Specialty Chemical Industry To See 6% Revenue Growth: Crisil
India’s specialty chemical industry is expected to record around 6% revenue growth in FY2026-27, down from approximately 8% in each of the previous two fiscals, as weak exports and higher input costs weigh on the sector, according to Crisil Ratings.
The agency’s analysis of 126 companies, representing about 40% of industry revenue, indicates that strong domestic demand will remain the primary growth driver, while export recovery is likely to take a few quarters as global supply chains stabilise following disruptions linked to the West Asia conflict.
Domestic sales account for nearly two-thirds of industry revenue, led by agrochemicals, dyes and pigments, and flavours and fragrances. Exports make up the remaining one-third.
According to Anuj Sethi, Senior Director, Crisil Ratings, domestic demand is expected to support 7-8% growth, while exports will remain subdued despite some improvement if geopolitical conditions continue to stabilise. He added that reduced Chinese export incentives for certain products may provide limited pricing support, although continued competition from China is expected to restrict gains.
Operating margins are projected to decline to 14-14.5% from around 16% last fiscal as higher crude-linked raw material costs and weak export realisations squeeze profitability.
Poonam Upadhyay, Director, Crisil Ratings, said crude-linked inputs, which account for nearly one-third of raw material costs, will continue to pressure margins despite recent easing in crude prices. She expects operating margins to contract by 150-200 basis points, provided crude prices remain stable and geopolitical tensions do not escalate.
Companies are also expected to moderate capital expenditure to around Rs 16,500 crore this fiscal, focusing investments on backward integration, import substitution and specialty chemistries. As a result, debt-to-EBITDA is projected to rise to 2.2 times from 1.9 times last year, while interest coverage is expected to decline to around 6 times.
