Ladies and gentlemen, good day and welcome to SRF Limited Q3 FY 2022 earnings conference call hosted by Nirmal Bang Institutional Equities Private Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Abhishek Navalgund from Nirmal Bang Institutional Equities. Thank you, and over to Mr. Navalgund.
Thank you, Nirav, and good afternoon, everyone. Thank you for joining us on SRF Limited Q3 and Nine months FY 2022 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 results conference call. Thank you, and over to you, Nitika.
Good afternoon, everyone, and thank you for joining us on SRF Limited's Quarter Three and Nine Months FY 2022 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. I extend a warm welcome to you all, and thank you for joining us today on SRF's Q3 and Nine-Month FY 2022 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 tire cord fabrics. On a consolidated basis, our revenue grew 56% to INR 3,346 crore, and EBIT grew 66% to INR 796 crore.
Profit after tax stood at INR 506 crores in Q3 FY 2022, 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 2022, that included a one-time 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 2021.
Coming to our segmental performance, our chemical business reported a strong performance during the quarter. Revenue grew 58% at INR 1,428 crore in Q3 FY 2022 on a corresponding period last year basis. Within the chemical 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 multi-purpose facilities, and focused cost reductions across all product lines. We achieved highest ever 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 one new pharmaceutical intermediate and successfully completed campaigns for two 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 chemical complex at a cost of INR 190 crore. 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 a cost of INR 61 crore. The overall capability of SRF's engineering teams to set up plants in record time frames is best in class, which demonstrates our leadership position in the Indian chemical industry. These capacities will allow us to take advantage of new and forthcoming commercial opportunities across all verticals in the future.
Our fluorochemical business registered robust performance as a result of improved prices for certain key refrigerant products, increased export volumes, and positive contribution from Dymel. Dymel, our brand of pharma propellant, delivered 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-32 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 CapExes such as chloromethane expansion, ETFE and HFC are largely on track and augurs well for the future of the business. In our packaging film segment, SRF registered an increase of 59% to INR 1,276 crore in Q3 FY 2022 on a CPLY basis.
Sir, can you hear us? Uh, Mr. Jain, can you hear us? Participants, please stay connected while we rejoin Mr. Jain's line. Ladies and gentlemen, thank you for your patience. We have the line for the speaker reconnected to the call, so you may go ahead.
Sorry, I had the line dropped. I will come back from the packaging film segment. We registered an increase of 59% in our overall revenues to INR 1,276 crores in Q3 FY 2022 when compared on a CPLY basis. During the quarter, both the domestic and international facility 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 and 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 on stream 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 INR 425 crore to set up an aluminum foil manufacturing facility in Jaitapur, Indore, Madhya Pradesh. We believe that this investment 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 GTA facility, which is in close proximity to the proposed site. The plant is expected to be commercialized approximately 20 months around September-October 2023. 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 non-food packaging, including pharmaceuticals. Currently, in India, there is a domestic market estimate of around 2 lakh metric tons per annum, and this is expected to grow in the range of 8%-8.5% annually. Further, India imports approximately 1 lakh metric tons 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 in 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 packaging film 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 1.75-2 times and an IRR in the range of 15%-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. 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 film business has been recognized with two awards. Our facility at Indore was conferred the Quality Sustainability Award at the International Convention organized by the International Academy 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 8,538 crores in Q3 FY 2022. 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 Fabrics increased significantly. The company is actively focusing on improving its operational efficiency and overall productivity. In our other segment, SRF reported a growth of 45% in the segment revenue at INR 107 crores during Q3 FY 2022. 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 Center for Corporate Governance and Sustainability awarded SRF's Managing Director, Mr.
Ashish Bharat Ram received the Transformational Leader Award in mid-cap company category for 2020. The League of American Communications Professionals LLC awarded SRF's FY 2021 annual report a silver and a position in the top 100 communication material 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 Electric 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.
Thank you very much. We'll now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Participants, you may press star and one to ask a question. The first question is from Tarang from Old Bridge Capital. Please go ahead.
Hello, Mr. Jain. Good afternoon. Congratulations on very strong numbers. Three questions from my side. One on the pharma intermediate, which has been recently commercialized. Is the product for which the intermediate is gonna feed into commercialized or is the product under some stage of trials?
Tarang, the point to make is that we have recently sanctioned a Pharma Intermediate Plant which is at a cost of INR 190 crore. The plant that we had commercialized, there are various products that were there. One of them was a pharma product. It has 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?
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. Largely, all our new plants are following that approach.
