Ladies and gentlemen, we have the management line reconnected with us. Thank you.
Please note that anything we say that refers to our outlook for the future is a forward-looking statement and a disclaimer to this effect has been included in the earnings presentation shared with you earlier. I would now invite our CMD, Mr. Bharat Ram, to make his opening remarks. Thank you.
Thank you, Nitika, and good afternoon to all of you. 2024 marks SRF's 50th anniversary, and I would like to use this opportunity to thank all our stakeholders. It is due to your unwavering support that we have been doing business as a company for half a century, since our first facility, Manali, commenced operations in 1974. Our 50-year journey is a series of transformations. As we look to the future, our position remains strong and promising for delivering sustained performance, particularly as the end markets begin to rebound. Therefore, despite the recent challenges, we firmly believe that the future remains positive. This optimism is based on a proven track record in developing complex products, all of which are supported by world-class infrastructure, skilled personnel, and exceptional R&D capabilities in driving sustainable growth of our business for people and the society at large.
Let me now share with you my thoughts on the business performance in the fiscal year gone by and the growth opportunities that lie ahead. Financial year 2024 has been a relatively difficult year for the company. Our operating revenue decreased by 12% to INR 13,139 crore, and EBITDA dropped by 26% to INR 2,744 crore, translating to an EBITDA margin of 21%. The company's profit after tax decreased by 38% from INR 2,162 crore in financial year 2023 to INR 1,336 crore in financial year 2024. While our Packaging Films and Chemical businesses witnessed tough market conditions, the Technical Textiles business saw marginal growth in financial year 2024. Moving to my viewpoint on the performance and the future outlook of each of our three market-leading businesses now, and I'll begin with the chemical business. During fiscal year 2024, the chemical business declined 15% and registered revenue of INR 6,297 crore.
We underestimated the slowdown to a certain extent at the beginning of the fiscal year. It turned out to be a more protracted inventory destocking cycle from our customer's side and led to a pressure that led to pressure on pricing for some of our products. While we will see some short-term challenges in the Specialty Chemicals business, I'm very confident that the recovery will be strong and will give us a 20% annualized growth. On quarter-on-quarter basis, while we have done better in the fourth quarter of financial year 2024 when compared to the third quarter, we continue to live in a VUCA world. Having said that, I would add that the worst is behind us. On the CapEx front, in financial year 2024, the Chemicals business has spent INR 1,700 crore on various expansion projects.
More specifically, in the Specialty Chemicals business, financial year 2024 has been a challenging year. The business faced headwinds due to excess inventory in the market, forcing agrochemical customers to initiate inventory normalization measures. In addition, a large capacity has come up in China, which makes the landscape more competitive. However, the business has taken several steps to combat this onslaught and is much stronger. There have been some concerns voiced about our competitiveness in one of our key products. Let me state upfront that this is nothing new in our lives. We have seen this in many other cases in the past. As far as this product is concerned, we have done some major process breakthroughs that will bring our cost structures down significantly.
In addition, this will allow us to take an even higher volume share and, most importantly, as the market recovers, help us grow the absolute profit pool from this product. We actively worked on our customers' new products and their developmental projects while ensuring the production capability capacities were optimally utilized for existing products. Apart from commissioning new facilities, we are working very diligently on our cost structures, ensuring we run our plants most efficiently. In financial year 2024, both at Bhiwadi and the Dahej site, improved operational efficiency, managing and expanded portfolios of innovative products. We enhanced our capabilities and cultivated expertise in novel chemistries. Our inroads in pharma are showing positive traction, and in order to seize future market opportunities, we commissioned nine dedicated facilities at the Dahej site in financial year 2024.
In the future, our focus will be on putting up the most advanced plants, and for that, we have invested substantially in people, assets, and capability building. Our funnel is very strong. All the AIs that we're working on are on stream. It is now a function of how customer registrations pan out. Over the last year, and specifically in the last six months, a large number of plants have been capitalized to the tune of approximately INR 1,800 crore. Our focus now will be to ramp them up. We believe that in the second half of financial year 2025, we will go back to the higher CapEx intensity in line with our aspirations for the future. Fundamentally, we're extremely positive about this business. We believe that whatever may happen in China, we will continue to take market share from there.
And while we may have some short-term challenges, we're confident in the long-term prospects of the Specialty Chemicals business. Coming to our Fluorochemicals business, financial year 2024 was a tough year for the Fluorochemicals business. At the beginning of the year, we witnessed a weak season in the domestic market. There was a stretch of stress on refrigerant prices and volumes due to Chinese dumping in India and the international markets. The U.S. continued to destock HFC inventory. Prices were softer, and so was the demand. Overall, the refrigerants business remained under pressure in the domestic and international markets. There was an inventory buildup in India when the Chinese prices were low, and we are waiting for that inventory to get liquidated, which seems to be happening quite rapidly now. And as a result, we're starting to see some signs of improved pricing now.
Our primary goal for the next couple of years is to maximize our production per quota and sales volumes. I would also like to take this opportunity to clarify an issue related to our export of gases to the U.S. While there has been a reduction in anti-dumping duty on one Chinese manufacturer by the U.S. authorities, this is still provisional and is expected to come up for final review in a few months by the Department of Commerce. The more important element is that the prices for R125 were already down to $9-$10 per kg for the past 8-9 months, and thus the price correction is in the range of only $2-$2.5. Since R125 is used as a component of blends and SRF being an integrated player, our focus has always been to offer R410A.
