SRF Limited analyst Q&A

Thank you. We will now begin the question -and-answer session. The first question is from the line of Arjun Khanna from Kotak Mutual Fund.

Congratulations on a great set of numbers. S ir the first question is on the capex. While we did indicate in the opening remarks that we have done debottlenecking , but if I look at capex this year, it’s been roughly Rs. 1,230 crore, and if I look at FY23, almost Rs. 2,800 crore and Rs. 2,200 crore in FY24. So just wanted to understand, given that the capex is lower for FY25, are we going to see substantially higher capex in FY26? We have a number of projects such as fluoropolymers, etc. coming online, so I just wanted a sense on that front.

Thank you, Arjun, for your question. You are absolutely right; we had said this earlier as well that the capex for FY25 is going to be slightly lower. That ’s something that has panned out . Although there have been a lot of debottlenecking projects that we have done this year. So to that extent , there is a lot of new capacity that has got created and added. F rom an FY26 perspective, in our current estimates we believe capex will probably be in the range of Rs. 2,200 crore - Rs. 2,300 crore. We have been judicious about capex going forward. But to a certain extent, yes, the intensity of the capex will increase for FY26. I hope that answers it, Arjun.

Sure. Very helpful. Secondly, sir, if one looks at the specialty chemical side , w hile we did mention we are looking at overall chemical growth of 20%, if you could, now that we are at the end of the year, give us a sense how did specialty chemicals do for FY25? And what would be the mix between pharma and agrochemical at this point in time? The second part to that question is, we have talked about the intermediate prices improving , at the same time we have talked about pricing pressure from China. So, if you could clarify these points.

Last year the sales for our Chemicals business overall were roughly about Rs. 6,300 crore. On that side, roughly about Rs. 3,700 crore was Specialty Chemicals business and Rs. 2,600 crore was Fluorochemicals business. This year, roughly the sales are in the range of Rs. 6,700 crore, out of which, roughly about Rs. 3,850 crore is Specialty Chemicals business and Rs. 2,850 is Fluorochemicals business. So share between them has remained in the range of , let’s say, 57% - 58% for the Specialty Chemicals business, and 42% - 43% for the Fluorochemicals business. So that’s the breakup. Now to answer your second part of the question, in terms of saying that pricing pressure through China and various other things. This is essentially also something that we saw in the earlier part of the year, H1 . To a certain extent , that pricing pressure has come down a bit , we have seen both lower pricing pressure as well as better volume of ftake coming through. Again, for FY26 we believe that there is a positive traction that we are seeing from agrochemical customers. While in some pockets there are probably slightly lower positions that are playing out, but we are fairly hopeful that 20% plus growth in the overall chemical bus iness should be achievable going forward. Share of pharma is, roughly about 6% to 7% from a Specialty Chemicals business perspective.

Just a clarification on the opening remarks. You mentioned we have done debottlenecking and possibly 30% increased capacity. That’s for the specialty side of it, Fluorochemicals, or should we read that Rs. 6,700 crore of revenue potentially can have Rs. 2,000 more crore of revenue if demand permits over a period of time?

Do not do the math on it, Arjun. What it referred to was Specialty Chemicals business only rather than Fluorochemicals. It was being talked about in the same way when we were talking about the Specialty Chemicals business.

The next question is from the line of Naushad Chowdhary from Aditya Birla Sun Life Mutual Fund.

Congrats on a good set of number . One question on the fluoropolymer business, I just wanted you to touch upon this in terms of how this business is doing ? Acceptance of our specialty polymer? And how much capital so far we have deployed here? And how do you see this in the next two, three years, how this business should look like?

So, 2 - 3 questions going together, Naushad, let me try and answer each one of them. How is this business doing, I think we have improved on the domestic side in the fluoropolymers business. We have seen better intensity on the fluoropolymers business on fine cut and the free flow grades, export seeding of the fluoropolymer business has also started and we are starting to see some traction on that side as well. Like we said in the opening remarks, I think we will see a positive coming through on the fluoropolymers business during FY26. From a futuristic perspective, we have already announced capex of roughly, Rs. 550 crore or so for three new fluoropolymers PVDF, FEP and FKM. Some of those will get commercialized and completed during FY26. So, from FY27 onwards we should see more fluoropolymer sales coming through. I think those were the questions, if I missed out anything please do repeat.