Got it. You know, your foray into Aluminium Foil stock and you've given 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? Instead of having that person in between, you all will do it, or what will it exactly do? I mean, what are these synergies that you all are envisaging by putting in?
Two or three things I'd like to point out. First, about the fact that the customers for Aluminium Foil sheets are also similar to those that we currently supply to. They are largely in the nature of, let's say, people who are converters. I'm not getting into the converting business. The requirement of the converters is also for Aluminium Foil for certain types. For example, a converter manufacturing a Tetra Pak, which has become a brand name, always needs an Aluminium Foil as one of the layers. In some situations. Effectively, the synergy drive is two or three 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 Indore is a positive.
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 Aluminium Foil, which could be of various gauges from anywhere between 5-150 micron, but not on foil stock. Foil stock is essentially the raw material for making the film.
Okay.
I hope it answers it.
Yes. Yes, it does. That's it. That's it for me. Thank you.
Thank you.
Thank you. The next question is from the line of Chintan Modi from Haitong Securities. Please go ahead.
Sir. Hi sir, thank you and congratulations on such a strong performance. My question is, with respect to this Aluminium Foil, as you said that we'll be targeting an IRR of 15%-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?
Again, over a period of time, I've said this, Chintan, that the IRR in the specialty chemical business are expected to be 3%-5% higher than our normal chemical business. In the chemical and let's say the chemical business overall, another 3%-5% higher than, let's say, our packaging or our technical textiles business. That's how it works. Again, what I'm saying here is that 15%-17% is what we are expecting today. It could be better, given where the current market pricing is. But it will take 20 months for the project to get commercialized, which is far from now. Hopefully, again, like I said, I think the foray into the Aluminum Foil is not just purely an Aluminum Foil. There are various applications that we are looking at.
There are various, value-added products that we are looking at. We have applications in the electric vehicle industry also, which we believe can be become kind of a substrate within, let's say the packaging film business like a BOPP or a BOPET and therefore an Aluminium Foil. That's how we are thinking about it strategically.
Sure. Got it. Basically one can expect higher investments which can flow in, you know, after you do this project in the same line of business. Is it a correct understanding? You will have more opportunities.
Over a period of time, we will have to look at various opportunities in the space. Yes, more or less you are right.
Okay. Sure. Sir, just a connected question. If you look at, you know, three quarters of EBITDA and we generally, I mean, if we annualize it, we reach to a number of something around INR 3,000 crore. Which is I think, significantly higher than what we were doing about, say, a few years back. Also along with this, the cash flows will improve significantly. The expectation of the redeployment of these cash flows will also kind of keep moving up. If you could give us some sense, you know, like clearly the company is moving into next orbit with this such a high amount of cash flows that it will generate. How should one see the redeployment of these funds over, say, next three to five years?
You know, whether this will go more precision will be taken in terms of redeployment, basically. Whether it will be more IRR-based approach or it will be more on, you know, where are the new adjacent opportunities coming up.
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. 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 payments around dividend that will come out of it. Overall, I think the cash deployment will continue to be strong. For FY 2023, we believe INR 2,200 crores is easily deployable. Some of the projects that is 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-INR 700 crores of projects that we currently sanction will get invested over the next, let's say, 12-24 months.
Again, we believe we will continue to see significant opportunities on the chemical business side, which we will keep tapping in and therefore enhancing our future position.
Okay. Basically chemicals will something, which I mean in terms of ratio, what we see today of the EBITDA, that ratio will be maintained or it will probably increase only. Is that the right way to look at it?
I would say chemicals, given their 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 one last question. With reference to the refrigerant gas, how much, you know, 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? Thank you, sir. That should put my mind at rest.
very difficult in terms of saying on refrigerant gas. Let me try and break this up into HFCs and non-HFCs. HFCs in India, our share would be in the range of about 60%-70%, and balance is being met by imports. For non-HFCs, we will probably be in the range of 40%-50%, which is largely today left as R22. In terms of sustainability of margin, given where trade actions are both in U.S. and in India, we are in 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 revert back to you from a global market share perspective.
Okay. Sure, sir. I think this was very helpful, sir. Thank you and all the best.
Thank you.
Thank you. The next question is from the line of Sanjesh Jain from ICICI Securities. Please go ahead.
Good afternoon, Rahul. Thanks for-
Sanjesh, be a bit louder, please.
Ha. Is it good?
Yeah.
