The chemical sector in India is set to experience robust growth in the coming years. There’s no better time to capitalise on this opportunity for the top chemical companies in India. Major growth drivers of this revolution include growing domestic consumption, government initiatives and policies, technological advancements, foreign direct investment (FDI), availability of raw materials, and sustainability and green chemistry trends.
According to data from IBEF, the current market size of the Chemicals & Petrochemicals sector in India is around $215 billion. This is expected to grow to $300 billion by 2025 and $1 trillion by 2040. India is already the 6th largest producer of chemicals in the world and the 3rd largest in Asia. The sector contributes 7% to India’s GDP.
Over the past year, most chemical companies in India have seen their stock prices rise by up to 30%. This trend highlights the sector’s impressive growth and potential. The sector’s outperformance has exceeded the expectations of shareholders and market enthusiasts alike. Let’s take a look at the top chemical companies in India that are leading the industry with their innovations.
Industry Scenario – Indian Chemical Sector
The chemicals industry in India includes more than 80,000 commercial products. In 2021-22, the market size was US$ 232.6 billion. According to Invest India, India ranks 11th globally for chemical exports (excluding pharmaceuticals) and 6th for chemical imports (excluding pharmaceuticals). In 2021-22, chemical exports (excluding pharmaceuticals and fertilizers) comprised 11.7% of total exports. This was down from 12.9% in 2020-21. By September 2022, the contribution was 10.8% for the 2022-23 period.
A CRISIL report shows that India’s speciality chemicals market will grow faster than China’s. The market share is expected to increase from 3-4% in 2021 to 6% by 2026.
On September 14, 2023, Prime Minister Narendra Modi laid the foundation stone for development projects in Bina, Madhya Pradesh. These projects are worth more than Rs. 50,700 crore (US$ 6.11 billion). The Indian government supports the industry through research and development initiatives. They are reducing basic customs duties on several imported products and promoting the ‘Make in India’ campaign.
Also explore the Tourism Stocks In India: Emerging Trends From Taj Mahal To BSE
Sector Trend – Top Chemical Companies in India
According to data from IBEF, chemicals and petrochemicals demand in India is expected to nearly triple, reaching US$ 1 trillion by 2040. To boost domestic production, reduce imports, and attract investments, the government has set up a 2034 vision for the sector. They plan to implement a production-linked incentive (PLI) system, offering 10-20% output incentives for the agrochemical sector.
Additionally, four Petroleum, Chemicals, and Petrochemical Investment Regions (PCPIRs) have been established as investment hubs. The Gujarat Infrastructure Development Corporation (GIDC) has invested US$ 2.09 billion (₹17,317 crore) in PCPIR infrastructure. Under the new PCPIR Policy 2020-35, the government targets investments of ₹10 lakh crore (US$ 142 billion) by 2025, ₹15 lakh crore (US$ 213 billion) by 2030, and ₹20 lakh crore (US$ 284 billion) by 2035.
In the Interim Budget 2024-25, they allocated ₹192.21 crore (US$ 23.13 million) to the Department of Chemicals and Petrochemicals. PLI schemes for Bulk Drug Parks have a budget of ₹1,629 crore (US$ 213.81 million). The government also plans to open 25,000 Jan Aushadhi Kendras for affordable medicines.
Between April 2000 and December 2023, FDI inflows into the chemicals sector (fertilizers excluded) totalled US$ 22.07 billion. By 2025, they estimate an investment of ₹8 lakh crore (US$ 107.38 billion) in the sector.
Top Chemical Companies in India
Among the top chemical companies in India, the following are the innovators in the industry. Himadri Speciality Chemical Ltd, Aether Industries Ltd, PCBL Ltd, GHCL Ltd, NOCIL Ltd, Castrol India Ltd, Aarti Industries Ltd, Gulf Oil Lubricants India Ltd, UPL, TATA Chemical.
Live Data as of 11th June 2024.
Let’s Explore Some Of The Top Chemical Companies in India
Himadri Speciality Chemical Ltd
The company is a Mid-cap with a market capitalization of ₹17,494 crores. As the only producer of advanced carbon material in India, HSCL holds the top spot in the rankings for coal pitch manufacturing. It is also India’s biggest producer of SNF and naphthalene.
The company’s profitability is strong. ROCE is 19.1% and ROE is 15.7%, indicating efficient use of capital and good returns on equity. The Price-to-earnings (P/E) Ratio is 42.75, lower than the sector’s P/E of 56.46. This suggests the stock might be undervalued. The Earnings Per Share (EPS) is growing, with a TTM EPS of ₹8.34 per share, showing consistent earnings.
