SRF Limited (503806) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to SRF conference call, hosted by Emkay Global Financial Services. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Meet Vora from Emkay Global Financial Services. Thank you, and over to you, sir.

Thank you. Good afternoon, everyone, and thank you for joining us today. We at Emkay Global Financial Services Limited are pleased to host SRF Limited's Q3 and 9 Months FY '25 Results Conference Call. We have with us today Mr. Rahul Jain, President and CFO of SRF Limited. I would now like to invite Ms. Nikita Dhawan, Head of Corporate Communications at SRF, to initiate proceedings for the call. Thank you. Over to you, Nikita.

Good afternoon, everyone, and thank you for joining us on SRF Limited's Quarter 3 and 9 Months Financial Year '25 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, Nitika. Good afternoon, everyone. I would like to extend a warm welcome to all of you, and thank you for joining us today for SRF's Q3 and 9 months FY '25 Earnings Conference Call. I trust that you have had the opportunity to go through our results and the presentation shared with you earlier. 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 for a Q&A session. We have delivered a healthy performance this quarter, supported by a strong Q-on-Q uptick, primarily driven by strong contribution from our Chemicals business. The Packaging Films business also demonstrated stable performance. For Q3 FY '25, the company reported gross operating revenue of INR 3,491 crore, reflecting a 14% year-on-year growth. EBIT was at INR 529 crore, yielding a margin of 15%, while PAT stood at INR 271 crore, up 7% Y-o-Y. Overall, we have seen a decent recovery this quarter. Building on the momentum, we expect to finish the year on a reasonably strong footing with a positive outlook for the next fiscal year. Coming to our segmental performance. Our Chemicals business reported revenues of INR 1,496 crore during the quarter, registering a 7% Y-o-Y growth and a 10% growth over Q2 FY '25. Also, when compared to Q2 FY '25, EBIT margins were up 600 basis points plus and around 100 basis points plus when compared with corresponding period last year. The Specialty Chemicals segment delivered a strong performance this quarter with a healthy increase in revenues and margins. While the broader industry continues to witness some overhang of inventory buildup among agrochemical customers, our performance was strong, driven by positive traction in recently launched products and a gradual pickup in demand for some key agro intermediates, which were deferred earlier. Our cost-competitive pricing strategies and robust export market performance further supported revenue growth. With sustained momentum in demand from agrochemical customers, we expect Q4 performance to improve even further. We have received registrations for some of our future active ingredients and are hopeful of ramping up sales for some of these products during FY '26 as customer demand picks up. In our Fluorochemicals business, domestic demand for refrigerants, particularly for room air conditioners, continued to be strong, taking our domestic ref gas sales to their highest ever levels. While export realizations for some refrigerant gases were soft, we expect performance to improve in Q4, supported by stronger volumes and better realizations. The Chloromethane segment delivered stable results during the quarter. We continue to focus on ramping up sales of PTFE in both free-flow and fine-cut grades and expect positive traction from the same from FY '26 onwards. The Packaging Films business delivered a steady performance this quarter, with revenue growing 27% Y-o-Y to INR 1,385 crore. Despite some demand-supply imbalance in BOPET, margins improved slightly, supported by strong sales of value-added products in both BOPET as well as BOPP segments. In India, BOPET demand and prices have remained stable, whereas BOPP witnessed demand growth. Meanwhile, in the aluminum foil segment, export sampling has started gaining momentum from the U.S. and European markets. However, there was pressure on margins in the domestic market due to lower cost imports from China. Our Technical Textiles business delivered a stable performance with revenues increasing 11% Y-o-Y to INR 510 crore. The segment benefited from steady demand and highest-ever capacity utilization for polyester industrial yarn and better traction for polyester tyre cord fabric though lower demand and margins in melting fabrics impacted overall performance. To mitigate this, we are focusing on expanding our VAP sales. The ongoing belting fabric and dipping machine project remained the key driver of future growth and are on track. In our other segment, the Coated Fabrics business experienced lower demand in the domestic market, though we continue to maintain our dominant position in this space. The Laminated Fabrics segment performed in line with expectations. Looking ahead, the demand is expected to remain stable in the next quarter, and the integration of our new hot lamination machine is expected to drive margin improvements. Additionally, the geopolitical environment remains uncertain. And overall interest rates, both locally and globally, probably with the exception of the EU, may settle higher than earlier expectations. Overall reductions in interest rates over the past 6 to 9 months should flow through to the P&L during FY '26. The current quarter also witnessed a significant strengthening of the U.S. dollar against major currency payers, which negatively affected the results to the tune of about INR 34 crore. However, a weaker rupee is generally favorable for the company over the long term, both as a net exporter and import parity pricing for some of our key domestic products. In line with our commitment to consistent shareholder returns, the Board of Directors has approved a second interim dividend of 36%, amounting to INR 3.6 per share. This follows the earlier declaration of the first interim dividend at the same rate. I am glad to share that SRF has been honored several prestigious awards, including the Gold Award for our annual report '23-'24 at the LACP Global Communications Competition; a bronze medal in sustainability from EcoVadis, a globally recognized consortium for sustainability rating; and the internationally recognized Gold Stevie Awards for our diversity, equity and inclusion campaign in her shoes. Additionally, our Packaging Films business in Indore has been recognized as one of the top 25 industries for waste minimization and management at the CII 4R Awards. SRF strives to be a responsible corporate citizen. SRF Foundation works at the grassroots to empower communities. As part of our Anganwadi Development Program, we organized door-to-door visits and community meetings in Bhopal to strengthen programs and retain students at these centers. We also held a 2-day training for Anganwadi workers focusing on hands-on activities, workbooks and proper use of materials. In Rajasthan, we inaugurated a new Anganwadi center in Khijuriwas in December, attended by children, villagers, Anganwadi workers, supervisors from Gram Vikas Samiti and SRF Foundation team. To conclude, SRF's multi-business structure has enabled us to navigate a challenging operating environment over the past 2 years with resilience. Despite headwinds across verticals, we have remained focused on strengthening our core foundation built on world-class infrastructure, a highly skilled workforce and cutting-edge R&D capabilities. These trends reinforce our leadership position and equip us to capitalize on emerging opportunities as market conditions improve. As we move forward, our focus remains on driving innovation, operational excellence and sustainable growth, creating long-term value for all our stakeholders. 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 the Q&A session. Thank you very much.

