SRF Limited (503806) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to SRF Limited Q1 and FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Kumar Saumya from AMBIT Capital. Thank you, and over to you, sir.

Thank you, Anshul. Good afternoon, everyone, and thank you for joining us today. We at AMBIT Capital, are pleased to host SRF Limited's Q1 FY '26 Results Conference Call. We have with us today, Mr. Rahul Jain, President and CFO of SRF Limited. I would now like to invite Mr. Nitika Dhawan, Head of Corporate Communications at SRF, to initiate the proceedings for the results conference call. Over to you, ma'am. Thank you.

Good afternoon, everyone, and thank you for joining us on SRF Limited's Quarter 1 Financial Year '26 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.

Good afternoon, everyone. I extend a warm welcome to you all, and thank you for joining us today for SRF's Q1 FY '26 Earnings Conference Call. I trust all of you have had the opportunity to go through our results and 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 started the year on a positive note, delivering strong performance across our key business segments despite prevailing global uncertainties, with expectations of an improving external environment, we remain cautiously optimistic about achieving stronger performance in FY '26 as a whole. In Q1 FY '26, our gross operating revenue stood at INR 3,819 crores and EBIT was up 43% recorded at INR 694 crores, reflecting an 18.2% margin. Profit after tax grew 71% Y-o-Y to INR 432 crores. During the quarter, Board also approved an interim dividend of INR 4 per share with a total outlook of approximately INR 119 crores. Our Chemicals business reported revenues of INR 1,839 crores, registering a 24% year-on-year growth. The operating profit of Chemicals business increased 64% from INR 306 crores in CPLY to INR 503 crores in Q1 FY '26. The Specialty Chemicals business segment delivered strong revenue and margin performance, driven by a healthy demand for newly launched products. We are now witnessing a gradual recovery in the agrochemicals market post inventory rationalization that happened during FY '24 and FY '25. While there are still some overhang of the inventory cycle, we believe majority of the same is now behind us. Albeit, some pricing pressures remain, and we continue to witness the same in some of our products. During the quarter, key milestones included a launch of new pharma intermediate and registration of an AI product both of which are expected to scale up in FY '26. In an environment of evolving market dynamics, Chinese competition and uncertain tariff position, operational efficiency remained a key focus for the segment, supported by cost optimization, process improvements, automation and better asset utilization. Demand for agrochemical intermediates remained favorable with strategic pricing and solid export performance contributing to overall growth. To support future demand, the Board approved an INR 250 crore investment for a new agrochemical intermediate facility at Dahej, reinforcing SRF commitment to long-term sustainable growth. The Fluorochemicals business delivered good growth compared to corresponding period last year. While the overall domestic market remained weak with RAC production being lower, we were able to find countermeasures in the export market and grow our HFC volumes when compared to corresponding period last year. A key highlight in the segment was SRF commercial sale of R467A in Q1 FY '26, developed and patented in-house by SRF's R&D team. R467A is a low GWP, nontoxic refrigerant gas designed for retrofitting legacy R-22 stationary air conditioning systems. It has also earned Global Ashley certification, making SRF the first Indian company to achieve this milestone. SRF maintained its leadership in both room AC and mobile AC segments in the domestic market. The recently operational AHF-3 plant is helping increase HFC production and PTFE segment is preparing to expand sales for its fleet to reflow and fine cut variance in FY '26. The Chloromethanes segment also delivered stable results with pricing largely remaining range bound. A lot of questions around quota regime for HFCs have been received since our results announcement and in the past as well. We will plan a separate call to explain deeper nuances around the same. However, I would like to clarify that the quota policy is extremely clear, and we believe that someone putting up large capacities has incorrect understanding of its implications. SRF's R&D capabilities remain a core strength, supporting innovation and competitiveness across Fluorochemicals and Specialty Chemicals. With over 400 skilled professionals, our R&D team is engaged in developing complex chemistries and advanced products. SRF has built a strong intellectual property portfolio with 153 granted patents and 494 process patents filed. Moving forward, R&D will remain central to advancing process development, scale up and commercialization across agrochemicals, pharmaceuticals and next-gen refrigerant gases. The Performance Films and Foil business recorded a 6% Y-o-Y growth, revenue growth in Q1 FY '26, reaching INR 1,418 crore with operating profit increasing 62% over CPLY to reach INR 140 crore in Q1 FY '26 on account of record production, improved efficiency and higher capacity utilization and overall margins. Volumes of BOPP were higher and margins improved on the back of better overall realization, higher VAP sales and disciplined cost control. South Africa remained stable, and Hungary benefited from lower energy costs and higher exports to mainland Europe. While our Thailand unit did face margin pressure due to high costs and competition from China. The aluminum foil business delivered its best ever quarterly sales, driven by higher volumes and supportive trade measures on the notified antidumping duty. The current BOPP demand supply situation is likely to remain favorable in the domestic market given known market developments. In the Performance Films and Foil business, we remain focused on profitability by commercializing new apps and accelerating sales of high-impact VAPs. To support future growth, the Board approved INR 490 crores CapEx investment in a BOPP facility in Indore equipped with a 10.4-meter wide BOPET line and metallizer. The project is expected to be completed in 24 months, further strengthening SRF leadership in high-performance sustainable packaging films. Our Technical Textiles business recorded INR 467 crores in revenue during Q1 FY '26. Weak domestic demand of nylon tyre cord fabric and pricing pressure in belting fabrics due to Chinese competition impacted the business performance. However, higher exports in belting fabrics and healthy sales in Polyester tyre cord fabric helped offset some of the challenges. While MTCF volumes improved sequentially, they remain below last year's levels. Ongoing CapEx of the new dipping machine and ramp-up of recently commissioned belting fabric clients positions the business for future growth with continued focus on high-margin value-added products. In other segment, we saw muted performance with coated and laminated fabric facing soft demand. However, coated fabrics retained its domestic leadership, in monsoon demand expected to boost growth. Production capability and operational efficiency improved through installation of new looms. Despite industry overcapacity, Laminated Fabrics maintain price leadership and upcoming equipment additions will further enhance in-house production capabilities. Sequentially, our overall interest cost has also witnessed some softening as both global and local interest rate benchmarks were on a downward trend and is likely to impact our cost of borrowing in FY '26 positively. I am happy to share that during the quarter, SRF was honored with 2 prestigious awards, reflecting our commitment to quality and social impact. The Fluorochemicals business received the ZERO PPM award from Toyota Kirloskar Motor Pvt Ltd for flawless performance, while the SRF Foundation won the CSR Times Gold Award 2025 for its rural education program in Mewat. During the quarter, our CSR wing SRF Foundation undertook transformative initiatives around our manufacturing locations, empowering close to 2,500 students in wind via a digital bus training 100-plus educators in tech, upgrading classrooms for 140 children in Nambampatti distributing medical equipment to 12 sub-health centers in Dhar and delivering mobile health care across 15 villages in Bharuch. In conclusion, we have had a solid start to the year, supported by a steady performance and continued momentum across key segments. Our commitment to capital expenditure remains robust with planned investments of around INR 2,400 crores to INR 2,500 crores during this fiscal year. The recent announcements reflect our continental business and its long-term potential. SRF has built a strong diversified foundation that enables us to adapt to evolving market conditions and pursue growth opportunities with agility. While certain sectors may face near-term headwinds, our overall outlook remains positive, and we are firmly focused on delivering sustainable long-term value through innovation, strategic initiatives and operational excellence. On that note, I conclude my remarks, and we'll 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 is from the line of Nitesh Dhoot from Anand Rathi Institutional Equities.