Our pure R125 sales have always been the smallest component of our wide portfolio of ref gases. For SRF, the focus is to increase our R410A sales, in which the price correction is less than $1 because it is a blend of R125 and R32. R32 prices have seen a steep rise in China recently. With our enhanced R32 capacity now on stream, we will more than make up for any potential loss with additional R410A and additional R32 volumes where we have a unique value proposition. On Industrial Chemicals, chloromethane is going through a weak cycle. Having said that, we are now beginning to see some signs of a pickup in the agrochemical industry, which seems to indicate that demand may improve in the months ahead.
We continue to increase our market share in the Dymel and propellant vertical in both the domestic and international markets, entering new geographies and broadening our customer base. In the Fluorochemicals business, we capitalized approximately INR 1,200 crore of CapEx in financial year 2024. That includes the PTFE and R32 plants, along with the capacity expansion of the hydrochloric acid, the AHCL plant. In our Fluoropolymer journey, while we have done good work on bulk, we are now moving into the new grades, which are free flow and fine cuts, and ramping those up. This is a learning journey, and I believe that the knowledge that we have attained will help us streamline our new Fluoropolymer projects at a faster pace. In the future, our focus will be to optimize raw material sourcing, cost-saving initiatives, strengthening capabilities in the new product portfolio with sustainability as a priority.
Overall, the business performance is anticipated to improve over last year with maximum utilization of capacities and the commissioning of specialty Fluoropolymer plants. Broadly, I estimate the chemical business will grow at approximately 20% in financial year 2025 and build a strong momentum for the years ahead. Over to the Packaging Films business now. During fiscal year 2024, the Packaging Films business registered revenue of INR 4,489 crore, declining by 14%. Financial year 2024 has been a challenging year for the Packaging Films business. Market conditions are extremely difficult, and margins continue to be under pressure for both BOPET and BOPP. Several new lines of BOPET and BOPP were commissioned in the last couple of years, driven by attractive margins during the boom period. In addition, severe competition from the Chinese players across regions, particularly in Southeast Asia, impacted order booking and margins.
The BOPET films segment remains at the bottom of the cycle, and this trend is expected to continue for another 1.5-2 years. The BOPP films segment is performing better than BOPET. Overall, the business achieved its highest-ever peak production. Intensive cost rationalization and enhancing business profitability by strengthening our VAP portfolio have been the major thrust areas to survive the down cycle. All this has ensured that we have outperformed our competition quite convincingly. Energy prices have stabilized in Hungary, which should give us some respite, and we expect the performance there to be better than last year as we continue to improve our footprint in mainland Europe. However, till the overall BOPET cycle changes, things will remain under pressure. On a newly commissioned aluminum foil plant, this is a new business segment for us.
We had a slightly slow start, which is linked to the fact that it is a completely new product, and the learning curve has been a little longer than we expected. We also had some technical challenges, which have been streamlined a short while ago. In the future, we see this as a great growth opportunity, and I'm confident of making inroads in the EV and AC fins application segments. No Indian manufacturer is in the space, but we will tap into it once we get a full understanding of this product. Work on the upcoming capacity grade BOPP film project in India, which we announced in 2023, is also progressing as per schedule. In the future, our primary focus will be on enhancing our profitability by further strengthening our VAP portfolio, improving capacity utilization, and cost rationalization.
We will commission a new inline coating machines in Thailand and India and leverage our capabilities fully to further enhance the portfolio. Ramping up the aluminum foil business will be an important focus area for the Packaging Films business in the coming months. Moving on to Technical Textiles. In financial year 2024, we reported a healthy performance in the Technical Textiles business and registered a revenue of INR 1,898 crore. In the Nylon Tyre Cord fabric segment, we increased our share of business with the domestic tire companies. We enhanced our focus on the value-added yarn portfolio. Despite our monthly operations having been impacted due to the Michaung cyclone in December 2023, I'm glad to share that all our employees are safe and our team was able to restore and restart the machinery in record time.
Furthermore, we have adequate insurance cover in place on a reinstatement value basis against such occurrences. The demand for belting fabrics was healthy during the year. However, like in our other businesses, we faced competition from China, which led to margin pressures, but it will get made up by the overall volumes. The demand for polyester industrial yarn was strong in financial year 2024. The business successfully commissioned its PIY capacity expansion towards the end of financial year 2024, and our initial belting target capacity will also come on stream soon. The expanded capacity is expected to be fully utilized in financial year 2025 and become a future growth driver for the business. Overall, the business will experience moderate growth going forward. In our other businesses, financial year 2024 has been a good year for our coated and Laminated Fabrics businesses, reporting an increase of 19% and revenue of INR 465 crore.
In Coated Fabrics segment, the demand, particularly for our VAPs, remains strong, which helped the business achieve its highest-ever domestic sales. The business made this highest-ever record during the year. In response to the growing demand, SRF expanded its textile capacity by adding four new looms during the year. We continue to maintain our domestic market leadership in Coated Fabrics. The business also continued its price and volume leadership in the Laminated Fabrics business by selling at full capacity and achieving its highest-ever sales during the financial year. However, margins remained under pressure in Laminated Fabrics, as cost increases could not be passed on completely to the customers due to excess supply. In the year ahead, our focus will be to enhance capacity and strengthen our VAPs portfolio.
In Laminated Fabrics, we will be commissioning our new hot lamination machine, which will help us serve our customers with superior product offerings. On ESG, corporate social responsibility and sustainability are core to our business strategy. It ensures we remain focused on resource optimization and contribute meaningfully to the circular economy. At SRF, we maintain a high level of sustainability disclosure, which has helped us identify and measure ESG risks and develop a long-term plan to move up this curve. Our chemical business commitment to sustainability and pioneering work in the area of ESG continues to be recognized internationally, leading to our The Dahej site being awarded a gold medal in financial year 2024 in recognition of sustainability achievement by EcoVadis, which is one of the most recognized business sustainability ratings in the world. Further information on our ESG journey will be available in our annual report.