[Operator Instructions] The first question comes from the line of Sumant Kumar from Motilal Oswal.

Yes. So in our PPT, we mentioned our focus on maximizing HFC production for quota requirement between '24, '26. So can you talk about how much R32 capacity expansion we can do under quota system?

Sumant, again, I think the R32 position with respect to probably about 25,000 to 28,000 tonnes that we have is fairly well set. Again, as of now, there are no plans on the ground to expand HFC-32 and R-32 capacity. Whenever there is a need, we will be able to do that depending upon what situation the market presents. As of now, I don't think there is any plans to increase HFC-32 capacity.

But how much we can expand under quota, whatever the limit we have?

Sumant, I don't think we have done that calculation as of now in terms of what quota can we get. Again, quota is a combination of production as well as consumption, right? So to that extent, depending upon what the situation pans out, we will be able to do our expansion or, let's say, modify some of our existing plants to be able to do 32, but again, 32 may not just be the only HFC that we are doing. We are doing multiple other HFC and blends as well. So it really will depend on the situation at that point in time, Sumant.

So on overall basis, how much quota we have? Do we have a calculation for that?

Again, to be very frank about it, there is no quota setup that has been created as of now. These 3 calendar years, '24, '25, '26, have to pan out, post which we will know what the quota position the government sets up.

The next question comes from the line of Arjun from Kotak Mahindra Asset Management.

Congratulations on a good set of numbers. Sir, the first question is on the AI. So we have talked of a better fourth quarter versus the third quarter. And in addition, we have talked in the presentation of -- we are on track for the new AI. So in terms of the milestones that we would have had internally, are we on track with the same in terms of samples sent, et cetera? And if you could talk about what kind of -- we have said the fourth quarter should be better than the third quarter, are we also indicating fourth quarter should be better than the fourth quarter of the previous year, which was actually a very good quarter for us too?

