PRIVI SPECIALITY CHEMICALS LIMITED Annual Report 2020-21

40 PRIVI SPECIALITY CHEMICALS LIMITED (Formerly known as Fairchem Speciality Limited) Widespread vaccine deployment is expected to improve consumer and business confidence. Pent-up demand for more elastic discretionary goods, especially among the top 10 income percentile (HNI and upper-middle class) of the population that could not spend because of mobility restrictions, may spur private investment that has been contracting for five consecutive quarters. The impact of government spending, reforms and liquidity measures by the Reserve Bank of India (RBI) lag buoyancy, however, it is likely to boost economic recovery. The path to recovery will have a few challenges. High inflation, job losses, poor wage growth, and low asset values may impact the consumer’s purchasing power, especially among the low- and middle-income class. The RBI may not be able to reduce policy rates in the near term amid inflation concerns. As a result, MSMEs and the informal sector will likely continue to face high borrowing interest rates on working capital. Low demand and credit availability will likely impact investment spending. Despite a quicker rebound, the output levels are likely to remain below the pre-pandemic GDP levels. The short-term growth is not looking encouraging but the outlook in the medium term may improve significantly as the number of COVID-positive cases reduce. Overall, the outlook remains uncertain, and the recovery/ growth will be governed by the containment of the pandemic. Availability of vaccines reduced infections, and increased mobility will be key to economic and industrial revival, industries will see varied trajectories until the pandemic is contained. (Source: IMF reports) INDUSTRY OVERVIEW Aroma Chemicals The global aroma chemicals market size was valued at USD 5.5 billion in 2019 and is expected to grow at a compounded annual growth rate (CAGR) of 5.8% from 2020 to 2027. Growing demand from the fragrance industries is expected to be a major factor driving the market. Rapid urbanization, coupled with increased consumer spending, has led to augmented demand with fragrance being a prominent factor. The aroma chemicals market is growing as the demand for perfumes and body deodorants have increased substantially in recent years. The practice of using aroma chemicals in cosmetics and new product line-ups with toiletries have fueled the market growth. Medical products and treatments using aromatic ingredients will spur the growth of the industry. End-users are actively interested in synthetic perfume ingredients, labels that specify ingredients, perfume ingredients by brand and perfume chemical ingredients among others which have been influencing market growth. Leading and growing players in the market have been investing an extensive amount in the research & development of these chemicals Synthetic aroma chemicals are still preferred over natural chemicals by cosmetics and personal care formulators as the use of synthetic ingredients can produce a strong scent without hampering the characteristics of other chemicals used in cosmetic formulations. Natural aroma chemicals are considered to be therapeutic, sustainable, and greener by consumers. As natural aroma products are perceived as sustainable and environmental-friendly among consumers, their demand in the global market is expected to grow at a large scale. However, lack of availability of raw materials, along with the high cost to produce fragrance by natural aroma chemicals, will hamper the growth of natural aroma chemicals. (Source: Grand view research) Aroma Chemical Insights by Categories Terpenes & Terpenoids emerged as the largest chemical segment with a volume share of over 30%. Terpenes & Terpenoids possess effective medicinal properties, such as antiseptic, anti-carcinogen, and anti-microbial properties. Continuous usage of terpene for pharmaceutical and nutraceutical applications is estimated to propel the growth of the segment. Musk chemicals are a special type of aroma chemical that are extracted naturally as well as synthetically. Natural musk is obtained from animals and plants, which include roots as well as seeds as well as the rump gland of the musk deer, muskrat, and civet cat. Musk chemicals find scope in different applications, such as soap, detergents, cosmetics and personal care, food, and household products.