SRF Limited (503806) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to SRF Limited Q3 FY '22 Earnings Conference Call hosted by Nirmal Bang Institutional Equities Pvt. Ltd. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Abhishek Navalgund from Nirmal Bank Institutional Equities. Thank you and over to you, Mr. Navalgund.

Thank you, Nirav, and good afternoon, everyone. Thank you for joining us on SRF Limited's Q3 9 Months FY '22 Results Conference Call. Today, we have with us Mr. Rahul Jain, President and CFO of SRF Limited. I would like to invite Ms. Nitika Dhawan, Head of Corporate Communications at SRF, to initiate the proceedings for the [ conference ] call. Thank you, and over to you, Nikita.

Good afternoon, everyone, and thank you for joining us on SRF Limited's Quarter 3 and 9 Months FY '22 Results Conference Call. We will begin this call with brief opening remarks from our President and CFO, Mr. Rahul Jain, following which, we will open the forum for an interactive question-and-answer session. Before we begin this call, I would like to point out that some statements made in this call may be forward-looking, and a disclaimer to this effect has been included in the earnings presentation shared with you earlier. I would now like to invite Mr. Jain to make his opening remarks. Thank you.

Thank you, Nitika. Good afternoon, everyone, and I extend a warm welcome to you all, and thank you for joining us today on SRF's Q3 and 9-month FY '22 Earnings Call -- Conference Call. I trust you, your families and colleagues are keeping safe and are in good health. I will begin the call by briefly taking you through the key financial and operational highlights for the period under review, following which we will open the forum to have a Q&A session. I am happy to share that the company has had an outstanding quarter and has delivered excellent results across most of its business verticals with a reasonably healthy performance from the Technical Textiles Business amidst soft demand for nylon tyre cord fabrics. On a consolidated basis, our revenue grew 56% to INR 3,346 crores and EBIT grew 66% to INR 796 crore. Profit after tax stood at INR 506 crores in Q3 FY '22, higher by 56% on a corresponding period last year basis. The performance was -- despite some of the challenges that affected the second quarter in the domestic and international markets, which persisted into the third quarter as well. Also during Q3 FY '22, that included a onetime charge of INR 17.5 crores on account of issuance of certain shares under SRF LTIP 2018. Further, we are also pleased to announce that the Board of Directors has approved a second interim dividend of 47.5%, equating to INR 4.75 per share. In addition, to the first interim dividend of INR 12 per share declared earlier in July 2021. On an undiluted share capital base, which was the pre-bonus of 4:1, which was declared in October 21. Coming to our segmental performance. Our Chemicals Business reported a strong performance during the quarter. Revenue grew 58% at INR 1,428 crores in Q3 FY '22 on a corresponding period last year basis. Within the Chemicals segment, our Specialty Chemicals Business delivered healthy performance owing to an expanding product portfolio, robust demand from overseas markets, increased capacity utilization of dedicated and multipurpose facilities, and focused cost reductions across all product lines. We achieved highest level production in some key products and are constantly enhancing capacity utilization at our newly commissioned facility, and margins remained healthy. During the quarter, we launched 1 new pharmaceutical intermediate and successfully completed campaigns for 2 key agro products. We are cautiously optimistic of an encouraging performance in the future as new products are being rolled out along with ramp-up of additional capacities. This is despite the ongoing third wave of the pandemic and continuing supply chain and logistical challenges. I am pleased to announce that the Board of Directors has approved to set up a new pharma intermediate plant at SRF's Dahej Chemicals Complex at a cost of INR 190 crores. This announcement showcases our commitment to increase the share of pharma products in our overall portfolio. The Board also approved the establishment of a dedicated facility at Dahej to produce a key agrochemical product at the cost of INR 61 crore. The overall capability of SRF's engineering teams to set up plants in record time frames and best in class, which demonstrates our leadership position in the agrochemical industry. These capacities will allow us to take advantage of new and forthcoming commercial opportunities across all verticals in the future. Our Fluorochemicals Business registered a robust performance as a result of improved prices for certain key refrigerant products, increased export volumes and positive contribution from Chloromethanes. Dymel, our brand of pharma propellant, aided further growth with an addition of new marquee customers, both in India and overseas markets. Overall, we expect the demand for refrigerants to remain healthy in the upcoming quarter with HFC R32 gaining momentum and likely to expand further, and product margins remaining robust. Refrigerant gas season also kicks in in Q4, which we expect to be better than Q4 last year as we have seen significant impact of the COVID pandemic during last year. Key CapExs such as chloromethanes expansion, PTFE and HFC are largely on track and all bode well for the future of the business. In our Packaging Films segment, SRF registered an increase of 59% to INR 1,276 crore in Q3 FY '22 on a CPLY basis. [Technical Difficulty] Sorry, the line dropped. I will come back from the Packaging Films segment. We registered an increase of 59% in our overall revenues to INR 1,276 crores in Q3 FY '22 when compared on a CPLY basis. During the quarter, both the domestic and international facilities delivered strong performance. I am happy to share that recently established capacity in Hungary and Thailand contributed to overall growth. We expect the positive momentum in demand to continue in both BOPP and BOPET in the near term. However, margin pressure could accentuate as some of the new lines are expected to come onstream in the upcoming quarters. SRF has positioned itself as a renowned player in the worldwide packaging business with a growing market presence, catering to over 100 countries, along with multi-country and multi-substrate presence. We continue to reinforce our philosophy of easy to do