My first question is on the agro CapEx of INR 250 crores, that's for 12,000 metric tons. So assuming one point [indiscernible] there, this appears to be a sub-$3 product. Can you give some color if it's an existing product or a new product? And if you could also clarify any particular reason for CapEx in lower value products?

Okay. Nitesh, the way we are looking at it, while the 12,000 is a rated capacity. The way we are looking at it, it is also to think about the CapEx from -- the capacity will actually depend on the base product mix as you keep going up the value chain and keep doing differentiated products, that is something that we believe we needed to do. So therefore, while 12,000 maybe a nameplate rated capacity, which is a requirement to be given, the idea here is to not set this up as just that product. It is a requirement for a very large product again, the assumption of 1:1 may not be correct on this side. And therefore, we believe this sets up the foundation for the future for us.

But is this an existing product? Or is it a new product completely?

For us, it is a new product completely. We've not done this in the past.

Okay. Sir, secondly, on the capacity utilization in R32. I mean, what's the current capacity [Technical Difficulty]

Sorry, your voice is cracking. Could you repeat? Nitesh, your voice is cracking, could you repeat please.

Can you hear me now?

No, not very well.

Sorry to interrupt, sir, but I may request you to rejoin the question queue if you're not...

Just one moment. Sir, is it any better now? I've just tried to adjust.

