Jul-22
US$/MT Rs /kg
150
0
50
100
2,000
0
500
1,500
1,000
Feb-21
Sep-19
Chemicals
Mar-21
SECTOR UPDATE
Dec-19 Apr-21

May-21
Mar-20 Jun-21
June-20 July-21
Aug-21
ABS Prices and Spreads

Sep-20 Sept-21
Oct-21
Dec-20
Other key products spreads
Nov-21
Mar-21 Dec-21
Acetic Acid Prices and Spreads
Jan-22
June-21
Feb-22
Sep-21 Mar-22
Apr-22
Acetic Acid Prices (Rs/kg)
ABS Spreads (US$/ MT)

Dec-21
Acetic Acid Spread (Rs/kg)
May-22
Mar-22 Jun-22
Jul-22
Jun-22 Aug-22
Sep-22 Sep-22
28
US$/MT Rs /kg
40
60
0
100
20
80
300
400
600
0
100
500
200
700
Feb/20
Sep-19 Mar/20
Apr/20
Dec-19
May/20
Mar-20 Jul/20
Aug/20
June-20 Sep/20
Polystyrene spreads
Nov/20
Sep-20 Dec/20
Jan/21
Dec-20 Mar/21
Apr/21
Mar-21 May/21
Jul/21
June-21 Aug/21
Sep/21
Chlorine – Chloromethanes spreads
Sep-21 Nov/21
Dec/21
Dec-21 Jan/22
Mar/22
Polystyrene Spreads (US$/ MT)
Chloromethane Spreads (Rs/kg)
Mar-22
Apr/22
Jun-22 May/22
Jun/22
Sep-22 Aug/22
SECTOR UPDATE
Chemicals
Monthly prices
Commodity Unit Apr 22 May 22 Jun 22 Jul 22 Aug 22 23 Sep22 YoY (%) MoM (%)
Propylene Spot SEA, CFR US$/MT 1,245 995 1,015 890 880 900 (3.2) 2.3
Benzene Spot India, CFR US$/MT 1,190 1,320 1,235 1,090 910 935 (6.0) 2.7
Acrylonitrile Contract SEA, CFR US$/MT 1,950 1,850 1,690 1,575 1,475 1,545 (30.4) 4.7
Biphenol A (BPA), China US$/MT 2,724 2,703 2,687 2,669 2,619 2,206 (37.4) (15.8)
Toluene Spot South Korea CFR US$/MT 1,040 1,105 1,205 930 1,000 955 20.1 (4.5)
Ammonia US$/MT 1,245 1,000 970 950 950 1,100 74.6 15.8
Acetic Acid US$/MT 545 815 597 515 444 471 (66.6) 6.1
Phenol US$/MT 1,570 1,637 1,519 1,371 1,372 1,525 1.9 11.2
Acetone China, Spot US$/MT 851 946 821 741 699 822 (16.5) 17.6
Ethylene US$/MT 1,185 1,105 1,005 875 835 905 (17.0) 8.4
Chlorine Contract China US$/MT 165 165 171 220 1 -29 NA NA
Methanol Spot India, CFR US$/MT 380 335 320 275 290 315 (38.8) 8.6
MEG Spot SEA, CFR US$/MT 640 615 570 555 495 530 (33.8) 7.1
Acrylic Acid Contract China US$/MT 2,084 2,407 2,173 2,259 1,760 1,112 (52.8) (36.8)
ABS Contract U.K. US$/MT 3,390 3,385 3,282 3,073 2,686 2,381 (20.9) (11.4)
Adipic Acid Contract Asia, CFR US$/MT 2,065 2,150 1,900 2,000 1,675 1,625 (5.8) (3.0)
Propylene Oxide Spot China US$/MT 1,758 1,742 1,639 1,404 1,309 1,417 (47.2) 8.3
Styrene Spot India, CFR US$/MT 1,475 1,510 1,430 1,280 1,215 1,240 (1.6) 2.1
PTA Spot India, CFR US$/MT 1,030 1,070 1,020 920 890 870 6.7 (2.2)
Caprolactam Contract Asia, CFR US$/MT 2,045 2,045 2,170 2,125 2,190 1,975 (4.6) (9.8)
TDI Spot China Huadong US$/MT 2,663 2,477 2,612 2,283 2,496 2,881 35.5 15.4
MDI Spot China Guangdong US$/MT 2,500 2,700 2,175 2,825 2,175 2,341 (18.6) 7.6
EDC Spot SEA, CFR US$/MT 695 640 625 465 335 330 (63.1) (1.5)
VCM Spot SEA, CFR US$/MT 1,275 1,045 995 725 745 740 (43.3) (0.7)
SBR Spot China US$/MT 1,843 1,845 1,891 1,813 1,719 1,655 (13.0) (3.7)
EPS Contract U.K. US$/MT 3,321 3,454 3,392 3,419 2,915 2,544 (8.0) (12.7)
PET Spot China US$/MT 1,290 1,369 1,418 1,317 1,310 1,164 4.4 (11.1)
Polycarbonate Spot China US$/MT 3,321 3,246 2,904 2,438 2,453 2,650 (33.2) 8.0
Polyamide Fibre Contract Asia US$/MT 3,500 3,500 3,550 3,400 3,550 3,400 (4.9) (4.2)
Polyamide Resin Contract W.Eur US$/MT 3,639 3,639 3,961 3,570 3,973 3,824 15.0 (3.8)
Polystyrene Spot India, CFR US$/MT 1,860 1,720 1,760 1,660 1,460 1,460 (6.4) -
Caustic Soda NEA, FOB US$/MT 690 735 655 545 525 655 39.7 24.8
Caustic Soda SEA, CFR US$/MT 765 805 760 685 605 730 46.6 20.7
Glyphosate 95%, China US$/MT 10,029 9,596 9,750 9,622 9,084 8,407 (22.1) (7.5)
Caustic Soda Liquid 32%, China US$/MT 204 188 180 177 154 151 (18.5) (1.6)
Sulphuric Acid 98%, China US$/MT 145 137 139 135 52 35 (77.4) (31.4)
Polyvinyl Chloride SG5, China US$/MT 1,427 1,319 1,233 1,041 962 932 (47.5) (3.1)
Butadiene Spot SEA, CFR US$/MT 1,325 1,445 1,435 1,145 835 805 4.5 (3.6)
Pulp Bleached Chemical Pulp, China US$/MT 1,106 1,096 1,087 1,075 1,063 1,067 33.6 0.3
Pure Benzene, China US$/MT 1,307 1,315 1,459 1,395 1,138 1,112 (8.6) (2.2)
Methyl Alcohol, China US$/MT 431 393 396 370 353 381 (24.6) 7.9
Soda Ash Rs/50 kg 2,000 1,950 2,100 2,075 2,075 2,050 64.0 (1.2)
Caustic Soda Flake Rs/50 kg 3,850 3,300 3,100 3,200 3,150 3,400 58.1 7.9
Caustic Potash India Rs/50 kg 6,500 6,450 6,300 6,400 6,900 7,000 52.2 1.4
Sodium Bicarbonate Rs/50 kg 2,375 2,375 2,375 2,375 2,375 2,450 66.1 3.2
Sodium Nitrite Rs/50 kg 3,650 3,650 3,650 3,650 3,650 3,750 15.4 2.7
Plastics PVC Resin Rs/kg 140 160 165 150 115 83 (51.2) (27.8)
India Formaldehyde Rs/kg 35 42 42 42 40 37 5.7 (7.5)
India Formic Acid Rs/kg 125 138 138 142 130 125 27.6 (3.8)
India Glacial Acetic Acid Rs/kg 80 75 68 70 60 60 (52.0) -
SEA – South East Asia.
More than 10% up YoY , More than 10% down YoY
29
SECTOR UPDATE
Chemicals
Spreads of key products
Spreads Unit Apr 22 May 22 Jun 22 Jul 22 Aug 22 23 Sep 22 YoY (%) MoM (%)
PVC-EDC/Ethylene US$/MT 592 548 497 464 498 455 (23.4) (8.6)
ABS (non-integrated) US$/MT 1,865 1,840 1,820 1,777 1,511 1,182 (28.5) (21.8)
ABS Grade 2 US$/MT 1,819 1,801 1,789 1,738 1,454 1,120 (29.1) (23.0)
Caprolactum-Benzene US$/MT 855 725 935 1,035 1,280 1,040 2.0 (18.8)
AN-propylene US$/MT (67) 236 69 102 13 -17 NA NA
Bisohenol A-Phenol/Acetone US$/MT 1,168 1,066 1,182 1,311 1,271 696 (65.1) (45.2)
Acetic acid-methanol US$/MT 340 634 424 367 287 301 (73.5) 4.7
Propyplene Oxide-propylene US$/MT 725 916 796 666 579 670 (64.9) 15.8
TDI-toluene US$/MT 1,987 1,759 1,829 1,679 1,846 2,260 40.7 22.4
MDI-benzene US$/MT 1,727 1,842 1,372 2,117 1,584 1,733 (23.1) 9.5
Rubber (SBR)-Butadiene/Styrene US$/MT 624 576 675 756 773 701 (25.8) (9.3)
Monomer
Phenol/Acetone-Benzene/Propylene US$/MT 576 509 545 455 555 775 (5.6) 39.6
P-Cresol - Toluene Rs/kg 178 186 202 232 214 NA - -
More than 10% up YoY , More than 10% down YoY
30
SECTOR UPDATE
Chemicals
Exports of top chemicals over the years

