Meta System Risks & opportunities

Ajay Gohil A Perspective - unplagiarised , original ,

unprecedented and intend to cause instigation and ignite the genius.

A Perspective on

WHY YOU CAN GROW 10X … but you cant grow 10%

And WHY INDIAN GDP can grow 10X without TATA , BIRLAs and AMBANIs…

META SYSTEM Risks and Returns

Implication – A careful consideration to the meta systems risks and returns will

prove that the conventional business assumptions need RETHINK

Across the Vast Meta systems of OIL & GAS, CHEMICALS ( Specialty , Performance materials, Basic chemicals) , AGRI BUSINESS ( commodity , Traits, Inputs) ,

Pharmaceuticals ( APIs/ bio technology /CRAMs) , AUTOMOBILE ( Interiors, Exteriors, Safety , systems , engine efficiency) TEXTILES ( chemicals. Yarns, pulps , machineries ),

CASPI / CONSUMER GOODS - exists Metasystem Synergies

Global Mixes – capable of bringing the changes – How to read the connections

PF 80 Tn$

Ins 50 Tn$

HNWI 60 Tn$

SWF 10 Tn$

Mass Affluent 100 Tn$

Global Assets 300 Tn$

Alternative 15

Active 15

Sol 10

Active CORE 45

Passive ETF 15

Global AUM 100 Tn$

Coal 4100 MTOE

OIL 4300 MnTOE GAS

3900 MTOE

Nuclear 500

MTOE

RE 100 MTOE

Global Primary Energy Mix Mn TOE

Food 400 Mn Has

Feed 550 M Has

Fiber 60 Mn Has

Fuel 30 Mn Ha

Others 150 Mn

Has

Global ARABLE LAND MIX 1500 Mn Has

Meeting of WORLDS three primary meta system and economic impact

Yield ROCE

CO2 emission

Meeting Point of Land, Capital and Energy

Global Acreages are falling. EL NINO and strange natural phenomena could increase Inflation risks and chances of loss of competitive advantages of the EM economies which further torsion

the vicious spiral

Yield

Low Emission / GDP At 1.4 kg/$ of Chinese GDP … it is still

going to be 10 GT / the global warming to happen – 450 PPM can be by 2025

CO2 With the Disconnect of the GLOBAL

systems of value addition and controlled sustainable growth – the

financial returns are difficult to achieve and it will be reflected in more

UNPRODUCTIVE STRESSED ASSETS

ROCE

The presence of the geopolitical constraints make the optimization non linear and strategic pay off as

non NASH equilibrium case

Global Constraints can play spoil sports Resources Natural constraints Good blessings

Global METALS scarcity. Limited supplies , lasting for 30-100 years in case of AL, Mg, Zn, Iron ore,

Global warming, El Niño, La Nina Ocean acidification, Earths biological capacity to

sustain the growth at current pace,

450 PPM CO2, ocean surface temperature

rise Potable water scarcity Epidemics and curability Biotic stresses Natural disasters Rare earths like LI, Ds, Nd,

Nb, Ru, Rh,

Unlimited solar power Unlimited CLOUD BIG DATA analytics ADVANCED GENETICS ADVANCED ROBOTICS WIND POWER CO2 consuming devices Ultra advanced

processes and technologies

Global PRIMARY ENERGY supplies ( Danger point 600 Qbtu) – except coal , the reserves of global crude oil ( 1600 BBOE) and Global gas reserves ( 380 TCM) may not last 50 yrs or more

ICT vs Illumination vs EV- the key global trends towards the use of IOT, last mile FTTH, wireless ICT and advanced LEDs and Electric vehicle – require 6500 TWH of extra electricity | ICT alone will consume 3000 TWH of electricity

Meta Systems Risks – Hieroglyphics

CHINA – Long on Good time CALL

And Bad time PUT

CHINA CHINA

50%

50% 50%

Seeking Alpha – High volatility /

High Risk

China Polarization

Capital Glut

$ US

Conundrum

Topsy Turvy Competitive Advt

How to read HIEROGLYPHICS?