Yes, much better. Please go ahead.

Yes. Okay. So yes. So I was asking on the capacity utilization, the current capacity utilization in R32 and what will be the likely exit rate for FY '26? And if you could give some outlook on the R32 prices. What we hear from the channel is that there has been some softening in prices in the domestic market. If you could just give some color there?

Two or 3 questions together, Nitesh. The first one about capacity. We -- our current capacity utilization is pretty much as much as the rated capacity that we have on 32. So that's effectively full capacity utilization. Again, from an FY '26 exit perspective, our target is to continue this at that level, right? So that's the position on it. From a pricing perspective, you have to also understand that pricing of this is also a function of the current demand and supply. There is always the seasonality that prevails within the 32 or HFC position overall. So -- and again, that is your channel check in terms of what the pricing is either lower or higher. We believe that the pricing is strong. And given overall market conditions, it is likely to remain that way. That's what we believe, Nitesh.

Sure. Just one last question on packaging films. So I mean the typical equipment ordering, ordering to plant, commercialization would typically be around 24 months, right? So -- but are there any other faster routes -- also vendors, asking this in context of the recent supply disruptions that happened in the industry, and also if you've seen any increase on the BOPP import side since the incident?

So 2 things, Nitesh. I think the Performance Films and Aluminum Foil business and specifically BOPP segment in that, the supply situation, what you are saying is right. But there are no other routes. You will have to buy the machinery from the 2 global suppliers on it. If it is BOPET or BOPP, there are 2 large global suppliers being Bruckner and Dornier on it. So that's how it works out, no shortcuts around it. That's one element of it. With respect to the second question was with respect to the overall situation in terms of the supply. On BOPP, yes, it remains tight. India will be short from an overall perspective. The incident that happened is roughly about 25% of the India, let's say, production capacity. So India will be short and therefore, there will be a need for some imports as well.

The next question is from the line of Arjun Khanna from Kotak Mutual Fund.

Congratulations for a great set of numbers. Sir, I have 2 questions. The first question is on the N2, N3 regulation for the MHCV side. We have referred to that in a market trends part of it. In terms of 134a, my understanding is we are the sole HFC manufacturer of this gas in India. Is this correct? And what would our market share be at this point in time?

See, again, I think to a certain extent, from an HFC perspective, overall market share is roughly in the range of 60% to 70% from a domestic market perspective. Balance gets imported from a 134a perspective. There are a couple of new capacities that have started on 32. But on 134a, you are right, we are the sole manufacturers.

Sure. And just in terms of pricing, while you did allude to R32, given with this regulation, do you see a step-up in terms of demand? And since it's already in the system now, are we seeing benefits from the same?

I think that demand kicks in from '26 onwards, rather than now, roughly speaking, I would say it should start to see demand positive in '26 only, not in the current year from 134a perspective.

Okay. Sure. Fair. The second one is on the PTFE and the aluminum foil. So these have been recent projects by us. We were expecting a ramp-up in FY '26. If you could comment on both of them, please?

On the aluminum foil, Arjun, I think we kind of said in the press release as well, that the ADD that has been levied for 5 years is a positive. We are starting to see traction on that side in the domestic market. Our overall goal here is to continue to grow the market and to increase our production on the aluminum foil side. PTFE also, we believe there will be some positives in the overall FY '26 perspective from PTFE, global sales, free flow, fine cut should take up a better position going forward.

We were earlier talking about exports also of aluminum foils. We haven't seen much in export data. So is this something that will happen maybe in the second half of the year? Or we are now concentrating post the ADD on the domestic market?

No, there are U.S. and European customers that have been identified. Some of the sampling will start happening. And hopefully, some of that traction we should see in FY '26 itself.

And just on this, what utilization levels are we currently at for both PTFE and aluminum foil?

Aluminum foil, we will roughly be, I would say, at 50%, 60%. PTFE about also in similar ranges.

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

Rahul, so in Specialty Chemicals, when we talk about healthy revenue growth, so is it because of the newly launched product or majorly is contributed by our newly launched product or existing product is also driving growth?

So again, when you think about FY '26, Q1 FY '26, yes, I would say, attribute a larger growth into the newly-launched product. But I think when you compare it to CPLY, there was -- where we were seeing a bit of depression from an overall inventory cycle that we have spoken about. We've kind of seen some of the older products or some of the legacy products also go up in volumes. Although in some cases, we've seen, let's say, pricing to be slightly lower. The point also is that some of these products, we are saying that we will ensure that our market share remains positive and continue to find answers to, let's say, some of the pricing pressure that's there.