Exports – P Xylene, Other Insecticides, Other Herbicides Exports – Benzene, Other Fungicides, Reactive Blacks
40,000 20,000
30,000 15,000
Rs mn
Rs mn
20,000 10,000
10,000 5,000
0 0
Oct-20
Dec-19
Oct-21
Feb-20
Feb-22
Jun-20
Aug-20
Feb-21
Oct-19
Jun-21
Aug-21
Apr-20
Apr-22
Jun-22
Apr-21
Jun-19
Aug-19
Dec-20
Dec-21
Oct-20
Dec-19
Oct-21
Feb-20
Feb-22
Jun-20
Aug-20
Feb-21
Oct-19
Jun-21
Aug-21
Apr-20
Apr-22
Jun-22
Apr-21
Jun-19
Aug-19
Dec-20
Dec-21
P-XYLENE BENZENE
OTHER INSECTICIDE NES OTHERS FUNGICIDE NES
OTHER HERBICIDES-ANTI-SPROUTING PRODUCTS REACTIVE BLACKS
Exports – Other Cyclic Amides, Pigment Blue 15, Exports – Reactive Blues, Pyradine Derivatives,
Activated Carbon Butadiene and Isoprene
4,000 3,000
3,000
Rs mn
2,000
Rs mn
2,000
1,000 1,000
0
0
Oct-20
Dec-19
Oct-21
Feb-20
Feb-22
Jun-20
Aug-20
Feb-21
Aug-21
Oct-19
Jun-21
Apr-20
Apr-22
Jun-22
Jun-19
Aug-19
Apr-21
Dec-20
Dec-21
Oct-20
Dec-19
Oct-21
Feb-20
Feb-22
Jun-20
Aug-20
Feb-21
Oct-19
Jun-21
Aug-21
Apr-20
Apr-22
Jun-22
Apr-21
Jun-19
Aug-19
Dec-20
Dec-21
OTHER CYCLIC AMIDES AND THR DRVTVS AND SALTS REACTIVE BLUES
PIGMENT BLUE 15 (CPC Blue) OTHER DERIVATIVES OF PYRADINE
ACTIVATED CARBON UNSTRD BUTS-1 3-DIENE AND ISOPRENE
Exports – Pigment Green 7, O Xylene, Carbon Black, Exports – Acid Black, Reactive Reds, Optical
Cypermethrin Whitening Agents, Ethanediol
4,000 6,000 1,500 4,000
3,000 3,000
Rs mn
4,000 1,000
Rs mn
Rs mn
Rs mn
2,000 2,000
2,000 500
1,000 1,000
0 0 0 0
Oct-20
Dec-19
Oct-21
Feb-20
Feb-22
Jun-20
Aug-20
Jun-22
Feb-21
Oct-19
Jun-21
Aug-21
Apr-20
Apr-22
Apr-21
Jun-19
Aug-19
Dec-20
Dec-21
Oct-20
Dec-19
Oct-21
Feb-20
Feb-22
Jun-20
Aug-20
Jun-22
Feb-21
Oct-19
Jun-21
Aug-21
Apr-20
Apr-22
Apr-21
Jun-19
Aug-19
Dec-20
Dec-21
PIGMENT GREEN 7 ACID BLACKS(AZO)

O-XYLENE REACTIVE REDS
CIPERMETHRIN TECHNICAL 0PTICAL WHITENING AGENTS
CARBON BLACKS ETHYLENE GLYCOL (ETHANEDIOL)
31
SECTOR UPDATE
Chemicals
Imports of top chemicals over the years

Imports – Phosphoric Acid, Styrene, P-Xylene Imports – Ammonia, Terephthalic Acid, Methanol
30,000 20,000
25,000 15,000
Rs mn
20,000
Rs mn
10,000
15,000
5,000
10,000
0
5,000
Oct-20
Dec-19
Oct-21
Feb-20
Feb-22
Jun-20
Aug-20
Feb-21
Oct-19
Jun-21
Aug-21
Apr-20
Apr-22
Jun-22
Apr-21
Jun-19
Aug-19
Dec-20
Dec-21
0
Oct-20
Dec-19
Oct-21
Feb-20
Jun-20
Aug-20
Feb-22
Feb-21
Oct-19
Jun-21
Aug-21
Apr-20
Apr-22
Jun-22
Apr-21
Jun-19
Aug-19
Dec-20
Dec-21
Anhydrous Ammonia
Terephthalic Acid and its Salts
Phosphoric Acid Styrene P-Xylene Methanol (Methyl Alcohol)
Imports – Acyclic Hydrocarbons, Ethanediol, Imports – Vinyl Chloride, Acetic Acid, Pearlescent
Diloxanide Furoate, Cimetidine, Famotidine Pigment
12,000 15,000
7,000 10,000
Rs mn
Rs mn
2,000 5,000
(3,000) 0
Oct-20
Dec-19
Oct-21
Feb-20
Feb-22
Jun-20
Aug-20
Feb-21
Oct-19
Jun-21
Aug-21
Apr-20
Apr-22
Jun-22
Apr-21
Jun-19
Aug-19
Dec-20
Dec-21
Oct-20
Dec-19
Oct-21
Feb-20
Feb-22
Jun-20
Aug-20
Feb-21
Oct-19
Jun-21
Aug-21
Apr-20
Apr-22
Jun-22
Apr-21
Jun-19
Aug-19
Dec-20
Dec-21
SATURATED ACYCLIC HYDROCARBONS Vinyl Chloride (Chloroethylene)