No, that’s it. That’s helpful.

The next question is from the line of Nitesh Dhoot from Anand Rathi.

Congratulations on a good set of numbers , sir. So my first question is on the India-UK FTA, if you could please throw some light on what kind of benefits could accrue to us business wise?

Nitesh, when we look at our European sales, sales to the UK are very low. So, I do not think that there is a large positive or a negative impact in that sense from an India-UK FTA perspective.

Sure. And sir, just one question on the mix of domestic and exports for the chemical segment.

Let me do that separately for the Fluorochemicals and the Specialty Chemicals business . Specialty Chemicals business, I would say roughly in the range of about 70 % - 71% is exports and the rest is domestic. For Fluorochemicals, 60:40 is the domestic versus export.

The next question is from the line of Sanjesh Jain from ICICI Securities.

My first question is on the refrigerant gas, what was the utilization last year? Now that we have started our AHF plant, would it be fair to assume we’ll be using 100% in FY26?

Simple answer to that is, yes, from an FY26 perspective. From an overall FY25 perspective, we will probably be roughly in the range of about 70%, because R32 capacity utilization was slightly lower than what we had initially planned because of the AHF thing.

Got it. And from the pricing perspective, now that we see the inventory level in the US coming down, which adds to the demand, how should we see pricing for the HFC in FY26? Should we hold on to the pricing of FY25 exit?

Each gas will play out differently. I think for R32 our pricing has to still play out fully. Whatever we have seen as exit pricing in FY25, that we should be able to sustain and maybe slightly better it going forward . On R134a, I think it should remain flat to slightly positive only. And R125 again should remain flat from where we have seen it exiting in FY25.

Very clear. How should we see R22 now that there is a 50% cut starting from 1st January 2025, we should be using that remaining R22 in our PTFE plant, have you started that?

R22 is always being used for the PTFE , Sanjesh. As PTFE capacities grow out and we see full utilization of PTFE capacity, R22’s usage for PTFE is only going to increase. There is no doubt on that. But today, pricing is pretty decent from a refrigerant market perspective. We have seen a slight increase in pricing on the R22 side as well. On R22’s utilization we will obviously see positive, not just for PTFE, but for other fluoropolymers that will come through over a period of time and for the Specialty Chemicals business also.

Very clear. One last question on the specialty side, when we speak of 20%, I assume that we are looking at 20% growth in specialty as well. Are we seeing this kind of order book growth coming in because BASF first results showed a quite muted volume growth what they reported couple of weeks back; how does our order book look like?

When we are giving you 20% guidance, we have a fairly good confidence in terms of where the order book is. But, if you ask me that do I have 100% visibility of the order book , I would probably say that the visibility is probably in a 70% to 80% range. There will be countermeasures that we will implement, but we have a fairly good sense of how that 20% number is going to be achieved going forward, Sanjesh.

Very clear, sir.

The next question is from the line of Madhav Marda from Fidelity International.

First question on the ref-gas business. I think, sir, like you said, we have not seen the full benefit of R32 play out yet, is it fair understanding that in both the export and the domestic market, for us, the R32 benefits will show up more in FY26, especially exports, where if we have certain contracts which reset over a few months or a few quarters , so the full benefit especially on the export side reflects more in FY26. Is that the right way to think?

The way we would look at it , Madhav, is that we will have a better volume utilization from an FY26 perspective, given that we should be able to produce more of R32, given that the issues with AHF have now kind of sorted out, so that ’s a positive . From a pricing perspective , we believe the current pricing should sustain and it should be probably slightly higher going forward. But very difficult to be able to give the exact number. What I can only tell you is , the exit rates for March 2025 were probably higher than what we saw as averages for the entire year.

Yes, definitely. But are export prices for R32 playing catch up to our current domestic prices ? Is that moving with the lag, the increase that you have seen?