And considering the current scenario, can we assume chemical business, what margin we have shown in Q1, it is going to continue in Q2?

Look, I have always looked at it from an annual margin perspective, Sumant, you are aware of that, right? Again, quarter-on-quarter margin may not be the right way to look at it. And therefore, we will continue to be on the same position on that side, Sumant. I don't think we want to look at quarter-on-quarter margins.

Okay. Okay. And any change in chemical business growth guidance for the year?

I think we've done fairly well in Q1, when you think about it. Why should there be a change? You want a higher change or a lower change?

Higher, higher, higher.

So you will always want a higher one, but I'm saying we are still sticking to the original guidance.

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

So sir, just in terms of the ref gas pricing, of course, it has helped us this quarter. And roughly speaking, R32 quarter-on-quarter has increased around 20%. That's what we've come to -- that's what the pricing increase reflects. Now I just wanted to understand, you have also mentioned in your presentation that domestic market was weak. So could you give us some color in terms of how this has panned out, just roughly ballpark in terms of volume or price, how the performance has been so strong in terms of the Fluorochemicals business. And also a related thing is, do you think this pricing will be sustainable going ahead?

Look, I would really say 2 things here, Jason. The fact is that there has been a positive in gas pricing. I don't want to put a number of 20% or 25% or 30% around it from a domestic and an export market perspective. I can only give you color in terms of saying that the pricing has been positive, right? The other thing in terms of overall, let's say, market situation, RAC production is known data that it has been weak. And that's why we have been saying that the overall RAC production when we think about it has been lower than when we compare it to CPLY, right? So that's how we are looking at it. We've been able to find some countermeasures and continue to utilize our capacity to the maximum possible. The second question, I kind of forgot, could you repeat?

So just wanted to know, do you think this pricing trajectory, do we expect this to continue going ahead, the strong pricing trajectory of ref gas?

The way you want to look at it is the global pricing on this. I think there are various positions in terms of where China is, where overall capacity positions are playing out. We do believe that the pricing should remain strong. But again, there could be changes in overall demand from a world market perspective, although we don't see that happening.

Okay. Sure, sir. And sir, my next question, I just wanted to know the progress on the various AIs under development under the Specialty Chemicals segment?

Going on, I think there are a few that are under, let's say, campaign positions. Hopefully, some of that ramp-up will be get seen in FY '26, but there are larger products that we are talking to and are in various stages of development in the AI phase.

Okay. Okay. And Sir, just wanted to know, I mean, of course, it's a well-known fact that last quarter, one major competitor witnessed a major fire -- and that must have positively impacted our performance in films business. Just wanted to understand what is -- do you -- how much of a positive impact was there? And how do you -- how much do you think it is sustainable going ahead?

Again, 2 things. We are all aware of what is happening in the market, right? There has been that incident that has caused. There is a positive in terms of the fact that BOPP demand and supply situation has kind of got changed because of that. But frankly speaking, I would say that to be able to quantify it is very difficult.

[Operator Instructions] The next question is from the line of Sanjesh Jain from ICICI Securities. .

Yes. Sanjesh here. First, on the specialty side, you mentioned that there was some strategic pricing action that has been taken. And in the initial remarks, you said that there were pricing pressure. In a scenario of pricing pressure, and I think when you say strategic pricing, you're talking of upward revision, now what's transpiring? Is there certain...

That's your assumption, Sanjesh. What we are saying here is that in certain cases, in certain products, we are not willing to let our market share go. We are working on cost position. We are working on our overall, let's say, utilization of the product and therefore, want to continue it like that. We are not saying that we have taken certain strategic pricing decision upwards or downwards. We are just saying that we want to look at some of the products as one of the largest products that we have and continue, let's say, gaining market share around it.

Okay. Okay. Got it. Got it. That's clear. Second, on the R32, you said that India market was weak, but we as a countermeasure found some market in the exports. Which are the markets which are showing traction for R32 for us?

I mean, I don't want to go into position for various other export regions. I'm saying overall exports were higher from a volumetric perspective. And it could be to the U.S. market, it could be to other Middle East and Southeast Asia markets. But overall is where we are at. I'm not talking about various jurisdictions or geographies here.

Okay. Same geography, but more volume is what you are telling?

I have not said any of that. Interpretation at your end.

One last question from my end before I get back into the queue. For the specialty, what we are hearing commentary from the global agrochemical is sort of slightly weakish from earlier. Are you seeing that trend in your discussion with the customer because the customer, once who are listed large agrochemical companies have been downward revising their guidance. Anything that we have picked in our discussions?