business with constantly improving quality and delivery parameters and value-added products being delivered to our customers to cater to the needs of our global customers as well. Our geographical spread, along with continued focus on enhancing efficiencies, innovative practices and cost competitiveness has enabled us to emerge as a major player in the global packaging industry. To further enhance our leadership position in this segment, I am pleased to share that we have allocated a CapEx of [ Rs ] INR 425 crores to set up an aluminum foil manufacturing facility in Jaitapur, Indore, Madhya Pradesh. We believe that this is an investment which will provide us a first-mover advantage in the space and enhance our overall product profile. We have also a locational advantage in terms of synergy with our existing DTA facility, which is in close proximity to the proposed site. The plant is expected to be commercialized approximately 20 months, around September, October '23. The plant will house state-of-the-art technology with capability to produce a wide range of products. Aluminum foil is extensively used in food and nonfood packaging, including pharmaceuticals. Currently in India, there is a domestic market estimate of around 2 lakh metric tonnes per annum, and this is expected to grow in the range of 8% to 8.5% annually. Further, India imports approximately 1 lakh metric tonnes of aluminum foil, and this is likely to continue in the future despite entry of some other players. Therefore, we see a promising opportunity to enter this segment. This plant will help fulfill the growing demand for food packaging in both domestic and export markets. Our foray into this segment will help us leverage our existing customer base and make us the only player in India to become a one-stop shop for our existing -- for our Packaging Films products ranging from BOPET, BOPP and aluminum foil. In addition, we believe with this segment, there would eventually be a potential to emerge as an enabler to tap the upcoming electric vehicle space in the future. The project is expected to be completed in 20 months, and the company anticipates that this project will achieve an asset turn, which range from 1.75 to 2x and an IRR in the range of 15% to 18%. We have included a more detailed note on the foray into aluminum foil business in our quarterly investor presentation, which has been made available on our website. With our focus on technology, product innovation and operational excellence, we are of the firm belief that this is likely to be a strategic investment in our future growth plans for the business. Further, our new BOPP Film Line, which is currently under construction at Indore is on track and expected to be commissioned in the forthcoming quarters. During the quarter, Packaging Films Business has been recognized with 2 awards, our facility at Indore was conferred the Quality Sustainability Award; and at the international convention organized by International Academy of -- for Quality, IAQ. SRF Flexipak South Africa was awarded the prestigious Sword of Honor from the British Safety Council, demonstrating our emphasis on superior EHS practices. Moving on to our Technical Textiles Business segment, SRF reported an increase of 47% in this segment. Revenue at INR 538 crores in Q3 FY '22. This segment performed reasonably well during the quarter despite weak demand for nylon tyre cord fabrics. Sales volume from Belting Fabrics and Polyester Industrial Yarn segments witnessed a good performance during the quarter. The Polyester Industrial Yarn segment achieved its best-ever results amidst a challenging market situation. With the reopening of mines, demand for belting fabric increased significantly. The company is actively focusing on improving its operational efficiency and overall productivity. In our Others segment, SRF reported a growth of 45% in the segment revenue at INR 107 crores during Q3 FY '22. Despite a soft demand, SRF maintained its domestic market leadership in coated fabrics due to improved sourcing initiatives and plant performance. The contribution to the domestic market improved as a result of renewed focus on certain value-added products. In Laminated Fabrics, SRF achieved its highest-ever sales in Q3 as the plant operated at full capacity and company continues to lead the segment in terms of volume and price. On the balance sheet front, SRF maintained a strong position and adequate liquidity. We continue to focus on efficient working capital management, which should lead to better balance sheet position going ahead. At the Adam Smith Awards Asia 2021, SRF was conferred highly commended winner of the Best Working Capital Management Solution, which is a testimonial to our efficient working capital management practices. During the quarter, SRF has earned accolades across a range of business verticals and operations. The Asian Centre for Corporate Governance & Sustainability awarded SRF's Managing Director, Mr. Ashish Bharat Ram, the Transformational Leader Award in mid-cap company category for 2020. The League of American Communication -- American Communications Professionals LLC awarded SRF FY '21 annual report [ of silver ] and a position in the Top 100 Communications Materials in global communications competition in the 2021 Spotlight Awards. Our community engagement initiatives continue to motivate us to work towards betterment of society. We believe it is intrinsic to our DNA. During the quarter, SRF Foundation, our CSR wing, signed an MoU with Rajya Shiksha Kendra, Madhya Pradesh, to transform 50 government schools in the state. In addition, we expanded the scope of our partnership with like-minded partners such as Schneider to take our flagship Basic Electrician Training Program to 13 locations, with 10 new training centers established across our manufacturing facilities. To conclude, over the years, SRF has established a robust multi-business entity that is driven by technology and innovation across our offerings. As a result, we have developed a pipeline of world-class products, have a state-of-the-art infrastructure, qualified personnel and have excellent R&D capabilities in place. This model has created immense value in the past, and we believe it will continue to create sustainable value for all stakeholders in the future. On that note, I conclude my remarks and would be glad to discuss any questions, comments or suggestions that you may have. I would now like to ask the moderator to open the line for Q&A session. Thank you very much.