Yes. Understood. And sir the second question on the specialty chemical side, from our six, seven AI launches which we are speaking about, could you just give us an update in terms of how many of them maybe are already launched or will be launched in FY26? And how we could see ramp up in the next one or two years from these newer AIs? Thank you.

Look, I do not think that position has changed very much, Madhav. We have always said that in FY26 we will see at least two to three AI, more towards H2 is when they will come through. We will give you an update on some of these as we start to see a pickup on volumes. When we look at it from an FY25 perspective, the key AI still remains as P32 only . We have seen some new AIs come through over the financial year, there have been some positive developments that have come through. The ramp up will continuously depend on the customer requirements going forward. Some of these are patented products, and as they launch in various geographies, we will start to see a pickup in volume of these. Very difficult to judge the exact timing, but we are fairly confident that in H2 there will be some positive traction going forward.

And just on the capex of Rs. 2,200 crore to Rs. 2,300 crore, could you just split it into different segments? And within chemicals, how much would go into spec-chem and like fluoropolymers etc.?

Madhav, I will have to come back to you separately on this . Today what we are implementing in Fluorochemicals, is on the fourth gen gases and the fluoropolymer project on the chemical side. So those are the larger projects that are being implemented. From a performance films and foil perspective, BOPP BOPE, the capacitor grade line and the CPP line are being implemented. So, my sense is that from an FY26 perspective, this will probably be 65% - 70% on the chemicals side and the balance will probably be in the performance films and foil and technical textiles. So that’s how the split should be. But I will re-vouch that number and come back to you.

Got it. Perfect, sir.

The next question is from the line of Pankaj Tibrewal from Ikigai Asset Manager.

Congratulations on the great set of results. Rather than quarterly, just wanted to get a sense on how will the shape look like of the Chemicals business in the next three years. This year we entered at about Rs. 6,700 crore of revenue. If you can just help us from a size and scale perspective, one on chemical? And overall, Company, what is the medium term thought process, Ashish ji and Rahul ji?

In terms of the three-year share, I think 20%+ growth going forward should be a key positioning from a Chemicals business perspective. So we ended up with Rs. 6,700 crore of revenue, we will probably be, let’s say, Rs. 11,000 crore of revenues plus in three years. I think the split of that probably remains similar between specialty chemicals and Fluorochemicals. Fluorochemicals is also implementing large projects - fluoropolymers as well as the new gen gases. So in three years some of these should have come up and become revenue yielding. So mix remaining the same, I think at 20 % - 25% growth we should probably be hitting a Rs. 12,000 crore number going forward.

That’s great. And on the BOPP side and in the Technical Textiles, what will the shape of the business look like over the next couple of years?

From performance films and foil business, t he way we will look at it, is that there are new capacities. Between BOPP-BOPE and CPP, aggregate new capacity expansion of roughly about 50,000 tons to 55,000 tons is happening. Given a similar run-rate in terms of their asset turn, that is the addition that we are looking to get, in the performance films and foil business. Obviously, more value-added products, better realizations, high end products, all of that will keep on taking better shape from a performance films and foil business perspective. But maybe I can come back to you separately in terms of a three-year positioning of where this is likely to end up.

Great and wish you all the best.

The next question is from the line of Rohit Nagraj from B&K Securities.

Congrats on a strong Q4 and FY25. The first question is in terms of the EBIT margins that we have done for FY25, given that you have explicitly said that there was pricing pressure on the specialty chemicals front , so is it safe to assume that the margin expansion is predominantly from ref-gas volume growth as well as the pricing increase that has happened during the course of the years?

Rohit, no doubt on that . I would say , from a Q4 versus Q4 perspective, we have seen margin expansion happen in the Specialty Chemicals business also. We have seen significant margin expansion happen in the fluorochemical side and the ref-gas side also. So those are two positives. But from an overall perspective, we had said between 25% to 26% , +/-2% should be the range that we will continue to look at. That story remains pretty much intact, Rohit.

Sure. That’s helpful. And second, just a minor question that the margin s that we have reported for the Chemicals business, about 25% EBIT margins for FY25, is it safe to assume that we will be able to at least maintain and better it in FY26, given that conditions probably will further improve from the industry perspective?