As for the SRF Foundation, core to our purpose is a need to uplift everyone, and we lay equal importance on community engagement initiatives and constantly strive to give back to society. With a focus on empowering the society through education and employability, the SRF Foundation is working on the physical and trust growth, quality of academics, and scaling programs as focus areas. Presently, we have reached 480 government schools across 24 locations in 12 states providing quality education to over 165,000 students and across 314 Anganwadi centers, positively impacting the lives of close to 14,000 children. To conclude, I believe that financial year 2025 will be better than financial year 2024 for the chemical business and on an overall basis for the company as a whole.
While the chemicals business will show a recovery, possibly more towards the second half of the fiscal year 2025, the margin pressure on the Packaging Films business will continue through the course of the year. Having said that, the team is working on various projects to reduce the impact of down cycles, which in reality is a part and parcel of this industry. Our balance sheet remains strong, and we are happy to invest in opportunities that will provide growth opportunities for us in the future. We are optimistic about our bright future and our capabilities to deliver a solid performance and drive returns for all our shareholders. Thank you for your time.
Thank you. We can now open the call for Q&A.
Thank you very much. We will now begin the question- and- answer session.
Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use headset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Rohit Nagraj from Centrum Broking. Please go ahead.
Yeah, thanks for the opportunity, and good to see quarterly recovery. And, thanks for a detailed presentation. So first question is on the Specialty Chemicals business. So, we have mentioned in our press release that the recovery will pick up pace in the second half of FY 2025, while we gave a very strong 20% kind of growth guidance.
So is it that the first half will be relatively muted and a significant portion of the growth will come only in the second half? Just, I mean, wanted to understand your confidence on the scene.
Thank you. So Rohit, thanks for your question. To be very frank about it, when we are saying, when you look at the Specialty Chemicals business, there is always, let's say, to when we look at it, H1 versus H2, H2 is always stronger. Now, the way we are looking at it is the fact that we are coming out of a kind of difficult environment, the environment where inventory destocking has started to happen. What we have seen is that there is some positive that is already starting to build. When we say overall growth of 20%, that's something that we are looking to achieve even in the Specialty Chemicals business.
Given the fact that this year was a slightly lower year than what we expected at the beginning of the year, a large recovery should come towards H2. But yes, I don't think there is a negative trend here. I think we've always said that we have to look at it from a business as a whole or a year as a whole perspective rather than looking at it from a quarter-on-quarter perspective. So I think that's the way we are looking at it rather than dividing it into Q1, Q2, Q3, Q4. So that's how we would look at it, Rohit.
Sure, sure. That's helpful. So second question is, again, similar on the ref gas. There also, we have been pretty confident.
So, given that, the U.S. market, you know, the quotas have been declined, there have been, you know, Chinese ingress of material, do we see really see that there will be significant volume pickup for us from the other geographies to make up for, the loss, in the U.S. and similarly a strong traction in terms of pricing so that we will be able to achieve this, 20% kind of growth?
Thank you. So Rohit, again, I think the way we are looking at it is the fact that we have seen a lot of Chinese inventory in the system as of now, largely on R32. We have also said and, and I think Ashish also commented on it that the inventory that had built up over a period because of low Chinese prices is now starting to, kind of get liquidated at a very fast pace.
As that is happening, we have also seen pricing improve with respect to where the U.S. market is versus where, let's say, the overall market is. I think the way we are looking at it is that while the U.S. HFC market will see some declines, there will be some negatives around it. What we believe is that the overall increase in, let's say, India domestic versus the Middle East and Southeast Asia should more or less cover it up. And therefore, given that we will have more capacity, more volumes to play here because of the new R32 plant that commissioned probably at the end of Q3 last year, right, we should have a very large presence in the HFC space both from a volume and pricing perspective. I think we should be in great shape.
Sure.
That's really helpful. Thanks a lot, and best of luck. Thank you.
Thank you.
Thank you. The next question is from the line of Ankur Periwal from Axis Capital. Please go ahead.
Yeah. Hi, sir. Thanks for the opportunity. First, on the chemical side, and you know, in our release, we did mention, you know, pricing-led pressure because of excess capacities at China. And so, just wanted to get your thoughts in terms of growth. Is it that now the overall trend in pricing has come down, and we are focusing more on volume-led growth, which will drive the growth across both ref gas as well as the Specialty Chemical side?
Again, and let me distinguish this for you, Ankur. I don't think we can compare between Specialty Chemicals and Fluorochemicals and the ref gas piece. What we are seeing is that prices have been softer.
We are starting to see some price positives starting to come in. The U.S. has continued to destock inventory. There is now some local Chinese prices that have started to go up largely on R32. That's what we are seeing. And again, I think the focus for us from a Fluorochemical business is to look at where quota positionings are and improve our, let's say, capacity, utilize our capacity to the full and sales volumes so as to maximize that piece. Like I think we have said in the past, when we look at HFCs, quota becomes an important element for it. Also, and now going back into the Specialty Chemicals piece, I don't think it is a generally common that can be made where we can say that we are now looking at more volumes than pricing.
What we are saying even in the Specialty Chemicals piece and I think, CMD's comments also reflected that, that there are certain, let's say, views in the market coming around one of our key products, which is essentially saying that the Chinese have crashed prices of that product. We have made very significant technological breakthroughs in the product. Our costs have come down significantly. We are continuing to work on cost of those products. While there will be some market erosion, I think it will be much more taken up by the volume that we will be able to achieve in that product, which I think should add significantly in terms of our overall profit from the product and Specialty Chemicals business as a whole. So that's how we would look at it. So the rebound that when it comes in should be a positive, Ankur.
