A revival in domestic demand and continuing, robust exports will spur a 50% on-year increase in the capital expenditure (capex) of specialty chemicals manufacturers this fiscal to ₹6,000-6,200 crore, according to Crisil ratings.

The significant rise in domestic demand and exports have propped up the prospects of the speciality chemical manufacturers. The strong surge in their profitability has continued to be led by the regular rise in realisations too. Various disruptions in supplies due to hurricanes in the US at the start of the year, leading to lower supplies from American manufacturing hubs, followed by Suez Canal blockage and later the pandemic impacting supplies, all have led to a regular rise in speciality chemical prices. The regular rise in crude prices has further led to rise in prices. The Indian manufacturers also have benefitted as international companies looking at reducing dependence on China are turning to Indian manufacturers for their supplies.

“Revenue growth is likely to improve sharply to 19-20% on-year this fiscal, compared with 9-10% in the pandemic-marred last fiscal, driven by a recovery in domestic demand, higher realisations owing to rising crude oil prices, and better exports. Among other reasons are the environment-focus of the western nations that is leading to production increasingly getting outsourced to India. India also remains an efficient and cost-effective alternative to China," according to Gautam Shahi, director, Crisil Ratings.

Indian manufacturers have logged in a compound annual growth rate (CAGR) of 11% in revenue between fiscals 2015 and 2021, increasing India’s share of the global specialty chemicals market to 4% from 3%, according to the Crisil report.

With this, the rise in capex should not come as a surprise. Notably, the capex will be well above pre-covid levels. The suggested capex is well above the ₹5,000 crore spent before the pandemic in fiscal 2020 as per Crisil data