Capital Glut

Global Increase in the Capital stock – HNWI wealth increase to 165 Tn$/ Global Equity markets to surge to 70 Tn $ ( US 15 Tn$/ China 10Tn$ )- Increase in Global Debt / Unsecured loans/ pension funds – Very high capital base will strengthen the PE /VC / Activist investors power

Seeking Alpha

The High Power capital requires High quality returns – the complex Alternative assets / global diversification / Structured credits / Basel 3 norms / heightened M&A/ IPO /PIPE /CDO/CLO activities lead to seek High returns which is totally disconnected to the real life operational performance of the companies

China Polarization

China over capacity and high end Quality products /R&D pursuits will compel the global MNCs ( US/EU giants ) to re-align their business portfolio towards high margin but compelling value offer products vs generics products – as china will polarize the market into High end and generics

Global Meta systems and failure & weakening of the giant corporate like yahoo, HP , Infosys, Nokia , Sony , Kodak , Lehman brothers, DuPont , Dow - has sent a

message – loud and clear

Nothing can be taken for granted

Nobody is “too big to fail”

“Staying Big” is a even bigger problem

Paradoxes of Capitalism – Capital glut but no ROC Communist China vs. Capitalist US

World is on OXYGEN ( Risks of Petro-wars/ Massive debts / US fiscals deficits/ China voracity

Failed Economics – Monetary expansion , Inflation vs Interest rate

Paranoids survives – “keep walking”

Corporate deaths come whichever direction

Status is COMPLEX – no straight problems no straight solutions

Strategy is “nothing but win” – Strategic planner must be YOCTA to YOTTO , High bandwidth and strategy must be flexible based on milestones

Committing BIG – means – Committing BIG mistakes ( Aus LNG / O & G / Mining)

Failed Global Economics and Logics and Too Dangerous to rely ( TDTR) on Assumptions

• BIG FAILED ECONOMIC THEORY - Monetary expansion leads to JOB creation and Economic outputs – GDP growth – did not work , massive quantitative easing ( QE 1,2,3,4) which has resulted in massive monetary expansion of the balance sheet of FED Reserve ( 5 tn$ US/ LTRO/OMP in EU of 5 TN$ , massive ABENOMICS ) – but still the US economy has shown no confirmatory effects of Job gains and improved business fundamentals , in fact the strengthening of the S&P 500 index from lows of 800 to now 1960 , with forward P/E at 15x/ CAPE 24x..and EPS growth at 15%.. Has out performed global indexes and Emerging markets (MSCI EMI P/E 10x , also EM/EU cos are less profitable than US counter parts )

• GINI TOSSING - Improved Corporate performance does not mean improved jobs – the gini coefficient has only widen due to economic power being concentrated in the hands of few giants

• US TIME BOMB – US economic situation is at worst , with massive CAD of 900 bn$ , and CBO budget deficits of 800 Bn$ (Medicare 800 bn$ / defence 800 Bn$) has resulted in annual increase of 1.7 Tn$ into net debt , which is already very high ( 15 Tn$ ) – thought of increasing the debt limit to 21 Tn$ - the bomb is TICKING ..

• EM THE SAVIOUR ?? - Emerging market economies despite having the strong business fundaments , emergnece of the consumerism driven by the rise of middle class segment , small base , relatively low level of Gross DEBT TO GDP , fast catching up the growth – however the performance of the EM seems to be quite dependent on the DM FDI/FII / FPI and also the DM economic progress – in fact the Ems growth is almost solely attributable to the DM , shifting their resources and production base to APAC .

• Middle east will be perennially the suppliers of fossil fuel – The wrong business assumption – it might be the year 2025 , when we can think of KSA being the net importer of ENERGY products . The KSA dependence and Venezuela the OPEC members , may have to worry about their future plans.

• Oil and Gas markets – Aus LNG / RIL / Simulations failure

• Global Economies are strong and mature and long term strategic thinker – daiou vs shenkaku

• Capital para

Failed Global Economics and Logics and Too Dangerous to rely ( TDTR) on Assumptions

• BIG UNCERTAINITIES and BLACK SWANs - Oil and Gas markets – Aus LNG / RIL / Simulations failure – despite you hire the best consultants and run 1000s of simulations and adopt the best practices of FTGG / 3D sonar practices / have exact AZIMUTHAL cordinates for identifying the “sweet oil spots” on the ocean floor.. The work can not be the guarantee of the success – the case in point is RIL ( * if we were to believe AMBANI – the gas estimates has gone for the toss ) … Case of Australian LNG projects – the competitiveness of the LNG projects of GORDON, ICTHYS, SUNRISE , WHEATSTONE – gone for toss- the reason – the US shale gas revolution , which has become an unexpected global phenomenon and now CHINA ( 1100 TCF) and Russia ( 50 Bn barrels of SHALE OIL ) … are back in the game ..