Sure sir.
Just, just to follow up. So, no changes to the overall, chemical business margin guidance set. Will that be a fair assumption?
Again, Ankur, I don't look at it from a quarter-on-quarter perspective. If you look at it from a year-on-year perspective, I think, when you when you look at it, we have we are still at almost 26% EBIT margin. Our EBITDA margins will still be probably north of 27%-28%. I think when we started the year, we kind of gave that as a guidance. Again, two or three key pieces that should play out is that, there are new, new capacities that have been commissioned for roughly about INR 1,200 crore for our, Fluorochemical business and roughly about INR 1,800 crore for our Specialty Chemicals business.
When we look at all of those, because they are kind of unleveraged as of now, as they ramp up their production, overall margin positive should also come through. Yeah, but even 26% EBIT margin is pretty decent, of course.
Sure. And, and just on the ref gas bit, sorry, on the ref gas bit, any volumetric, you know, you did mention that can be compensated in different markets, whether Middle East or, you know, the Southeast Asia.
Yeah, there will be volumetric growth in the ref gas space without a doubt, Ankur.
Yeah, yeah, yeah. Sure. So, what sort of magnitude of that growth is where I was coming from? You know, are we looking at a at a high double-digit sort of a growth because, you know, the base is low, so obviously, there will be a growth?
No, no.
I would only look at it from a volumetric perspective. I think anywhere between 10,000-12,000 tons of HFC volume should get added this year when we compare it to last year.
Okay. Great sir. That's helpful. Thank you and all the best.
Thank you.
Thank you. The next question is from the line of Surya Patra from PhillipCapital. Please go ahead.
Yeah. Thank you for this opportunity, sir. My first question is on the Specialty Chemical business. See, while on the chemical business front, we have seen for the full year, there is a sequential, margin, correction, obviously possibly because of the underperformance at the, ref gas front. But, sir, can you clarify that, this dent in the margin is purely from the ref gas front and may not be from, Specialty Business?
So Surya, to be very frank about it, again, I don't think we have to look at it like that. But in relative terms, if I look at it, Specialty Chemicals business margin has been slightly positive from what we have seen in FY 2023. For Fluorochemical business, yes, there has been a margin dent, but I also have to understand, Surya, that FY 2023 for Fluorochemicals business was also very high yet. Now, to that extent, there was some expectation of this coming out, and I think we contributed to that in our earlier discussions as well. Yes. To that extent, yes, the margin is lower. To my mind, between FY 2023 and FY 2024 for Specialty, margin is flat to flat positive.
Yeah. Exactly. That is my point. In fact, our speculation indicates that the Specialty Chemical margin has sequentially improved only in FY 2024.
That's where I have asked this question. Now, having clarity, my point is that, see, in the previous year, we have added INR 1,800 crore of assets for Specialty Chemicals. Correct. Utilization of those should not be more than 20% or so because in the later part of the year only that we have added. Given that, there would be a kind of a cost pressure also of underutilization that we would be seeing in the business. There would be possibly some impact of the prices also that we would be facing currently for our, for our, Specialty Chemical business, because of the downturn. Given these two things reversing in 2025, should not we believe a kind of a meaningful recovery in the profitability of the business, which has now become more larger compared to last year?
That's a very long question. I will try and answer it simply. I believe that what you are saying is right to a certain extent that there is underutilization of assets in the Specialty Chemicals business given the fact that majority of those were capitalized in Q3 and Q4. Some of them were capitalized in the earlier part of the year, and therefore, some of that, let's say, has been utilized well. To that extent, I would still believe that there is a possibility of a margin expansion, but we've also alluded to the fact that there is certain additional capacity that has come in. And therefore, for some of our key products, we have to find that out in the market. Again, given where we are, my sense is that there should be some improvement in margin. But again, I go back to that same thing.
The 26% margin for the overall Chemicals business on an EBIT basis is not a good one. So that's how we would really look at it, Surya.
Thank you, sir. So my just an extended question on that, sir. See, since it is the full year performance that we are discussing, can you share what would be the share of active ingredient now in FY 2025 and 2024 and the new product mix?
The active ingredient that is there is only one, right, which is roughly about 9%-10%.
Okay. Okay. And specialty chemical revenue. Yes, yes. So because now you have added also 15 new products, so given that, what is the mix that we should think about for 2025, sir?
Sure. Again, we believe, by the end of FY 2025, there will be at least 5-6 AIs that will come through.
But meaningfully, I think there will be only two or three which will start to contribute to revenues.
Okay. Just one question I'll ask about the refrigerant gas business. Let's see. In fact, we know what happened.
I have to ask a question. You can't keep asking questions.
No. Just last question, sir, if you allow.
Sorry to interrupt, sir. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants, the contents, please submit your questions to two per participant. Thank you. We will move on to the next question. The next question is from the line of Vivek Rajamani from Morgan Stanley. Please go ahead.
Hi, sir. Thank you so much for the invitation. Two questions. Firstly, if I could just, you know, make an extension of the earlier questions on Fluorochemicals.
Would it be possible to give a sense of, you know, how you see your geographic profile in Fluorochemicals settling in the next 1-2 years as you transition away from the U.S. and explore some of these other geographies? That was the first question.
