India’s specialty chemicals sector could see a disruption in its recovery in profitability on the back of trade uncertainties arising from US tariff measures, stated a report by Crisil Ratings. The operating margin, earlier estimated to improve to 15.5-16 per cent in fiscal 2026, it said, could decline by approximately 150 basis points to 14-15 per cent, same as in the two past fiscals.
The tariff threats and persisting pricing headwinds could mean fiscal 2026 could mark the third consecutive year of pressure on realisations. Even as volumes recover, Crisil maintained, aggressive dumping from China could erode the pricing power of domestic manufacturers and weigh heavily on profitability.
ALSO READTrump’s 25% tariff on auto import: What are the key risks
Already, Chinese imports into India and the global markets have surged over the past two fiscals, driven by their economic slowdown and excess capacity. This has triggered sharp price corrections, with domestic and export realisations for Indian specialty chemicals makers plunging 15-20 per cent between fiscals 2024 and 2025.
While demand remains steady, Crisil said, further price erosion could undermine profitability and curtail recovery momentum. The risk of a further decline in realisations has intensified with the US imposing an additional 20 per cent tariff on Chinese chemical exports since February 2025. This is expected to trigger a fresh wave of dumping by Chinese manufacturers, redirecting excess inventory to India and other markets.
Anuj Sethi, Senior Director, Crisil Ratings, said, “With realisations under pressure, the Indian specialty chemicals sector’s 7–8 per cent revenue growth next fiscal will be largely volume-driven. Domestic revenues, forming 63 per cent of the pie, are expected to grow 8–9 per cent, while exports may see just 4–5 per cent growth. But with the rising threat of Chinese dumping, further fall in prices could deepen competitive pressure, push realisations to new lows, and impact profitability in an already fragile environment.”
According to the findings of the Crisil analysis, profitability pressures will continue but vary across companies, influenced by end-user exposure, revenue mix and demand-supply dynamics. Companies with balanced portfolios or catering to resilient end-user sectors are likely to better absorb shocks, while those reliant on exports or commoditised segments may face increased margin risk due to price volatility.
Poonam Upadhyay, Director, Crisil Ratings, said,
» Read More