• Daiou vs shenkaku - If we expect that Global Economies are strong and mature and long term

strategic thinker , so much so that the WORLD WAR 4.. Can not be even thought about …. We are HIGHLY MISTAKEN – CHINAs growing PARANOIA or the expansionist mindset … may trigger the DISQUIET and DISCOMFORT amongs the PACIFIC RIMs and we have ISLAMIC TERROISM .. Spread across MAGHREB and IRAQ / SYRIA ..and the JEWS SEMITISM days can be back …. So easily ..

• Emerging Markets means HIGH RISKS – low per capital income, consumption, very high cost to serve, fragmented markets, volume game, high generics , high over crowding of the market – and hence extracting the business from EM ,. Requires different mindset .. The growth will not come that easy through big KEY ACCOUNTS … the need for the smart GTM system

• US WEALTH – Despite the Massive DEBT TIME BOMB effect, US recovery can not be ignored – the world economy , can flex muscles – S&P 500 index risen from 800 to 2000 now – the US consumer confindence has improved – the Capital Market wealth has increased from 8 Tn$ in March 09 to 20 Tn$ in Dec 13… while REAL ASSETS like Houses . The wealth has increased from 6 TN$ to 10 Tn$ … resulting in shoots of economic progress…

Global META SYSTEM Risks

Strategic Inflection Point

Time to change Adopt new horizon Reinvest

Black swan

Expect unexpected Big shocker Insurance

Undercurrent trends

Keep eyes ears open Embrace multi

dimensions Change readiness

Leadership Inertia

Human problem Don’t want to change Slow killing

Concentration

Too much dependence

Uninsured

AB Group and MECO both could be facing meta system risks

MSR SIP BSN UCT LI H2SO4

Meta system Risks Strategic Inflection point

Black Swan Risks Under current trends risks

Leadership Inertia risks

Concentration Risks

If there is pest attack on Argentina sunflower , the re is high inflation in INDIA . – Globally connected , cross regional , cross systemic . Agriculture vs petro cutlure Food vs Fiber vs Feed vs Fuel Chinapolarization China 50%: 50%

Time to move on , recognize the need for strategic horizon, ability to switch gear

Ability to prepare for sudden shocks, natural calamities , unexpected risks Disruptive technologies – 3D/ Analytics/ SMAC/Biotech/RE/Solar/Shale gas/ Smart grid Obscolence

Despite being the market leader , expert in the strategic emerging areas- things can go awry Risks of Average out thinking – lack of value creation Remaining in comfort zone – Operational thinking

In order to create stakeholders returns. Blindly pursuing the strategic short term vision less moves 0 like spin off, divestments , low R&D Operational thinking only

All eggs in one basket High dependency on critical drivers Big reliance on several competitive advantages like Oil . Mines etc Over investments

High Impact , Sudden HIGH impact, Slow realization

HIGH impact Abrupt

HIGH impact Slow

HIGH impact SLow

HIGH impact Slow

INFOSYS, TCS NOKIA, AUS LNG, CHEMTURA

SONY, NOKIA , TATA INFOSYS , SONY, MONSANTO , DUPONT , DOW , YAHOO, HP

RIL , CHEMTURA, ARKEMA

EMERGING MARKETS Are they reliable ? And why china is

different

Implication – the growth assumptions need to be weighed

practically & smartly

Emerging Markets story – Is it reliable ?

• BRIC is now BRI – China has safe guarded and decoupled

• Brazil , Russia , China – the current account deficits – may be troubling

• Russia ( with bovonenkovo shale oil discovery of 50 Bn barrels and brazil with jupiter and lula pre salt discovery – seems to be avoiding the disaster)

• India faces the biggest challenge of ENERGY SECURITY – unless like China ( 1100 TCF ) or Russia / brazxil like oil findings , india will be subject to the massive shocks created by oil economies

• Indian Manufacturing and farm efficiency is the lowest

Amazing India – Incredibly suppressed

• Agriculture Production Despite 1/4th the agriculture productivity of the world , and despite fed only 25% of the global average of fertilizers and chemicals n nutrients . Despite the 40-50% losses in post harvest storage , logistics problems – India is still , No1-2 Agri crop produces like Rice, Wheat , Cotton , Sugarcane , Soybean, Corn

