Indian chemical industry holds a favourable position

Pulcra Chemicals is a global company with outstanding engineering capabilities and unique processing knowledge. The company has over 140 years of experience in the production of innovative specialty chemicals for the fibre, textile and leather industries. Working in specialised fields, Pulcra focuses on innovation, health, safety, sustainability and regulatory compliance of their products. Umasankar Mahapatra, Managing Director, Pulcra Chemicals, in this interview with Divya Shetty, addresses the current challenges within the Indian textile and chemical sectors. Furthermore, he offers insights into potential solutions to mitigate these challenges.

How did Pulcra Chemicals perform in the calendar year 2023?
Examining the global performance, the overall verdict for the year wasn’t favorable due to the widespread global slowdown. Pulcra, a German multinational company based in Munich with operations in 16 countries, faced sluggish demand in most locations. From a top-line perspective, the results were less than stellar globally. However, there were positive developments in India, where the company stayed on course to achieve its 2023 plan and experienced growth compared to the previous year, 2022.

Despite the challenging global scenario affecting top-line figures, the bottom line and overall margin outlook remained positive. The main contributors to the top-line challenges were a decline in volume, influenced by reduced demand, and a decrease in prices from the 2021 or 2022 levels. These price adjustments were a result of both lower demand and the increased raw material prices during and post the COVID period. However, these factors are now stabilising, leading to a normalisation of average sales prices and quantities.

The prevalent trend of declining prices and volumes is a common occurrence across various industries. Despite the challenges, Pulcra maintains healthy margins. The company’s primary focus is on the textile industry, particularly in India, where it serves both textile and leather sectors, albeit with limited exposure to the latter.

A notable impact on the company’s numbers was the significant decrease in exports compared to previous years. However, the domestic demand provided a reasonably good market. The overall outlook could have been more favourable if there had been a robust export of finished articles from India, Europe, and the US.

In the midst of global uncertainty, what strategies can the industry employ to enhance its export activities?
There are a couple of key considerations to bear in mind. Firstly, an excessive reliance on exports may not be advisable. It is essential to maintain a robust share in the domestic market. Examining the statistics of textile industries reveals that companies with a balanced mix of both domestic and export activities are faring better in the current scenario. This is owing to the substantial size of our domestic market. Emphasising the preferences of domestic consumers and focusing on meeting domestic demand can establish a sustainable business model, as opposed to relying solely on exports, which is inherently uncertain.

Various factors, such as disruptions in the supply chain, issues related to shipments, fluctuations in foreign exchange rates, and changes in demand in destination countries, contribute to the uncertainties associated with relying solely on exports. Since the onset of the COVID-19 pandemic, the business landscape has become increasingly dynamic, with one surprise following another.

However, it is crucial not to disregard export altogether, even though there is an ambitious target for export growth. The domestic market should not be overlooked, and Pulcra is strategically structured in alignment with this principle. With a presence in 16 countries, each affiliate focuses primarily on the domestic market. While we may indirectly be impacted by exports due to our customers being exporters, our exposure is managed with a time lag, making it an effective business model.

In the international context, the landscape of exports is evolving, primarily concerning compliance with environmental and social standards. Adhering to these new guidelines is imperative to meet various criteria. Price competitiveness remains essential, but non-tariff barriers, including certification, social compliance, environmental adherence, and timely delivery, are equally significant. These factors must be diligently addressed to successfully navigate the international market.

Despite the challenges, the export sector presents numerous opportunities, especially in the chemical industry. India, particularly in the realm of chemicals, holds a favourable position, boasting a significant number of domestic players, both multinational and indigenous. The specialty chemical sector, in which India already holds a leadership position, is self-reliant and poised to cater to both domestic and international demands.

What domestic challenges do you currently perceive facing the chemical sector?
On the home front, the primary concern revolves around demand. Domestically, the awareness of compliance is still in its early stages, making it less of a barrier at this point. However, the significant challenge arises from the low demand scenario, leading to intense price competitiveness. This situation poses difficulties for those with extensive production capacity, struggling to utilise their facilities to full capacity. Consequently, there is a fierce competition for a share of the domestic market pie. This results in a high-stakes price war, which is not conducive to a healthy business environment.

Do you have any suggestions for Indian manufacturers aiming to achieve the government’s target of reaching $ 100 billion in exports?
There are a couple of crucial considerations. Firstly, it is imperative that we attain global standards, as India is still not universally acknowledged as the best in terms of quality and supply commitment for various products, particularly those based on manmade fibres in textiles. This is especially relevant for technical textiles, sportswear, and similar technical items, where our growth is still in its early stages. It is essential for us to diversify beyond our foundational strengths. While India is recognised as a major source for cotton textiles, we need to broaden our product portfolio to include more value-added and performance-driven products that comply with international standards.

To achieve sustainable growth, we must extend our focus beyond cotton textiles and concentrate on the manmade synthetic sector. In the home textile market, such as terry towels, bed linens, and home furnishings, we already possess a substantial market share. Conversely, we find ourselves importing a significant amount of technical textiles and other products based on manmade fibres. There is a considerable scope in the domestic market for import substitution, presenting both a local market opportunity and the potential for exports. By gearing up to manufacture technical and performance-driven items, we can reap the dual benefits of tapping into the domestic market and exploring export opportunities, thereby multiplying our revenue.