Okay. So Vivek, as of now, what we are looking at is roughly about, let's say, from a revenue perspective in the Fluorochemical business, on an overall basis, let's say, exports of HFCs being almost, what, 60%-70%, 60-70% of our overall sales in terms of overall revenues. Give me just a second. I'll just do a back-of-the-envelope calculation. Yeah. About 70% is export versus, just one sec. So roughly about 53%-54% is export, and the balance is domestic.
Again, for us, in terms, what we believe is that U.S. will come down while Middle East and Southeast Asia will continue to expand. What we end up will seeing over probably a , 3 to -5 year period is Middle East, India, Southeast Asia probably getting to 70%-75%, and U.S. coming down very significantly.
Sure, sir. So this was this was really helpful. Thank you so much for that. And the second question was on packaging. I think you've been very clear about the magnitude of the pain and the efforts that you've been undertaking so far. But just, from a more medium-term perspective, from a strategic standpoint, just wanted to get a sense of what other levers could be available to SRF to best optimize the situation, as and when, you know, this situation eventually starts to repair itself. Thank you so much.
So Vivek, again, I think the way we are looking at it is that, again, if you break it up, I think Hungary was one of the key elements that we saw kind of perform much lower than our expectation given where we are and given where energy prices in Hungary are. I think there will be some positions that are going to change on that side. So that's a positive that will come in. Again, on the aluminum foil business, again, that ramps up in this year and should start to contribute meaningfully in our overall packaging film business situation. The third, and again, the most key element here is that we have had some great successes in our value-added products. I think that as a journey will continue for us to be able to continue to deliver market benchmarking performance.
So that's how we would look at it. Some positions changing in Hungary, for the better, aluminum foil ramping up and continue to that journey on a continuous, on a long-term basis to provide, let's say, go away from the key down cycles that the business faces as a commodity player. Vivek?
Sure. Just yeah. Just one clarification. When you speak about your, VAP , kind of perhaps if the benchmark margin would be at any sense of how much higher, this VAP portfolio could be getting you?
Depends on, on the product-to-product, but anywhere between INR 20-INR 35 is what we see.
Got it, sir. Thank you so much. All the very best.
Thank you.
Thank you. The next question is from the line of Rohan from Nuvama. Please go ahead.
Yeah. Hi sir. Good evening, and thanks for the opportunity.
Sir, first question, if you can, just give the breakdown for the current year, the revenue from the Specialty Chemicals and Fluorochemicals.
So, Rohan, last year, the total revenue for, for Chemicals business was roughly about INR 7,400 crore. This year, we are roughly at about INR 6,300 crore, which is a 15% reduction. Fluorochemicals last year was INR 3,200 crore. That is roughly in the range of about INR 2,600 crore this year. And, Specialty Chemicals was about INR 4,200 crore, which is roughly in the range of INR 3,700 crore this year.
Okay. Sir, the growth guidance which you're talking about in Chemicals is roughly 20%. It is still driven by, both Specialty as well as Fluorochemicals. In Fluorochemicals, we're talking about roughly 10,000-12,000 tons kind of additional volume growth. You didn't make any comments on the.
So, so, pricing growth as well.
Yes. Yeah. So volume, and I was coming on that.
So you didn't make any comment on pricing and margin. So at 10,000-12,000 per ton, 10,000-12,000 tons additional, what kind of, sir, we can expect the margin improvement and the pricing gain one can expect in a Fluorochemical business?
Okay, Rohan. I have not broken that up in an overall situation in terms of what is the price or volume gain. Overall, I think it's best to keep with that guidance in terms of what is the growth we are expecting. Now, there could be some pricing positions that play out, and I have kind of also given you the volume position on it. But saying that how much of this is from price and volume is a very difficult position to play out for the future. So I'd rather not comment on that.
But, sir, this 20% kind of revenue growth in Chemicals surely should drive EBITDA growth higher than that, right, because that's where we are assuming the price increase is happening in ref gases. So I was looking more from the EBIT or contribution from the chemical business in profitability. It should be higher than the 20% at least. That's what we are indicating.
So like I said to a previous question also, Rohan, that, given where the operating leverage is playing out today, we believe that should be a positive.
Sir, second question is on this, ref gas prices, I mean, AD reduction from the U.S. on China. Sir, what is giving us the confidence that the similar things may not happen on other REF other blends or even other gases as well?
We are still saying that the R410A gas blend prices are still going to remain strong and even may go up. So, I mean, though we understand that Middle East and other markets may gain overall volume growth, but what is happening in the U.S. can be a worrisome for us in near-term for our margins, isn't it?
Again, Rohan, I'd like to answer it in two ways. One, when we look at it, our value proposition always has been to offer blends, which is more R410A. R125 has always been a kind of, let's say, product that we've been supplying on an opportunistic basis also. When we really look at it, the component of R125 in our total was very small, let's say, between 1,800-2,000 tons.
As R125 is, let's say, coming down in terms of the overall demand, again, R125, we had always said that R125 is the gas with the highest GWP, and that will be the first one to see a cut, if you remember. Now, what happens then is because the R410A is, let's say, the requirement is R410A, and R32 prices are up. We will end up seeing higher prices of R410A. Even despite the duty reduction on R410A on one of the, let's say, suppliers, the pricing differential is not much, roughly about $1 or so. Given that, volumes can be higher given that R410A will be a lower GWP product as compared to R125. And I think our demand traction on that also remains strong.
Middle East, Southeast Asia should become our home market, and therefore, demand should, let's say, volume play should be a positive for us. Rohan?
Thank you, sir. Thank you, sir, for answering that.
Thank you. The next question is from the line of Arjun Khanna from Kotak Mahindra Asset Management. Please go ahead.