[Operator Instructions] The first question is from of Tarang from Old Bridge Capital.

Congratulations on very strong numbers. Three questions from my side. One on the pharma intermediate, which has been recently come of place. Is the product for which the intermediate is going to feed into -- is the product commercialized? Or is the product under some stage of trials?

So Tarang, the point to make is that we have recently sanctioned the pharma intermediate plan, which is at the cost of INR 190 crores. The plant that we had commercialized there are various products that were there, one of them was the pharma product. It had already been commercialized and some commercial quantities are already being supplied to our customers.

Got it. On the pharma intermediate plant, do you think it'll be a cGMP plant or a non-cGMP plant?

So cGMP is largely in the nature of current good manufacturing practices, right? Most of our plants follow that, let's say, the new plant will follow the requirements of cGMP, but they are not to be tested against cGMP. But largely, all our new plants are following that approach.

Got it. And sir, your foray into aluminum foil stock and you've given us a rather detailed explanation in your presentation and your opening comments. If you could give us some sort of examples in terms of what exactly are the synergies that this business will drive along with your Packaging Business? Like for instance, the plastic sheets that you manufacture. Do they eventually go to a foil manufacturer, who then processes it and gives a combined sort of a product to the customer? And instead of having that person in-between, you will do it? Or what will it exactly do? I mean what are these synergies that you all are envisaging [ by aluminum foil ]?

Well, 2 or 3 things I'd like to point out. First about the fact that the customers for aluminum foil sheets are also similar to those that we currently supply to. So -- and they are largely in the nature of, let's say, people who are converters. So I'm not getting into the converting business. The requirement of the converters is also for aluminum foil for certain types. So for example, a converter manufacturing [ tarpaulin ], which has become a brand name, all those needs an aluminum foil as one of the layers in some situations. So effectively, the synergy drive is 2 or 3 things. One, customer profile remains more or less the same as what we are doing currently. Second, I think the proximity to our current manufacturing plants in [ Madhya Pradesh ] is a positive. And third, I think marketing efforts because of the fact that the customers are similar, will remain the same. Again, let me also clarify. You had called out foil stock. We are not getting into foil stock, we are getting into aluminum foil, which could be of various gauges from anywhere between 5- to 150-micron but not on foil stock. Foil stock essentially is the raw material for making the foil. I hope it answers it.

Yes, yes, it does. That's it for me.

The next question is from the line of Chintan Modi from Haitong Securities.

Congratulations on such a strong performance. Sir, my question is with respect to this aluminum foil, as you say that will be targeting an IRR of 15% to 17%. Can you just tell us like in case of Specialty Chemicals, when we do a project, what is the IRR that we generally target?

So over a period of time, I have said this shipment, but the IRR in the Specialty Chemicals Business are expected to be 3% to 5% higher than our normal Chemicals Business. In the Chemical -- and let's say, the Chemicals Business overall another 3% to 5% higher than, let's say, our Packaging on Technical Textiles Business. So that's how it works. Again, what I'm saying here is that between 15% to 17% is what we are expecting today. It could be better or given where the current market pricing is. But it will take 20 months for the project to get commercialized, which is far from now. And hopefully, again, like I said, I think the foray into aluminum foil is not just purely on aluminum foil. There are various applications that we are looking at. There are various value-added products that we are looking at. They have applications in the electric vehicle industry also, which we believe can become kind of a substrate within, let's say, the Packaging Films Business like a BOPP or a BOPET and therefore, in aluminum foil. So that's how we are thinking about it strategically.

Sure. Got it. So basically, one can expect higher investments, which can flow in after you do this project in the same line of business? Is that a correct understanding? You'll have more opportunities to...

We have to look at various opportunities in the space. But yes, more or less, you're right.

