Thirumalai Chemicals Limited

New Growth
Opportunities
Growth Strategy Framework

Presented by:
Rahul Singh
April 14, 2014

Table of Contents
Scope ............................................................................................................................................................................. 3
Goal ............................................................................................................................................................................... 3
Product overview .......................................................................................................................................................... 3
Challenges ..................................................................................................................................................................... 3
Business Environment................................................................................................................................................... 4
Strategy Formulation .................................................................................................................................................... 4
PVC Industry .............................................................................................................................................................. 6
Paint Industry ............................................................................................................................................................ 6
Potential competitive advantage for TCL.................................................................................................................. 7
Implementation ............................................................................................................................................................ 7
Measure and Control .................................................................................................................................................... 7

Scope
This report presents organic and inorganic growth opportunities for Thirumalai Chemicals Limited (TCL).
The geography being considered is India.

Goal
To increase the market-share of TCL by 5%* in the next 2-3 years
*(NOTE: 5% is a hypothetical number that is assumed to be the companys target to achieve by adopting
the proposed strategy.)

Product overview
TCL is the leading manufacturer of chemicals like Phthalic Anhydride, Maleic Anhydride, Fumaric Acid, L (+)
Tartaric Acid, Specialty Chemicals and Diethyl Phthalate (DEP).

The main product of TCL is Phthalic Anhydride (PA) with a production capacity of 145,000 metric
tons.
PA has major application as plasticizer in PVC compounds manufacturing industry and Paint industry
apart from drug manufacturing, agriculture sector and others.
PA contributed to around 83% of the total revenue in 2012-13 as compared to 78% in 2011-12.
TCL shut down one stream of its PA plant on April 22, 2013 due to large inventory. The reason
identified was large volume of imports of raw PA from foreign countries, impacting the profitability
of company.

Challenges
Currently, the company is facing the following challenges:
TCL has expertise and infrastructure to produce large volume PA but facing difficulty in retaining the
market-share due to stiff competition from foreign players.
Pricing competitiveness of raw materials
Technology innovation, to cope with the fast changing market requirement, and hence be able to
create a clear differentiation from competitors

Business Environment
The business environment of the company would be well understood through SWOT analysis.
SWOT Analysis of company
Strengths:
1. Largest manufacturer of PA, in India
2. Wide distribution network
3. Extensive experience in applied research
and laboratory-scale synthesis
4. Strong manufacturing base

Weaknesses:
1. Located away from the raw material
sources and the main markets in western
India
2. Low investment in R&D (0.16% of sales) as
compared to India industry average (0.5%
of sales). Global standard is 4% of sales!

Opportunities:
1. Global demand for Indian chemical
products due to their high quality and
competitive pricing
2. Indian governments various initiatives to
promote infrastructure for innovation and
introduction of Petroleum, Chemical,
Petrochemical Investment Regions
(PCPIRs) policy
3. Large pool of less expensive scientific and
engineering manpower
4. Increasing disposable income and urban
population in India
Threats:
1. Discovery of Shale gas depository in the US
and hence their re-entry in chemical
producing market with competitive pricing
2. Acute shortage of various building blocks
like methanol, toluene, xylene,
naphthalene, ethanol, butadiene etc
3. Lack of proper roads, railways, ports,
warehouses to support the overall
industrial growth

Strategy Formulation
Strategic Approach: The approach towards strategy formulation will include leveraging the strengths of
TCL and taping the available opportunities in the market.
Following strategic options are suggestible:
Organic growth
Strategic Option 1: To grow in the core business of PA, Maleic Anhydride and Derivatives, and in Food
Ingredients
Strategic Option 2:To build businesses in Specialty & Functional products and Additives for Cosmetic
and Personal Care, Food Ingredients, Polymers, Paints and Coatings.
Inorganic growth
Strategic Option 3: To grow through forward integration/acquisition

Strategic Option 1: To grow in the core business of PA, Maleic Anhydride and Derivatives, and in Food Ingredients
1. Increased sale through targeted promotional activities
2. Enhanced marketing channels. Increased presence in digital media (targeted online trade magazines and other
networking sites, publishing white papers online, etc.)
3. Identifying and offering customized services to the key customers who are loyal to the company and are good
at paying receivables.
4. Strengthening sales and marketing team to penetrate the market for increased sale with the existing
customers and developing new customers.
5. Engaging with the key customers through providing regular training to the customers user and procurement
team
6. Spend more on R&D to develop new/improved products with better features and benefits, offering strong
value proposition
7. Identify new market verticals in the same geography