Yeah. My first question on the spread on technical textiles. We have seen some pressure this quarter. It's mostly driven by volume, but there is some shrink in the margin also. Now we are in a new year.
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 fixed expenses. Because the volumes have been slower than what we had expected. There is some volume dip 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. Therefore, there is some softness in terms of demand for Nylon Tire Cord Fabric. Hopefully in the next quarter that should pan out, but largely not on account of product margins coming down.
Got it.
When I say margin, I am talking about contribution margin, not an overall margin.
Yeah. You're telling that gross profit per kg has remained stable. It's just the volume was soft, so we have made
Yeah. Largely it's a volume issue that has happened during the quarter.
Got it. This year, the contract renewals would have happened now that we are in a new calendar year.
Sanjesh, be a bit louder again. Your voice is muffled.
Okay. Now is it good?
Yeah. Yeah, much better.
Sorry. Just a follow-up question for that. Now we are in a new calendar year, and I expect that you would have done a lot of renewals in this year. How would the renewal spreads look like? Will these spreads are sustainable for next 12 months as well? Do you think that is possible?
I'm a bit confused, Sanjesh. You are talking about renewables?
Yeah, the renewals of the contracts in the technical textile side.
Right. Contract renewals.
We have 12 months of contracts. Yeah.
You are talking about specialty chemicals business or technical textiles?
No, technical textile. Technical.
See again, renewals will happen, start happening towards March-end. Larger contracts will kind of get renewed in March and April, right? First quarter is typically when you are renewing your annual contracts. Largely all the renewals were closed by the end of Q3. No fresh renewals are there. There may be 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. That's how the cycle operates.
Okay. We will know the new spreads for the next year only, say, when we do a Q4 call.
Even these spreads are good, Sanjesh.
No, sir. Amazing. I'm not complaining. Not complaining about that. Second on the ref gas side, can you just give us some sense on this quarter, how much was the volume growth and how much was the pricing growth? And number two, particularly on an HFC, how has the realization been for the average and have those spreads sustained or so have those prices sustained even at the end of the quarter? And probably a related question now that India has put up an anti-dumping on an HFC, our domestic volume also should improve and with a better margin. Is that understanding right?
Long question, Sanjesh. Let me try and answer it. When I compare HFC large volume increases we have seen over the quarter as compared to Q3 last year. 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 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. Again, given where our current CapEx plans are, given where our current positions are in terms of availability of material for the next year, I think we are in fairly decent shape on that side also. You're absolutely right that there has been the R32 anti-dumping 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. Certainly, you are right, it's a positive. Although I would say that positive has still not kicked in.
Got it. How has been the pricing for R134 over the quarter and for the exit quarter? Has it been stable or we have been seeing some tapering there?
No dip. Both R134A and-
Okay.
When I compare it to Q3 also, it is Q3 corresponding period last year also, pretty significant increases. Again, I think one of the key elements that we also look at, Sanjeev, 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. 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 your volume growth looks phenomenal and looks like we have been using at that optimal level. Given that the realizations are, it makes a lot of sense to run at an optimal level. Until the new capacity of INR 550 crore be announced, do you think there's any possibility for volume growth?
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 plans.
We will have at least 20% headroom for our volume growth, for that we had a lower utilization in the first half. Is that the reason?
I am saying the fact is that when I look at it, the first quarter in the domestic market was kind of is not a washout, but a significantly lower number. Therefore, my available capacity in the next year will be a better utilization overall, is what I'm saying.
No, I got your point. Correct.
Let's say the volume headroom growth that's available for me is about 15%-20%. On HFCs is what I'm talking about.
Got it. Do we see any risk from U.S. revoking R134a anti-dumping duty now that the prices are very high? Will that have any impact on us in any way?
The trade actions that are imposed even in India or in the U.S. are typically done for five-year periods.
Right.
Right? 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 anti-dumping duties, at least in the near term. When I say near term, three to five years seems to be the case here.
Okay. Got it. Thanks for answering all the questions and best of luck, sir.
Sanjeev, [Non-English content]
Thanks for all the answers, sir, and best of luck, sir.
Thank you very much. The next question is from the line of Prasanjit from Kotak. Please go ahead.
Thank you, sir, for the opportunity. Sir, just wanted to understand regarding your CapEx for the pharma plant. What can be the optimum revenue from this project and what kind of products are these? Are these patented or catalog or contract products which you are manufacturing?