With a debt-to-equity ratio of 0.2, the business is well-financed, with equity covering the majority of its assets. This year’s dividend is ₹0.50, with a yield of 0.14%, offering modest shareholder returns. Promoter shareholding increased by 5.5% in the last quarter to 50.29%, showing promoter confidence.
Annual revenue rose 0.66% last year to ₹4,227.41 crores, indicating slight sales growth. The stock price increased by 175.39%, outperforming its sector by 153.78%. This significant rise shows strong market confidence and robust stock performance.
PCBL Ltd
The company is a Mid-cap with a market capitalization of ₹9,293 crores. As part of the RP-Sanjiv Goenka Group, it produces Carbon Black and generates electricity for captive consumption and external sales.
PCBL Ltd shows strong profitability, with an ROCE of 14.2% and an ROE of 16.2%. These figures indicate efficient use of capital and strong returns on equity. The Price-to-earnings (P/E) Ratio is 18.97, lower than the sector’s P/E of 56.46. This suggests the stock might be undervalued. The earnings-per-share (EPS) is positive and growing, with a TTM EPS of ₹13.0 per share, indicating consistent earnings growth.
The debt-to-equity ratio is 1.48, which is higher than 1. This suggests that debt is the main source of funding for the company’s assets. This year’s dividend is ₹5.50, with a yield of 2.24%, offering solid returns to shareholders. Promoter shareholding remained steady in the last quarter at 51.41%, reflecting consistent confidence from promoters.
Annual revenue rose by 11.04% last year to ₹6,456.8 crores, indicating strong sales growth. The stock price increased by 75.98%, outperforming its sector by 54.42%. This significant rise shows strong market confidence and robust stock performance.
GHCL Ltd
The next company on the list of top chemical companies in India is GHCL Ltd. This Mid-cap company has a market capitalization of ₹5,046 crores. GHCL was incorporated in 1983 and manages its trading, consumer products, textile, and chemical divisions. It also produces commodities products.
GHCL boasts robust profitability ratios, with an ROCE of 21.2% and an ROE of 17.8%, indicating efficient use of capital and strong returns on equity. The Price-to-earnings (P/E) Ratio is 6.34, much lower than the sector’s P/E of 56.46, suggesting that the stock might be undervalued. The Earnings Per Share (EPS) is positive and growing, with an outstanding TTM EPS of ₹82.9 per share.
A strong financial indicator, the company’s debt-to-equity ratio of 0.07 (less than 1) indicates that equity is the primary source of financing for its assets. This year’s dividend is ₹17.50, with a yield of 2.26%, providing solid returns to shareholders.
However, annual revenue fell by 23.68% last year to ₹3,498.82 crores, indicating a decline in sales. Despite this, the stock price rose by 7.16%, though it underperformed its sector by 14.4%. This modest increase still shows some market confidence, despite the challenges in revenue.
Castrol India Ltd
Castrol India Ltd is a Large-cap company with a market capitalisation of ₹20,000 crores. The company focuses on manufacturing and marketing automotive and industrial lubricants, along with related services.
Castrol India boasts outstanding profitability ratios, with an ROCE of 56.7% and an ROE of 42.5%, highlighting efficient use of capital and excellent returns on equity. The Price-to-earnings (P/E) Ratio is 22.79, slightly higher than the sector’s P/E of 21.85, indicating a premium valuation. The Earnings Per Share (EPS) has consistently grown over the past five years, with a TTM EPS of ₹8.88 per share, showing steady earnings growth.
The business is debt-free, which is a good financial indicator, and has a zero debt-to-equity ratio.
This year’s dividend is ₹7.50, with a yield of 3.71%, offering attractive returns to shareholders. Promoter shareholding remained stable in the last quarter at 51%, showing consistent promoter confidence.
Annual revenue rose by 6.53% last year to ₹5,157.76 crores, indicating solid sales growth. The stock price increased by 79.26%, outperforming its sector by 30.03%. This significant rise reflects strong market confidence and robust stock performance.
Tata Chemicals Ltd
The final company in our discussion of top chemical companies in India is TATA Chemicals. This flagship company of the TATA Group holds a large-cap title with a market capitalisation of ₹28,247 crores. It produces and ships speciality and basic chemistry products.
TATA Chemicals shows modest profitability ratios, with an ROCE of 7.81% and an ROE of 2.32%. The Price-to-Earnings (P/E) Ratio is 105.39, higher than the sector’s P/E of 56.46, indicating a premium valuation. The Earnings Per Share (EPS) is highly fluctuating and declining but remains positive, with a TTM EPS of ₹10.5 per share.
The debt-equity ratio is 0.25, which is less than 1, indicating that the company’s assets are mainly financed through equity, a healthy sign. This year’s dividend is ₹15, with a yield of 1.38%, providing modest returns to shareholders. Promoter shareholding remained stable in the last quarter at 37.98%, reflecting consistent promoter confidence.