Okay. Sure. And sir, just a connected question. So if you look at 3 quarters of EBITDA and we generally -- I mean, if we annualize it, we reach to a number of something around INR 3,000-odd crores, which is, I think, significantly higher than what we were doing about, say, a few years back. And also, along with this, the cash flows will improve significantly. So the expectation of the daily deployment of these cash flows will also kind of keep moving up. So if you could give us some sense, like clearly, the company is moving into next orbit with this -- such a high amount of cash flows that it will generate. So how should one see the redeployment of these funds over, say, next 3 to 5 years? And whether this will go more towards other decisions will be taken in terms of redeployment, basically, whether it will be more IRR-based approach? Or it will be more on where are the new adjacent opportunities coming up?

So long question, Chintan, but let me try and answer it. I think the intent is to keep our debt at similar levels to where we are. And therefore, what it means is that the amount that we will be deploying back into the business is a significant amount, given, let's say, the interest tax and improvements around dividend that will come out of it. Overall, I think the cash deployment will continue to be strong. For FY '23, we believe INR 30 crore to INR 100 crores is easily deployable. Some of the projects that we have currently on the ground and some of the ones that have been sanctioned now are in the range of, let's say, about INR 600 crores, INR 700 crores of projects that we've currently sanctioned will get invested over the next, let's say, 12, 24 months. Again, we believe we will continue to see significant opportunities on the Chemicals Business side, which we will keep tapping in and therefore, enhancing our future position.

Okay. So basically, Chemicals will something -- which -- I mean, in terms of ratio, what we see today of the EBITDA, that ratio will be maintained or probably increase only? Is that the right way to look at it? .

I would say Chemicals, given where current asset bases are and given where our future investments are, I think Chemicals will probably keep increasing its share in the pie.

Okay. Sure. Sir, just 1 last question. With reference to the refrigerant gas. How much -- what do you think in terms of whether it will be sustainable this quarter, like the margins that we have made? And secondly, if you could just throw some idea on what would be a rough market share on a global level in the refrigerant gas business and in India? That's it from me.

Very difficult in terms of saying on refrigerant gas, but let me try and break this up into HFCs and non-HFC. HFCs in India, our share would be in the range of about 60% to 70% and balance is being made by imports. For non-HFC, we will probably be in the range of 40%, 50%, which is largely today left [ a large obstacle ]. In terms of sustainability of margin, given where trade actions are both in the U.S. and in India, we are in a fairly good position in terms of -- we believe that there will be -- these margins will remain sustainable over a period of time. Also, with respect to global market share, very difficult to be able to comment. It's a large market. I'll have to go back to my numbers and look at it and then relay that back to you from a global market share perspective.

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

[indiscernible] ...

Be a bit louder, please?

Is it good?

Yes.

So my first question on the spread on Technical Textiles. So we have seen some pressure this quarter. It's mostly driven by volume, but there is some shrink in the margin also. And now ...

I had said this earlier also, when you compare last quarter to this quarter, margin percentages have kind of come down, but largely on account of figured expenses because the -- let's say, the volumes have been slower than what we had expected. So there is some volume which that has happened. Largely, I think this is because of the fact that the tire industry is not -- let's say, the OEM industry is not doing very well. And therefore, there is some softness in terms of demand for nylon tyre cord fabrics. Hopefully, in the next quarter, that should pan out, but largely not on account of product margins coming down. When I say margin, I'm talking about contribution margin, not the overall [ margin ].

So you're telling that gross profit per KG has remained stable. It's just the volume was also -- we have made...

Yes. largely, it's the volume which that has happened during the quarter.

Got it. Got it. Got it. And this year, the contract on would have happened now that we are in a new calendar year.

Can you be a bit louder again? Your voice is muffled.

Okay. Okay. Now is it good?

Yes, very much better.

Sorry. So just -- and a follow-up question for that. Now we are in a new calendar year. And I expect that we would have done a lot of renewals in this year. How are the renewables sets look like? And will these spreads are sustainable for next 12 months as well? Do you think that is possible?

I'm a bit confused on this. You are talking about renewables?

Yes, the renewals of the contracts in the technical tax 12 months of contracts. Yes.

Oh, contract renewals. You are talking about Specialty Chemicals Business? Or Technical Textiles?

Technical Textiles.

See the renewals will happen -- start happening towards March and larger contracts will kind of get renewed in March and April, right? First quarter is typically when we are renewing our annual contracts. Some of the renewals -- so largely all the renewals were closed by the end of Q3, and no fresh renewals are there. There may be a couple of contracts new that we are negotiating with some of the customers. But I think more contracts will get renewed towards Q1 and Q2 next year. So that's how this cycle operates.

Okay. Okay. So we will know the new spreads for the next year on the sales when we do a Q4 call?

