The chemical industry is a major contributor to the Indian economy and is expected to have a compounded annual growth rate (CAGR) of around 9.3% and have a size of USD 304 billion by 2025. The Indian chemical industry can be classified into speciality chemicals, bulk chemicals, agrochemicals, petrochemicals, polymers and fertilisers. Moreover, the growing disposable income and increasing urbanization are boosting the demand for construction, paints and adhesives which in turn gives rise to substantial opportunities for the chemical industry. The industry’s product offerings encompass a vast basket of more than 80,000 commercial products with dyes, pigments and agrochemicals accounting for nearly 50% of chemical exports from India. Looking at its growth potential, the chemical industry in India is expected to attract investments worth 8 lac crores by 2025. Â
Few of the corporates in the industry have exported as they have a significant international customer base, others have imports whereas few have both imports and Exports. The imports are mostly in imports, Organizations with exports have exposure to USD, and EURO mostly with some exposure in JPY too. The challenge is to align the exposures with business objectives and devise optimum hedge strategies. Risk management in a net or gross manner remains to be the deciding factor given the objectives of a specific company. The corporates may have term loans in foreign currency and some CAPEX in FC as well.
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A large corporate with 15 to 20million imports every month was paying a huge hedge cost before they became our clients. We worked with them to devise their risk management policy, their hedge strategy and introduced a combination of instruments to be used depending on the market dynamics for hedging. We monitored their exposures closely, advised and worked with them on pricing, instruments, timings, and negotiations for hedging. In a single year, they have seen considerable savings.