Prasanjit, the plant is being configured to meet a couple, two or three different products. I think the strategy is to initially do a lot of pharmaceutical products in the plant and then the final product in the cGMP plant. The final reactions will be done in that. Typically, specialty chemicals we've seen to be of revenue multiples in the range of one to 1.25. I think there it will remain in that range for the PIP also. I'm assuming that is the plant that you are looking at. But I think one of the key and very important things to understand, Prasanjit, 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, we'll take six months to put that up. There is significant back-end work that is happening, which gives us this ability to reduce our time to market.
Right. Sir, in terms of asset turnover, it will be similar to what we are already seeing our existing MPPs?
That is what I said, Prasanjit.
Yeah. Okay. Got it. Sir, in terms of your coming to refrigerants, so is there any new capacity for R32 which will be coming in next one year also? You mentioned that you will be tweaking some capacities just to meet the demand.
I was talking about HFCs, not R22. R22 capacity you can't put up for HFCs purposes, only for captive purposes. To my mind, I don't know that there is any additional other than SRF that has recently put up the R22 plant.
No. I meant, sir, sorry, sir. For R32, are you adding any new capacities in next one year?
Prasanjit, we already have a CapEx on the ground of INR 550 crore that is looking to do various HFCs. We are trying to configure it like a swing plant. Hopefully, that will be the one that comes up. I think that has an 18-20-month tenure, probably July to August 2023 is when it comes up.
Sure, sir. Sure. Sir, finally, just to see like in FY 2022, your all three segments have fired simultaneously and, you know, all the businesses in terms of realization and demand has been very strong. Going ahead also, and particularly in packaging business also, do you see the demand and margin is going to sustain at least for next one or two years timeframe?
Packaging is what you're talking about, Prasanjit?
Yeah. Particularly in packaging.
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 rerating of margins that will happen. Again, we will probably be in a good position given our value-added product profile. 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 are currently announced.
Okay. Understood. Basically, margins may come down, but volumes will offset that drop in margin.
Well, the BOPP plant comes up, I think, in July or August this year, right? To that extent, there will be additional volume available to sell.
Right. Got it, sir. Thank you, sir. That's it from my side and all the best. Thank you.
Thank you, Prasanjit.
Thank you. The next question is from the line of Abhijit Akella from IIFL Securities. Please go ahead.
Yeah. Good afternoon, Rahulji. Congrats on excellent results.
Thank you, Abhijit.
Just a couple of clarifications to seek. First on the chemical segment, just wondering, you know, is it, the quarter-on-quarter growth in revenue that we have seen in the chemical segment, it's about INR 300 odd crore sequentially. Is that come largely from the, you know, export business while domestic has been a little bit subdued? Is that how we should, you know, think about it?
Again, when I look at it from a business on business perspective, I think both have grown. When I compare it to 2Q also, both seems to have grown significantly. Yes, large portions of it have come through in the export market only.
Domestic we could see a recovery as and when the OEM situation improves. That's how we should read it.
No. Why just OEM? I think the positive in the ref gas side is something that is also a seasonal thing that I have told you many times, Abhijit, right? The season starts to kick in in Q4 and Q1, which are probably the best quarters for the fluorochemical business. I think that should take that position a bit better. Also, R32 duties will also kick in in the domestic market.
Okay. Understood. That's helpful. On the chemical segment margins, you know, the very strong margin performance we've seen, 29% EBIT. Would it be a similar kind of margin performance across both the, you know, key sub-segments, I mean, specialty as well as gases? Or would one have done, you know, significantly better than the other?
Abhijit, is 29% not a good margin?
No, no, it's very good, sir. You know, just trying to understand it a little bit better so that, you know, for our modeling purposes going forward.
I think the point to make, Abhijit, is the fact that I have told you that there are positives that we are seeing in terms of domestic market in Q4. I've told you that the duty structures though are unlikely to change in the domestic or the international markets. We will have more capacity available, therefore mean per ton margin should be better off. 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.
Okay. Thank you, sir. One last thing. You already spoke about, you know, the fact that the ref gas business is doing pretty well and fairly tight at the global level. Also just wanted to get your views on the PTFE business, you know, which is going to come up sometime from now. There has been a sharp ramp-up in prices there also. So how do you see the supply demand situation in that business? You know, will it be similar to, say, I mean, the strength you're seeing in refrigerants, you know?
I think the PTFE plant has got delayed by about a year and a half. Now, I think this year is when, or 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. 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 sale. It will be a 12-18 months timeframe 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.
Got it. Understood. Thank you so much, and wish you all the best.
Thank you, Abhijit.
