Akshatha NeerajeArjun ParekhPooja RawatRohan BharajRonak SharmaVibhu Gauba

Adhesives Construction Chemicals

Global Scenario

North America and Europe expected to see a growth of only 3% whereas Emerging Economies in in Asia like India and China are expected to show growth of 6% and 8%

Increasing construction

activities

Growing automobile

sector

Rapid industrialisati-

on

Application of adhesives in Aerospace

Medical Electronics industries

Global Scenario

2015 2016 2017 2018 2019 20200

2000

4000

6000

8000

10000

12000

14000

Volume(Kilo Tonnes)

Volume(Kilo Tonnes)

Strict regulatory compliance

Fluctuation in prices of key raw

materials

Dominated by large companies

CHALLENGES

Worldwide market expected to grow at 5.8% till 2020 to 13000 KT

Indian Imports and Exports Limited to Asia

Adhesive Industry

• Growth driven by packaging, construction and automotive sectors• Increase in disposable income levels, rising GDP and booming retail

markets propel growth in flexible packaging industry• Rapid urbanization coupled with growing infrastructure and real estate

construction projects fuel the demand for adhesives

Adhesives market in India is anticipated to reach 379 thousand metric tons by 2020 at a CAGR of 9-10%.

Adhesive Industry

Reactive

Water basedHot melt

Solvent based

Volume share by technology type (2015)

40%

14%

30%

16%

Pidilite

Henkel

Sika

Others

market share by company (2015)

6%

24%

62%

8%

Indian Adhesive Market

• PVAc Adhesives

•Cyanoacrylate Adhesives

• Epoxy Adhesives

• Silicone Sealants

Key Applications Areas of Adhesives

Packaging is the largest end-use application for adhesives and still holds a huge scope; use of adhesives in automobile and construction industries is expected to increase in the near future.

Industry Application

Paper Board and Packaging Packaging is the largest market for adhesives. Most packaging materials used nowadays are different materials laminated together and adhesives are used for this purpose, thus giving packaging a commercially alluring appearance

Building and Construction Adhesives are used in a variety of applications in building and construction including flooring underlayment, flat and drywall lamination, sandwich construction, profile wrapping, prefinished panels, edge bonding, tilling, carpet layment, etc.

Furniture In the furniture-making industry, polyvinyl acetate dispersion adhesives are widely used. Others such as melamine-formaldehyde resins, polyurethane (PUR) adhesives, hot melts, etc. are also used in various bonding and laminating applications.

Automotive Adhesives are used in bonding metal sheets in vehicle bodywork construction, car carpets, bonding panes of glass into car bodywork, sound damping, bonding and lamination interior, etc.

Electronics In this segment, adhesives find application mostly in cable filling/jelly compounds, cable insulation compounds, electronic circuits, etc. In some cases, adhesives are preferred over solder joints, as they are lead-free and less vulnerable to heat.

Lifestyle This segment includes applications in textiles and apparel laminates, mattresses, fabric combining, footwear and leather goods, etc.

Consumer/DIY This segment includes applications in decorative films, hobby supplies, school crafts, and stationery products.

Others Road construction, plastic processing, medical applications, aircraft and aerospace, etc.

Mega Trends in Adhesives

Urbanization

Bricks and

Clicks

Economic Trends

New Business Models

Social Trends

Health Wellness

& Well Being

MegaTrends

Green Products

Last Mile Connectivity

Convenience Packaging Quick Cure

Technological Advancement

Strong Bonding

Properties

Key Developments in Adhesives Addressing the Trends

Company

• Pioneer in consumer and speciality chemicals in India

• Over 2/3rd of sales from products and segments pioneered in India

• Consolidated Revenue of Rs 53,695 million in FY 15-16

• Well established R&D set-up – Most products developed through in-house R&D

• Wide geographic presence – Domestic & International

Indian Adhesive Market

PVAc Adhesives Market

Market Split – By Companies

The furniture industry, which accounts for

41.0% of PVAc consumption, is highly unorganised, resulting in ~75% of sales to the

segment occurring through retail

channels.

Cyanoacrylate Adhesives

Market Split – By Companies

Pidilite’s Fevikwik is synonymous with cyanoacrylates in

India, indicative of its brand recall with consumers and

tradesmen alike.

Business Segments

FINANCIALS

Source: Pidilite Annual Report 2015-16

2011-12 2012-13 2013-14 2014-15 2015-16 -

5,000

10,000

15,000

20,000

25,000

10,340

12,698

16,002

19,009

22,190

Growth in Reserves & SurplusRs

in M

illio

n

Financial Ratios – Pidilite Industries Ltd.

Source: money.livemint.com

Cash to Cash Cycle = 42+40-33 = 49 Days | Hence, money rolled 7 times in a year

This means that the investors are ready to pay ₹5.92 for every ₹1 sale

made by Pidilite

Financial Ratios – Atul Ltd.

Source: money.livemint.com

Cash to Cash Cycle = 58+56-49 = 65 Days | Hence, money rolled 5 times in a year

This means that the investors are ready to pay ₹1.73 for every ₹1 sale made by

Atul Ltd.

