Adani Wilmar looks to break India's high-end castor oil derivatives jinx

Most players still find high technology cost a hurdle in pursuing high-end value-added derivatives

With players such as Adani Wilmar and Royal Castor Products engaging in second- and third-generation castor seed and castor oil derivatives production and exports, India's absence from the global market for such products is likely to end.

While India is the market leader in production and supply of castor seed and castor oil, the country is nowhere in the high-end value-added castor oil applications market or derivatives production. According to industry players and experts, high technology cost has been a major reason why the country is unable to capture a large share of the global derivatives market. 

"In the derivative segment, there is a huge potential for India, as we are the largest suppliers of castor oil in the world and the country contributes about 90 per cent of global demand. To catch the opportunities, we have to clear our vision and focus more on marketing also," said a top official in trading at Adani Wilmar Limited.

Adani Wilmar has close to a 30 per cent market share in derivative exports from India. The company is also in the process of producing second and third generation applications of castor oil derivatives.

Industry body Solvent Extractors Association of India (SEA) is also trying to push derivatives production in India, despite the cost hurdle.

B V Mehta, executive director of SEA, said, "Cost of technology to produce high value derivative products is unaffordable for majority of players. This has restricted India to move forward in this segment."

On an average, India is producing 1.5 million tonnes of castor seed and exports 500,000 tonnes of castor oil every year, whereas the country’s derivative business is limited to just 100,000 tonnes. However, according to industry leaders, with growing emphasis by existing players into value addition, India's derivative business could grow to 300,000 tonnes in the future.

According to the Adani Wilmar official, players are being forced to look beyond India for such high-end derivatives. "Indian players must develop marketing set up to capture opportunity in high-end derivatives. There is no market in India and that's why we have to focus on the international front," the official stated.

Though there are vast opportunities, Indian companies have not yet grown in this segment as production and technology of second and third generation castor oil derivatives applications are quite costly, which limits the trade to castor oil exports alone.

"Internationally, there are several research projects being done on this. We have to learn from it. We have potential to grow in this but we need to be backed by high-end research," said Haresh Vyas, managing director of Royal Castor Products Limited.

The global castor oil and derivatives market is expected to reach $1.81 billion by 2020. Growth of key end-use industries, including biodiesel, lubricants and cosmetics, is expected to drive the global castor oil and derivatives market. Volatile crude oil prices have prompted a strong shift towards substitution of conventional fuels with bio fuels, which is also expected to have a positive influence on the market growth.

Growing demand for bio ingredient-based cosmetics is also expected to remain a key driver for this segment. Cosmetics and pharmaceuticals are also expected to witness the highest growth rate over the next six years. The segment is expected to grow at an estimated compound annual growth rate of 4.7 per cent from 2014 to 2020.