• Milk production – despite Indian milk production is the highest globally ( 140 Mn MT – global production 708 Mn MT), there exists no world globally competitive dairy farm company the size of LACTALIS, SAPUTO. MINGNIU, MEIJI, FONTERA , NESTLE , DANONE , US DIARY etc – the result is a large scale inefficiency of the system

• Electricity – Despite india has 267 Bn MTs of the coal reserves of high- moderate quality , still we have ADANI importing the coal in a bid to get high price for electricity to constrain the country perenielly in to the depression state of economy

• Solar Energy – despite the sun god spreads 2500 W/m2 energy every minute on ISC .. County does not have YINGLI, SOLARTECH, HANWAH like orgs to create the massive infrastructure

Key risks in emerging markets Not decoupled Highly co-related to global

markets performance Very HIGH systemic inefficiencies and lack

of basic infrastructure the growth is stunted Very low Per capita income , per capita

consumption very high cost to serve , even though

bundled to a sizeable market opportunity Very high cost of capital ( cost of debt is

worrisome / equities underperformed US/EU

CDS /FCCB ratings are downgraded Currencies depreciated disproportionately

on the US QE tapering news

KEY RISKS OF EMERGING MARKETS

Emerging Markets are highly vulnerable to ….

Except CHINA. The other Ems are highly vulnerable to currency shocks .. Wrt to the global capital contraction and tapering effect of QE

The basel 3 capital requirements are JUST enough to prevent the BANK RUN

The EM economies are COUPLED with the Developed markets economies , but interestingly CHINA has decoupled

China is different

Problems with MECO and ABG & Why they are on the SAME BOAT

Implication – Conventional OPERATIONAL thinking may be too

dangerous to follow…

Problems with ABG and MECO Stuck up in comfort zones

• The global heavy weight industries like Oil & Gas, Mining & Metals, Specialty chemicals – is undergoing sharp, invisible and tectonic shifts

• Major risks are RM sourcing, competitive

advantage sustainability , New unconventional means , disruptive technologies – has transformed the landscape into a battlefield

• MECO grapple with the value added products performance vs basic chemicals /

Ethane rich gas natural advantage, innovative performance materials needs good marketing and sales support

• Asia expansion / China 50% :50% - china being 50% of entire worlds consumption center and almost 50% of world GDP growth ( 2.5% of 70 Tn$ ) comes from china - resulted in massive capacity expansion and other words competitive advantage erosion for US/EU MNCs –

• CHINA effect – Polarized world – there is a huge polarization of markets between HIGH END INNOVATIVE products vs GENERIC products – and hence the BIG MNCs are either forced to be a GENERIC competition or they have to be ULTRA HIGH END VALUE ADDED PRODUCERS ( ie DOW/ DUPONT / BASF/ BAYER )

• No more POOR CHINA companies

despite being known for poor in qualities , earned a strong reputation of GIANT SLAYER ( XIAOMI/ HUA WEI/ LENOVO / ALIBABA /SINOPEC)

• Rebalancing of CHINESE ECONOMY – means immense opportunities for SPECIALITY CHEMICALS and CHINA is all there to exploit it itself

• MASSIVE PC/ PX/PTA /MEG/ Ethylene / Shale gas expansions ( ~ 50% global capacity)

Problems with ABG and MECO Stuck up in comfort zones

• CHINA INVESTMENTS – massive 500 bn$ investments happened in Africa / Canada / CIS / Russia – eg 15 bn$ Nexen acquisition by CNOOC/ 300bn$ purchase of gas from Russia ROSNEFT / GAZPROM deals/ Kazakhi investments to avail CASPIAN oil n gas assets at DUSHANZI / SINOPEC venturing with multiple companies .. Availing technologies , building up capacities , expanding globally … remain competitive ---

• QUESTION IS … WHAT IS STOPPING INDIAN COMPANIES TO BE “WORLD CLASS GLOBALLY COMEPTITIVE and REAL VALUE BRINGER” organization