Even these spreads are good to include, Sanjesh.

I'm not complaining, I'm nowhere complaining about that. So second, on the Ref Care side. Can you just give us some sense on this quarter, how much of the volume growth and how much was the pricing growth? And number two, particularly on the HFC, how has been the realization for the average and have those spreads -- so you have those prices sustained even at the end of the quarter? And probably a related question. Now that India has put up an antidumping on an HFC, our domestic volume also should improve and with a better margin. Is that understanding right?

Long questions, Sanjesh let me try and answer it. When I compare large volume increases we've seen over the quarter as compared to Q3 last year. And even when I compare to, let's say, annualized numbers in terms of volumes, there is a significant increase that has happened. I think blends have started to kick in, in the U.S. market. That's been a positive for us. Also, while I would say there is some lower number on HFC domestically, I think the idea of it also is that the blends have been doing fairly well and therefore, some of these gases are individually showing a slightly lower number. But again, given where our current CapEx plans are, given where our current positions are in terms of availability of materials for the next year, I think we are in a fairly decent shape on that side also. You're absolutely right that there has been the R32 antidumping that has been imposed by India. There will be some shift in terms of volumes that we will need to do from an R32 perspective. There will be some new plant configurations that we will have to think about, and look to do more R32 in the domestic market. But certainly, you're right, it's a positive. although I would say that positive has still not seen this.

Got it. Got it. And how has been the pricing for R32 over the quarter and for the exit quarter, has it been stable? Or we have been seeing some tapering there?

No tapering, Sanjesh, all increased. Both on the [ 134a ]. When I compare it to Q3 also, it is Q3 corresponding we had last year also, pretty significant increases. And again I think 3 of the I'm getting at Sanjesh is the fact that the volumes of all of these HFCs and blends have gone up significantly in the U.S. market. We have done a fairly good job. And if you remember, I talked about it during the last quarter that we had seen a significant shift in our product mix to the U.S. market. We are kind of getting there and some of those positives are now reflecting out.

Are we left with any more capacity? Because the volume growth looks phenomenal and it looks like we have been using at that optimal level. And given that the realizations are, it makes a lot of sense to run at an optimal level. Until the new capacity of INR 550 crores be announced, do you think there's any possibility for volume growth?

Our December number will probably -- let's say, availability of HFCs for next year will probably be higher by about 20% in terms of what we have done with our plants.

So you will have at least 20% headroom for a volume growth for -- that we had a lower utilization in the first half. Is that the reason?

I am saying that the fact is that when I look at it, the first quarter in the domestic market was kind of -- if not a washout, but a significantly lower number. And therefore, my available capacity in the next year will be a better utilization overall is what I'm saying. And the volume headroom growth that's available for me is about 15% to 20%. On HFCs is what I'm talking about.

Got it. Do we see any risk from U.S. revoking the 134a and the antidumping duty because the prices are very high? And does that have any impact on us?

The actions that are imposed even in India or in the U.S. are typically done for 5-year periods. Given that some of these are very recent impositions both in India and the U.S., we don't see a risk of, let's say, removal of some of these antidumping duties, at least in the near term. And when I say near term, 3 to 5 years seems to be the case here. [Foreign Language]

[Foreign Language]

The next question is from the line of [ Pasengi ] from Kotak.

Sir, just wanted to understand regarding your [ annual ] CapEx for the pharma plant. So what can be the optimum revenue from this project? And what kind of products are desired. Is this patented or catalog or contract products which you are manufacturing?

So [ Pasengi ], the plant is being configured to meet a couple -- 2 or 3 different products. I think the strategy is to initially do a lot of pharmaceutical products in the plant. And then the final products in the cGMP front, the final reactions will be done in that. Typically, Specialty Chemicals, we've seen to be of revenue positives in the range of 1 to 1.25. I think there -- it will remain in that range for PTFE also. I'm assuming that is the product that the plant that you are looking at. But I think one of the key and very important things to understand, [ Pasengi ] is the fact that today, we are talking about putting up this plant in 10 months' time. The amount of upstream work that has been done, the amount of upstream planning that has been done is phenomenal to get to a state where a INR 200 crore plant, we are saying we'll put up in 10 months' time. The new agro intermediate dedicated plant that we've been talking about will take 6 months to put that up. So there is significant back-end work that is happening, which gives us this ability to reduce our time to market.

Right, right. And sir, in terms of asset turnover, it will be similar to what we are already seeing our existing [ in PTFE ] ?

I think what I said.

Got it. Sir, in terms of your coming to Refrigerant Business. So is there any new capacity for R32, which will be coming in next 1 year also? So you mentioned that you will be taking some capacity just to meet the demand.

