Whilst the Indian specialty chemicals industry is rapidly expanding, another change currently being experienced in India is an increase in the number of mergers and acquisitions. As the Indian chemicals industry has historically had many smaller firms supplying small quantities to general markets, economies of scale and the ability to combine products for specific purposes has lead to larger players buying up smaller operators.

As Manish Panchal, Practice Head – Chemicals, Energy & Supply Chain Management at Tata notes, “M&A has been playing a critical role in shaping the Indian speciality chemicals industry and in the past five years, several large and medium-sized global speciality chemicals companies have used the acquisition route to establish their presence in India. During 2013 alone, there were 34 deals in the chemical industry in India, with an estimated value of $2.2 billion“.

He notes that this trend may in part be due to how many chemical companies are family owned. He states, “[Owners of] family-owned businesses, often with first generation entrepreneurs facing a succession void due to the unwillingness of the next generation to join the business are seeking exit options by selling. For these reasons, some Indian chemicals companies are looking for alliances, partnerships, and exit options. This offers attractive opportunities for global chemicals companies looking to establish or expand presence in India. In the past few years, several European companies have seen this opportunity and expanded their business by acquiring companies in India. [Other family firms struggle with] a lack of resources and know-how to scale up operations.”

Only time will tell if the trend of buying into the Indian chemicals industry continue.