• Why NOT A SINGLE company like RIL/ TATA/ BIRLA is not recognized like

What could be problems for INDIAN companies

• Fast changing dynamics

• Energy insecurity

• Presence in low value addition / Research meek areas

• Unable to expand globally

• Cost competitiveness vs Real value addition products

• Not having global BIG market size to influence the results

• Highly corrupt and low employee moral

Why MECO & ABG are on the same boat

MECO 60 Bn$/ 20 Bn$ EBIDTA

CHEMICALS

30 Bn$ - 11 bn$ EBIDTA

40 Mn MT @ 750 $/t High price of MEG/ MTBE / Ultra low cost

advnatage

POLYMERS 15 B $ / 4.5 Bn$ 10 mt @ 1500$/t

Commodity polymers but cost competitiveness

Key Risks – High end products from US / Low end

commoditization CHINA

INNO PLASTICS 10 B $ / 2.7 Bn$ 2 mt @ 4600$/t

LEXAN/ NORYL/XENOY/PC /ABS – Auto /

Medical/CE/Paints vs Dupont / BASF/ Eastman

SMALLS – Performance

chemicals 2 bn$ + Fertilizers 2 bn$ + Metals 4.2 bn$ - EBIDTA 1.2 Bn$

MECO has windfall advantage of Low cost RM and then very high consumption growth in last decade.. .however this can not be sustainable .. Pressure is on both side .. RM side and market side too

ABG 40 Bn$/ 2 Bn$ EBIDTA

ALUMINIUM ( Production/FRP) Hindalco 5 Bn$ / 0.7 Bn$ NOVELIS 10 bn$/ 0.9 Bn$

2.85 Mnt shipment AL – Cars, cans, Construction , Conductors

India low cost COAL / BAUXITE adv FRP margins ? /China over capacity / Huge competition in FRP

GRASIM 5 Bn$ / 1.2 bn$ Cement 43 mt - 3.9 Bn$/ 0.9 Bn$ VSF 336 k – 1 Bn$/ 0.17 bn$ NaOH – 270k - 0.175 b$/0.045 bn$ CEMENT – HOLCIM X LAFARGE VSF may shrink Chemicals minuscle

AB NUVO 5 B $ /0.8 Bn$

RETAIL & LIFESTYLE AGRI BUSINESS

IDEA TELECOM 27%

INDIA ONLY focus can be seriously detrimental ..even if ur INDIAN KING – BIRLA has to be GLOBALLY COMPETITIVE

Wait and Watch is not the option

CHINA Capacity ,US R&D strength, Vagaries of Economies , Financial stress

Key meta systemic trends

Key trend Implication

Economic conundrum continues ( QE/ Inflation/ UnEmp/Debt /Alt assets) prudential planning,

Black swans – comet hurling at … light years away , MicroDL gene space responsible

for metabolic pathway

Yocto to Yotto Strategic planning bandwidth

Smart guy will make money from AIR Competitive advantages moves from product specialty to smarter value offers

Ultra high Marketing and Strategic business development skills

Strategic horizons getting shorter n shorter Risks weighted approach

Growth is not for every body – ex Digital Photography vs Kodak Specialist value proposition is must – No scope for Low end players

The NextGEN strategic fuels - Biofuel , RE ( Biomass, Coal ,Solar, wind,

nuclear, Anti matter)

Capital GLUT – almost free money – but still ROCE will be constrained – Investment

traps vs. dry powder of PE/VC, Cost of Debt is considerably lower than Equities , but

Cost of debt is low – but

Disruptive technologies ( SMAC/ Cloud / 3D printing/ IOT / Adv analytics ,

Adv genetics , Adv materials to redefine the SHAPE and SIZE of the Markets

Preparedness for next gen technologies

Margins – Too much for too little ROCE

Any one can CHECK MATE

Adv Plastics

Adv BIOFUEL

ALUMINIUM

Cannibalization

Adv BIOPlastics

CHINA Over

capacity

CEMENT

CHINA Over

capacity

CHINA Over

capacity

Holcim +Lafarge

The Key CHECKMATES scenarios for ABG and MECO

Cement Aluminum Oil & Gas & Energy

Plastics Chemicals

China over capacity No All Aluminium car , Steel + plastics innovation

No presence in Adv Petrochemicals process / refineries / High GRM

China over capacity – PVC/HDPE/LDPE prices to reduce

China Over capacity price erosion due to generics

Emerging markets targetted by Global advanced players

FMCG no longer likes AL cans

No presence in Smart grids

Huge build up of SHALE GAS based ETHYLENE crackers and PE capacity

Cannabalization due to innovation

Big M&A – HOLCIM + LAFARGE

Light weight Plastics No presence in Renewable energy sources WIND / SOLAR

Bio plastics from Bio mass

Bio plastics from cheaper sources

Lack of cheaper coals ( electricity)