Rohit like I said, I think the story remains intact between 25% to 26%, +/-2%, even from an FY26 perspective with larger volumes will be the story that will play out. Therefore, both from a revenue perspective and an overall volume perspective, we will start to see bigger positives going forward in the Chemicals business. When we think about overall margins, even a 25% to 26% EBIT margin with a large depreciation is a pretty decent number going forward. The target on that side remains in that range only.

We have mentioned in the PPT that India and Middle East will drive future growth for refrigerant gases. Is it because that there is a baseline period in both these geographies and we will be pushing more volumes in these markets to gain more quotas? Because I do not think we are strategically moving away from the US as a market, just wanted to get your sense.

I think you are right in terms of understanding this, that yes there will be the quota position that plays out in calendar year 2024, 2025, 2026 in these two geograph ies, India and Middle East. We have the capabilities and the capacity for supplying to these markets , and that’s what will play out. We are not strategically moving away from the US market, is also the right comment. The only point is that overall in the US market, while inventories are low today, we will probably see some inventory filling that will happen going forward. The other position is that by l aw or by Montreal protocol, US will have a lower HFC need, and therefore we will have to balance it out in terms of how we are thinking about that market. Given where our capacity is, we are fairly open to either export or sell in the domestic market, given where price positions are today.

Understood, sir. Perfect. And just one more question. I just wanted to get your sense on H1 on a Y-o-Y basis, so will it be better given that now ref-gas volumes will grow because of our AHF plant which is there now in place? And also, do we expect spec-chem to grow Y-o-Y in H1?

You are talking about H1 FY26?

Yes, on a Y-o-Y basis.

Too early to comment on that , Meet. But thematically, we believe that volumes will be better, both for specialty chemicals and for the Fluorochemicals business. But I think thematically is what we can talk about rather than pure and exact numbers.

The next question is from the line of Vivek Rajamani from Morgan Stanley.

Congratulations on a very strong set of results. The question was on specialty chemicals, the improvement that you were going to see in Fiscal Year 2026, would it be fair to say it ’s going to be driven largely by increased volumes and cost efficiencies? Or do you think there could also be a positive mix change, either from new products or some pricing improvement? I just wanted to get your thoughts on what will be the biggest driver of improvement in Fiscal Year 2026?

I think it is a combination of both , rather than one or the other. We will probably see better volumes for some of the legacy products, newer products that have started to ramp up in FY25 should also see better volumes. So there is a volume positive that will come in, in the Specialty Chemicals business. During H1 we had also seen a lot of pricing pressure, while we saw some improvement in Q4FY25. So we will probably start to see some of that positive coming through as well. And like I said in an answer to a previous question, the AI positions will also start to play out during FY26, more towards H2.

Sure, sir. And just one clarification with respect to the improvement that you are foreseeing in Fiscal Year 2026, that already assumes the two, three new AIs, not from your perspective but from the customer registration perspective, correct? Or do you think that would be a significant upside risk if some of those things fall into place?

We are assuming some volumes on the AI side. I cannot tell you the exact numbers, but ye s, there are some volumes that we are assuming . S ome of these products have already been registered. It’s now a question of when the customer starts to launch them and provide more volumes into the market, which will depend on his own business plan, based on which we will start to see volumes on that side.

Sure, sir. Very clear. But at least for Fiscal Year 2026 you will be able to meet them with the existing capacities that you have in place, that would be a fair statement, correct?

I do not think capacity today is too much of a challenge, Vivek.

The next question is from the line of Keyur Pandya from ICICI Prudential Life Insurance.

Congratulations to the team for the strong results. Sir, question on the ref-gas side, what is the utilization for the full FY25 for the new R32 capacity or overall HFC ? So that is first question. And second on the pricing side, so either because of the news of upcoming newer supplies for R32 or relatively weaker summer season in India, or for any other reason, are you seeing any signs of prices coming down or any moderation?

From a capacity utilization perspective, given where the AHF positions were during FY25, some of that has got better significantly and therefore we believe that during FY26 capacity utilization should go up very, very significantly, maybe from current 70% utilization on an average to about 85% - 90% - 95% utilization is where we should end up being from an HFC perspective. On the pricing front of HFC, even with the new capacities that have been talked about, I think they do not come in early part of FY26. Probably towards December is what some people talked about, and those plants will also have to get stabilized. Also, from an overall pricing perspective, I don't see any major challenges or signs pointing to a likely significant reduction in HFC prices, particularly for R32. That doesn’t appear to be the case.

