Dr Vani Aggarwal (Senior Assistant Professor, SOIL School of Business Design), Devendra Singh*, Isha Vishnoi*, Aryan Tuli*, Vanshaj Joshi*, Anushka Mishra*, Atulya Vashist*
*Management Students, SOIL School of Business Design
Data-led assessment places fertilisers and rubber products among the most attractive segments, while pharmaceuticals face a sharp rise in firm exits
India’s chemical and chemical-products sector has expanded steadily over the past five years, but a detailed analysis of market size, growth, profitability, competition and firm entry-exit trends shows that the industry’s performance is far from uniform. The analysis, based on company-level financial data compiled from the CMIE database for 2020–2025, compares six major segments: pharmaceuticals, refinery, rubber products, organic chemicals, pesticides and fertilisers. It finds that fertilisers and rubber products offer the strongest combination of growth and profitability, while pharmaceuticals remain large but face mounting competitive and structural pressures.
Fertilisers record fastest growth
The fertiliser industry recorded the highest compound annual growth rate among the segments studied. Its market size increased from ₹72,713.83 crore in 2020 to ₹1,44,018.3 crore in 2025, representing a CAGR of approximately 14.65%. The segment also reported an operating profit margin of 15.67%, one of the strongest among the industries examined. Its attractiveness, however, is tempered by a relatively concentrated market structure, with the four largest firms accounting for a significant share of total industry sales.
Coromandel International, National Fertilisers, Rashtriya Chemicals and Fertilisers, and Paradeep Phosphates emerged as some of the leading companies in the segment during the period under review. Their strong revenues indicate that fertiliser demand remains closely linked to agricultural activity and national food-security priorities.
Rubber products combine growth and profitability
Rubber products emerged as one of the most attractive segments in the assessment. The sector’s market size rose from ₹16,531.54 crore in 2020 to ₹29,164.43 crore in 2025, translating into a CAGR of 9.92%. The segment recorded an operating profit margin of 10.9% and maintained a relatively competitive structure. Its concentration ratio remained close to 29%, suggesting that the industry is not dominated by a handful of firms.
The findings point to opportunities for new entrants, particularly in specialised rubber products, industrial applications, automotive components and high-value materials. However, the sector’s active-firm count fell from 125 in 2020 to 105 in 2025, indicating that market growth has not prevented weaker or smaller firms from leaving the industry.
Pharmaceuticals remain large but volatile
Pharmaceuticals continued to be one of the largest segments, with market size increasing from ₹3,56,233.44 crore in 2020 to ₹5,83,541.45 crore in 2025. The sector posted an 8.57% CAGR during the period. Despite its scale, the segment recorded a negative aggregate profitability figure in the analysis, reflecting wide variations in performance among companies. While several large firms reported strong revenues and margins, many smaller companies experienced weak or negative operating profitability.
The pharmaceutical industry also witnessed a sharp deterioration in firm dynamics in 2025. After registering 30 new firms and 15 exits in 2021, the sector recorded only four new entrants against 87 exits in 2025. The number of active firms fell from 1,055 in 2023 and 2024 to 971 in 2025. The trend may indicate rising compliance costs, intensifying competition, pressure on margins and difficulties faced by smaller manufacturers. At the same time, the sector remains relatively competitive: the top four companies accounted for approximately 14.5% of industry sales in 2025.
Refinery sector remains highly concentrated
The refinery segment was the largest by market size, generating approximately ₹28,80,469.9 crore in 2025. However, its growth was moderate, with a CAGR of 7.52% between 2020 and 2025. The sector reported a relatively low operating profit margin of 4.75%. More importantly, it remained highly concentrated. The four largest companies accounted for more than 82% of total industry sales in 2025.
Indian Oil Corporation, Reliance Industries, Bharat Petroleum Corporation and Hindustan Petroleum Corporation dominated the segment throughout the period. This concentration reflects the capital-intensive nature of refining, high entry barriers and the importance of established infrastructure, distribution networks and access to crude supplies.
Organic chemicals and pesticides face mixed outlook
The organic chemicals industry grew from ₹57,565.29 crore in 2020 to ₹93,353.56 crore in 2025, recording an 8.39% CAGR. Its operating profit margin stood at around 5.01%, suggesting moderate profitability. The sector’s market structure was also moderately concentrated, with a four-firm concentration ratio of about 36.18%. However, the number of active firms declined from 127 in 2020 to 115 in 2025. The segment recorded limited new entry and repeated exits during the period, suggesting that companies may be facing pressure from input costs, environmental requirements and global competition.
The pesticide market expanded from ₹64,161.82 crore in 2020 to ₹84,731.53 crore in 2025. Its CAGR of 4.74% was the lowest among the six segments analysed. Operating profitability remained comparatively strong at about 7.03%, while the market stayed relatively competitive, with a 2025 concentration ratio of nearly 29%.
However, the active-firm count dropped from 93 in 2020 to 84 in 2025. The industry recorded substantial firm entry in earlier years but saw a sharp increase in exits in 2025, indicating possible consolidation and pressure on smaller players.
Industry attractiveness remains uneven
The final industry-attractiveness assessment assigned the highest score to rubber products, followed by fertilisers. Pharmaceuticals, refinery, organic chemicals and pesticides received moderate scores, reflecting a combination of market opportunity and operational risks.
The analysis suggests that market size alone does not determine industry attractiveness. The refinery sector, despite its enormous revenues, scores lower on several parameters because of low margins and high concentration. Pharmaceuticals, similarly, benefit from scale and long-term demand but are weakened by firm exits and uneven profitability.
By contrast, rubber products combine relatively healthy growth, profitability and competition. Fertilisers benefit from rapid market expansion and strong margins, although their concentrated structure may limit opportunities for new entrants.
Policy and investment implications
The findings have implications for both policymakers and investors. Policymakers may need to support smaller firms in sectors experiencing high exit rates by improving access to finance, technology, testing infrastructure and regulatory guidance. Investors, meanwhile, should assess firms not only on industry size but also on profitability, concentration, entry barriers and the ability to withstand changes in input costs and regulation.
The data also point to opportunities in specialised manufacturing, research-intensive products and value-added chemical applications. Companies that can move beyond commodity production and build technological capabilities may be better positioned to benefit from India’s expanding industrial and agricultural demand.
India’s chemical industry therefore presents a mixed picture: substantial growth potential exists, but the benefits are unevenly distributed. The next phase of expansion is likely to favour firms with stronger balance sheets, technological capabilities, efficient supply chains and the capacity to comply with increasingly demanding market and regulatory standards.