No COAL TO METHANOL – SG

Use of Adv biotech converting Bio waste cellulose mass into Ethanol

Specialty chemicals value addition EPHEMERAL

Adv algae and yeast and bacteria

Adv Plastics replacing Al in cars, Building materials etc

How it will affect MECO / ABG? – Danger of Profit dripping out

High Margin > 15-20 %

Mid Margin > 10-15%

Low Margins > 5-10%

Ultra Low

Margins > 5-10%

Ultra High

Margin > 30%

Low capital investment Mid capital investment Ultra High capital investment

Inno Plastics

Comm. Polymers

Very High capital costs

will require to add value or even maintain margins

to these products , challenged by China over

capacity problems

MEG 33%

FERTILIZERS 60%

VSF 10%

CEMENT 12%

AL FRP 15%

FIN 15%

BIG WORRIES for BIG Group – CHINA factor is really worrisome

Probability High Low

Imp

act

Hig

h

Low

$ 4 bn if MEG /MTBE/MeOH/EDC/Styreneprice fall by 10%

$ 6 bn if Polyolefins

price drops by 10%

$ 3-4 bn If price of LME AL

falls by 10%

$ 4-5 Bn If Holcim –Lafarge improve reach out

by 10%

$ 1-2 Bn If global GDP remains sub 3% for AMC

The Big worries for MECO and AB Group is there… they can envisage a REAL DROP in revenues and profitability – of course they can and they had availed the super normal profits…,,, and with CHINA 50%: 50% …. It is POLARIZING the markets in High end and low cost generics – forcing companies to either built up great R&D

strength or compete on volumes … thus STAYING COOL is also not an OPTION

$ 1-2 bn If CAR-CAN AL replaced by

10%

Staying in the game …. Play smart else quit else forced to quit

High SCOPE and LOW cost High Scope but High COST of value addition

Consumer chemicals Innovative business models Financial services Strategic Alliances ISLAMIC Finance

PET/ PX Innovative Plastics Advanced Materials Coal to chemicals / Biomass to SG Specialty chemicals

Low scope , Low cost Low Scope & High Cost of value addition

VSF Commodity polymers

AL Cement Basic chemicals

Genesis for Meta system thinking for MECO and AB GROUP

MACRO RISKS

CHINA 50:50:50

US DEBT BOMB

SHALE GAS RISKS

POLARIZATION

RETURN ON/OF CAPITAL

BLACK SWANS

SECTORAL RISKS

COMMODITIZATION

PROFIT EROSION

OBSCOLENCE

SUBSTITUTION

CHANGE IN CONSUMER TRENDS

DISRUPTIONS

VAPs R MUST

OPERATIONAL RISKS

PRODUCT CONCENTRATION

TOO THINLY SPREAD

FINANCIAL STRESS

RONA/NW?

NEXT STAGE GROWTH HORIZONS

UNABLE TO PASS ON COST

Wait and Watch is not the option

40-50% of the Profits /Revenue at Risks – coupled with Financial stress ( Debt ) can really damage

MACRO Oppty

C+ I + G + S

CHINA REBALANCING

SHALE GAS OPPORTUNITIES

SECTORAL Oppty

META SYSTEMS OF AUTO/PHARMA/CONSUMERS

ADVANCE MATERIALS

CROSS SECTORAL SYNERGIES

OPERATIONAL Oppty

ACROSS VALUE CHAIN

CHEMICALS TO CONSUMER

CONVERGENCE GTM

ASSET LIGHT INVESTMENTS

SKIP TO DANGER ZONES

ADV KAM/CRM

Looks like Only Jesus is the Redeemer

Well..A Global Yocto ( 10^-24) to Yotta (10^24) Strategy planner

could be jesus sent …

Yotta (10^24)

Yocto ( 10^-24)

What is Y2Y Global Strategy Planning?

• High bandwidth Yocto ( 10^-24 ) to Yotta (10^24) – to

indicate not to miss any strategic opportunities and risks ( Ability to see a Comet coming light years away … while ability to find the High performance gene and think of double haploids)

Ultra HIGH - • uH Proactive ( NO Don’t ask , don’t tell)

• uH Practical ( NOT just 10% cost of capital and growth is 11%)

• uH Futuristic ( sustainable , advanced , mindful of disruptions)

• uH Smart ( Asset light investments, Strategic alliances thinker),

• uH Evangelical ( who says u cant call boss in the mid night)

• uH Meta-systemic ( NOT just Happy in my own little world –comfort zone player)

• uH BIG picture HERO ( Real heroism & savior & redeemer )

uH TM

Why meta systemic strategic planning – A MUST FOR BIG COS?