I think our order book is in fairly good position, Sanjesh. There could be various positions that some of the global players have. And therefore, from their overall perspective, they are looking at probably a slightly negative outlook. I don't think we are in a situation where we are saying that there is a negative outlook on our end as well. I think we are -- we continue to stick to our overall guidance here.

Got it. So we stick to the things we said earlier that last quarter, we said that 60%, 70% of our order book is already booked. So that gives us the confidence of growth, and we stick to that point.

Correct.

The next question is from the line of Naushad Chaudhary from Aditya Birla Mutual Fund.

Congrats on a good set of numbers. Two, 3 quick clarification. First, you touched upon R467, which is our in-house developed baby. Just wanted to understand the current revenue size? And can this really be big for us in the future? In next 4, 5 years...

Look, Naushad, I can't give you revenue by gas, right? Overall, HFC positions were higher, that's all that I can tell you. But gas by gas, I don't either give revenue or volumes. But yes, given the fact that this is a replacement for 22, we certainly believe that, let's say, for a 5 to 10-year period, this could play out as a large positive.

Sure. Second, on the fresh land acquisition, similar or larger size of compared to Dahej, any development there or if anything if you would like to touch upon?

I can only say there is work going on, on that side. Hopefully, there should be something that comes through in the near future. Once there is an announcement around it, you will certainly come to know. But as of now, there is -- I can only tell you what's going on.

And last on the packaging business side, despite marginal revenue growth, we have seen a good margin jump sequentially and year-on-year as well. And historically...

Sorry, I didn't catch the question. Repeat, please?

On the Packaging business side, despite marginal revenue growth, we have seen a decent jump on the margin side. But historically, it has been on an average, 14%, 15% margin business last 2, 3 years was in the problem. Do you think the cycle has bottomed out and we should quickly go back to the normalized run rate at least?

Look, again, I think you are well aware, probably better than I am in terms of the current market situation on what has happened to one of the market participants on it. I think given the situation, the supplier demand situation has completely twisted on it on BOPP. Hopefully, that can sustain over a period of time because capacities don't come up quickly. It will take time to probably someone else had asked the question in terms of saying, can there be a shorter route to get these capacities online, to which I said it's practically impossible.

Sure. Should this lead to the normalized average margin of the packaging business versus what we are today?

Look, very, very difficult to be able to say marginal increase or more increase. So again, it will depend on the demand and supply situation only.

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

Your -- there is a comment wherein we highlight that the stricter registration norms are delaying some bit of product launches from the innovators. Is this comment in general -- yes, yes, yes. Correct. So just wanted your clarification here. Is this referring to some of our AIs that we are making? Or it is a general comment for the industry at large?

It's more a general comment. But yes, to a certain extent, dovetails into the AI position as well.

Okay. But as you mentioned, your 20% growth guidance remains intact, which factors in such delays or maybe the pricing-led strategic initiatives, which we had highlighted there? Is that -- will that be the right statement?

I would say that the way we are looking at it, Ankur is the fact that we are still very confident that we will be able to get there. There may be some delays. But given all of the current situation prevailing, we are fairly confident whether AI or non-AI, we should be able to get that number.

Great, sir. Secondly, the new pharma intermediate that we had launched, and I'm going back to our earlier comment wherein we had expected the Pharma business to grow at a much faster pace. Can -- will this be a bigger driver for that ramp-up? Or this is -- how should one look at the new launches on the pharma side there?

Again, the way we are looking at it, Ankur, is that pharma intermediates, agrochemical products, all of these will continue to come through, right? When we say we have launched the new product doesn't mean that the commercial scale quantities have started to flow through. It's now been approved as the customer needs to get more stable, we will continue to sell the product is the way we think about it.

Great, sir. And just lastly, on the fluoropolymer side, any time lines you'd like to share from a ramp-up perspective, given that we are almost 50%, 60% utilization?

You're talking about PTFE.

PTFE, correct.

Again, I think FY '26 should be a better year than FY '25 for the PTFE segment overall.

So should we expect, let's say, full ramp-up by the end of this year, let's say, Q4 at an exit run rate? Or it may take slightly lower.

75%, 80% exit FY '26.

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

Just one question on the refrigerant side, Rahul Ji. For R32, what would our estimate of total world demand at this point in time? And if you have a forecast for the next 5 years by 2030 or so, that would be great to have as well. And also how much might China production be at present for the product?