Thank you, sir, for taking my question. The first one is in terms of CapEx. Could you help us understand, what is the CapEx we have planned for 2025? If I heard correctly, we said in the second half, CapEx may actually increase. So, we spent INR 2,200 crore in FY 2024. What's our outlook for 2025?
So, Arjun, as of now, the CapExes that are, let's say, sanctioned and running are probably in the range of about INR 1,000-INR 1,200 crore or so.
Those are the ones that have been sanctioned, and let's say, work is going on on them. For the year as a whole, roughly about INR 800-900 crore additionally, we believe, will expand. But that's also a function of how some of the projects are ramping up, what's the situation on the land that comes in, and multiple other elements around it. But as of now, running projects are probably in the range of about INR 1,200 crore or so.
Sure.
Chemical business as such.
Right. And, apart from Chemicals, we have, the packaging for capacitors. Is there any other large project, which is, for the other segments?
No, I didn't catch your question. Could you repeat, Arjun?
No. So, so apart from the Chemicals, we have the, packaging for capacitors. Is there any other project?
Not as of now on the ground, Arjun.
I think, for from Packaging Films perspective, there is nothing other than the capacitor grade film that is involved.
Right. So this year, we are looking at roughly INR 2,100 crore.
Should we in that range?
Sure. Sir, the second question is in terms of, the guidance provided on, on the packaging side. We have mentioned probably weakness to continue for maybe 1.5-2 years, and then move to normalcy. Just want to understand, what do we, assume to be normalcy because historically, margins have been 14%-15% a bit. Right now, for the year, we are at closer to 5%. So, how do we look at this business going back?
Arjun, to be very frank about it, it is a curve rather than being a, a vertical line, right?
So when we say that we'll start to come out of it, the margin expansion will also start to happen on a slow pace. So let's say from 5%-8% to 10% and in that range because more new capacities are being added, right? And as the market ramps up, the demand really just takes up the additional capacities that have been put in, we will end up seeing margin expansion happening. But it won't be that it goes to 15% immediately. It will be a slow and steady journey also.
And this was indicated for BOPET and BOPP. So aluminum foils, what kind of margin profile are we looking at because when we launched the project, we were looking at paybacks of 4-5 years. Essentially, that means higher margins?
Yes, Arjun.
But again, aluminum foil will is also a learning curve for us. We are also understanding the product. We will get into higher value-added products in the aluminum foil space also. But that's also a journey. Like, like CMD said during his call, we believe that, there were certain technical challenges that were there in the initial part of the aluminum foil thing. All of those have now been sorted out. We are now starting to produce fully. The product has now been approved by some of our Indian customers. It's also in the position we are also sending samples out to our U.S. and European customers. We will start to tap into the EV and the AC films market over probably by the end of this year. So I think a lot is going on on that side as well, Arjun.
Yes, margin profile should be better given where current margin profile is for, for the BOPET films as such. But, going forward also, I think we should see a probably a delta on that side. What we are essentially saying, Arjun, is that as we keep going into more specialty products in the packaging film space also, margin profile and the effect of down cycles that the commoditized industry faces should be much lower.
Sure. So just a continuation, PTFE was the other molecule which we had mentioned we are going through a learning curve, etc. How has the progress been there given that, we are seeing falling, export volumes from India and prices?
So PTFE, again, I think it's a similar story, Arjun. The bulk has been pretty much in, in good shape. We are we are at a decent domestic market share on the bulk side.
We are also looking at some of the sampling in Europe starting to go through. We are hopeful that some of those orders will come in this year. Some of the sampling for the U.S. customers have also started for PTFE.
Sure. Sounds good. Thanks for this.
Thank you. The next question is from the line of Tarang from Old Bridge. Please go ahead.
Hi. Good evening. Couple of questions. One, you know, what would be the maintenance CapEx for the business now? I'll actually just go ahead with my questions, and then you can probably take them together. The second, you know, in the spec chem business, how are we in the agro and non-agro segmentation? And if you could just give us a sense of the molecules that you plan to launch, what, what percentage would be in agro and non-agro?
And third, you know, you said margins have improved in the spec chem business. Have your per ton, per kg margins improved, or have your percentage margins improved? Just wanted your clarification on that.
Okay. Thanks, Tarang. The maintenance CapEx for business, we don't look at it that way. But let's say from a more pure academic perspective, anywhere between INR 50 crore-INR 100 crore could be a maintenance CapEx. Nothing more than that because, generally speaking, our majority of our CapExes should have a ROI or a positive play that has to come in. So that's the first answer to your question. Agro and non-agro, when we look at year as a whole, will probably be at 3.5%, 4% from a agro versus pharma. So agro and pharma is the breakup.
If you are looking at material sciences, probably not major on that side. When we talked about margin improvement, I think we maintain margin but then per ton margins because there is no single product here where we can compare per ton margins. It is a multiple product. We follow to 40, 45 products on an annual basis. So it won't be really right to be able to give you that, positioning because then you are comparing apples and oranges.
You said 3.5%- 4%. Sorry, I didn't catch that, for your segmentation.
Yeah. 3%-4%. And so when we look at specialty chemical business, we've kind of given you the breakup, the agro products and non-agro products. And when we say non-agro products, that's pharma. For the year as a whole, that's been the position.
Okay. Thank you.
Thank you.
The next question is from the line of Mr. Sanjay Jain from ICICI Securities. Please go ahead.
Thank you, sir. I got two questions. One is on the refrigerant gas. When we see that our contribution of India, Middle East and Southeast Asia will go up to 75%, it is also fair to assume that the bulk sales will reduce and our direct distribution will increase. Will that be a fair assumption, the refrigerant gas? Hence, we'll have a better ROE on that business as we progress to the U.S.?