I was talking about HFC, not R22. R22 capacity, you've got put up for a purpose is only for capital purposes. To my mind, I don't know that there is any additional other than SRF that has recently put up an R22 plant.

No sir I mean for 32 are you adding any new capacities in the next 2 years?

So presently, we already have a CapEx on the round of INR 550 crores that is looking to do various HFCs. It's -- we are trying to configure it like a swing plant. Hopefully, that will be the one that comes up. I think that has an 18- to 20-month tenure. Probably July, August 23 when it comes up.

Sure, sir, sure. And sir, finally, just to see like in FY '22, your all 3 segments have fired simultaneously. And all the businesses, in terms of realization and demand, has been very strong. So going ahead also, and particularly in Packaging Business also, do you see the demand and margin is going to sustain at least for the next 1 or 2 years' time frame?

Packaging is see what you're talking about, wasn't it?

Yes, particularly in Packaging.

So again, we've said it multiple times that there are multiple lines that are coming in. There may be some, let's say, degrowth in margins or some re-rating of margins that will happen. Again, we will probably be in a good position given our value-added product profile. But overall, as new capacity is coming, they will take time to, let's say, get entrenched. The good part is that the market is growing at a substantial pace, and that should take up all the new capacities that were currently announced.

Okay. Understood. So basically, margins may come down, but volumes will offset that drop in margin?

The BOPP plant comes up, I think, in July, August this year, right? So to that extent, there will be additional volume available to sell.

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

Congrats on excellent results. Just a couple of clarifications to seek. First on the Chemicals Segment, just wondering, is it the quarter-on-quarter growth in revenue that we have seen in the Chemicals segment? It's about INR 300-odd crores sequentially. Is that from -- largely from the export business, while domestic has been a little bit subdued? Is that how we should think about it?

So again, when I look at it from a business on business perspective, I think both have grown. When I compare it to 2 also, both seems to have grown significantly. But yes, large portions of it has come through in the export market only.

Okay. So domestic, we could see a recovery as and when the OEM situation improves? That's how we should read it?

Not just OEM. I think the positive in the Res Care side is something that is also a seasonal thing that I have told you many times, Abhijit, right? And the season starts to kick in in Q4 and Q1, which are probably the best quarters for the global Chemicals business. I think that, that should take that position a bit better. Also 32 duties will also kick in, in the domestic market.

Okay. Understood. And that's helpful. And on the Chemicals segment margins. The very strong margin performance we've seen, 29% EBIT. Would it be a similar kind of margin performance across both the key subsegments? I mean Specialties as well as Gases? Or would one have done significantly better than the others?

Abhijit, is 29% not a good margin?

No, no, It's very good, sir. But just trying to understand it a little bit better so that for our modeling purposes going forward.

I think the point to make, Abhijit, is the fact that I've told you that there are positives that we are seeing in terms of domestic market. I have told you that the duty structures are unlikely to change in the domestic or the international markets. We will have more capacity available. Therefore, means per tonne margin should be better off. So all of those put together, I can't tell you whether it will be higher or lower, but you take a good guess, and I'm sure you will.

And one last thing. You already spoke about the fact that the Res Care business is doing pretty well and fairly tight at the global level. Also just wanted to get your views on the PTFE business, which is going to come up some time from now. There has been a sharp run-up in prices there also. So how do you see the supply demand situation in that business? Will it really be similar to, say, I mean the strength you're seeing in [indiscernible]?

Yes, I think the PTFE plant has got delayed by about 1 year, 1.5 years. Now I think this year is when September, October is when the PTFE plant gets commercialized. Again, this is our first foray into the PTFE business, in the PTFE space. We believe prices have been a significant positive from what we had approved the plant at. So therefore, let's say, the IRR of this plant are probably better than what we had initially estimated given where current prices are. Hopefully, we will be able to do a good job in terms of manufacture and sales. It will be a 12-, 18-month time frame from the date of commercialization for it to get ramped up. I would also believe that given our technological capabilities, given our operational capabilities, we should be able to do a good job with the PTFE plant as well. Hopefully, the value-added products in the PTFE, we should be able to do much sooner than, let's say, some of our competition.

The next question is from the line of Vivek Ramakrishnan from DSP Mutual Fund.

Congratulations on great performance. I just wanted some bookkeeping type question. In terms of the CapEx done year-to-date FY '22, the balance for the year and the CapEx amount for FY '23, I just wanted the aggregate amount, sir.

So more or less this year, our total CapEx will be in the range of INR 1,900 crores, INR 2,000 crores on an overall consolidated basis. Given where our current projects are those that have been sanctioned and the recent wins that we sanctioned, we believe that the aggregate amount that we will be spending on this will be in the range of 18 -- INR 1,600 to INR 1,700 crores. Additionally, probably INR 400 crores to INR 500 crores of CapEx will get sanctioned during FY '23. So therefore, my number on FY '23 will again be in the range of INR 2,100 crores to INR 2,200 crores. as cash spend for next year. For the year next, difficult to say as of now.

