SRF Ltd
NSE:SRF
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
2 138
2 668
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
SRF Ltd
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to the SRF Limited Q4 and FY '22 Investor Conference Call hosted by Axis Capital Limited. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Ankur Periwal from Axis Capital Limited. Thank you. And over to you, sir.
Thank you, Faizan. Good afternoon, friends, and welcome to SRF Limited's Q4 and FY '22 Post Results Earnings Conference Call. The call will be initiated with a brief management discussion on the earnings performance, followed by an interactive Q&A session. Management team will be represented by Mr. Rahul Jain, President and Chief Financial Officer, SRF Limited.
I would like to hand over to Ms. Nitika Dhawan, Head of Corporate Communications at SRF, to initiate the proceedings for the conference call. Over to you, Nitika.
Good afternoon, everyone, and thank you for joining us for the Q4 and FY '22 results conference call. We will begin this call with brief opening remarks from our President and CFO, Mr. Rahul Jain, following which we will open the forum for an interactive question-and-answer session.
Before we begin this call, I would like to point out that some statements made in this call may be forward looking and a disclaimer to this effect has been included in the earnings presentation shared with you earlier.
I will now request Mr. Jain to make his opening statement. Thank you.
Thank you, Nitika, and good afternoon, everyone, and I extend a warm welcome to all of you, and thank you for joining us on SRF's Q4 and FY '22 earnings conference call. I trust you, your families and colleagues are doing well.
I will initiate the call by briefly taking you through the key operational highlights for the period under review, following which we will open the forum for a Q&A session.
SRF delivered a robust performance during the period under review, ending fiscal '22 on a strong note. We achieved notable growth in all our segments with our Chemicals business performing remarkably well. In Q4, gross operating revenue increased by 26% Y-o-Y to INR 3,549 crores. EBITDA grew 46% Y-o-Y to INR 944 crores, translating to an EBITDA margin of 27%.
The company's profit after tax increased 59% from INR 381 crores to INR 606 crores in Q4 FY '22 when compared to corresponding period last year. Even in comparison to our Q3 FY '22, our profit after tax grew by about 30% to INR 606 crores as compared to INR 506 crores last quarter.
Given the persistent challenging macroeconomic environment, the company has delivered yet another solid performance during the quarter.
Moving on to our segmental performances. The Chemical business recorded a strong growth of 36% Y-o-Y to achieve revenue of INR 1,572 crores. Our Fluorochemicals business delivered a strong performance on account of higher volumes in refrigerants, blends and the chloromethanes segment in both domestic and export markets.
Our continued focus on growing our exports markets, especially in the U.S. has gone through well. We are well placed to seize future opportunities in the U.S. market.
During the period, SRF continued to grow its global market share of R134a pharma-grade gas marketed under the Dymel brand, with presence in India, Bangladesh, Argentina and Thailand. We have further expanded to new geographies such as Greece and Taiwan and have a healthy order book in the new locations as well.
The price of HFCs in both international markets and domestic markets have increased, given trade measures in both internationally and domestically as well. We are of the view that this can continue and firmer price action will be witnessed. Given now, new capacities that cannot be added -- that can be added only until December '23, SRF is in a position to cater to the growing demand. In the chloromethane segment, higher sales realizations and optimized product mix helped business perform well.
Our capabilities on the backward integration allows us to control our costs as well and propel the business forward. Having said that, some inflationary pressures on prices of key raw material utilities, higher CapEx costs on account of commodity price inflation are certain risks that we continue to keep a close watch on.
In this segment, I am happy to share that all our CapEx plans are on track. The Fluorochemicals business is in the midst of implementing large CapExes and the few like PTFE and CMS are likely to be commissioned over the next 2 quarters. I believe that this along with other projects will auger well for the growth of the business. Additionally, the Board in its meeting yesterday approved the proposal to expand the R22 capacity at a cost of approximately INR 30 crores.
During the quarter, our Specialty Chemicals business did remarkably well as well, driven by strong demand in both domestic and export markets. Our new product portfolio is being enhanced continuously, which also helps strengthen our client base. In addition, our customers are demanding more and more of the complex molecules that we produce, which has been met by our robust in-house R&D team, giving SRF an overall edge in the marketplace.
During the year, we launched 6 new products, 4 in Agro and 2 in Pharma. Furthermore, demand for existing products continues to be healthy. We are also seeing traction in the AI space and building our capabilities in this front and are excited about a couple of AIs that are currently under discussion.
On the cost aspect, we have indeed faced certain supply chain challenges in terms of availability and prices of key raw materials. The team has found countermeasures to effectively deal with such challenges and focus on diversifying raw material supplier dues to offset the risk to the supplies. This combined with process optimization, assets, optimal utilization and other initiatives to reduce environmental manufacturing costs has enabled us to lay emphasis on further cost reduction and focus on sustainability.