Okay. Arjun, you have asked multiple questions. Let me try and answer each one, one by one. With respect to AI, I think what we've done, and in terms of our internal targeting, we are in fairly good shape. Now it also depends on 2 things: what registrations and what dossiers we are able to get into, which is in good shape. But the final demand of this will come through only once the customers are looking to expand their production on that side. So to that extent, again, we are very hopeful that FY '26 should be a good year for some of the AIs that have got registered. My sense is 3 or 4 have already got done. Hopefully, some of the sales traction will also start getting witnessed in FY '26, maybe to a certain extent in Q4 FY '25 as well. Further, with respect to the question that you asked in terms of whether Q4 will be a better quarter, we were typically talking about Q3 versus Q4, where I was saying Q4 is going to be a very good quarter. Also, when you look at this historically, for Specialty Chemicals business, Q4 always has been a good quarter always. So to that extent, I have not looked at and compared it with Q4 numbers, but I'm sure the way we are looking at it today, Q4 is going to be probably even better than the last year, CPLY.

Sure. Sir, the second question is regarding ref gas. So we have seen a slight uptick in our '22 prices also in India. Given that PTFE is -- a key ingredient is R-22 to make TFE, are we seeing an increase in prices for the PTFE market also? And you have talked about, and you said it in the previous quarter also that probably we would just start from the fourth quarter, and from FY '26, we could see both grades doing well. If you could talk about a little bit in terms of what pricing improvement we could see? And what's our current utilizations? Or do you expect FY '26 -- I mean, for FY '26, we should be maybe 3,000, 4,000 tonnes or higher?

So, again, PTFE is being driven by 2 or 3 things today, Arjun, the suspension grade, plus some of the free-flow and the fine-cut positions that we are creating. Now, domestically, I think we're doing fairly well, but there is pressure on PTFE also given current pricing. And again, we've not seen very significant increase in domestic prices on PTFE. The way we are looking at it also is that as our sampling for the international market starts to get approved, there will be export traction that we should see building out on PTFE as well. It's at that point in time where we will believe that things have changed for the better. And once the export starts to kick in, hopefully, better utilizations of PTFE for FY '26 is what we are targeting today, Arjun.

Sure. Any guidance in volumes, what we possibly can do?

Generally, we don't do that, Arjun. So I would keep it close to my chest. And hopefully, just say that we will be much better going forward.

The next question comes from the line of Naushad Chaudhary with Birla Mutual Funds.

Congrats on a good set of numbers. First, on the ref gas business side, sir, if I look at it, 4, 5 years back in domestic market, there were 3, 4 players. Eventually when things started phasing out, other peers started shifting focus to some other businesses, and we kept adding capacity and now moving to HFO as well. Does that mean eventually in the next couple of years we might have kind of virtual monopoly kind of situation in the ref gas business versus the market share we have today? How you look at your ref gas business 3, 4 years down the line?

I don't think it is going to be a monopolistic situation, Naushad. I think we've always seen imports on HFCs coming in. That, I think, is continued -- will probably continue to a certain extent. And I am not really sure with respect to what pans out in, let's say, next 3 to 4 years from a market perspective. The only couple of things that I want to talk about is the fact that what we are seeing is AC manufacturing in India going up very significantly, roughly, let's say, about from 15 million ACs. If you aggregate all of these up, the demand for ACs is going up.

Sir, sorry to interrupt you. Sir, you are not audible. Mr. Rahul Jain? Ladies and gentlemen, please stay connected while we reconnect the management line.

Hello?

Yes, sir. You can go ahead, sir.

Naushad, I was continuing to reply to your question while the line got disconnected. So what we are seeing is that there will be growth in the AC market that will happen over a period of time, which should augur well for, let's say, the overall domestic demand for the HFCs and more specifically 32 as well. So that's the way we look at it. I don't think it's a monopolistic situation. We know there are announcements by other players about 32 expansion. Let's see how that pans out, Naushad.

And from an HFO point of view, is there really any tech barrier? Or can anybody easily enter by investing some money into this gas?

What we have said in the past, Naushad, is that we are looking at the fourth generation gases. We are a key player. We are doing it through our own technology. I think we will let it be at that rather than comment on what others are doing around it.

Okay. Final one, in the ag-chem cycle recovery, so we have invested so much in our spec-chem, we have created a gross block. Do you think in the -- if cycle recover your commercials of the pipeline molecule, at least for the initial first year of recovery should accelerate and should be better than your expectation than it should normalize? Is that how we should look at it?