Bcz we don’t need Mckinsey and KPMG guys just to prepare the 10% up business projections

Mere financial engineering and EPS delivery has not worked

Risks are not defined in oxford encyclopedia

Black swans can come any time

Both YIN and YANG … could die / Anybody can fail .. No assurance for the people who think they are playing smart

WAIT and WATCH is also not the option ,like Aus LNG projects

Competitive advantages swinging wildly –US shale gas vs Debt bomb

Contradictions are many – Monetary expansion vs job growth

have to do Something , have to do SMART ,

have to do SIGNIFICANT ,

have to do SOLID

SUMMARY

Meta system risks are invisible and both MECO and ABG in the same boat ( which can sink ) and also they have BLUE OCEAN opportunities which can make them SIGNIFICANT

PLAYERS ……. But for that BOTH MEC and ABG

But for that BOTH MEC and ABG

Who provides customer delight , Who makes life easy and enjoyable for all stakeholders , who offers innovative cost efficient solution, who brings the

best of every thing it touches , who is HEROIC , Who is Adorable and savior

To Become GLOBAL LEADER

Vision of

$ 250 Bn

HGHMLC High Growth, High Margin, Less Cyclical Strategic market sectors

Implication – Need for Smart, Futuristic, Sustainable competitive advantage.. Not just OPERATIONAL

thinking

Valuable Middle East resources need to think big and High value added products – apart from

commodity chemicals like MEG/ PTA/ Styrene/ Commodity polymers – HDPE/LLDPE/PVC

The emergence of shale gas arena has made US, china , russia , brazil – key players to offer competition to Middle east cos like MECO , Saudi ARAMCO

Performance chemicals like Acetic Acid, anhydride, Bis A, MDI , MTBE , EDC advantages may soon go to emerging markets players in china. Thailand – companies gearing up for BIG CHANGEs

Ethylene crackers – capacity addition on the rise – may put margin pressure for MEG , china MEG capacity build up / PX/PTA prices may come down as RAPID – petranaus project comes to full scale running

China strategic alliances with RUSSIA – ROSNEFT / gazprom and azerbaijan and kazakhistan for the CASPIAN gas and oil assets and subsequently execution of the DUSHANZI project will make china sort of self sufficient for the demand of PET/ PVC/ HDPE / aromatics

SINOPEC , petrochina , CNOOC , Shenhua – all gearing up for Oil n gas n energy security .. China has spent 500 bn$ in last several years for assets purchase in USA/ Canada / Africa

Quick rise for APAC giants like INDIA ( PCPIR , shale gas policy changes , Offshore resources ) + Brazil readying for the LATAM , China self sufficiency would mean the compression of the business for MIDDLE EAST COMPANIES .. In the long run

Why HMS ? High margin sectors are critically important for INDIAN and MIDDLE EAST COMPANIES

Global Chemicals , Oil & Gas , Energy outlook

Restructuring – Realignment of portfolio – Dow , Dupont , Rockwood, DSM , Bayer

China voracious rise , capacity expansion

APAC saving the day

Chemicals M&A – shaken , but not stirred

Focus on High growth Low cyclical, futuristic ,sustainable technologies

Disruptive technologies emerging and respected

PE players eyeing chemicals… must have big things on mind ( carlyle/ TPG/ EPP/ KKR/ Berkshire hathaway)