Ethylene Glycol (Ethanediol) Acetic Acid
Diloxanide Furoate, Cimetidine, Famotidine Pearlescent Pigment And Other pigments
Imports – Toluene, Titanium Dioxide, Pyridine Rings Imports – Ethyl Alcohol,Nitrile Function, Ethylene
Compund Dichloride
8,000 8,000
7,000
6,000 6,000
5,000
Rs mn
Rs mn
4,000 4,000
3,000
2,000 2,000
1,000 0
0
Oct-20
Dec-19
Oct-21
Feb-20
Feb-22
Jun-20
Aug-20
Feb-21
Oct-19
Jun-21
Aug-21
Apr-20
Apr-22
Jun-22
Apr-21
Jun-19
Aug-19
Dec-20
Dec-21
Oct-20
Dec-19
Oct-21
Feb-20
Feb-22
Jun-20
Aug-20
Feb-21
Oct-19
Jun-21
Aug-21
Apr-20
Apr-22
Jun-22
Apr-21
Jun-19
Aug-19
Dec-20
Dec-21
Toluene Ethyl Alcohol

Titanium Dioxide and and lustre pearlescent Pigment Nitrile Function Compounds
Compounds containing Pyridine ring or Piperazine Ring 1,2 Di-Chloro Methane (Ethylene Dichloride)
Acrylonitrile Butyl Acrylate
32
SECTOR UPDATE
Chemicals
Wholesale price Index

Dyestuff/Dyes, Carbon Black, Phthalic Anydride Caustic Soda, Soda Ash
210
240
160 200
110 160
60 120
Jan-20
Oct-20
Jan-21
Jan-22
Oct-21
Jul-20
Jul-22
Oct-19
Jul-21
Jul-19
Apr-20
Apr-21
Apr-22
80
Jan-20
Oct-20
Jan-21
Jan-22
Oct-21
Jul-20
Jul-22
Oct-19
Jul-21
Jul-19
Apr-20
Apr-21
Apr-22
Dye stuff/dyes (Incl. Pigments)
Carbon Black
Phthalic anhydride Caustic soda Soda ash
Source: Department For Promotion Of Industry And Internal Trade, B&K Research
Nitric Acid, Sulphuric Acid, Camphor Amine, Aniline, Expandable Polystyrene

240
300 220
270 200
240 180
210 160
180 140
150 120
100
120
80
90
Jan-20
Oct-20
Jan-21
Jan-22
Oct-21
Jul-20
Jul-22
Oct-19
Jul-21
Jul-19
Apr-20
Apr-21
Apr-22
60
Jan-20
Oct-20
Jan-21
Jan-22
Oct-21
Jul-20
Oct-19
Jul-21
Jul-22
Jul-19
Apr-20
Apr-21
Apr-22
Amine
Aniline (including pna, ona, ocpna)
Nitric Acid Sulphuric Acid Camphor Expandable Polystyrene
Ethyl Acetate, Mono Ethyl Glycol Phosphoric Acid, Ammonium Nitrate

160 290
140 240
120
190
100
140
80
60 90
40 40
Jan-20
Oct-20
Jan-21
Jan-22
Oct-21
Jan-20
Oct-20
Jul-20
Jan-22
Oct-19
Jul-21
Jul-22
Jan-21
Oct-21
Jul-20
Jul-22
Oct-19
Jul-21
Jul-19
Apr-20
Apr-21
Apr-22
Jul-19
Apr-20
Apr-21
Apr-22
Ethyl acetate Mono Ethyl Glycol Phosphoric acid Ammonium nitrate
33
SECTOR UPDATE
Chemicals
Anti-Dumping Duty
ADD Imposed/Recommended
Date Chemical Filed by Imports from Period Maximum Currency Unit

duty
25-02-2022 Melamine Gujarat State European Union, 428.0 US$ MT
Fertilizers and Japan, Qatar, United
Chemicals Ltd Arab Emirates
25-02-2022 N, N – Dicyclohexyl Clean Science China 826.8 US$ MT
Carbodiimide (DCC) and Technology
30-03-2022 Certain Rubber NOCIL China, EU, Russia 1,146.0 US$ MT
Chemicals (TDQ, PVI
and CBS)
31-03-2022 LDPE Chemicals and Qatar, Saudi Arabia, 5 years 216.8 US$ MT
Petrochemicals Singapore, Thailand,
Association UAE, USA
28-04-2022 N, N – Dicyclohexyl China 5 years 826.8 US$ MT
Carbodiimide (DCC)
05-05-2022 Saturated Fatty Indonesia, Malaysia, 51.6 US$ MT
Alcohols Thailand, Saudi
Arabia
24-06-2022 TDI GNFC China, Japan, Korea 5 years
ADD – Imposed over the years

35
32
30
25 23
20
Nos.
15 12 12
10
10 8 7
6 6 7
4 4
5
0
2017 2018 2019 2020 2021 2022
Total China
Source: DGTR, B&K Research
34
SECTOR UPDATE
Chemicals
ADD – Investigation initiated over the years ADD – Reinstated over the years
40 18
34 14 14
30 13
8
18 18
Nos.
Nos.
20 8
16 5 5
9 2 2 2
10 7 3 1 1
3 0
2
0 (2)
2019 2020 2021 2022 2017 2018 2019 2020 2021 2022
Total China Total China
ADD – Terminated over the years ADD – Denied over the years
8 7
7 6
7 6
6 5 5 5
6 5
5
Nos.
4
Nos.
4 3
3 3 3 3
3 2
2 2 2 2 2 2
2 1
1 1
0 0 0
0 0
2017 2018 2019 2020 2021 2022 2019 2020 2021 2022
Total China Total China
ADD expiring in 2022
Product Filed by Country (ies) involved Expiry date Remark

TDI Indian Polyurethane China PR, Japan, Korea RP 04-06-2022 Reinstated
Association
Hydrogen Peroxide National Peroxide, Bangladesh, Chinese Taipei, 13-06-2022 Expired
Hindustan Organics Korea RP, Indonesia, Pakistan,
Thailand
PTFE Gujarat China PR 27-07-2022 Reinstated
Fluorochemicals
Sodium Nitrite Deepak Nitrite China PR 24-08-2022 Reinstated
Styrene Butadiene Reliance Industries European Union, Korea RP, 29-08-2022 Expired
Rubber Thailand
Ammonium Nitrate Deepak Nitrite Switzerland, Iran, USA, 11-09-2022 Denied extension for
Indonesia, Russia, Singapore Russia, Georgia, Iran
Certain Rubber China, EU 16-11-2022
Chemicals-1
35
SECTOR UPDATE
Chemicals
Environmental Clearance (EC)