In the way we are looking at it is that we are starting to see some recovery in the ag-chem cycle because the customer traction is good. We are also looking at Q4 again, like we have said, better than Q3. I think we've said that probably earlier in the -- early part of the year as well that H2 will be better than H1. I think that's the state that is panning out in the way that we have thought even in the beginning of the year. I think there is some recovery that has happened. Again, geopolitically and various issues still persist. Let's see what happens, but yes, we are fairly confident of what Q3 and what FY '26 has in store for us.

The next question comes from the line of Jason Soans with IDBI Capital.

Sir, just wanted to understand from a rev gas pricing trajectory point of view, of course, even in the middle of the quarter, there were some news regarding a reasonable and a very, very big price increase in terms of a U.S. distributor. So just wanted to know your take on how -- I mean, of course, I'm not getting into specifics and probably that was more of a one-off kind of thing, but just in terms of a pricing trajectory, if you could give us some color on how the rev gas pricing is looking domestically as well as in the export markets?

Yes. I can't comment on each of -- so the way I would look at it is that we have seen some price increasing happening -- increase happening, both in the domestic and to a certain extent that's also been the rudder for the international markets. And to a certain extent, local China prices also to that extent. Now when we think about it, I -- and again, I think we've talked about it in the past also. We've seen historical low prices of HFCs coming through probably for the past 18, 24 months. Now this cycle had to recover at some point in time. The way we are looking at it is pricing is going to be stronger. It is going to be a positive. But again, when we think about it, historically also, when there is a long tail in terms of low pricing, we also see an uptick in prices, which is very strong. Hopefully, that can continue and give us better realizations on ref gases, especially on 32 as well. Again, we also commented that other -- some of the other HFCs, we've seen lower export prices in the last quarter. Hopefully, some of that negative can also turn into some positive.

Sure. And just in terms of ballpark, sir, how much would be exports and how much would be domestic in terms of ref gas?

As of -- what are you talking, 9 months, Q3?

On a full-year basis -- 9 months or a full-year basis. Roughly 9 months, how would that be?

Exports would probably be -- just 1 sec, I'll come back with the number. Just 1 sec. About 40%, 42% in export in terms of tonnages.

40% to 42% in terms of tonnages is exports, right?

As for HFC is all I'm talking.

Yes. Okay. So that's exports, 40% to 42% and 58% is domestic. Okay. Got it. Got it. Okay, sir. And sir, just wanted to also get your view on -- I mean, margins have recovered very, very smartly at 24.3%, I'm talking on a consol level. So from the sub-20% levels, and you've, of course, alluded to a good recovery going ahead. So I just wanted to know, sir, what are we doing differently? Of course, I understand that environment has not changed considerably. Still things are quite difficult in terms of the business as such. So just wanted to know from your point of view, is -- could this be looked at as a sustainable turnaround from here? And what are we doing things differently in a tough environment?

So to be frank about it, I think we had also said this in the past that when we look at FY '24 margin versus FY '25 overall margin. And again, we've said this multiple times, we don't look at margins on a quarter-on-quarter basis. It's best to look at it more on an aggregated basis because there will be seasonality, volatility, customer demand, various factors playing out. Now when you think about margins, just Q-on-Q, when you're looking at Q2 versus Q3, yes, there is smart recovery that has happened. I think we had also alluded to the fact that this is likely to happen. Given some of our new products have started to kick in, given some of our, let's say, existing products also have started to show some better traction, we believe margin profile can improve from here when you look at it on a Q3 versus Q4 basis. But again, going back to it from an aggregated year-on-year basis, again, I think 2% plus/minus from FY '24 versus FY '25 perspective, should still be the target when we think about it overall. When you think about margins in Q4 FY '24, we were probably at about 13% overall. I don't remember the number, but yes, that may have been the case. Now purely from that perspective, we will see some positives for Q4 in FY '25 as well.

Margins are -- you clocked in 27.4% for the Chemicals business in Q4, just wanted to tell you. So can we look at a better margin there?

Not to be looked at purely from that perspective. Go back to FY '23, probably in 30% plus ranges.

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

First on -- yes.

Sorry to interrupt, sir. You're not audible, Mr. Sanjesh.

Am I good now?

Yes, sir. Please go ahead.

A couple of questions. First, on the Specialty Chemical, I got that Q4 is going to be very strong. What is the sense are we getting, it is a restocking demand, which they are seeing or there is an underlying recovery in the agrochemical demand? Or it is that we have sitting on a lot of approval and that is driving? So what exactly is playing out so strong for Specialty Chemicals for us and in general for industry?