The next question is from the line of Rohan Gupta from Edelweiss Financial Service.

Congratulations on a fantastic set of numbers. Sir, a couple of questions. Sir, first is on this -- your specialty chemicals I don't know if you can give some color that how it has performed in the current quarter, while what we understand in chemicals, a lot of profitability was driven by the ref gases and HFC. So how has been the performance of Specialty Chemicals? And have you also seen a margin expansion?

Two things, margin has remained stable to better on a product-on-product basis. In terms of volume and in terms of overall it's okay compared to Q3 as well as compared to Q2. So when I compare it to corresponding period last year and even compared to Q3, I think we have seen a positive. Also, on an overall basis, we've seen Q4 to be the strongest in the specialty chemicals business. Given where our current product profiles are given where our current contracts are, I think we will be able to do a better job than in Q3 in Q4 also.

Sir, any sense you can give that how has been the profitability in the current quarter in nonspecialty chemicals, though it is not looking very attractive. But is there any price the inventory gain, which is there in the current quarter, which you can quantify. And you already mentioned that even Q4 is also the pricing environment remains very favorable for the ref gases and HFCs.So any sense in terms of higher profitability or which can continue in the current scenario? And is it all driven by the pricing? And do you see that the prices -- or when you'll see that the prices may start is stabilizing?

Prices are already stabilized now. Again, the first question that you asked was with respect to whether there are inventory gains that have happened. No significant onetime numbers are included in the results. There will always be a opposition when you are buying and selling. In fact, I would say this is despite some more increases in cost of key raw materials, EDC. So the numbers that we are predicting are actually despite some raw material cost that have gone up. So -- and again, the second question that you had was with respect to whether prices are stable. Like I said, we're kind of looking at various prices on the domestic front in HFC 32 to be specific. -- various prices in the U.S. market where our exports have gone up very, very significantly. And we are believing where our current order book is there is likely to be larger can-based exports into the U.S. market. So all of those are positives too.

And sir, from our current manufacturing structure, I mean can we divert more towards the R32 and can we benefit from the current scenario with the rising demand of R32? Is there any scope or do we have to wait for the new CapEx to complete only by July 23.

So like I said, Rohan, in the earlier part of the call, I think there will be about 20% additional volume that will be available given the debottlenecking given the shift of reactors that we have done in our 32 category. The ability on our side is also to be able to shift our Hiwariplant from 134a to 32 and at a short, let's say, depending upon what market requirements are. Wherever this position settles in terms of the requirements by the market. Let's say, we have a flex of 3,000 to 5,000 tonnes available on an annualized basis between 134a and 32

And to the last question from my side and then I come back in queue. Sir, there has been -- I mean, this is a very positive thing that your ability to commission a plant. We generally, we always see that in specialty chemicals catering to agro pharma was a lead almost 18 months to 24 months. We have been able to successfully complete it within almost 10 months. So sir, this is a very positive development, probably from your company side or I don't know whether for the entire industry. Will it lead to I mean a shorter lead time for all the future projects like the ability to complete that in such a short span of time. And it is going to have any positive impact on the client side, where we are able to, I mean turn out so quickly? I mean is it going to have a structural change in the industry or for your company?

Rohan, there are 2 points to make on this. It really does depend on the size of the problem or product and the plant also. When, let's say, you are putting up a plant of INR 500 crores last MPP plant, which is roughly in the rate of INR 400 crores -- roughly in the range of INR 400 crores, the implementation time is 12, 13, 14 months, right? Let's say, a smaller plant, the implementation time like the new Ag chem dedicated one that we are putting up is probably about 6 months. I don't believe it's a huge positive for us given the fact that our abilities have gone up significantly, and therefore, huge positive from a time-to-market perspective also from our perspective. Very difficult for me to be able to comment it from an overall industry perspective.

Okay. And sir, just on PTFE, you mentioned the plant will be commissioned by September '22, this year, and will take another 16 to 18 months for full ramp-up, despite the industry scenario being so positive and very solid demand domestically and globally, which we see for the PTFE. So you see that the 16 to 18 months ramp up, is that technical or it's basically from the demand side?

No, no. Demand is not an issue. So the point is this is the first foray. We are also being conservative when we say that we should be able to do this in 20 or 16 months is what I had said, post-commission. And if the demand for all these products comes out good, why should it take that much time? It can be done faster also. But again, this is the first time that we are doing it. There may be some technical challenges that come through. We will solve those out for sure. But the overall outlook -- overall it is good.

Okay. So thank you for that, I'll come back into the queue.

The next question is from the line of Sumant Kumar from Motilal Oswal Financial Service.