Date Company name Project Cost Proposed Location
(Rs mn) capacity (tpa)
17-05-2022 Aarti Industries Pharma Intermediates 240,000 Jhagadia, Gujarat
30-05-2022 Aarti Industries TriChloro Benzene, Parachloro Jhagadia, Gujarat
Aniline, Ortho DiChloro Benzene
31-05-2022 Bodal Chemicals API and API Intermediates 780 Ahmedabad, Gujarat
31-05-2022 DCM Shriram ECH, hydrogen Peroxide, Purified 253,500 Bharuch, Gujarat
Glycerine
08-06-2022 Apcotex Industries Butadiene based rubber & 27,200 Bharuch, Gujarat
Lattices and Synthetic Lattices
08-06-2022 Aarti Industries Pesticides and Intermediates & 16,700 201,480 Bharuch, Gujarat
Synthetic Organic Chemicals
17-08-2022 Indo Amines Expansion of synthetic organic 1,100 156,000 Avdhan, Maharashtra
Chemicals
13-09-2022 Anurag Chemicals Dyes and Pigment 828 Ahmedabad, Gujarat
13-09-2022 Polymers India Polyester Resin 1,800 Ahmedabad, Gujarat
13-09-2022 Veer Chem Synthetic Adhesive, Vinyl 9,000 Gandhinagar, Gujarat
Industries Polymers, Textile Auxiliary
Source: Ministry of Environment, Forest and Climate Change, State Environment Impact Assessment Authority, Gujarat, B&K Research
EC – Granted over the years

140 129
120
101
100
75
80
Nos.
60
40 23
19
20 15
0
2017 2018 2019 2020 2021 2022
EC granted during the year
Source: Ministry of Environment, Forest and Climate Change, State Environment Impact Assessment Authority, Gujarat, B&K Research
36
SECTOR UPDATE
Chemicals
Key news flows

Hurricane Ian targets Florida leading more oil & gas producers to evacuate offshore drilling platforms
in the US Gulf, as the storm maintained its path towards Tampa. The US fertilizer industry is watching
the tropical threats closely, as Tampa is a key centre with both trading, shipping and production
operations in the area. Major domestic producers, including both Yara and Mosaic have facilities in the
surrounding region. Huntsman International produces maleic anhydride in Pensacola, and Reichhold
Chemicals has production sites in Pensacola and in Jacksonville, Florida.
https://www.icis.com/explore/resources/news/2022/09/27/10809808/more-us-gulf-oil-platforms-
shut-in-port-of-tampa-closed-as-hurricane-ian-targets-florida/
EU gas stocks smashed through the 80% storage target more than two months ahead on the back of
persistently strong net injections despite dwindling Westward Russian gas flows. Still, key markets
have set stricter goals heading into the peak heating season, with Germany pushing for domestic
tanks to be filled to 85% capacity by 01 October and to 95% capacity by November.
https://w w w.spglobal .com/commodityinsights/en/market-insights/latest-news/natural -
gas/083122-eu-gas-storage-reaches-november-target-early-as-gazprom-cuts-flows
Clariant Chemicals has reached a definitive agreement to divest its quats business to Singapore-
based Global Amines Co. in a deal worth US$ 113 mn. Global Amines Co. is a 50:50 joint venture owned
by Clariant and Singapore-listed agribusiness and oleochemicals major Wilmar.
https://www.icis.com/explore/resources/news/2022/08/31/10801112/swiss-clariant-divesting-quats-
business-to-global-amines-co-for-113m/
Asia PVC stabilises after sharp decline, supply pressure continues. Asian producers face competition
from deep-sea cargoes. Buyers not in a hurry to restock at present. Demand may improve once rainy
season subsides.
https://www.icis.com/explore/resources/news/2022/08/30/10800567/podcast-asia-pvc-stabilizes-
after-sharp-decline-supply-pressure-continues/
Nobian declares force majeure on caustic soda supply in Europe. Europe’s biggest chlor-alkali producer
hit by equipment breakdowns, feedstock limitations, upcoming plant turnarounds.
https://chemweek.com/document/show/phoenix/4518096/Nobian-declares-force-majeure-on-
caustic-soda-supply-in-Europe?connectPath=&searchSessionId=2e6f35cb-bd59-419e-a3a8-
60c8267e7e96
Rates for shipping containers from east Asia and China to both US coasts continued to plummet this
week as softening demand amid persistent inflation, fears of a recession and an extremely early peak
season have opened up capacity, which is weighing on rates.
https://www.icis.com/explore/resources/news/2022/09/23/10808833/asia-us-container-rates-
plunge-as-inflation-recession-fears-stunt-demand/
Solvay will invest US$ 14 mn in its soda ash production plant in Rosignano, Italy, and deploy a scheme to
reduce limestone residues there. It aims to reduce limestone residues discharged into the sea by 20%
by 2030, compared with January 2022 levels.
https://www.icis.com/explore/resources/news/2022/09/06/10803071/solvay-invests-15m-in-italian-
soda-ash-plant-to-reduce-limestone-residues/
Wilting downstream demand and stiff inflationary pressure has challenged the European polyolefins
market in the third quarter, and this is set to continue heading into 2023.
https://www.icis.com/explore/resources/news/2022/09/22/10808325/podcast-europe-polyolefins-
face-higher-costs-poor-demand-into-2023/
37
SECTOR UPDATE
Chemicals
Solvay outlines plans to implement new global soda ash production process. Process, if validated,
would eliminate all limestone residues, further reduce CO2 emissions.
https://chemweek.com/document/show/phoenix/4521976/Solvay-outlines-plans-to-implement-
new-global-soda-ash-production-process?connectPath=&searchSessionId=d42bfefe-0b41-45b3-
8a79-5f768da7fac0
European chlorine output drops to new 2022 low. In July, the average chlor-alkali plant utilization rate
dropped below 70% for the first time this year; daily production of chlorine in Europe is down to 22,234 tonnes.
https://chemweek.com/document/show/phoenix/4523877/European-chlorine-output-drops-to-
new-2022-low?connectPath=&searchSessionId=c6d88533-b707-442a-ad87-2007c0372dfe
Germany cranks up chemical imports as energy crisis hikes costs. Germany is increasingly getting
vital chemicals from abroad, as the country’s industrial giants like BASF SE struggle with sky-rocketing
energy prices from Russian gas cuts. Chemical import volumes have almost doubled this year, as the
crisis deepened.
https://www.bloomberg.com/news/articles/2022-09-11/germany-cranks-up-chemical-imports-as-
energy-crisis-hikes-costs#xj4y7vzkg
A Swiss court has granted the operator of the Nord Stream 2 gas pipeline from Russia to Germany, a
stay of bankruptcy until early January, as calls from within Germany for the link to keep open.
https://w w w.spglobal .com/commodityinsights/en/market-insights/latest-news/natural -
gas/091222-nord-stream-2-gas-link-operator-wins-further-stay-of-bankruptcy-court
The fall in the eurozone’s chemicals output in July does not bode well for the overall economy in the third
quarter and beyond. Health of the eurozone’s chemical industry continues to be affected by supply-
chain bottlenecks and rising natural gas prices, which greatly affect an energy-intensive sector, such
as petrochemicals.
https://www.icis.com/explore/resources/news/2022/09/14/10805532/eurozone-chemicals-output-
fall-signals-hard-times-ahead-icis-economist/
After two years of shortages, the global chip industry’s concerns continue to pile up. Chipmakers are
now wary about weaker consumer demand, over-stockpiling by manufacturers and changes to US
chip export policies.
https://www.spglobal.com/commodityinsights/en/market-insights/blogs/metals/092022-around-
the-tracks-chips-shortage-supply-chain-hrc-electric-vehicles-steel
China’s phenol spikes on tight supply, increasing demand. Increasing demand from new BPA capacities.
Suppliers actively raising EXW prices.
https://www.icis.com/explore/resources/news/2022/09/22/10807950/video-china-s-phenol-spikes-
on-tight-supply-increasing-demand/
Germany’s coalition government agreed not to go through with a controversial levy or surcharge on
natural gas consumption, which it was estimated would have cost the country’s chemical industry
alone about € 4 bn/year. Instead, the government agreed a € 200 bn package “to brake” the soaring
natural gas prices, to be financed through an “economy and stabilisation fund”.
https://www.icis.com/explore/resources/news/2022/09/29/10810588/germany-scraps-natgas-levy-
agrees-200bn-package-to-brake-rising-prices/
38
SECTOR UPDATE
Chemicals
Company specific events and updates