Strategic Option 2:To build businesses in Specialty & Functional products and Additives for Cosmetic and
Personal Care, Food Ingredients, Polymers, Paints and Coatings.
1. Aggressive launch of new product lines in the targeted market segments through real and digital
media
2. To involve existing distributors and resellers to accommodate the new product lines in their portfolio
and help them cross-sell/up-sell the same.
3. The activities may include setting up customer support channels and value added services such as
online interaction with the end customers and other value chain partners to generate awareness of
the new launch and knowledge sharing on maximizing the benefits of the solutions.
4. Offering end-to-end solution across the product life-cycle.
Strategic Option 3: To grow through forward integration/acquisition
TCL should employ forward integration strategy in order to capture growing market and reach to the
end customers directly by utilizing all the strengths of the company and available opportunities in Indian
emerging economy.
The target market could be:
PVC
Paint
Pharmaceutical
Agrochemical
Consumer durables
Etc.

The softest target would be PVC and Paint industry because of the extensive use of PA by these
industries as their raw material. A brief analysis of these industries is presented below, showing their
respective attractiveness and their compatibility with TCL core business.

PVC Industry

PVC is a major plastic material which finds widespread use in building, transport, packaging,
electrical/electronic and healthcare applications.
At present, the Indian PVC industry boasts of a production capacity to be 1.3 Million mt/year
whereas annual demand is estimated to be 2.08 Million mt/year. In India, the total PVC capacity is
expected to reach 1.635 Million mt/year and demand is expected to reach to 3.1 Million mt/year by
2016-17.
The consumption of PVC in pipes is expected to progressively increase and reach 10 million metric
tons by 2017 from a current estimated consumption of 6 million metric tons.
Heavy investments by the government in infrastructure projects and focus on increase in irrigational
land are the main drivers for the increased consumption of PVC.
The introduction of the eco-point system for housing and funding by various International Agencies
such as World Bank and Asian Development Bank for water management projects in the country will
give major boost to the PVC demand.
PA is mainly used in the manufacturing of phthalate plasticizers. The strong global demand for
phthalate plasticizers is the major driver for the growing consumption of PA.

Paint Industry

Due to the emergence of middle class in India, growing infrastructure and increase in the tendency to
spend, the industry is estimated to grow at an annual CAGR of 12- 13% for the next four to five years.
The market for paints in India is expected to grow at 1.5 times to 2 times GDP in the next five years.
This industry is segregated in two parts:
1. Decorative segment catering to housing sector and accounts for 70% of the total demand of
paints
2. Industrial segment consists of powder coatings, floor coatings and other protective coatings
catering to automobile, marine and other industries and accounts for the remaining 30% of the
total demand of paints
The major players in the industry are Asian Paints, Kansai Nerolac, Berger Paints, Akzo Nobel and
Shalimar paints. These 5 companies make up 65% sales of organized market. The unorganized
segment has over 2,000 small and medium sized players and account for the remaining 35% of
market.
This industry is raw material intensive with 50% petro based derivatives involved in manufacturing
process.

Brand, distribution network, working capital efficiency and technology play a crucial role in
determining barriers to entry in this sector.

Potential competitive advantage for TCL

Petro based derivatives are very important raw material being used by TCL and hence demanding
more of this raw material would give bargaining power from the suppliers due to economies of scale.
The large volume of inventories of PA that is not being sold in the market would be absorbed by the
new ventures as the raw material.
Existing infrastructure for storage, transportation and technology would aid TCL in entering into
these new ventures.
The exponential growth in the target markets would offer ample opportunities to grab the growing
customer segment with its existing brand value.
Recently, there has been a rise in the product prices of PA coupled with imposition of anti-dumping
duty on the imports of PA would increase the profitability margin to a higher extent.

Implementation
TCL can adopt the proposed strategy of growth through any of the given ways after analyzing the
business and financial viability of each of the options:
Setting up new plant
A team should be formed for in-depth analysis and selecting and executing themost feasible strategy
Proper resources should be allocated to the team.

Measure and Control

A mechanism should be set up to keep an eye on the project execution and Return on Investment (ROI).