The next question is on the line of Abhijit Akella from Kotak Securities.

Sir just on the comment regarding the fact that maybe 1H is expected to be a little bit softer than 2H, if I understood it correctly. So just was hoping to get your perspective on what are the factors that sort of lead us to believe that this might be the trend?

Abhijit, you have to look at the historical trends on this. Go back to FY20, FY21, even probably earlier, other than FY23 where it was kind of flattish, seasonality does play out a factor from our overall chemical business perspective and an overall business perspective also. So what we were tending to say here is that the seasonality still remains, it has not gone away. We have always seen much higher sales in the Fluorochemicals business happening towards Q4 and Q1. So that seasonality remains. Even in the Specialty Chemicals business , when we think about it from procurement trends in the past, we have always seen Q3 and Q4 to be higher than Q1 and Q2. So, the reference point here is more towards the seasonality that we have seen in the business rather than anything else, Abhijit.

Okay. So just to clarify, in Fiscal Year 2025, we saw a mix of about 42:58 between 1H and 2H, so we can broadly go with a similar kind of trend for next year as well?

What I can tell you Abhijit is, when you compare it with corresponding period last year you will see certain positive trends, but the H2:H1 positioning between let’s say 60:40 or 65:35 or 55:45 still remains overall.

Got it. And just one last thing, if possible, is it possible to give us some rough sense of how much was revenue from the new projects of PTFE and aluminum foil for the full year?

I do not have that number readily available with me. I will check and come back, Abhijit.

Okay, sure.

The next question is from the line of Krishan Parwani from JM Financial.

Congrats on the strong set of numbers. Firstly, just clarification, so this Rs. 2,850 crore of Fluorochemicals revenue in FY25, does that include the industrial chemicals revenue also? And what would be the number?

Yes, FCB includes all industrial chemicals, all ref-gases (HFCs and HC FCs), CMS , and fluoropolymers to a certain extent as well.

So just wanted to understand what was the industrial chemical revenue for the full year.

I do not give out revenue breakups of each of those , because they are subsets and they are interlinked with each other. So this is all that you will get, Krishan.

No problem, because I think in your annual report you do give out, so I thought you might have it handy. No problem, we will wait for the annual report.

We have to give out in the annual report . T he reason for that is because there is a certain requirement by law to give those . But to a certain extent those are also combined up in large numbers. But we do not give out exact numbers, Krishan.

From an AI capacity perspective, as of now we are doing it from our multipurpose plants. Various blocks have been created within those multipurpose plants to manage the requirements. We have a fair sense of how those AI requirements will pan out, and we should be able to meet them up from our existing multipurpose plants, from the agrochemical or the AI intermediate plant that we have put up. As we see larger demands, as we see higher volumes, we will look to put up newer capacities, and obviously those will get announced.

Understood, sir.

The next question is from the line of Dhruv Muchhal from HDFC AMC.

Sir, just on this US-China tariff issue, are you seeing any change in customer engagements for this reason?

To be very frank about it , there is no clarity in terms of how these tariffs will pan out . By the end of June, or mid of July is when all of these positions will play out in terms of what tariffs have been imposed on what entities. Our belief today still remains that the tariffs that will come through on India versus China, there will be a differential , and as long as there is a differential, we should be in good shape. That ’s how we would budget ourselves in respect to these tariffs going forward.

No, I am wondering are customers also thinking similarly and thinking of supply chain changes in favor of India and you also, but as of now nothing changes?

There is a 90-day window. They will end up saying that supply me as much as you can, but that 90-day window will also expire at a certain point in time. We have not seen a large change happening in customer behavior due to tariffs.

Got it. Perfect. That’s helpful.

The next question is from the line of Archit Joshi from Nuvama Institutional Equities.