Thank you. The next question is from the line of Vivek Ramakrishnan from DSP Mutual Fund. Please go ahead.
Sir, good afternoon. Congratulations on great performance. I just wanted some bookkeeping type question. In terms of the CapEx done year to date, FY 2022, the balance for the year and the CapEx amount for FY 2023. That's. I just wanted the aggregate amount, sir.
More or less this year our total CapEx will be in the range of INR 1,900-INR 2,000 crore on an overall consolidated basis. Given where our current projects are, those that have been sanctioned and the recent ones that we sanctioned, we believe that the aggregate amount that we will be spending on this will be in the range of INR 1,600-INR 1,700 crore. Additionally, probably INR 400-INR 500 crore of CapEx will get sanctioned during FY 2023. Therefore, my number on FY 2023 will again be in the range of INR 2,100-INR 2,200 crore as cash spend for next year. For next year, difficult to say as of now.
Okay, sir. Fine. Thanks a lot. That's the only question I have. Thank you.
Thank you, Vivek.
Thank you. The next question is from the line of Rohan Gupta from Edelweiss Financial Services. Please go ahead.
Yeah, hi, sir. Good afternoon, and congratulations on fantastic set of numbers. Sir, couple of questions. Sir, first is on this, your specialty chemicals. Sir, if you can give some color that how it has performed in the current quarter, while organic chemicals, a lot of profitability was driven by the ref gases and HFCs. So, how has been the performance of specialty chemicals, and have it also seen a margin expansion?
Two things. Margin has remained stable to better so on a product basis. In terms of volume and in terms of overall sales compared to Q3 as well as compared to Q2. When I compare it to corresponding period last year and even compare it to Q2, 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 and given where our current contracts are, I think we will be able to do a better job than Q3 in Q4 also.
Sir, any sense you can give that, you know, how has been the profitability in the current quarter in non-specialty chemicals, though the numbers looking very attractive, but is there any price-led inventory gain which is there in the current quarter which you can quantify? And you already mentioned that even in Q4 is also the pricing environment remained 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 you see that the prices or when do you see that the prices may start stabilizing?
Prices are already stabilized, Rohan. Again, the first question that you asked was with respect to whether there are inventory gains that have happened. No significant one-time numbers are included in this, sir. There will always be a position where you are buying and selling. In fact, I would say this is despite some increases in cost of key raw materials, EDC, fluorspar. The numbers that you are today seeing are actually despite some raw material costs that have gone up. Again, the second question that you asked was with respect to whether prices are stable. Like I said, we kind of looking at various prices on the domestic front in HFC R32 to be specific.
Various prices in the U.S. market, where our exports have gone up 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. All of those are positives to me.
Sir, from our current manufacturing structure, I mean, can we divert it more towards the R32, and can we benefit from the current scenario with the rising demand of R32? Is there any scope or until unless we have to wait for the new CapEx to come complete only by July 2023?
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've done in R32 and R134a. The ability on our side is also to be able to shift our Bhiwadi plant from R134a to R32 and vice versa at a short, let's say, depending upon what market requirements are. Wherever this position settles in terms of the requirement marked by the market, let's say we have a flex of 3,000-5,000 tons available on an annualized basis between R134a and R32.
The last question from my side, I'll come back in queue. Sir, there has been I mean, this is a very positive thing that you are able to commission a plant, which generally we always see that in specialty chemicals, catering to agro, pharma was generally almost 18 months to 24 months. You have been able to successfully complete it within almost 10 months. 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, our 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 structural changes in the industry or for your company?
Rohan, there are two points to make on this. It really does depend on the size of the product and the plant also. Let's say you are putting up a plant of INR 500 crore, let's say the MPP plant, which is roughly in the range of INR 400 crore. The implementation time is 12, 13, 14 months, right? Let's say a smaller plant, the implementation time, like the new Agchem dedicated plant that we are putting up, is probably about 6 months. I do believe it is a huge positive for us, given the fact that our abilities have gone up significantly and therefore a huge positive from a time to market perspective also from our perspective. Very difficult for me to be able to comment on it from an overall industry perspective.
Okay. Just on PTFE, you mentioned the plant will be commissioning by September 2022 this year, and will take another 16-18 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 16-18 months ramp up, is it technical or it's basically from the demand side?
No, no. Demand is not an issue. See, 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 12-16 months is what I had said, post-commissioning, right? If the demand remains solid, product 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 sort those out for sure, but do a good job of it overall is the idea here.
Okay, sir. Thank you. I'll come back into it. Thank you, sir.