Bulk sales, see, again, when you look at ref gas, Sanjay, the packaging is either in the ISO tanks or then, subsequently, at the lowest level of packaging is cans, right? So depending upon the jurisdiction, depending upon the requirement, in some cases, there are only disposable cans to be used.
In some cases, there are only returnable packaging to be used. So depending upon the jurisdiction, that happens. But generally speaking, two things will happen. More from a distributor to a direct sale is obviously the one thing that we are looking to get to. I think that will improve. That mix will improve. And second, I think, more of the overall sale will start to go towards can in the medium term, which would therefore be also margin-effective.
Fair enough, sir. And second question on the specialty chemical. We have added close to INR 1,800 crore of CapEx in FY 2024. What is the potential revenue for that CapEx when it achieves the peak utilization?
Again, Sanjay, I think we've talked about this historically as well. Specialty Chemicals, pure plant-on-plant revenue, what we ended up seeing is between 0.9-1.1.
I don't think it is going to be any different from that given the nature of the business and the nature of the, let's say, the products because as we are going up the value chain, the complexity of the products are increasing. I don't think it is going to be very different from there.
So as we go up, this metrics is not going to materially change. That's the fair assumption, right?
Unless you get into a commoditized product.
Okay. Okay. That's it from my side. Thanks, sir, for answering the question. Thank you, Sanjay. Thanks.
Thank you. The next question is from the line of Archit Joshi from B&K Securities. Please go ahead.
Hi, sir. Thanks for the opportunity. My first question on the new Chinese capacities.
I just wanted to understand, from a supply chain perspective, has there been any change from what we saw during COVID? Has the nature of the supply chain diluted in favor of Chinese companies of late, in the narrative of China Plus One, which was obviously in our favor? Has it been that MNC companies have started in a very sporadic manner adopting a few of the Chinese products of late because they're offering a competitive price, or the situation remains the same as we saw during COVID?
Very long question, Ashish. But let me try and answer it because I think our Chairman and Managing Director also commented on it. We believe whatever may happen in China, we will continue to build market share. And while there will be certain short-term challenges, we are really confident of the long-term prospects of this business.
So again, I think technological breakthrough. I think, thinking about the customer's requirements, working with them on a consistent basis, probably too positive on that side. So, it really is not thinking about just one product and one opportunity. I think, long-term relationship with customers do help. Now, at the end of the day, there are certain capacities that have been put up. And, to that extent, we have also taken our cost structure, relooked at our cost structure, managed that through, and are really confident on the key product. And again, to date, I think it is P17, which is what we are talking abou t, which a lot of you have talked to us about in the past as well. I hope that clarifies it, Archit.
Sure, sir. So one more on the gases, I think a few points above.
In order to curtail production in the US, there was a rumor probably that the anti-dumping duties were expected to be rolled back. There was a clarification later that, so, this is not going to play out. But with the current reduction or the proposal to reduce R125 duties on these Chinese companies, do you see that playing out for other HFCs also? And which is probably the reason why maybe we are expecting a higher share of volumes from non-US jobs because of those gases?
I don't think it is going to pan out like that, Archit. The reduction of duties that has happened is essentially for one Chinese player, right? And it is not for all the gases. I don't think there is a move to look at all the HFCs for reduction of duties, right?
Again, to be very frank about it, the one gas which is R125 that is being talked about, prices for the last 8-10 months were already down, right, about $8-$10 a kg. Even if they go down slightly further, our value proposition is to then move into the other product which is R410A or R407C, which are which is a blend. Now, what happens with that is because our country's prices are up, our ability to market those products is higher. From a regulatory angle, as of now, there is no move with respect to other gases. But if that comes through, you will know probably earlier than I do.
Sure, sir, sir. Thank you. All the best.
Thank you. The next question is from the line of Krishan Parwani from JM Financial. Please go ahead.
Yeah, hi, sir. Thank you for taking my question.
Congrats on decent recovery in 2024. So two questions and clarification. So the first is, when do you expect optimum utilization of your new R32 capacities?
So, to be very frank, Krishan, I think if all goes well, by the end of this year, we will probably be at optimum capacity utilization on that one.
Perfect. And I think, I missed one part that was a clarification. So I think you mentioned HFC exports were 53%-50% of sales. Did you mean 53%-50% of? By volume?
By price? By volume.
Okay. By price of ref gas sales, how much was it?
No, sorry. I didn't get the question.
So, ref gas exports of your total ref gas, value?
Huh. So we were talking value, not volume. We have to do our calculations for volume. Maybe we can come back to it later.
Okay.
The last question is, how do you think, you know, refrigerant gas exports mix playing out in FY 2025? Given I think we talked about R32. So do you, can you, like, give some geography-wise breakup in terms of how do you plan to do it?
Rough. Okay. Again, I think there is significant traction from U.S. customers with respect to R32, R410A, also. So that's a positive. I mean, maybe it should ramp up. R32 should ramp up in some of the other geographies. I think blends, our ability to deliver on blends will be higher. Those will pan out. In terms of breakup, I think we will probably remain in the range ±4%-5% here or there in terms of overall, export versus domestic.
Okay. Perfect. Thank you for answering. Wish you all the best.
Thank you.
Thank you.
The next question is from the line of Sumit Kumar from Kotak Securities. Please go ahead.
Thank you, sir, for taking my question. So, my question was on aluminum foil business. If you could share revenues from the business in 4Q, and could you then just incur any EBIT loss? And if so, could you please share the quantum? And how much revenue can you expect from this business in FY 2025?
