Executive summary:

• Chemicals is a $180-200Bn market in India with $32 Bn in Specialty Chemicals
  • ~45% of specialty chemical production is exported today
  • Publicly listed specialty chemical companies operate at 30-50% GM, and trade at xx P/E
  • Specialty chemicals is one of the fastest growing market across all B2B segments with 15%+ YoY growth in some sub-segments, largely export led
• Of the 15Bn export market, more than 35% of the market is served by fragmented supplier base given market has a long tail of suppliers (5000+ manufacturers) for different use cases
• China+n is a strong tailwind and unlike verticals like textile where countries like Vietnam and Bangladesh have been able to capture significant new demand. Chemicals in India have advantage of production capability
• Market characteristics make export focused specialty chemicals great play for aggregation of supply and demand on both ends given high number of SKUs & fragmented manufacturing base. On top, large TAM, commoditised products, export tailwinds and presence of multiple listed companies give great comfort around path to IPO unlike any other B2B vertical
• Companies that can solve for international buyer demand can win the market, given India has supply advantages. Founders with deep international connects and credentials will have advantage in this
• Existing startups have found it tough to crack market because they fell in trap of solving for supply first

Chemicals are one of the most pervasive industrial RMs with products that have end-use applications in all types of manufacturing goods such as agriculture, food, textile, minerals, healthcare etc. In the last decade, the Indian chemical industry has outperformed most other upstream and downstream industries both locally and globally, in terms of growth and shareholder value creation. A key driver for this growth has been the specialty chemical segment which is expected to drive further growth due to its high margins, increased revenue multiples and export led growth in revenues

This memo will focus on evaluating opportunities in the Indian specialty chemical market especially with the the goal of building venture scale business. The memo is divided into 3 parts with individual sections covering the market overview, business models, gaps, opportunities and competition:

Part 1 - Market overview, trade flows and future outlook

Part 2 - Market structure, success factors and investment opportunities

Part 3 - Competition & Final takeaways