To be very frank, I think it's a combination of all of these factors. I think to a certain extent, restocking is happening. I think to a certain extent, balance sheets of some of the customers, they are probably also looking at getting this from a Q3 versus Q4 perspective because their financial year typically ends in December. And therefore, some of their future requirements, they are looking to price out or take delivery for from Q1 onwards. So there is restocking. There is some underlying recovery that is happening. So multiple factors playing out, Sanjesh. And again, customer traction seems pretty decent going forward as well.

And in the Q4 when you see, a significant portion of incremental demand is coming from the new products? Or even the existing products...

It's a combination of both. Some of our existing products have seen a bit of a run down when we look at the 9-month period. And to that extent, some of the existing products are seeing some good traction. But yes, certainly, new products are providing a positive.

And one last question here. In your opening remarks, you said that you also had a better margin for Specialty Chemical in this quarter. Was it more operating leverage or it's that the cost has come down and that is benefiting us? What is driving margin improvement for Specialty Chemicals?

I think, again, a combination of both. To a certain extent, pricing has improved. To a certain extent, I would say operating leverage because newer plants are starting to kick in, that's giving the positive. And I would also say that volumes have also picked up. So all of those 3 are adding to the margin. So when you say volumes have picked up, it also adds to the operating leverage. When you say that new products have started to kick in, therefore, again, operating leverage is a positive and to a certain extent pricing as well. I think a combination of all of these factors. But I would really say volumes, and to a certain extent, new products are creating the positives.

Got it. One last question. You looked a little cautious on the U.S. HFC demand. Why you seem cautious given that industry-wide there appears to be some sort of shortage?

I have not talked about U.S. HFC demand. Again, thematically, U.S. has gone through now another large cut on the HFC side. And then, therefore, thematically, there will be lower demand from the U.S. Yes, to a certain extent, what we have seen also is availability of the product. And therefore, some positive development on that side is clearly visible. But I've never said that we are negative on U.S. demand. I always said that pricing going forward seems to be in good shape.

Got it. No, in your presentation, there was a statement, sorry, not in your opening remark, my bad, but got the point, but Q4...

Again, I think that's a thematic, Sanjesh. That -- thematically, because U.S. will have to cut their GWP positioning because of the protocol. There will be a lower demand. There could also be a situation where because of, let's say, lesser use of 125, but 32 goes up. So that's the mechanics operating between the HFCs overall.

Got it. Got it. Structurally next year, we should have more refrigerant gas exports than the domestic? Or because of the quota regime, you want to maximize the domestic quota than the export one? How you want to place yourself for the longer game?

You're talking about FY '26?

I'm talking about CY '25, correct?

Okay. Again, I think it's been a stated position that we want to increase our domestic positions given quota positioning playing out, but we are also, therefore, happy to export our -- because we have a fairly large capacity on this side. Hopefully, both can work out well. I think mix between 40% to 50% on HFC still is a good mix to have in terms of domestic versus export.

The next question comes from the line of Madhav from Fidelity.

I just wanted to check on the ref gas pricing. So obviously, there has been this recent increase in price coming out of China for exports of HFCs. Just wanted to understand how does that pricing contracts work in India and in the key export markets like Middle East and U.S., like are these quarterly contracts or monthly contracts? So basically, the impact of the increase, like over what duration of time does it start showing into our P&L?

Again, for U.S. market, there will be some contracts that we will have, right? Again, the way domestic market operates is largely spot, but OEMs will be different. So the trade versus -- let's say, the OEM market would operate differently. OEMs typically have a monthly, maybe in some situations the quarterly, position, but largely, I would say, some of the price benefit that we have seen should start to percolate down in Q4 as well.

Yes. That's what my question was that given some of this price increase has been more recent, is there some price hike benefit which will flow through more in Q4 versus Q3 in our key markets? Is that the right way to think?

I just keep telling you each pricing of each gas for each quarter very difficult to do that, Madhav. Thematically, pricing is higher, that's what we will see.

The next question is from the line of Ankur Periwal with Axis Capital.

Congratulations on a good set of numbers. First question on the Specialty Chemicals side. Again, from a demand recovery perspective, you did highlight that there is a general uptick, volumetric uptick from the existing portfolio as well, but what's your thoughts on pricing front, at least for the existing portfolio, wherein there was some bit of pressure earlier? And we had highlighted that we will be trimming our cost as well to negate that negativity. So where are we? And any timelines there...