Gujarat Alkali has commissioned expansion of Caustic Soda plant at Dahej from 785 tpd to 1,310 tpd
and installation of 65 MW coal-based power plant.
htt ps: //w w w. bseindia . com/xml -data/corpfiling/Attach Live/f 2 2 a 9 cfe -d 81 0 -44 b5 -a42 d -
206bc0132c3f.pdf
Laxmi Organics resumed operations of its Mahad plant after 21 days of maintenance and will continue
to increase its utilisation levels in a staggered manner.
https://www.bseindia.com/xml-data/corpfiling/AttachHis/89cac75b-04b1-4648-8293-f8a3ee7678f7.
pdf
Aarti Industries has received approval to demerge its Pharma segment to Aarti Pharmalabs and has
set a record date as 20th October.
https://www.bseindia.com/xml-data/corpfiling/AttachLive/11431641-0304-4412-96e8-41240bea1845.
pdf
SRF has commissioned and capitalised second BoPP line and Metallizer on 25th August 2022 at an
aggregate cost of Rs 4.46 bn.
htt ps: //w w w. bseindia . com/xml -d a ta/corpfiling/Attach H is/dcb 0 2 3eb -e8a5 -478d -a 672 -
3360a3cf00ce.pdf
Balaji Amines’ Phase-1 of 90-acre Greenfield Project (Unit IV) has been completed and the Di-methyl
Carbonate (DMC)/Propylene Carbonate (PC) and Propylene Glycol (PG) plant will be ready to commence
commercial production by the end of September 2022. It also announced expansion of Methyl Amines
and DMAHCL capacity by 40,000 tpa and 7,500 tpa.
ht t ps: //w w w. bsei n d ia . co m/xm l -d a ta/co rpfi l i n g/At ta ch Live/5 b39 e7b1 -c3ce -4 2 4 c -b3 f 9 -
9d8dc1f9aae2.pdf
Chemcon Specialty commences production of P9 unit at Manjusar Gujarat. The company has added
a capacity of 2,400 tpa of Bromo Benzene at the P9 facility. The company is further evaluating to add a
pharma chemical, Guanine, at the same unit.
https://w w w. bseindia .com/xml -data/corpfiling/Attach Live/4cfbed4c -c6de -4bc1 -8dda -
8ec872c35df2.pdf
Balaji Amines completes Phase 1 of Greenfield Project (Unit IV) and announces further capex for adding
new capacities in Phase 2 of Greenfield Project (Unit IV). The commercial production of DMC/PC and PG
has commenced at the company’s newly set up plant in MIDC, Chincholi, Solapur with effect from 26th
September 2022.
htt ps: //w w w. bsein dia . com/xml -d a ta/corpfilin g/Attach Live/532 640 c5 -c251 -4 cfb -8b9 2 -
76e6ada1f25a.pdf
SRF has commissioned a project to produce 300 tpa of P38 at Dahej at an estimated cost of Rs 580 mn.
https://w w w. bseindia .com/xml -data/corpfiling/Attach Live/9 94382 05 -4cca -4551 -9 625 -
c793f3ce58fa.pdf
Gujarat Alkali has commissioned 10,000 tpa of Hydrazine Hydrate with a forward integration to
Hydrogen Peroxide at its Dahej complex.
https://www.bseindia.com/xml-data/corpfiling/AttachHis/91cbaef6-78b2-4c90-9fcd-c948d2f4268b.
pdf
39
SECTOR UPDATE
Chemicals
Bharat Petroleum eyes cracker, PP projects at refinery sites. The company is carrying out feasibility
studies, other activities for ethylene, PP projects at Bina, Kochi refineries; new plants potentially
onstream within five years.
https://chemweek.com/document/show/phoenix/4518278/Bharat-Petroleum-eyes-cracker -
PP -projects-at-refinery-sites?connectPath=&searchSessionId=2e6f35cb -bd59 -419e -a3a8-
60c8267e7e96
Exide Industries commences construction of Li-ion cell plant in India. First phase of the facility is
expected to be operational by the end of 2024 and will have a production capacity of 6 GWh.
https://chemweek .com/document/show/phoenix/4536823/Exide -Industries -commences -
construction-of-Li-ion-cell-plant-in-India?connectPath=&searchSessionId=96f6a9fc-6694-455a-
8097-2d251cf3efc1
Epsilon Carbon plans to expand the capacity of Vijayanagar unit by adding another 100,000 tpa with a
new capex investment of Rs 5.5 bn. This investment will increase the company’s Carbon Black capacity
by 85% to 215,000 tpa. It also includes setting up of a 25 MW captive power plant to service its entire
energy needs within its own Integrated Carbon Complex.
https://www.indianchemicalnews.com/chemical/epsilon-carbon-to -invest-rs-55o -cr -for -
vijayanagar-capacity-expansion-14906
40
SECTOR UPDATE
Chemicals
CMP (Rs): 3,987 Market cap. (Rs bn): 437.9 Target price (Rs): 4,766 Upgrade to BUY
Plethora of opportunities in Fluoropolymers…

We came out positive from our meeting with the management of Gujarat Fluorochemicals (GFL) and
upgrade our rating to Buy given 1) supply-demand mismatch in fluoropolymers (PTFE, PVDF) creating
multiple tailwinds, 2) Rs 45.0-60.0 bn capex visibility beyond FY24E, 3) capex would largely target new-age
applications like battery chemicals, cathodes, HFO refrigerant gases and 4) grabbing low-hanging fruits
– HFC gas expansion. Taking cues from global fluoropolymer manufacturers, we believe that the tailwind
in fluoropolymers is here to stay due to 1) demand coming from new-age applications, 2) current hi-tech
available only with MNCs (Solvay, ARKEMA, Chemours, etc.), 3) China’s dominance is only in commodity
grades and 4) demand running ahead of supply.
Connecting the dots
Capex momentum moves one notch up: GFL is expected to incur ~Rs 25.0 bn capex over FY23-24 to
increase capacities of fluoropolymers, refrigerant gases and commission a new battery chemicals
complex. Beyond this, the company has plans of investing ~Rs 45.0-60.0 bn on the drawing board. The said
investments are expected to bring in chemicals finding applications in sunrise sectors like EV batteries,
Storage batteries, Solar panels and Semi-conductors.
GFL’s near to long-term expansion plans
(tpa) Current Near-term expansion Long-term expansion

PTFE including micropowders 18,000 21,000 –
PVDF 2,500 5,000 10,000
LiPF6 – 2,000 8,000
HFC 5,000 15,000
FKM 2,400 4,800 7,200
PFA 700 – 7,800
R142b 18,250 36,500 –
PPA NA 600 –
New capacity for Cathodes – NA NA
New capacity for HFO – NA NA
New capacity for Chemicals in Storage batteries – NA NA
Initiatives in Proton Membrane Cells – NA NA
Source: Company
Advantage – Integration and Fluoropolymers: We understand from the commentary of MNC

