The economic distress in the US and Europe is now opening up newer  opportunities for the lab chemicals companies in the Asia Pacific region. The challenging times for Western companies  are in fact a godsend  for India, China, Thailand, Malaysia and Indonesia in the area of fine chemical reagents, says S R Sudhakar, Director - Sales & Marketing, Leonid Chemicals Pvt. Ltd. in an interview with Nandita Vijay. Excerpts:

How do you view the current lab chemicals market globally and in India?
The current scene for lab chemicals in the global market is one of gloom. This is driven by the signs of disintegration in the European Union and the economic pressures in the US. However it augurs well for India as it  offers more opportunities  for growth. The  financial vagaries in the international market will impact the  capex purchases and  will reduce the growth of lab chemicals market worldwide. The US which holds 37 per cent  of the market share for labs chemicals followed by Europe with 30 per cent and Japan holding 15 per cent  at  present are all  under pressure due to  high cost of R&D. This will shift the  focus towards the  Asia Pacific region comprising India, China, Thailand, Malaysia and Indonesia which is growing much faster than the  western  market. By  2014 the market configuration  is expected to change. While the US share will dip to 33 per cent,  Europe to 27 per cent  and Japan to 12 per cent, the  Asia Pacific is poised to grow  from a mere 11 per cent  today to a  20 per cent growth which is a increase of nine  per cent  by 2014.

Specific to Indian market , recent investment flows into pharma R&D segment, CRAMS, CRO is helping markets to grow in double digits for next two to three years. Apart from this,the Government of India has announced a substantial allocation of spending in research for the next five  years. This will help Indian market to grow faster compared to the West.  

How do you see the growth of the manufactured reagents, imported lab reagents, microbiological reagents and bioscience reagents in India  and what according to you are the visible trends?
At present most of the major lab chemicals companies are depending on third party manufacturers in India. A few of the manufacturers are already having good facility and another one or two companies  are likely to join the bandwagon  by setting up manufacturing facilities in the country in the reagent segment. As far as  microbiological reagents are concerned,  India can produce world class quality products at very competitive prices. This has helped Indian companies to expand fast in  the West and also consolidate  their position in Indian market by restricting multinational companies  (MNCs) in this segment. However in the bio-reagents segment, India is lagging in terms of development and the required technology. In this segment, MNCs continue to dominate and avail of  premium much more than they deserve.

Do you think India can become a hub for  lab chemicals R&D ?
Yes!  The country has the expertise in the terms of qualified personnel and the production plants. Though there are opportunities,  we are likely to lose out to China as they far advanced which indicates higher growth prospects. Though prior to  1980, India was much ahead in terms of research paper submissions in chemistry, now  China has over taken us and  we are far behind. The Chinese have become much more fluent in English, are  aggressive and are fast  proving their mettle. With technology availability and quality manpower in China, it will be a big challenge for India to become a hub for R&D,  as far as lab chemicals are concerned. Another reason is that there are  only a very few companies having R&D for lab chemicals in India.  

What are the issues and challenges faced by the Indian lab chemicals manufacturers?
In India, there are a number of  small and medium scale manufacturers with the capability to deliver world class quality. Due to entry of MNCs and consolidation by mergers and acquisitions, big players are stifling the growth of smaller players. In a few cases, these manufacturers have now opted to be the  OEMs or third party manufacturers for the MNCs. Apart from these, some of the government  institutions have restricted the entry of small and medium enterprises(SMEs)  in the lab chemicals space to even participate in the tenders floated by CSIR or ICAR among others. There are clauses on turnover among others which don't allow  the SMEs even to enter  the fray. This allows  the MNCs dominate and take away lion’s share of the business.  In fact, orders from government labs will be a boon  for  the SMEs which form a major chunk of the lab chemicals supplies. In a phase of slowdown, such supplies would  help the growth of SMEs.    

What are the requirements needed to improve the quality of our products?
Most importantly huge investments are required by the Indian companies. Earlier this was worth it  as realizations were  better as margins were high.  Now due to stiff competition, companies are reluctant to invest more  because the  investments in the production of lab chemicals is no longer viewed as  lucrative.  

How easy is it to get the right expertise in the field?
India has the required expertise in chemical research, manufacture and engineering. The cost of qualified and quality personnel are also far lower compared to companies in the West. The access to  skilled   manpower at affordable prices are  luring Western   manufacturers to India. In fact many of the  Western companies are planning  to  enter Indian market in next 12 to 15 months and commence production using the readily available and easily accessible expertise which India offers.

Could you please provide us details on the latest  development at Leonid Chemicals ?
We at Leonid have invested in developing products that comply with cGMP of the US and EU. This has led to upgradation of the plant and investments to purchase advanced  instrumentation for quality control. The company has also strengthened its sales and marketing teams and we have set up our distribution points strategically in major developing locations  in India.

What are the likely expansion plans of your company?
We are not expanding in any area this financial year, but would only look at modernization of existing facilities. The present personnel strength is around 36  people working at various levels and we plan to augment our workforce by  25 per cent in this fiscal  mainly in sales & marketing and quality control.

What are the likely future growth areas in this space for the company?
We are growing at almost 50 per cent plus over the last financial year. We have entered into distribution agreements with few of the major speciality chemicals manufacturers in West like, BOROCHEM, France who are  specialized in Boronic acid derivatives. This segment is attracting the interest of  the scientific community at major pharma R&Ds in India. We have signed with other specialty chemicals manufacturers like  AKL Research Labs, United Kingdom, Trans World Chemicals, USA and Menai Organics Ltd., United Kingdom.

Menai Organics are having over 5000 products which are mainly advanced intermediates, screening compounds, polymers and specialty chemicals. Apart from all these, our existing partnership with  EURISOTOP, France for NMR Solvents and labelled compounds are growing at 80 per cent  over the last year  and will continue to grow and help us in meeting our objective of achieving 80 per cent overall growth target for this  year.