Private Equity eyeing BIG on chemicals

Program DSM Lanxess Rockwood

Divestments - Exiting merchant caprolactum business

- Spinoff – pharma business

- Wax emulsion business

- Rubber accelerators / Anti oxidants

- NBR - Perlon – Monofill

rubbers

- TiO2 , pigments , timber treatment chemicals, Rubbers , TPC , Water chemicals

- Advanced Ceramics - Clay based additives

Size of Divestments

700 Mn USD / 6% of 2012 sales

2012 : 700 Mn $/ 5% of sales

2012 : 2.2 Bn$ /63% of sales

Rationale - Stakeholders value creation

- Core focus

- Focus on HMLC - CORE business - High Multiples - Share buyback

- Activist investors - High multiples - Debt reduction - HMLC

Program Ashland DOW DUPONT

Divestments - Ashland Water tech - SBR

- NA Chlor Alkali - Chlor vinyl, Chl Orgs - Epoxies - EU building n

construction

- Performance chemicals, TiO2, Floro products

- Glass laminating solutions, - Automotive coatings sold to

CARLYLE - Several REVERSE MORRIS

TRUST transactions

Size of Divestments

2.3 Bn $ / 27% of 2012 sales

2012 : 5 Bn $/ 9 % of sales

2012 : 7.7 Bn$ / 22 % of sales

Rationale - Stakeholders value creation

- Core focus

- Focus on HMLC - CORE business - High Multiples - Share buyback

- Activist investors - High multiples - Debt reduction - HMLC

Carlyle acquired DuPont Automotive coating business – 5.5 BN$ / Advent sold OXEA to oman oil ( 2.5 bn$) , One equity sold Chemlogics to Solvay , Platform speciality acquired McDermaid from PE player

KKR has 5% of strategic investments

Berkshire Hathaway – solid specialty chemicals portfolio of Lubrizol / recently acquired CP chemicals ( Philips 66)

TPG / EPP / Apollo and LLPs Rise of Activist investors , PE

culture has forced the companies for Public to private, Reverse Morris trust transaction, Focus on core business , regulated diversification , realignment of the portfolios

Forcing restructuring and realignment amongst many big MNCs

High Margin Sectors for Middle east companies

Innovative plastics Ethylene glycol

derivatives TPE / TPU/SBCP WIMO

CASPI Electronics Optical fibers and

smart grids

Oil ^ gas exploration / shale gas opp

specialty nutrients

Animal nutrition

Focus on Key Global accounts

Refinery processes

Pharma Personal care

Spe Mining Li/Br/ PO4/ K

CTL/ MTO/MTP/

PDH/

GTL

Biotechnology

Must Avail…Key futuristic trends. Coal/Oil/Gas vs RE (

Hydro/nuke/ High MPH , High Octane, High

NELSON score refineries SHALE GAS / Invst in

INTEGRATED complex / oilfields offshore DW

Coal to Chemicals, Biomass, Biofuels, Wind Energy ,

SOLAR * /park , Real estates, townships / Electric vehicles/ Anti matter / Hydrogen fuels

Enzymes , Algae , Mubadla , MASDAR models ,

Energy producing buildings . SMART

GRIDS / CITIES

SMAC, Digital presence, Network setups , GTM ,

A&P blitkriegs,

Advanced analytics, DRONEs , Highly

efficient Marketing , SMART GTMs, Low cost

to serve

HIGH OCTANE CONSUMERISM propelled by Digital global outreach , Book warehouse in Mozave

desert delivers books in Mumbai

Agriculture productivity enhancement

Capacity Expansions

Farm awareness

More Output per seed

Corporate farming

Advanced Agri genetics ( IR/HT/DR/VR)

Multi traits stakes / GMO

IP/PVP / trade terms

Ultra Modernization of farm practices

Ultra advanced Multi stake traits ( native ) Abiotic/biotic

Plant health, Animal health nutrients

ROCE continue to trouble

Dry powder vs traps

China over capacity 50%:50%

EM risks and US /EU debt problems continue

Multi Mix portfolio investments

Alternative assets Strong ISLAMIC FINANCE Increased Retail investors

participation High Cost of Borrowing Debt stress to increase

SWF dominance Integrated financial

service merging MFG & FIN SERVICES

Big M&A deals Cross sectoral synergies

Agri

Macro

Energy

IT

Scope of Value addition- Large CANVASS

Product Advancement

Strategic business development / M&A/ territorial expansion

Strategic Relevance of products to consumers

Thicker , Faster and Better MARGINS , Low

cyclicality and SUSTAINABLE

Customer Insights and Delights and VP delivered

Strategic Alliances to skip the HEAVY investments

Bundled MULTI VALUE OFFERS and avail cost synergies thru Convergence GTM

META TURF

Mckinsey CHALLENGE ME …

• Emerging Markets are highly coupled – except CHINA

• The Growth is possible in a BIG WAY ..but requires ultra High Strategic planning – meaning the conventional hard core loot mindset of AMBANI and TATAs like ultra corrupt organisation ..if removed ..india can actually grow 10x….

• CHALLENGE ME ….