Again, Ankur, I think we commented on that also in our presentation to a certain extent. We will be able to mitigate some of the price negatives coming out of China, but it won't be 100%. There is a price reduction in some of the key products where that has happened. We will continue to fight for our share of those products. We will continue to cut our costs around it. There will be tech interventions around it. All of that we are doing. Some of that benefit we will start to see probably in Q4. Also, there is work going on in terms of cost of certain other products, which should pan out over a longer period of time. I can tell you that there is still some pricing pressure that is going on. Although we are starting to see some positive traction on that side, where pricing is starting to go -- inch up a bit, but there is still price pressure on this.

Okay. Fair enough. And for the new AIs that we have been working with the global innovators, most of them have already been tracked at the R&D approval stage, et cetera, is done. Are we seeing pricing pressure over there as well or it is largely for the older portfolio that is seeing pressure?

Again, like I said during the initial remarks, we are seeing some of the registrations that have -- that we had taken for coming through, right? Those have come through. Now, as we will start to see traction building on some of those AIs, we will start to see more volumes. Again, because these are so new, I can't even say that there is pricing pressure here. Pricing pressure will be witnessed, let's say, for some of the products we were selling it at $35, which has come down to $25, $28, that's the pricing pressure that you end up seeing. As these pan out, we will see some positive on that side. Now whether there is pricing pressure, I really can't comment on that, Ankur.

Okay. Fair enough. Fair enough. Secondly, on the PTFE side, we have been sort of trying to -- getting the product approvals here, both in the domestic and international market. Any timelines or anything further that you can share over there in terms of ramp-up and over what timeframe could we see...

Again, I think the sampling is out. There are positive tractions that we've seen from some of our global customers. Hopefully, that will pan out positively, more towards FY '26 than, let's say, Q4 FY '25.

Sure. And this will be both commodity as well as the specialty grade?

As of now, we are only talking about 3 grades, Ankur; the suspension, which is pure commodity type of grade, plus the free flow and the fine cut. So free flow and fine cut are a little more specialized, which has already gone out for sampling and in the process of getting customer approvals on it.

Sure. Great. Last question on the CapEx guidance, if you can share some thoughts?

Yes. Again, for FY '25, I think generally speaking, we should be in the range of about INR 1,500 crores overall cash spent. For FY '26, current projects, and let's say, certain future projects, we should probably be again in the range INR 1,500 crores to INR 2,000 crores. Hopefully, next year onwards, there can be some kick in on the investment cycle, and therefore, some more traction developing on that side.

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

Congrats on a good set of numbers. I have a couple of short ones. First, on Packaging Films, the aluminum foil capacity, where would we be in terms of utilization and the likely ramp up ahead of us?

So roughly speaking about 55% for Q3, Archit. But again, the way it is, let's say, the learning cycle on this has been longer than what we expected. And therefore, I can also tell you that the product is now also out into Europe and U.S. for approval. Again, like I had -- it's probably a similar story to PTFE as well, where we believe traction develops on these products in FY '26. You are all aware that there has been a duty put, ADD, from an India market that is probably being proposed on this side. Hopefully, some of -- when that gets notified, probably the Indian market will start to show some positive trends in pricing as well.

Sure, sir. Sir, second one, like you were mentioning before about the pricing pressure and our existing spec-chem portfolio. And I think [ DSDA ] has been one of the key losers there. Has anything changed on that account with respect to volumes? Of course, pricing will be a function of different market forces, but at least volumes shaping up well.

So again, like I said, I think thematically, what we are starting to see is some inch up on pricing, right? And when I had also answered Ankur's question, some of the tech intervention and some of the interventions that we have done are also starting to show some positive signs that we are looking on that side. Volumetrically, I think we are slightly higher, if not flattish, but price remains pretty much stable. Hopefully, some of that pricing pressure that is there gets toned down to a certain extent when we think about Q4 and going forward in FY '26 as well.

Sure, sir. The volumes will be higher going ahead. That's what I was trying to get to.

I'm saying Q3 versus Q2, certainly.

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

Just 2 questions from my side. One on Specialty Chemicals, so just with regard to given that we are already at the end of January, is there any...