Fluorochemical companies that there is dearth in capacity of Fluoropolymers and very few MNC’s
manufacture the entire basket of Fluorochemicals. Solvay is one such company having presence across
fluoropolymers. We note from our interaction with the management that GFL is evaluating opportunities
in the aforementioned applications and efforts to develop the right grade (very low impurities) are going
on in the R&D.
GFL also has best-in-class integration in place and is taking steps to increase capacity of R142b (doubling
it from ~18,250 tpa to ~36,500 tpa) to ensure availability for VDF, a key monomer used in PVDF, FKM and PPA.
41
SECTOR UPDATE
Chemicals
Solvay has presence across Fluoropolymers, GFL is moving in the same direction
Source: Solvay Investor presentation, B&K Research
FKM, PVDF and PPA will find applications in ICE/BV and EV vehicles
Source: Solvay Investor presentation, B&K Research
42
SECTOR UPDATE
Chemicals
Excerpts from an article describing shortage of high grade PFA used in semi-conductors
https://asia.nikkei.com/Spotlight/The-Big-Story/The-resilience-myth-Fatal-flaws-in-the-push-to-
secure-chip-supply-chains
HFC Refrigerant gases, a low hanging fruit snatched well: GFL started its journey by manufacturing
refrigerant gases and has kept its manufacturing limited to HCFC-22. They did try to manufacture R125 in
that past but shut down operations due to poor demand. However, now with the sunset clause in place
(refrigerant gas capacity addition will not be allowed after December 2023), GFL is expected to put up
a HFC-32 capacity of 10,000 tpa and R-125 capacity of 5,000 tpa. We believe, there is enough room for
another player available to co-exist in the refrigerant gas business and can provide steady cash flows for
at least 10 years, if not more. The company will also line up grades of HFO gases (4th generation refrigerant
gases after HFC’s) beyond FY25E.
No further investments in bulk chemicals and fluorospecialities: The management will focus only
on new-age applications and fluoropolymers. Growth in Caustic soda, R-22, Chloromethanes and
Fluorospecialities (used in agri/pharma) will hit the wall in the mid-term.
Concerns regarding related party transactions put to rest: GFL has doled out advances to its associate
company – Inox Wind which is a little over Rs 9.0 bn for commissioning a 100 MW power plant. The overhang
in our opinion about payback of the capital will continue to exist until the end of the current financial year
(FY23), as the state government of Gujarat is yet to give regulatory approvals for setting the plant. Along with
Rs 9.0 bn of outflow, GFL has issued a corporate guarantee of ~Rs 12.0 bn and will be revoked by FY23. The
management remains confident of receiving the advances and revoking the guarantees.
Outlook and Recommendation
We believe that GFL has identified opportunities in the new-age applications and intends to be an early
mover at the helm of incremental opportunities thereon. The aggression taken by the management is in
the right direction, as GFL has a basket of fluoropolymers to offer already with the best-in-class integration
in place. We upgrade the stock to Buy and roll forward FY25E estimates in the light of recent developments
of their capital expenditures. We expect Sales/EBITDA/PAT CAGR of 26.6/27.5/27.6% over FY22-25E, we keep
the target multiple unchanged to 32x FY25E EPS with a revised target price of Rs 4,766/share (earlier target
price of Rs 3,075).
43
SECTOR UPDATE
Chemicals
Income Statement (Consolidated) Cash Flow Statement (Consolidated)

Period end (Rs mn) Mar 22 Mar 23E Mar 24E Mar 25E Period end (Rs mn) Mar 22 Mar 23E Mar 24E Mar 25E
Net sales 39,536 54,000 65,415 80,164 Profit before tax 10,452 16,336 18,987 21,806
Growth (%) 49.2 36.6 21.1 22.5 Depreciation 2,054 2,411 3,114 3,415
Operating expenses (27,560) (35,453) (43,414) (55,342) Change in working capital (5,299) (783) (3,855) (4,981)
Total tax paid (2,317) (4,112) (4,779) (5,489)
Operating profit 11,976 18,547 22,001 24,822
Others (530) (200) (100) (400)
EBITDA 11,976 18,547 22,001 24,822
Cash flow from oper. (a) 4,360 13,653 13,367 14,352
Growth (%) 91.8 54.9 18.6 12.8
Capital expenditure (6,381) (13,248) (11,427) (15,427)
Depreciation (2,054) (2,411) (3,114) (3,415)
Change in investments 1,628 (60) 0 0
Other income 1,314 900 600 900
Others 1,340 900 600 2,900
EBIT 11,236 17,036 19,487 22,306 Cash flow from inv. (b) (3,413) (12,408) (10,827) (12,527)
Finance cost (784) (700) (500) (500) Free cash flow (a+b) 947 1,244 2,540 1,825
Profit before tax 10,452 16,336 18,987 21,806 Debt raised/(repaid) 1,423 0 1,000 (2,000)
Tax (current + deferred) (2,693) (4,112) (4,779) (5,489) Dividend (incl. tax) (771) (1,028) (1,028) (1,028)
Profit/(Loss) for the period 7,759 12,224 14,208 16,318 Others (287) (1,172) (450) (450)
P/L of Associates, Min Int, Pref Div 115 50 50 50 Cash flow from fin. (c) 365 (2,200) (478) (3,478)
Reported Profit / (Loss) 7,874 12,274 14,258 16,368 Net chg in cash (a+b+c) 1,312 (955) 2,062 (1,653)
Adjusted net profit 7,874 12,274 14,258 16,368

Growth (%) 100.4 55.9 16.2 14.8
Key Ratios (Consolidated)
Period end (%) Mar 22 Mar 23E Mar 24E Mar 25E
Balance Sheet (Consolidated) Adjusted EPS (Rs) 71.6 111.7 129.7 148.9
Period end (Rs mn) Mar 22 Mar 23E Mar 24E Mar 25E Growth 100.4 55.9 16.2 14.8
CEPS (Rs) 90.3 133.6 158.1 180.0
Share capital 110 110 110 110
Book NAV/share (Rs) 387.2 484.7 605.0 744.6
Reserves & surplus 42,442 53,154 66,384 81,723
Dividend/share (Rs) 6.0 8.0 8.0 8.0
Shareholders’ funds 42,551 53,264 66,494 81,833
Dividend payout ratio 9.8 8.4 7.2 6.3
Minority interest and others (248) (248) (248) (248)
EBITDA margin 30.3 34.3 33.6 31.0
Non-current liabilities 7,414 7,349 7,349 7,349 EBIT margin 28.4 31.5 29.8 27.8
Long-term borrowings 4,354 4,354 4,354 4,354 Tax rate 25.8 25.2 25.2 25.2
Other non-current liabilities 3,059 2,995 2,995 2,995 RoCE 19.9 25.7 24.8 24.1
Current liabilities 19,064 20,037 22,328 21,997 Total debt/Equity (x) 0.4 0.3 0.2 0.2
ST borrowings, Curr maturity 11,173 11,173 12,173 10,173 Net debt/Equity (x) 0.3 0.3 0.2 0.2
Other current liabilities 7,891 8,864 10,156 11,824 Du Pont Analysis – RoE
Total (Equity and Liab.) 68,781 80,402 95,922 110,930 Net margin 19.9 22.7 21.8 20.4
Non-current assets 44,399 55,296 63,610 73,622 Asset turnover (x) 0.6 0.7 0.7 0.8
Fixed assets (Net block) 31,404 42,241 50,554 62,567 Leverage factor (x) 1.7 1.6 1.5 1.4
Non-current Investments 539 600 600 600 Return on equity 20.3 25.6 23.8 22.1
Long-term loans and advances 4 4 4 4