Annual revenue fell by 7.64% last year to ₹15,707 crores, indicating a decline in sales. Despite this, the stock price rose by 12.44%, although it underperformed its sector by 9.09%. This moderate increase still shows some market confidence, despite the challenges in revenue growth.
Summarising The Top Chemical Companies in India
| Company | Current Price (In ₹) | Market Cap (In Crores) | ROE | P/E Ratio | 3-year Returns | 1-year Return |
| Himadri Speciality Chemical Ltd | ₹ 393 | ₹ 19,376 | 15.7 % | 47.3 | 92% | 200% |
| Aether Industries Ltd | ₹ 865 | ₹ 11,464 | 5.61 % | 123 | - | -26% |
| PCBL Ltd | ₹ 260 | ₹ 9,827 | 16.2 % | 20.0 | 32% | 66% |
| GHCL Ltd | ₹ 559 | ₹ 5,349 | 17.3 % | 8.91 | 28% | 8% |
| NOCIL Ltd | ₹ 298 | ₹ 4,973 | 8.18 % | 37.3 | 13% | 39% |
| Castrol India Ltd | ₹ 211 | ₹ 20,870 | 42.5 % | 23.8 | 13% | 73% |
| Aarti Industries Ltd | ₹ 707 | ₹ 25,638 | 8.15 % | 61.6 | -4% | 36% |
| Gulf Oil Lubricants India Ltd | ₹ 1,016 | ₹ 4,998 | 24.9 % | 16.2 | 13% | 119% |
| UPL Ltd | ₹ 570 | ₹ 42,807 | -3.82 % | - | -11% | -16% |
| Tata Chemicals Ltd | ₹ 1,133 | ₹ 28,855 | 2.32 % | 59.2 | 17% | 15% |
Data as of 21st June 2024
Challenges for India’s Chemical Sector
An article published by McKinsey & Company highlighted that “India’s chemicals industry has been a global outperformer in demand growth and shareholder wealth creation for a decade. Its strong starting point could make it the next chemicals manufacturing hub.” Considering the current scenario in the Indian market, this prediction seems plausible. However, the chemical sector in India is also facing significant challenges. These include:
High Raw Material Costs– The chemical sector faces high raw material costs. Fluctuating prices for essential inputs like crude oil impact production expenses and profit margins.
Stringent Environmental Regulations– Strict environmental regulations pose significant challenges. Companies must invest heavily in sustainable practices and technologies to comply with these regulations.
Competition from Global Players– The industry faces stiff competition from global chemical companies. Indian firms must constantly innovate and improve efficiency to stay competitive.
Infrastructure Bottlenecks– Infrastructure bottlenecks, such as inadequate logistics and supply chain networks, hinder growth. Improving infrastructure is crucial for the sector’s expansion.
Skilled Workforce Shortage– There is a shortage of skilled workforce in the chemical industry. Companies need to invest in training and development programs to build a competent workforce.
Regulatory Hurdles– Navigating complex regulatory frameworks can be challenging. Ensuring compliance with various national and international standards is essential for smooth operations.
Path Ahead for India’s Chemical Sector
Investing in domestic feedstock production, streamlining regulatory approvals, and enhancing R&D capabilities are crucial. Adopting sustainable practices, strengthening infrastructure, and encouraging technological adoption will support growth. Expanding global reach and continued government support through favourable policies will further solidify India’s position as a leading chemical manufacturing hub.
CONCLUSION
Summing up the article on chemical companies in India, we explored how the ever-changing scenario of the Indian economy towards growth and development is benefiting various sectors, including the chemical sector. Government initiatives and policies, increased FDIs, budget allocations, and an ambitious vision have created a conducive environment for the development of chemical companies in India. Last year, many chemical stocks rose by as much as 30%, boosting the confidence of existing investors and attracting new ones. Factors such as the shift in domestic demand, the China factor, the PLI scheme, PCPIR infrastructure, and the Make in India initiative have significantly contributed to this growth. Despite numerous challenges, continued government support through favourable policies and global expansion will further solidify India’s position as a leading chemical manufacturing hub.
That’s all for today’s post. Hope you get some valuable insights from here.
Happy reading!
Disclaimer
The blog is meant for informational purposes and serves the general analysis of the stocks. The contents provided here are based on careful research and analysis utilizing the fundamental and technical indicators over a while. The post does not consist of any direct recommendation about Investing or trading in the securities market. Thorough research and careful consideration are necessary for individuals to fulfil their responsibility in making financial decisions. Seeking professional advice before making any financial decisions is always advisable.