Slowly, slowly, you are too quick for me to understand what you are saying.

Yes, sorry. I'll go slower. On Specialty Chemicals for fiscal '25, given that we are just 2 months away from the close of the financial year. Is there any update you might be able to help us with in terms of the expected growth for this full financial year?

Give me just 1 minute, let me talk about this. Just give me 1 sec, Abhijit, to answer your question.

Sure.

So, again, when we think about Specialty Chemicals, year as a whole, 9 months to 9 months, I think we've seen some increase in sales. So that's a positive. Again, given our guidance for FY '25, we think there should be a positive trend on that side as well. But the 20% number is certainly out of the picture given the kind of environment that we deal with during FY '25. Hopefully, we can get back on our growth track in FY '26, Abhijit.

Understood. That's very helpful. And the other one I just had was on the R-32 capacity. Where do we stand in terms of capacity utilization for that? I know we wanted to maximize output in CY '24 through '26, so sort of how are we progressing in terms of the utilization?

Let's say, about 75% in terms of overall capacity utilization. Month-on-month, we would have hit that peak. Hopefully, in Q4, we should -- see, again, what we had suffered with was AHF, right, availability. I think that problem is now pretty much sorted out. Hopefully, you will see -- you will listen to an announcement on AHF probably in the next few months, which should give us the ability to produce more. My sense is we will probably in the 65%, 70% overall 9-month utilization range. But when we think about, let's say, the overall year as a whole, hopefully, better than that is what we can target.

The next question is from the line of Bhaskar Chakraborty with Jefferies.

Just wanted to check with you on these 7 new AIs that we have been working on. How many of these are patented vis-a-vis generic? And has any of these started contributing to our revenues in 4Q or 3Q FY '24?

I think Bhaskar to a previous question I had given that answer, that we have got some registrations that are now completed in our favor. As customer traction builds in, we will start to see revenue positions on that also building. I think most of them are patented, a couple of them may be also generic, but I'll have to check that and come back to you.

Okay. And just one other question, which is that across your portfolio, currently, what kind of increase would you have seen at your ref gas portfolio, export realizations compared to the last quarter?

For ref gases?

Yes.

So, again, like I said, I think from an export perspective, ref gas prices on 32 has been better, while we've also seen softer prices for other HFCs, which hopefully should recover in Q4 as well.

So at a portfolio level, would it be positive? Or would it be flat for...

[indiscernible] from a portfolio level. These are all different products, Bhaskar.

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

Congratulations on good set of numbers. First question is on, again, delving into ref gases. For the first 9 months, given that the quotas have kicked in from January for the U.S. market, what is the kind of overall growth that we have seen in terms of volumes for overall portfolio of...

[indiscernible] U.S. market.

Overall, and then, U.S. obviously will be lower, I guess.

Again, when we think about export, I think overall export volume growth has been roughly in the range of about 7%, 8%, all gases put together, HFCs.

Okay. And domestic -- so I mean, combined together, domestic and exports, for the first 9 months?

So domestic has been roughly pretty significant. I think it's about 60% overall.

Okay. Fair enough. Second question, again, on the AI front. So we have done the registrations. From the customer perspective, have they also done with the registrations and where are they in process of commercialize or marketing their products? Just broader sense on whatever...

The customer has already done their registration. We will get included in the dossier. And once that happens, we will see the positive traction on it when they start to see demand and start to buy the product.

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

Rahulji, congrats on good set of numbers. Just a couple of them. So firstly, when you mentioned large contribution from AI is expected in FY '26, so just wanted to understand...

I never said large. I said we will start to see some positive on that side. Don't misinterpret, Krishan.

Okay. Okay. Fair enough. I mean point taken. Sir, just what percentage of incremental spec-chem sales do you expect from AIs in FY '26?

Again, I can't comment on what percentage. I can only tell you that there will be positive traction. The existing one big AI that we are doing is P32. It's slightly been smaller when we think about overall volumes of P32, which will start to kick in probably from Q4, that's position that the customer is at. Again, some of the -- probably 2 to 3, we will start to see some traction in Q1, Q2 as well. Hopefully, by Q4, some of these would have ramped up and some of these would have started as well.

Got it. Got it. And on the ref gas capacity utilization, did you mention 65%, 70% in 9 months?

Roughly around 32 is what I talked about.