Ankur -- sorry, Abhijit, I don't have that data available readily. I will probably relook at the position on this and maybe come back to you separately on this. I don't have that -- both those data points available readily.

Sure, sure. That's fine. And maybe just one other thing then. You did mention at the close of your opening remarks that some businesses could see some near-term pressures. So if you could please just specify which areas you might be seeing that?

See, again, that's a more general comment, Abhijit. I think we are facing some, let's say, pressure on the technical textile front, given where demand is, given where the overall position is. So that's something that is there. But overall, I don't see a negativity around it. I think our commitment to CapEx has been strong. We are continuing to put in more money on the CapEx, some headwinds will always be there. Business is not linear. It will continue to evolve over a period of time. So I think that was a more generic comment rather than a specific comment, Abhijit.

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

Congratulations on a good set of numbers. Just one question on the refrigerant gases. Ex of R32, if you could just touch upon the kind of pricing trends that you're seeing for the remaining products and how you see that evolving over the course of fiscal '26?

Vivek, the way I would look at it is not ex of R32. I think thematically, what we've seen in HFC prices overall are higher. I think stable to higher is the trend that we will end up seeing during FY '26 also, and that's the thematic. I can't give you gas by gas prices because it will depend really on which market it is going, what kind of packaging it is going, the SKU-wise positioning. So I don't kind of talk about that overall. But thematically, better pricing is what we've seen in Q1, and hopefully, that trend can continue.

Sure, sir. That's clear. And just one clarification from a domestic export mix, the 50-50-odd percent number, which would be the same for this quarter? Or has that mix changed or purely on the ref gas side?

HFC side, I think, about 60% domestic, 40% export from a volume metric positioning.

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

Congrats on a good set of numbers. Two from my side. First, in your opening remarks, you mentioned that registration and scale-up of AI is expected in FY '26. So what is the status of the rest 4 to 5 AIs? Would there be a scale-up of any other AIs apart from the one that you mentioned in F '26?

Yes, again, the way we look at it, Krishan, is that there are 4 or 5 in, let's say, commercial batching situation. Hopefully, because these are dependent on customer registration and customer positions on it, we don't know the exact timing of it, but likely to witness some traction in FY '26 is what we are thinking about.

Got it. And secondly, just on this spec chem side, what would be your domestic specialty chemical sales as a percentage of overall spec chem sales? A rough range would be helpful.

Roughly speaking, I would say 60-40, 60% export, 40% domestic. But the point to make also is that even that 40% is at the best of some global majors only.

Yes. So earlier, I think that used to be 80% export 20% domestic. So that mix has changed considerably.

At some point in time, it was probably 95% export, 5% domestic. So that situation is also kind of evolving over a period of time.

The next question is from the line of Kumar Saumya from AMBIT Capital.

Sir, just one question, sir. So just wanted to understand the domestic and export mix of R32, last quarter it was 60-40 and now you said this quarter as well 60-40?

60-40 was overall HFCs. For 32, I think it was probably in the range of -- I don't know, I'll have to check, give me a sec. So roughly speaking same, 60-40.

Okay. Okay. No. So I was of the view that domestic demand has been weak and we have pushed more volume in the export market. So this Q would have been different this quarter compared to the last quarter.

I don't -- so again, the fact is that generally speaking, in this quarter, we would expect a better domestic demand. But given the weakness in the RAC segment, that demand was weak. So we had to kind of find countermeasures from an export market perspective.

The next question is from the line of Meet Vora from Emkay Global.

Sir, first question was with respect to R467a. Just wanted to understand what will be the current Indian market size and global market size? Is it sizable today? Or is this still getting as a development of probably replacement of R22 globally?

Again, very difficult to be able to give you the exact data on it, Meet. The fact is that this is a replacement for 22, right? And as the, let's say, secondary market or the trade market develops and this kind of becomes more available in the market, we will kind of find out. I don't have a sense of that right away.

Understood, sir. Second, sir, was more of a clarification. We have mentioned in the PPT that our EHF-3 plant is getting stabilized. So is it now running at optimal capacity or the ramp-up is yet to be seen?

Ramp up yet to be seen. But yes, it is kind of getting there.

Okay. And just one last bit, with regards to HFC capacity utilization, we mentioned that we are now running at optimal capacity, right in terms of all HFCs put together.

That was more on 32.

The next question is from the line of Nitin Agarwal from DAM Capital.