Other non-current assets 12,452 12,452 12,452 10,452 Valuations (Consolidated)
Current assets 24,381 25,105 32,313 37,309 Period end (x) Mar 22 Mar 23E Mar 24E Mar 25E
Cash & current investment 1,718 762 2,824 1,171 PER 35.5 35.4 30.4 26.5
Other current assets 22,664 24,343 29,489 36,138 PCE 28.1 29.6 25.0 21.9
Total (Assets) 68,781 80,402 95,922 110,930 Price/Book 6.6 8.2 6.5 5.3
Total debt 15,527 15,527 16,527 14,527 Yield (%) 0.2 0.2 0.2 0.2
Capital employed 60,890 71,537 85,767 99,107 EV/EBITDA 24.5 24.2 20.4 18.0
44
Global companies – Peer valuation
Chemicals
SECTOR UPDATE
Company Currency CMP Revenue (bn) EBITDA (bn) PAT (bn)
FY22E FY23E FY24E FY25E FY22E FY23E FY24E FY25E FY22E FY23E FY24E FY25E
Covestro EUR 29 17.9 16.7 17.2 17.8 1.9 1.7 2.0 2.3 0.6 0.5 0.7 0.9
Kureha JPY 8,880 168.3 195.5 201.1 212.4 38.2 41.4 44.4 14.2 18.6 21.1 23.1
Basf EUR 40 87.0 81.8 82.8 86.0 11.0 9.6 10.3 11.4 5.8 4.2 4.7 5.0
Bayer EUR 48 49.9 50.5 51.6 52.3 13.4 13.4 14.1 14.4 5.7 8.5 9.3 9.8
Eastman USD 71 10.6 10.6 10.8 11.3 2.0 2.1 2.2 2.3 1.1 1.2 1.2 1.3
Evonik EUR 17 17.7 17.0 17.3 18.4 2.6 2.4 2.6 2.8 1.0 0.9 1.0 1.1
FMC USD 106 5.6 5.9 6.2 6.5 1.4 1.5 1.7 1.7 0.9 1.0 1.1 1.2
Huntsman USD 25 8.8 8.2 8.3 8.7 1.4 1.2 1.3 1.3 0.8 0.7 0.7 0.8
Lyondell Basell USD 75 54.1 50.6 40.5 42.7 8.0 7.1 6.8 7.6 5.3 4.5 4.2 5.4
Dow USD 43.9 57.9 54.4 55.0 56.7 10.4 8.9 9.7 10.0 5.2 4.1 0.5 5.0
Nufarm AUD 5.0 3.6 3.5 3.6 3.8 4.4 4.3 4.6 5.7 1.3 1.3 1.4 1.9
Company Currency EPS P/E (x)

FY22E FY23E FY24E FY25E FY22E FY23E FY24E FY25E
Covestro EUR 3.4 2.5 3.8 4.4 8.7 11.5 7.7 6.6
45
Kureha JPY 725.7 953.5 1,079.0 1,180.0 12.2 9.3 8.2 7.5
Basf EUR 6.4 5.0 5.6 5.9 6.2 7.9 7.1 6.7
Bayer EUR 7.8 8.2 8.6 9.0 6.2 5.9 5.6 5.4
Eastman USD 9.0 9.6 10.7 11.3 7.9 7.3 6.6 6.3
Evonik EUR 2.3 2.1 2.3 2.6 7.4 8.4 7.6 6.8
FMC USD 7.4 8.4 9.3 9.8 14.3 12.6 11.4 10.9
Huntsman USD 4.0 3.7 4.0 4.3 6.2 6.7 6.1 5.8
Lyondell Basell USD 15.9 14.1 13.1 15.4 4.7 5.3 5.7 4.9
Dow USD 7.3 5.9 6.5 7.3 6.0 7.4 6.8 6.0
Nufarm AUD 0.3 0.3 0.3 0.5 15.9 16.3 14.2 10.6
Chemicals – Peer valuation
Chemicals
SECTOR UPDATE
Company Rating CMP TP Mkt. Cap Net sales (Rs mn) EBITDA (Rs mn) Adjusted PAT (Rs mn)
(Rs) (Rs) (Rs mn) FY21 FY22 FY23E FY24E FY21 FY22 FY23E FY24E FY21 FY22 FY23E FY24E
Aarti Industries Hold 739 910 257,493 45,061 63,690 78,078 90,243 9,815 13,178 14,699 19,961 5,235 8,035 7,448 11,005
Atul BUY 8,924 10,260 264,864 36,784 50,809 59,173 66,934 9,171 9,114 10,503 12,876 6,558 6,043 7,355 9,068
BASF India BUY 2,993 4,405 129,567 95,432 130,822 140,523 149,173 6,328 9,114 9,782 10,474 2,471 5,850 5,997 6,357
Clean Science and Tech. Hold 1,704 1,900 180,997 5,069 6,849 9,303 11,158 2,590 2,999 4,275 5,327 1,984 2,285 3,193 3,958
Galaxy Surfactants Hold 2,986 3,125 105,854 27,841 36,857 38,711 39,059 4,488 4,007 4,677 4,922 3,021 2,628 3,022 3,165
Gujarat Fluorochemicals BUY 3,987 4,766 438,171 26,505 39,536 54,000 65,415 6,246 11,976 18,547 22,001 3,929 7,874 12,274 14,258
Navin Fluorine Int’l BUY 4,465 4,408 220,915 11,794 14,534 20,656 26,946 3,093 3,548 5,186 7,487 2,420 2,625 3,764 5,451
Neogen Chemicals Hold 1,495 1,612 34,885 3,364 4,873 6,470 8,861 644 866 1,163 1,678 313 446 614 987
SRF BUY 2,479 2,844 734,338 84,000 124,337 142,799 162,210 21,452 31,032 37,267 42,441 11,979 18,889 23,249 26,271
Sudarshan Chemical Hold 420 467 29,075 18,443 21,833 24,338 27,215 2,878 2,748 2,686 3,871 1,411 1,300 1,060 1,796
Company Adjusted EPS (Rs) PER (x) RoE (%) RoCE (%)
FY21 FY22 FY23E FY24E FY21 FY22 FY23E FY24E FY21 FY22 FY23E FY24E FY21 FY22 FY23E FY24E
Aarti Industries 15.0 22.2 20.5 30.4 49.2 33.3 36.0 24.3 16.2 17.1 11.9 15.4 11.8 13.0 11.6 14.5
Atul 221.6 204.2 248.6 306.5 40.3 43.7 35.9 29.1 18.8 14.6 14.6 15.1 23.3 17.8 16.7 17.8
BASF India 57.1 135.1 138.5 146.8 52.4 22.1 21.6 20.4 16.7 28.6 21.6 18.0 21.1 32.1 26.0 22.0
Clean Science and Tech. 18.7 21.5 30.1 37.3 91.2 79.2 56.7 45.7 45.0 34.9 34.4 30.8 58.6 45.3 45.0 40.5
46
Galaxy Surfactants 85.2 74.1 85.2 89.3 35.0 40.3 35.0 33.4 25.5 18.3 18.0 16.6 25.4 19.0 18.8 17.8
Gujarat Fluorochemicals 35.8 71.6 111.7 129.7 111.5 55.6 35.7 30.7 10.9 20.3 25.6 23.8 11.9 19.9 25.7 24.8
Navin Fluorine Int’l 48.9 53.0 76.1 110.2 91.3 84.3 58.7 40.5 15.9 15.1 19.0 23.2 21.8 18.7 22.1 25.6
Neogen Chemicals 13.4 17.9 24.6 39.6 111.3 83.5 60.7 37.8 18.5 14.3 13.2 18.4 16.2 14.3 14.4 18.7
SRF 40.4 63.7 78.5 88.7 61.3 38.9 31.6 28.0 19.9 24.5 24.6 23.1 16.9 22.3 22.8 22.3
Sudarshan Chemical 20.4 18.8 15.3 25.9 20.6 22.4 27.4 16.2 20.8 16.4 12.3 18.7 16.3 12.1 8.7 12.9
Company Net debt (Rs mn) Net debt/EBITDA (x) Price/Book Value (x) EV/EBITDA (x)
FY21 FY22 FY23E FY24E FY21 FY22 FY23E FY24E FY21 FY22 FY23E FY24E FY21 FY22 FY23E FY24E
Aarti Industries 24,022 24,174 28,068 31,074 2.4 1.8 1.9 1.6 7.4 4.5 4.0 3.5 28.7 21.4 19.4 14.5
Atul (9,618) (2,994) (11,916) (13,965) (1.0) (0.3) (1.1) (1.1) 6.9 6.0 4.7 4.1 27.8 28.7 24.1 19.5
BASF India (214) 696 1,072 (3,521) (0.0) 0.1 0.1 (0.3) 7.4 5.5 4.0 3.4 20.4 14.3 13.4 12.0
Clean Science and Tech. (2,475) (2,655) (5,322) (8,429) (1.0) (0.9) (1.2) (1.6) 33.5 23.6 16.6 12.2 68.9 59.5 41.1 32.4
Galaxy Surfactants 1,261 2,949 2,551 1,730 0.3 0.7 0.5 0.4 8.1 6.7 5.9 5.2 23.9 27.2 23.2 21.9
Gujarat Fluorochemicals 12,316 13,810 14,765 13,703 2.0 1.2 0.8 0.6 12.5 10.3 8.2 6.6 72.1 37.7 24.4 20.5
Navin Fluorine Int’l (6,259) (956) 1,355 1,834 (2.0) (0.3) 0.3 0.2 13.5 12.0 10.4 8.6 69.4 62.0 42.9 29.8
Neogen Chemicals 2,007 1,525 2,152 2,425 3.1 1.8 1.9 1.4 19.1 8.5 7.6 6.4 57.3 42.0 31.9 22.2
SRF 30,159 27,633 36,425 37,602 1.4 0.9 1.0 0.9 10.7 8.6 7.1 5.9 35.6 24.6 20.7 18.2
Sudarshan Chemical 5,233 7,834 9,446 8,918 1.8 2.9 3.5 2.3 3.9 3.5 3.3 2.8 11.9 13.4 14.3 9.8
*Upgrade to BUY
SECTOR UPDATE
Chemicals
B&K Universe Profile – by AMFI Definition