Oh, thanks.
Thank you. The next question is from the line of Sumant Kumar from Motilal Oswal Financial Services. Please go ahead.
Hi, Rahul. My question is, overall chemical business margin in Q3 more than 29%, and for nine months it is more than 24%. Going by the historical performance in chemical segment, we have seen FY 2015 and 2016 as a 24% kind of margin. Can you talk about the trajectory of margin of this business for, say, FY 2023 and 2024?
Oh, difficult question to answer, Sumant. Like I said, we are being positive on account of pricing in HFC. We are being positive in terms of our overall utilization of the specialty chemical business. Given the fact that we are also investing heavily in the pharmaceutical intermediates 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. Therefore, I am fairly confident that the margin profile from here should remain positive too, at least a positive trend should be there. Again, this is also business. It is also volatile. Margins can keep shifting. The positions can keep changing. Whether I am confident of retaining this margin, very difficult to say.
I can only tell you that the overall business position that we've come to, we are very, very confident of the business getting or doing much better than, let's say, even for that matter, the nine-month period that has come through.
Thank you, Rahul. The margin will be better than nine-month number.
Yeah. Again, that's the most difficult piece to answer, right? I am saying we are confident. We have good commodity. We have good prices. There are certain duty structures that are to kick in. Specialty chemicals have great, let's say, typically has better Q4. Dedicated facilities are ramping up. We are putting in additional CapEx. What else do you want me to say?
Okay. Thank you.
Solar events will also kick in at certain point in time in April, May. It is just, I can't give you a number, but let's say I'm fairly confident that we should be in good position.
Thank you. Thank you so much.
Thank you. The next question is from the line of Rohit Nagraj from Emkay Global. Please go ahead.
Yeah. Thanks for the opportunity, and congrats on a great set of numbers. Rahul, the first question is on the packaging film business. Given that we have new lines in Hungary, Thailand, upcoming BOPP line in Indore and the Aluminium Foil foray, can this particular segment grow by 15%-20% in volume terms over the next fiscal year?
Rohit, your voice is a bit muffled. I'm assuming you have asked about the volume growth in the packaging film business. Is that right?
Correct, correct. Right.
Again, as of now, what we are seeing, Rohit, 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, August was when we commissioned our Hungary plant and October is when we commissioned our Thailand plant. August, September this year, we will commission the 640,000 ton BOPP line. There will be additional material available to sell, and therefore it will add to the volume growth in the packaging film business going forward.
Right. Got it. Sir, the second question is, given that in nine months, the specialty chemical piece has grown by almost 47%, the chemical business. We earlier had indicated that, specialty chemicals for FY 2022 will grow by about 15%-20%. Is there any possibility for this particular growth rate for specialty chemicals higher for FY 2022, given the nine-month performance? Thank you.
Because of nine-month performance, I am fairly confident that the growth number will be better than this.
Right. Got it. That's it from my side. Thank you so much and best regards.
Thank you. Ladies and gentlemen, in the interest of time, we'll take the last question from the line of Atul Tiwari from Citi. Please go ahead.
Yes, sir. Thanks a lot for taking my question. Just one question. How much will be the consolidated net debt on the balance sheet as of December end?
Roughly net debt on December will be about INR 2,600 crore. Roughly. I don't remember the exact number, but INR 2,600 crore should be the number, roughly speaking.
Okay. Roughly. In response to the previous question in packaging film, is it fair to assume, I mean? 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 2023 or on FY 2022. Is that a roughly ballpark or accurate number?
Roughly speaking, our total PET and BOPP combined is roughly in the range of about 300,000 tons, right? The new capacity is roughly about 40,000 tons. Now, if I purely take it up on that basis, additional volume for six months will be about 7.5%. That's the back of the envelope. Again, hopefully we will be again able to do a good job at the packaging where we ramp up our facility on a vertical basis, is something that we will look forward to doing on this facility also, Atul.
Okay. Beyond FY 2023, 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 a project later, that's a different thing, right?
Aluminium Foil.
Sorry, sir.
Aluminium Foil is the project that we've announced.
Okay.
20 months. September 2023 is when it is likely to come in. I think the focus will remain to be able to do the project well on the aluminium side.
Okay. Thanks. Got it.
Yeah.
Yeah. Thank you, sir.
Thank you very much. I now hand the conference over to Mr. Rahul Jain for closing comments.
Thank you, everyone. I hope I've been able to answer some, if not all, of your questions. I wish that each one of you continue to 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. 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.