Okay. And so overall, what is the capacity utilization, let's say, 65,000 tonnes what we have versus the utilization in 9 months FY '25?

Again, I'll have to delve into the details, probably in the range of about 75% overall.

And so do you expect to achieve a peak utilization in FY '26? Or would you be leaving some room for FY '27?

The intent would be to achieve full utilization. But again, it would depend on current pricing, market, various other elements around it.

Got it. And just the last bit, I think I missed out on the Chemicals EBIT margin guidance for FY '26. Did you give it? Or did I miss it?

I never give guidance.

Okay. So do you -- are you going to give or no?

[Foreign Language]. Not happening, Krishan, good try but.

The next question comes from the line of Surya Patra with PhillipCapital.

And good set of numbers -- congratulations for the good set of numbers. First question is on the Specialty Chemicals side. See, in the last of almost like 6, 7 quarters, we have capitalized Specialty Chemicals projects worth around INR 2,000-odd crores. And generally, we have been saying that our new projects are backed by customers' contract and all that. So if there is a visibility now coming better in terms of the demand and all, so what is the kind of utilization that one can target in, let's say, FY '26, sir?

Again, the way we've looked at it is that, yes, the capitalization has happened. I think the fact is that we believe for FY '26, there will be better capacity utilization that should come through. There is the AI block that we've also put in, which should give us traction on the AI side. Overall, I would say that it's a chemical business, Surya. It does not ramp up like -- it's not a turn of a switch where you can ramp it up. It will probably take between 12 to 18 months for it to fully ramp up.

Okay. So that seems if the trend reverses, really, then we will by '27 see the full benefit of this expanded capacities, that understanding would be right, sir?

More or less, I would say. We would target it to be faster, but yes, more or less, that should be a good target.

Okay. In regard to the refrigerated gas, sir, so there are contradicting trends. While in the export market, it looks like the pricing is kind of moderating or have been moderating so far. And on the domestic side, we have seen price rise. And also, we are anticipating there is a kind of a significant optimal utilization of the assets to qualify for whatever the quota that is likely. And there is a kind of a Chinese supply that is -- any way that has been continuously there. So given all this, so how should one think? Because, see, this quarter or following quarter could be because of the seasonality, we can see a better pricing situation for ref gas, but generally for FY '26 as a whole, how should one think, if you can give some sense, sir?

I think, Surya, you are answering the question yourself to be very frank about it. Again, the fact is that we have seen some pricing positive on the HFCs. I think that's a trend that can continue given where product positions are, given where availability of the product in the market is. Some uptick in price can continue going forward, is what we certainly believe, Surya. But what will the price be, really nobody knows.

Okay. Just last one point here, sir. Regards the -- you mentioned that for the 9-month period, the export share of refrigerant gas in terms of volume is 42-odd percentage. For this quarter, could you...

It's the same altogether.

Similar. Similar, sir? Sorry, I missed it.

Similar, yes.

The next question is from the line of [ Nevill ] from [ Origa ].

Am I audible now?

Yes, sir, please go ahead.

Okay. So my question is with respect to the BOPET case. So in the presentation you had mentioned that...

We are not able to hear you. Your question is with respect to...

BOPET spread.

BOPET spread or CapEx spread?

BOPET, thin BOPET spread, Packaging Film segment. So over there, in the presentation, you had mentioned that the Chinese guys are impacting your Thailand operations. So if you can give an outlook of what are the spreads prevailing in Thailand? For example, in India, the BOPET spreads are roughly 40, 42 kg. So what could that be prevailing in Thailand?

I would typically say maybe 5% to 10% lower. That's probably the range. Again, I have not looked at it from that perspective. Maybe you want to send that question out, and if possible, and within permissible limits, we'll try and answer it.

Okay. And just to add one more question. That is, are you observing any new BOPET or BOPP lines coming on board for -- in the next couple of years globally?

Again, you're talking SRF perspective or you're talking the market perspective?

Market perspective.

There are multiple lines that are scheduled, but given the current scenario, I think some of those might get delayed as well.

Ladies and gentlemen, that was the last question for the question-and-answer session. I now hand the conference over to the management for closing comments.

Thank you, everyone. I hope we have been able to answer all your questions. I wish that each one of you remain safe and healthy. If you have any further questions, we would 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. Bye-bye.

On behalf of Emkay Global Financial Services, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.