Thank you. So unfortunately, I don't give revenues or breakup of revenues for product by product. So that's how it has been. It will remain like that. I won't be able to give you specific revenues from aluminum foil. Again, the only thing that I can tell you is that we've seen some issues in the aluminum foil. There is a learning curve that we have on it. We had a slightly slow start.
Some of the machines that the aluminum had supplied did not work well for us. All of those issues are now past us. In April 2024, some of the repairs have already got done. Hopefully, it should add positively to our overall Packaging Films business, fabric, and margins. So that's how we will have to look at it. I don't give breakups to volume.
Sure. Thank you.
Asset turnover revenue between INR 1.2-1.5, at the peak utilization, we should get to.
Sure. Thank you. Thank you. And just one more clarification I wanted. So revenue growth guidance for Chemicals business of 20%+. For spec chem also, we, we stick by the same growth rate of 20%+, in FY 2025?
So what we have we have said in the commentary, initial commentary by the CMD is 20%+ is for the overall Chemicals business.
Now, there may be some pluses or minuses. We will hope to deliver better than this.
Sure. Thank you. Thank you so much, sir.
Thank you. The next question is from the line of Keyur Pandya from ICICI Prudential Life Insurance. Please go ahead.
Thank you. Just, one question is on the ref gas utilization. So if you can just tell me FY 2023 utilization, FY 2024 utilization of this new capacity addition which was just added in the last few months?
Oh, Keyur, I think you'll have to come back to me separately on this because FY 2023 utilization, again, my sense is, of the available capacity, we will probably be in the range of 80%. Of the available capacity in FY 2024, we would probably be north of 85%-90%. But I'll have to come back to you. And I'm not including the new 15,000-ton capacity here.
Sure. Noted.
Just last question, on the overall profitability of the chemical segment, you highlighted about some opportunity-based benefits, and some, I mean, reduction because of the product price cuts. But I mean, in the context of the change in geography in the ref gases from U.S. to non-U.S. or more of Indian, Indian subcontinent, will that I mean, net-net of all this effect, where do you see directionally margins going? If you can just help on that part.
No, so could you repeat the question? You were talking about the margin profile of the Specialty Chemicals business going forward.
For the full segment, for the full segment for which you have reported around 26% margin. So where do you I mean, there are multiple factors, positive and negative factors.
One more factor, I understand that the ref gas is moving from U.S. to Middle East and Southeast Asia and India. Will that negatively impact the margin of ref gas and eventually the chemical segment?
See, sir, the way I would look at it is that as, so when we look at both the businesses, both together, roughly above INR 3,000 crore of capitalization there happens. Now, in the medium term, between, let's say, 20-18 months, we should see some of or largely all of the capacity being utilized 20%. And as that happens, there should be a margin profile improvement from the operating leverage perspective. But when we look at it from a market mix perspective, yes, to a certain extent, U.S. will come away. There will be growth in Middle East, India.
Again, both of those things, given where pricing positions are today, I still believe there is a pricing positive that will come in. And therefore, it's a margin question.
Understood. Noted. Thank you.
I want to go back to this, Keyur, that is 26% or 27% as an overall margin from a business, not a growth margin. Now, we've talked also at that see, again, FY 2023 was a super cycle that had come in. And therefore, we had probably 32% margin level, right? Despite a huge down cycle this year, huge down cycle. We've talked about a down cycle in the specialty chemical business. We've talked about a down cycle in the Fluorochemicals pricing, Chinese dumping happening, multiple other things happening. We are still at 26%. I, I still believe that at 26% here, we are in better shape than at 32% in, in the year before.
Absolutely.
I definitely agree with that point and point noted. Sure. Thanks a lot.
Thank you. Thank you. And all the best. Thank you.
Thank you. The next question is from the line of Ranjit from IIFL Securities. Please go ahead.
Yes, sir. Thanks for the opportunity. So you have highlighted one product where we have a probably relatively higher concentration. That is where we are seeing a bit of a Chinese pressure. But we remain confident on protecting the margins on that front.
Oh, no, no. Wait, wait, wait. Ranjit, what I had said is that's a product that people have been talking to us about in terms of Chinese competition. Whether I have a huge, let's say, dependence on it, probably not. I am still at probably about 20%-21% of that overall specialty chemical piece. So I'm not saying that I have a large dependence.
It's, it's a decent dependence, but not a large one. And what we had also clarified is that there will be larger volumes that will come in. There will be larger and we have done a lot of technological work to be able to cut costs from it.
Yeah. Thanks for that clarification. My question was that are there any, such more products, probably one or two, that you are seeing in incremental competition, probably not now for six months or one year down the line?
So again, I, I think Ranjit, to a certain extent, CMD also clarified this in his, in his, comment. It's nothing new. This will keep happening. Competitive, positions will get built. As products go from niche into more, more larger products, we will have competition that will come in, right? But this is a part of our life. It happened in the past.
It will happen in the future as well. Whether there is some singular product today that is happening, probably not. But that's how the cycle is. And we will play that out. I think the advantage of the U.S. piece that SRF has built over a period of time is to be able to say that we will crack the technology even further. We'll do a better job in terms of our costs. And therefore, margin should remain good. And as volumes improve, we should be in good shape.
Thank you. And second, as we move towards more AI, so that should also be margin accretive in nature.
Hopefully, Ranjit, yes.
Thank you, sir.
Thank you. That was the last question for today's call. I would now like to hand the conference over to Mr. Rahul Jain from SRF Limited for closing comments. Thank you, everyone.
I hope we have been able to answer some if not all of your questions. 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. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us. You may now disconnect your lines.