Masterbatches can be classified on the basis of their color, their additive loading and their filler content. White master batches are mostly made from titanium dioxide, which is either rutile or anatase, while black masterbatches are made from carbon black pigment. Colored masterbatches uses titanium dioxide, organic pigments, dyes, additives etc depending on the application and the resin they are used for. They are made in several forms, depending on the aesthetic required for the type of plastics it is made for. Masterbatches are also available as addictives and compounds.

The masterbatches market India is estimated to at about 150000 tonnes in 2010-11 in terms of volume and worth Rs 1700 crore in value. The demand for filler masterbatches is an additional 200000 tonnes valued at Rs 650 crore. Non-vinyl polymers, especially polyolefin accounts almost 90% of masterbatches consumption in India. Styrenics and other non-vinyl polymers accounted the balance 10%. The extrusion sector is a major user for masterbatches, consuming 75%, while the thermoforming and blow-molding sector, which have started using masterbatches, have accounted almost 15-20% of total consumption.

The domestic masterbatches industry has a total capacity of 350000 tpa comprising organised-25% of capacity and unorganised-75% of the capacity. Since the masterbatches is less capital and less technological intensive, there are many players in the unorganized segment.

Polymer consumption in India has grown from a mere 4.47 mt in 2005-06 to 9.58 mt in 2010-11. Per capita consumption of plastics in 2010 was 7.5 kg, which is lower than that of China (34 kg) and USA (105 kg). The turnover of the polymer industry is estimated at Rs. 40000 crore, with capital assets of Rs 85000 crore. Exports of the industry are valued at around Rs 4500 crore.

Indian petrochemicals industry has seen a growth of about 14-15% per annum over 2005-2010, as per BMI, and a double-digit growth is likely to stay over the medium term. It should out-pace the global market, which is not expected to return to pre-recession levels of growth until 2012. Polymer output is set to accelerate over the next five years as capacity is expanded in India. By 2015, combined olefins capacity is forecast to cross 16 million tonne per annum (tpa), while polyolefin's capacity is set to rise above 13 million tpa. While PVC capacity is set to stagnate, PE capacities will grow by 80%. India is poised to be the third largest consumer of plastics by 2013.

Plastic is becoming one of the preferred materials in many industries due to their mechanical, physical and thermal properties. India's per capita plastic consumption is estimated between 7.5 to 8.0 kg, which is deplorably low in relation to global consumption of 28.9 Kgs, China and Asia have a per capita consumption of 24.2 Kgs and 21.6 kgs respectively. The per capita consumption in India is expected to double over the next five years. At this pace, India can over take China in automotive and white goods segment, and this should power demand for plastic products. Masterbatches derives its demand from plastic products, and hence its growth is intricately intertwined with the growth in plastic product sector.

The world market for masterbatches is estimated at about 3.2 mt in volume terms and US$ 1 billion in value. The Indian market thus is just 3.7% of the global market in terms of volume and 3% in terms of value. The market is Asia is 6.85 lakh tons valued at $1.8 billion. Region wise Europe is the largest market accounting for 29% of the global consumption followed by NAFTA region (2%), South East Asia (21%), Japan and Latin America (5%) each and the rest of the world constituting the balance 15%.

Domestic listed players

Plastiblends (India) is the largest player in the Indian master batches segment. Other players include Poddar Pigment, Bajaj Steel Industries etc.

Poddar pigments has increased its specialty master batches capacity from 8400 tonne as of March 2010 to 11100 tonne by March 2011. The company charged exceptional item of Rs 1.94 crore in the quarter and half year ended September 2011. As a result, the reported net profit fell by 23% to Rs 4.11 crore in the six months ended September 2011. The interest costs more than doubled (107% rise) during this period to Rs 0.87 crore. The company's total debt from Rs 9.07 crore as of March 2010 to Rs 24.02 crore by March 2011, which further increased to Rs 26.59 crore as of September 2011.

Bajaj Steel Industries has decides to sell / dispose off its superpack division, which predominantly consists of revenues from master batches. The plastic and related product segment of the company has been witnessing deceleration in profits at PBIT level from Rs 4.46 crore in FY 2008-09 to Rs 3.61 crore in FY 2009-10, which further eased to Rs 2.69 crore in FY 2010-11. This division recorded decent 23% rise in revenues to Rs 46.48 crore, which coupled with expansion of margins facilitated impressive 88% spike in PBIT to Rs 1.65 crore in the six months ended September 2011. The core steel and related product segment revenues zoomed by 69% to Rs 81.04 crore, but in view of the pressure on margins, the PBIT of this segment eased by 1% to Rs 2.91 crore during this period. There was over 10 fold rise in cotton trading revenues (1054% rise) to Rs 13.39 crore, leading to profit at PBIT level of Rs 0.81 crore in the six months ended September 2011, as against marginal Rs 0.01 crore losses registered in the corresponding previous half year period.

Outlook

The growth of the polymer industry in India and the growth in the demand for plastics will fuel the demand for masterbatches in India. With the polymer consumption in India expected to grow at annual rate of 15% and the per capita consumption of plastics is expected to double over the next five years, the outlook is very optimistic in terms of growth for masterbatches in coming years and the business could grow at about 20% for the next few years.

Sharp deceleration in the Indian economy has meant that the polymer consumption was nearly flat in the first half of the current fiscal on y-o-y basis. But the second quarter demand was sequentially higher from the first quarter levels. With five states to witness state elections in February – March 2012, many state funded projects are likely to be stalled temporarily. However, the share of Rural India in the total domestic polymer consumption has been rising. The two consecutive years of rise in rural income should help further improvement demand for polymer from rural India. Going forward, as India's interest structure eases, we can expect rebound in demand for polymers from many interest sensitive sectors like automobiles, real estate, packaging, consumer durables etc. So, while the demand for master batches are relatively sluggish in the current fiscal sofar, the prospects remains bright for the medium to long term.