Sir, with respect to your comment around the quota regime in India for HFCs and the challenges that some of the other competitors may face in putting up larger capacities. Sir, what is the typical time for somebody to -- that will be required somebody to put capacities to meet the quota requirements?

Okay. So '24, '25, '26 are the measurement years, right, '27 being the full year from a calendar year perspective, right? Somebody will have to look at capacity from the 3 years of production, and maybe a certain position with respect to the 65% of 8, 9 or 9, 10 of the 22 CFC capacity in terms of overall production. . The other position on that also is with respect to how much you sold during that period, which is '24, '25, '26 as the overall position, which will become your baseline. So I think that is how it is going to play out. But again, each one to their own.

And sir, for our perspective, are we looking to put up any incremental capacities before the quota -- the '26 period ends?

Not as of now. I don't think that is what we are looking at, and I don't think we have any plans around that. Because again, you have to understand the overall position on the quota regime. Capacity additions were only allowed until a certain point in time. Post that, they may not be considered for Montreal. And if you to set up capacity by, let's say, close of '26, where will you send that capacity. So you may have the production capability, but no consumption capabilities.

Nitin sir, were that all your questions.?

Yes.

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

Congrats on good set of numbers. Sir, just one question on the agrochemical intermediates capacity, new CapEx that we have announced. So in terms of margins for the product will it be in line with the company-wide specialty chemical margins. And allied question to that, in terms of the capacity it seems a large capacity. But any point in time in future, will it be fungible? I mean you said it's a nameplate capacity though. So will it be fungible at any point in time?

Okay. I have not understood the second question, but let me answer the first one, where you are saying that are my margin similar to the margin of some of the competition in this -- how...

Sorry. Not competition, but maybe our company-wide margins on the second business.

See, again, I don't give out breakup of the EBIT margin between chemicals -- between Fluorochemicals and Specialty. So that's not what we do, Rohit. So not happening again. Second question was...

Yes, sure. In terms of capacity, you said that it's a nameplate capacity. So we have taken -- right, right. The 12,000 tonnes capacity, it's a nameplate capacity, and we may reach that level or we may not, but we have taken approval. So at any point in time, if the -- is the capacity be fungible for any other products? Or will it always be a dedicated product till the life cycle of the final year?

It depends on the product mix. It will be dependent on the product mix of various products that can be produced. So yes, it will be, to a certain extent, fungible between products.

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

Just one question on the quota. When you said that 2024 to 2026 is the quota measurement period. If anyone is selling, let's say, instead of R32, if they're selling R125 in the domestic market in this period of 2024 to 2026 given that's an HFC as well, does that give you the ability to sell R32? If you're already selling 125 in the markets...

Probably on the equivalent basis -- not probably but probably will be on equivalent basis. So we were selling 125 in the domestic market, yes, you get the 3x multiplier on that if you can do very well. The only point is that there is R125 sales in India. It is largely an export product.

Okay. But 125 goes into some 410A consumption, right, in the country? So if you are selling that...

Yes. But I mean largely, as the 125, it only goes to the export U.S. market.

Okay. Okay. And sir, just a follow-up there, then the HFC consumption of 2024 to '26, it's -- that gets added with your the HCFC production you did in 2009 to '11, right? So it's a combination of these 2 or it's either all like this and that or this all that? Like how does it work?

There are 2 positions on this. There is one with respect to production capability and one with respect to sales capability. So there are 2 different things. And like I said, at the right point, we will set up a call along with Prashant to explain the entire detailed nuance of this. So maybe that's the right point to answer and ask that question.

The next question is from the line of Dhavan Shah from AlfAccurate Advisors.

So sir, my question is on the R32. If we look at the global capacity, it is always in the excess supply in the demand. So what gives us the confidence that the prices are likely to sustain? And secondly, I think, IBS also came out with capacity in Middle East. So are you seeing any incremental volumes from there for R32? And do you foresee any other incremental capacity coming in, in the global market except the Indian players who have announced the expansion for R32?

Dhavan, like I said earlier also, global capacity, you know better than I do, right? So I am unable to comment on the first one. In terms of pricing, in terms of overall position of 32, I think I answered that question in a brief to a previous question by someone. But we believe where current demand and supply situation is pricing remains strong. So that's how I would really look at it. Being able to comment on detail where -- whether the UAE plant is producing or not or it is being -- or is it selling? I think you know pretty much as much as I do. So I kind of pass that question.

The next question is from the line of Surya Narayan Patra from PhillipCapital.