So my question is the overall chemical business margin in Q3 at 29 -- more than 29%. And for 9 months, it is more than 24%. And going by the historical performance in the Chemicals segment, we have seen FY '15 and '16, earlier, 24% kind of margin. So can you talk about the trajectory of margins of this business for, say, FY '23 and '24?

Difficult question to answer, Sumant. But like I said, we are seeing positive on account of pricing in SSP. We are seeing positives in terms of our overall utilization of the specialty chemical business, given the fact that we are also investing heavily in the pharmaceutical intermediate plant, there are new dedicated plants that are coming in. The dedicated plants that we had commissioned over December to March last year have also started to kick in. And therefore, I'm fairly confident that the margin profile from here should remain positive to -- at least a positive trend should be there. But again, this is also a business. It is also volatile. Margins can keep shifting. The positions can keep changing. Whether I am confident of retaining this margin, very, very difficult to say. But I can only tell you that the overall business position that we've gone through. We are very, very confident of the business getting or doing much better than, let's say, even for that matter, the 9-month period that has come through.

So margin will be better than the 9-month number.

Again, that's the most difficult thing to answer, right? I'm saying we are confident we have good commodities. We have good prices. There are certain duty structures that are to kick in. Specialty Chemicals has great let's say, typically has a better Q4. Dedicated facilities are ramping up. We are putting in additional CapEx. What else do you want me to say? Also we will also kick in at certain bond in time in April, May. So it is just -- I can't give you a number, but let's say, I'm fairly confident that we should be in a good position.

The next question is from the line of Nawar Group.

And congrats on a great set of numbers. And also first question is on the packaging films business. Given that we have new lines in Hungary, Thailand upcoming bottling indoor and the 5 today. Can this particular segment grow by 15% to 20% in volume terms over the next 2 years?

Your voice is a bit muffled. I'm assuming you have asked about the volume growth in the packaging films business. Is that right?

Correct, correct right.

I mean, as of now, what we are seeing, it is, let's say, on the exit of December basis, most of our plants are today running full capacity.

Right.

When I compare it to a year-on-year basis, again, in October we commissioned our Hungary plant and October is when we recommissioned our Thailand plant. August this year, September, August, September this year, we will commission the 40,000 tonne BOPP launch. So there will be additional material available to sell. And therefore, it will add to the volume growth in the packaging business going forward.

All right. Got it. Sir, the second question is given that in 9 months, the specialty chemical piece has grown by almost 37% of the Chemicals business. And we earlier had indicated that specialty chemicals for FY '22 will grow by about 15% to 20%. Is there any possibility for this particular growth rate for Specialty Chemicals higher for FY '22 given the 9-month performance...

With the 9-month performance, I am fairly confident that the growth number will mean better business.

Correct. Got it. That's it from my side. Thank you so much and best of luck.

Thank you.

Ladies and gentlemen, in the interest of time, we'll take the last question from the line of Atul Tiwari from Citi.

Yes, sir. Just one question. How much is the consolidated debt on the balance sheet as of December end?

Roughly, net debt on December will be about INR 2,600 crores. roughly. I don't remember the exact number but INR 2,600 crores should be the number, roughly speaking.

Okay, roughly, roughly. And in just most of the previous questions, in packaging film, sir, you said that we -- assuming all the ramp-up, et cetera, during this year and next year as well, that you should be able to achieve about 15% volume growth in FY '22 -- or FY '22 -- is that a roughly ballpark accurate number.

Roughly speaking, our total PET and BOPP combined is roughly in the range of about 300,000 tonnes, right? The new capacity is roughly about 40,000 tonnes. Now if I purely take it up on that basis, additional volume for 6 months will be around 7.5%. So that's the back of the envelope. But again, hopefully, we will be aware and able to do a good job at the packaging where we ramp up our facility on a vertical basis. It's something that we will look forward to doing on this facility also, okay?

Okay. And sir, beyond FY '23, once this capacity is fully ramped up, then we don't have anything in the pipeline to add to the volume currently. I mean, you may announce the project later. That's a different thing.

[indiscernible]

Sorry, sir?

Aluminum foil is the project that we announced in '21. September '23 is when it is likely to come in. So I think the forecast will remain to be able to do the project well on the aluminum side.

Yes. Thank you.

Thank you very much. I now hand the conference over to Mr. Rahul Jain for closing comments.

So thank you, everyone. I hope I've be able to answer some, if not all of your questions. I wish that each of one of you continue to remain safe and healthy. If you have any further questions, we will be happy to be of assistance. We hope to have your valuable support on a continued basis as we move ahead. On behalf of the management, I once again thank you for taking the time to join us on this call. Thank you, everyone. Bye-bye.

Thank you very much. On behalf of Nirmal Bang Institutional Equities, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.