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Chemical MSMEs to log robust growth, margins stressed: CRISIL SME Tracker

MSMEs' double-digit revenue growth will be powered by improved price realisation

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MSMEs | Chemicals | Agrochemicals

Business Standard 

Premium valuations for specialty chemicals to sustain on multiple tailwinds

CRISIL Research projects the chemical industry’s revenue to rise 14-17 per cent year-on-year (YoY) in the current fiscal year (FY23), driven by better performance by specialty chemicals, followed by polymers and . Micro, small and medium enterprises (MSMEs) in the chemical industry are projected to grow 12-15 per cent.

MSMEs’ profitability margins are likely to be more constrained than those of large players, owing to rising material cost, higher working capital requirements, escalated freight cost and limited ability to pass on higher costs to customers. Making up 28-30 per cent of the sector, mainly cater to dyes and pigments, and certain niche specialty .

MSMEs’ double-digit revenue growth will be powered by improved price realisation.

The specialty chemical segment is expected to see better growth than polymers and due to growth in end-use sectors such as textile, real estate, construction and packaged foods. India’s exports are driven by changes at the global level, with a focus on the “China plus one” strategy, and environmental norms introduced by the Chinese government as well as the European Union.

Chemical MSMEs to log robust growth, margins stressed: CRISIL SME Tracker

Raw material and fuel costs form a major part of MSMEs’ cost structure in the chemical industry. In FY22, raw material and fuel costs rose 12-15 per cent YoY on average (see chart), but the cost pass-through to customers was limited. To counter the continued inflationary environment and preserve margins this fiscal, are steering towards lean inventory management and renewal of new contracts on an ex-factory basis, to avoid the impact of fluctuating freight cost and higher working capital requirements.

The global geopolitical situation and the resultant inflationary environment, especially for crude oil and other key commodities, will be the main monitorable in FY23.

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First Published: Tue, April 26 2022. 01:54 IST
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