A couple of clarification only. Sir, this R32 price appreciation in the recent month. Is it led by any production disruption by any large global producer because that is how it has been reported by a couple of global listing articles. So could you clarify?

To the best of my knowledge, I think it is a current demand and supply situation given where China is, given where overall position is, given the fact that there was a huge pre-quota filling that had happened in the U.S., there is -- there was a massive overstocking that happened. Again, when you think about it thematically, Surya, world needs more 32, right? And therefore, our capacity and maybe a couple of other capacities, we should -- we believe that they are in good shape, right? Given also the fact that some of the U.S. blends use more R32 than, let's say, the HFOs -- so overall, seems in good shape, but I don't see or I have not heard of any single disruption leading to capacity positions.

Okay. Second clarification, sir, about the agrochemical price or the specialty chemical pricing in the global market, what you have mentioned in the presentation. And you said that there is a kind of China-led pressure is anyway persist. And this is likely to the new norm going ahead. So given that -- is it a kind of a cautious -- I mean, are you giving a kind of a cautious indication about the margin situation for our overall specialty chemical business going ahead? Or how should one think about it?

I think that's the position that we've taken from an overall Specialty Chemicals business perspective. We -- the way we are looking at the Specialty Chemicals business, and I've talked about it in the past in the -- I've answered a few questions in the earlier comments, that we still believe that growth is there, right? Again, in some of the products, what we have said is we were -- we have been global leader. We don't want to give up our position as global leaders in some of those products. It's probably more a product-based comment rather than a generic comment in terms of the overall margin profile of the Specialty Chemicals business. That's how I really look at it, Surya.

Okay. Just one point, sir, more. Here in case of CapEx situation, see, in the FY '25, we have done something like INR 1,100-odd crores kind of CapEx, obviously, a lower number. But again, we are starting -- we are commenting about INR 2,500 crores kind of CapEx for the current year. So this is a kind of -- the visibility of the demand situation, all that is giving a kind of positive indication or -- and last year was a cautious stance in terms of CapEx announcement and execution. What was this indicating really, sir?

I think you're reading too much into it. I think last year, we had clearly said that the CapEx cycle that we are in, given the market situation also, we kind of said that we are not going be very large on CapEx. Today, what we are saying is we have kind of seen market improve. And therefore, our CapEx position is a function of how the market improvement has happened and therefore, taking the CapEx position upwards than, let's say, when compared to FY '25. FY '25 was also a year because when we think about FY '24, there were large capitalizations that happened during that period of time. And therefore, we wanted to digest some of that CapEx that has happened.

The next question is from the line of Aman Kumar from AK Securities.

There is a significant rise in the price of BOPP films in the domestic market. So is this happening to the overseas market also?

I've not looked at export pricing, Aman, but you are right in terms of the BOPP given the current demand and supply situation in the market.

So it is confined to India only, in the international market, margins are very much...

Margins are same.

Same. And sir, what about the BOPET there is overcapacity in the BOPET markets? So when we can think that this overcapacity gets over?

Look, I think the way we think about it from a BOPET perspective also, there is some change in the demand and supply situation there as well. Not many large new lines coming up globally on the BOPET side. So hopefully, in the next few years, we should see some positive on that side as well.

So right now, margins are better than last year?

Certainly.

The next question is from the line of Amit Agicha from HG Hawa.

Sir, what are your ROC targets post commissioning of the new projects?

For which business?

For all the 4 businesses.

Again, that's not how we look at it. I think overall, when we think about ROCE, IRR and payback period, each business has a different position, right? The Specialty Chemicals business are more, let's say, -- let's say, from an overall perspective, driven by positioning over a period of time, right? While -- when you think about the performance in that foils business, those are slightly more commoditized, and therefore, we'll have a slightly lower ROCE target. Again, I think capital is not a constraint in that sense. And we continue to invest in more value-added products even on the packaging or the performance films business side. I think overall targets remain in excess of 25% more from a, let's say, the chemicals business, slightly lower maybe 200 basis points from a packaging films business perspective on an overall long-term basis.

And sir, second question was connected to the debt, like what is the current debt levels? And what is the company's strategy?

Current debt levels?

Yes.

Yes. again roughly thinking about INR 3,400 crores was the overall net debt position. Again, debt is effectively function of how much cash we have available. Given our current situation, we believe the overall number remains here or there or thereabouts plus minus INR 200 crores as the overall position given where the CapEx cycle would be at that point in time.

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

Thank you, everyone. I hope we've been able to answer all of 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. Thanks, and bye-bye.

Thank you. On behalf of SRF Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.