COMPETITON ANALYSIS

Can leverage the extensive distribution network

2nd largest adhesives brand in India

DOMESTIC PLAYERS

Built the largest adhesives plant in India in the city of Pune that will be

operational in the H1 2017

INTERNATIONAL PLAYERS

Since 2000

11 - Acquisitions in India

3 - International subsidiaries in Singapore, Brazil and Middle East

2 - Acquisitions in Singapore and Dubai

1 - JV with a US based Company

Growth opportunities

1. Infrastructure Construction sector contributes to more than 8% of India’s GDP and is the second largest employer and contributor to economic activities Government’s emphasis is on infrastructure and housing as urban development schemes and industrial corridor projects are being expedited.• Adhesive manufacturers must focus on delivering product value by meeting

expectation in terms of technical performance such as tensile strength of the joints, adhesion runtime, etc.

• Considering the low awareness, price-sensitive nature and commoditisation of adhesives market in construction industry, technical performance must also be backed up by economic feasibility such as cost of adhesive materials and labour required.

Growth opportunities

2. Packaging The Indian packaging industry is growing at an annual rate of about 7% and is expected to grow at the same rate in the next five years. Macroeconomic factors such as favourable demographics and increase in disposable income are also in favour of the growth of the packaging industry.• Companies must focus on offering products for a wide range of applications such as

sealing, labels, tapes, etc. • Products need to be designed based on different temperature needs and adherence to a variety of substrates.

Growth opportunities

3. Woodwork and furniture sectorIt has been the major growth driver for adhesives in

India. Indian furniture Industry is estimated at around Rs 710 bn (Source: Annual Report-2013 Greenplay Industries Ltd) and is estimated to grow at 25-30% CAGR over the next few years (Source: Ernst & Young).

Growth opportunities

• Water-based adhesives are projected to hold a share of around 42% of the country's adhesives market by the end of 2019.

• With upcoming infrastructural projects such as railway tracks, metro rails as well as new wind energy farms, the country is set to witness a strong growth in the adhesives industry over the next five years.

• Automotive adhesives are expected to witness growth as the demand for lightweight and composite joining adhesives from automobile manufacturers continue to increase.

New Emerging Applications Segment

Owing to major government initiatives such as Digital India, Make in India, and favorable FDI policies for electronics manufacturing, adhesives industry is expected to grow at a CAGR of 9-10% till 2020.

Demand for maintenance, repair, and overhaul (MRO) facilities is increasing in India due to growth in the aviation sector.

Demand for hot melt adhesives

Call to ActionInvest in R&D centers to develop high performance adhesive properties such as fast solidification, rapid bond formation and glue gunsFocus on high temperature adhesives such as epoxy, silicone which find application in electronics, aerospace, etc.Strategic tie-ups with MNCs for manufacturers targeting emerging applications.

Critical Success Factors for Growth

•High performance adhesives at affordable prices especially in the largely commoditized construction industry

•Wider temperature ranges and different substrate types for packaging industry

•Strategic tie-ups with MNCs and investment in R&D capabilities

•Hedging raw material costs that are dependent on movement in oil prices

Market-Attractiveness/Competitive-Position Matrix

Strategy

We suggest that Pidilite opt for a NICHE strategy, entering into the area of hot-melt adhesives as it is a fast growing category and Pidilite’s presence in the industrial adhesives and chemicals segment is not that strong.

• Expected to reach $9.64b by 2020 Growing at 6% CAGR

•  Global market stood at around 1,500 kilo tons in 2014

• Focus on packaging• Widely used due to its

low cost and better performance.

• Its formulation that can withstand temperatures as low as -40 °C and humid environments

• Asia-Pacific is the largest market for hot melt adhesives

• Great distribution network

• Brand recall value is extremely high

Porter’s 5 Forces

Industry Rivalry: •Globally is hugh, but in India it is low•Competitors in the segment: Henkel AG, The 3M Company, Sika AG, Bostik smart adhesives, Huntsman Corporation

Bargaining power of Supplier: •Low

Bargaining power of buyer: •Low due to the absence of any local brands in India. Despite the industry growth, currently no foreign brands have entered the Indian Market yet, we can be the first mover advantage.

Threat of substitutes:•Low. Due to its cost effective nature it is used as a substitute infact to other adhesives.

Threat of new entrants:•Medium. Though local players can’t affect Pidilite brand and its products, the International players can still decide to enter the segment

Uses of Hot Melt Adhesives (HMA)• Carton sealing and labeling applications in the packaging industry

• Spine gluing in the bookbinding industry

• Profile-wrapping, product assembly and laminating applications in the woodworking industry

• Disposable diapers, bonding the non-woven material to the back sheet and the elastics.

• Electronic device manufacturers use an HMA to affix parts and wires, or to secure, insulate, and protect the device's components.

• HMA are regularly used to assemble and seal corrugated boxes and paperboard cartons.

Brownie points?... Yes Please!

•Is the leader an intelligent fanatic? Highlight example of ingredients Intelligence, Integrity and Energy!Fevicol Champions ClubFevicol bonded over 42000 woodworkers and contractors, in a unique pan-India community initiative – SHRAM DAAN DIVAS on December 20th and 21st December 2015. These woodworkers and contractors donated a day’s labour free of cost to repair and refurbish furniture at around 800 NGOs, beneficiary

schools, hospitals and institutions for underprivileged children. It is expected to have impacted and benefited the lives of over 60,000 children in more than 320 cities across the country.

•What are you doing that your competitors aren’t doing yet? How do they create strong entry barriers for competitors?

By talking to the carpenters directly. Creating Membership Clubs

•What’s not going to change in the next 10 years?The leadership position of Pidilite in the adhesives market

•What is their competitive advantage and how sustainable is it? If their competitor had unlimited resources, how quickly could they duplicate the company’s competitive advantage?  How could you hurt this business?

Their brand is their competitive advantage