Sir I just had one question, rather a clarification from a comment that I am reading from the PPT saying that innovators are expected to introduce more complex and downstream active ingredients. So, I was just wondering how one should read this? Is this the global R&D spends of innovators are going up or are these opportunities by any chance presented to us in the form of any contact development opportunities?

Look, the thematic here is outsourcing from global majors. For some of their existing products, for some of their future products , they are saying that manufacturing in Europe is becoming more difficult, and because of this, they are looking at outsourcing opportunities, which is a clear trend that we are seeing. Whether their overall R&D spend is going up or not, I really am unable to comment on that.

My first question, Rahul ji, just pertains to, when we look at it from a subsidiaries perspective, of course we have the packaging films there. Now we have clocked in a loss of around Rs. 173 million there for FY25. Just wanted to know from an overall perspective , going ahead in FY26 and FY27, is there a possibility that we can be profitable in th e subsidiaries business, if I just take subsidiaries of the packaging from business?

What you are doing here, Jason, is you are calculating it on PAT on PAT basis or PBT on PBT basis?

Yes, sir, so basically it’s a consol minus standalone.

Profit after tax.

Yes, that’s right.

Let’s understand the reason for it. It is largely performance films and foil business. When we look at it from an overall basis, because Hungary was going through a tough time, it has ended up being at a PAT loss. As Hungary improves; we should start to see positive PAT contribution on an overall basis within FY26 itself. And the other one Altec h, which is the aluminum foil. So, two of these, once they start to show a positive, we will start to see a positive PAT between FY25 and FY26 when you compare standalone versus consolidated also. On the EBITDA side, largely positive going forward as well. For FY25 also EBITDA was a large positive, when we aggregate all of the subsidiary entities.

Okay. Sure, sir. Thanks for that. My next question is, what I understand, obviously , there is a consensus that probably Ag-Chem is still on improving trajectory or overall, it’s just kind of subdued environment there, but on an improving trajectory. Now you mentioned in your PPT that you have seen good traction for your new products as well as certain key agrochemical intermediates. Now I just wanted to know from a directional sense , I mean, of course there are so many intermediates on your product offerings, just wanted to understand from vis-à-vis the competition are we better at these intermediates? Do you think we can buck this trend, and we can have better growth as compared to competition, especially for the spec-chem business, yes?

Look, I think two positives and one negative probably. Given our R&D, given our relationships with global customers, given our current product profile, given the number of products that we are currently in stage of developing, the first element should pan out positively in our favor. The negative element is that we are at almost Rs. 4,000 crore turnover, and 20% on Rs. 4,000 crore also means, say Rs. 800 crore of additional revenue that needs to be generated. So, there are positives around it and negatives, we will have to go through and understand how we make more positives than negatives.

Sure, sir. And finally just wanted to ask, sir spoke about Dymel, which is the pharma propellant. Just wanted to understand, sir, not asking you for an absolute value or something, I understand, but how was the prospect for that looking? I am sure it’s an integral part of your Fluorochemicals business. So, I just wanted to know how is the prospect for this pharma propellant of Dymel looking ahead?

Two things that you will have to understand , 134a Pharma is a high GWP product relative to R32. There is no timeline with respect to Dymel or the propellant or let’s say the 134a pharma piece. Overall, from Dymel perspective, we are roughly at an 80% market share domestically for Dymel as a product and propellant. So going forward, there are positives, one, there is no timeline in terms of this coming down on an overall utilization perspective. The product in itself is also seeing growth going forward. So , I think it should do well, but will remain probably a smaller number from our overall fluorochemical space. No new expansions can happen, but yes, capacity utilizations of 100% (which are probably at 80% today) to be achieved going forward is certainly possible. Certain debottlenecking might happen over a period of time as we see more traction, but it is still a product that is doing phenomenally well from our overall perspective.

Thank you very much. Ladies and gentlemen, we will take that as the last question. I would now like to hand the conference over to the management for closing comments.

Thank you very much for being on the call. We hope we have answered some of your questions, if not all. We are happy to connect for any additional questions that you have. Thank you and best of luck. This is a transcription and may contain transcription errors. The transcript has been edited for clarity. The Company takes no responsibility for such errors, although an effort has been made to ensure a high level of accuracy.