140
128
120
No. of companies
100 84
74
80
60
40
20
0
Top 100 Next 150 Residual
(Large Cap) (Mid Cap) (Small Cap)
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LARGE CAP (Market Cap > USD 2 bn) MID & SMALL CAP (Market Cap < USD 2 bn)
BUY >+15% >+20%
HOLD +15% to -10 % +20% to -15 %
SELL <-10% <-15%
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47
SECTOR UPDATE
Chemicals
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SECTOR UPDATE

Archit Joshi Viral Shah

Demystifying “Europe plus 1” opportunities

Our framework for identifying winners due to EU gas crises

Source: B&K Research

Total capacity versus Europe capacity

(’000 tonne) Soda Ash Caustic Soda Phenol PTFE TDI

Germany power baseload forward contract in EUR per kWh

Caustic Soda – Assumptions Caustic Soda – P&L (Rs mn)

Sensitivity of EBITDA to power cost and ECU realisations

EBITDA (Rs mn) Change in ECU realisations (Rs)

-3 1,329 2,116 2,510 2,904 3,297 3,691 4,479

0 793 1,581 1,975 2,368 2,762 3,156 3,943

Soda Ash – Assumptions Soda Ash – P&L (Rs mn)

Sensitivity of EBITDA to power cost and spreads of Soda Ash

EBITDA (Rs mn) Change in spreads of Soda Ash (Rs/Tn)

-3 2,015 4,515 6,515 7,015 7,515 9,515 12,015

0 (235) 2,265 4,265 4,765 5,265 7,265 9,765

3) Phenol and Acetone

Phenol spreads – Over the years Phenol spreads – One-year trend

Phenol Spreads Phenol Spreads

Source: Bloomberg, B&K Research

Phenol Acetone – Assumptions Phenol Acetone – P&L (Rs mn)

Sensitivity of EBITDA to power cost and Phenol spreads

EBITDA (Rs mn) Change in Phenol spreads (Rs/tonne)

-3 3,642 7,642 10,642 11,642 12,642 15,642 19,642

0 642 4,642 7,642 8,642 9,642 12,642 16,642

TDI – Toluene spreads

TDI Prices (INR/tn) TDI Spreads

Source: B&K Research

TDI Unit – Assumptions TDI Unit – P&L (Rs mn)

Capex 11,000 (Rs mn) Gross profit 6,579

Interest cost 7 (%) Gross profit (%) 51.2

Depreciation rate 5 (%) Total Power cost 1,064

Sensitivity of EBITDA to power cost and TDI spreads

EBITDA (Rs mn) Change in TDI spreads (Rs/kg)

-3 (1,195) 1,305 2,805 3,805 4,805 6,305 8,805

0 (1,485) 1,015 2,515 3,515 4,515 6,015 8,515

Source: B&K Research

Acetic Acid Prices and Spreads

Acetic Acid Prices (Rs/kg) Acetic Acid Spread (Rs/kg)

Source: B&K Research

Interest cost 7 (%) Gross profit (%) 51.9

Depreciation 5 (%) Total Power cost 196

Sensitivity of EBITDA to power cost and Acetic Acid spreads

-3 9 1,009 1,509 2,009 2,509 3,009 4,009

-1 (27) 973 1,473 1,973 2,473 2,973 3,973

PTFE Prices and Spreads

PTFE (Rs/kg) Spreads (Rs/kg)

Source: B&K Research

PTFE Unit – Assumptions PTFE Unit – P&L (Rs mn)

Capacity – R22 10,000 TPA Gross profit 1,185 (Rs mn)

Power 5400 (kWh/Tn) EBITDA 37.2 (%)

Sensitivity of EBITDA to power cost and COGS

-3 282 682 1,082 1,482 1,882 2,282 2,682

-1 239 639 1,039 1,439 1,839 2,239 2,639

Fluoropolymers – The desirable plastics!

Teflon PCB of Dupont co-operation PTFE insulation in co-axial cables

Source: Dupont website

PVDF battery binder of Solvay PVDF in Solar back-pane of Arkema