We are pleased to announce that the Board has approved a proposal to certain dedicated facilities to produce certain key specialty products at the range at an estimated cost of INR 115 crores. We believe the current opportunity together with recently commissioned and forthcoming capacities will further boost our market position in both the Agro and Pharma industries.
As we grow our revenue, we plan to continue investments in this segment to sustain healthy growth rates over the next few years. We believe this is commendable owing to a notably higher base, which have witnessed significant growth over the past few years. During the year, the business grew around 30% and registered sales of more than INR 3,100 crores, which is higher than our earlier guidance. We are also fairly confident of a 20% plus/minus growth that we can achieve in FY '23 as well.
Moving on to our Packaging Films business, which registered a solid performance during the quarter, with growth in sales across domestic and international businesses. The performance was driven largely owing to ramp up in capacities in Hungary and Thailand with supported volume growth.
During the quarter, demand for BOPP and BOPET films remained strong while we continue to prioritize efficiency and cost effective procurements to improve productivity. In addition, our performance was further supported by improving sales growth from value-added products.
SRF strengthened its easy to do business with PFB tag lines and solidifying its position as a global industry leader. With over 100 countries and multi-country multi-substrate presence, we effectively broadened our footprint. Our sustained focus on quality and delivery parameters have held us reach a broader and deeper consumer base around the world.
In the upcoming quarters, the demand for BOPP films is likely to remain healthy. However, we expect pressure on the BOPET margins on account of several new lines that are likely to come up in the future. Here, we believe that we have an edge over our competitors with multi-country presence across the globe.
Regarding our recent announcement of following into the manufacture of aluminum foil, I am happy to share that we have incorporated SRF Altech Limited as a wholly owned subsidiary of SRF Limited. And the civil works or construction of this facility will begin soon.
Our Technical Textiles segment achieved healthy revenues on the back of highest ever sales volume from our Belting Fabrics and Polyester Industrial Yarn segments during the quarter. This contributed to partially offsetting the weak demand of nylon tire cord fabrics. Despite the uncertain market environment, the business demonstrated promising results as SRF continues to improve its operating efficiencies in the segment. While demand for MTCF remained weak over the last quarter, we are witnessing some revival in the space going forward.
Lastly, in our other business segments, SRF maintained its domestic market leadership position in the Coated Fabrics business, with a focus on improved sourcing initiatives and superior operating performance. Domestic demand that was initially sluggish owing to the order postponement is currently ramping up and likely to firm up significantly. In our Laminated Fabrics Division, SRF retained its pricing and volume reduction with the facility operating at full capacity in Q4 and reaching its highest quarterly sales record.
On the balance sheet front, I am happy to share that we've been able to maintain net debt in similar levels around INR 2,700 crores when compared to last year. This was despite a CapEx investment of close to INR 2,000 crores and higher working capital on account of inventory and receivables greater, new plant start-up and increasing sales.
Our capital expenditure plans for the ensuing financial year are also progressing well. We envisaged an additional capital allocation in the range of INR 2,500 crores to INR 2,700 crores during FY '23. Most of these CapExes will be funded through internal accruals and cash generation. While there may be some additional debt that may be required, it could range only between INR 200 crores to INR 300 crores over FY '23. Despite the other, our balance sheet remains strong. We will cash other opportunities that may come through. However, the driving interest rate scenario and continued volatility, interest rate and liquidity management will remain a key focus area for us.
The commitment to CapEx clearly showcases 2 key metrics: A, our confidence in our business and its ongoing strategies; and B, the majority of cash flows that have been generated are being reinvested in our future and growth prospects. FY '22 was a volatile year with geopolitical tensions, COVID impact, supply chain disruptions impacting all aspects of business.
In spite of the challenging external environment and dynamic business strategy to counter the same, we maintained a heathy balance sheet position. The same is reflected in reaffirmation of the company's ratings by the rating agencies. During the year, exchange rate volatility remained a key concern, especially in emerging markets. However, prudent hedging and risk management strategies has been put in place to minimize its impact on businesses.
At SRF, we lay equal importance to community engagement initiatives and constantly strive to give back to society. During the quarter, SRF collaborated with Election Commission and Child and Women Development departments to conduct voting awareness, activities at Dehradun and Greater Noida, encouraging citizens to cast their vote. In addition, we imparted training on digital skills to empower more than 5,000 teachers at 5 locations. It is also heartening to see our efforts are being appreciated and SRF Foundation was recently awarded CSR Times Award 2021 in gold category for its rural education program.
To conclude, we are confident about the future growth and market prospects that each of our businesses present. Even in an uncertain global and domestic operating situation, we continue to remain cautiously optimistic. Over the years, we have invested meticulously in building world-class infrastructure and unparalleled R&D capabilities. Given our solid foundation and unmatched capability and resources, we are confident of achieving excellent outcomes, and it is our ongoing endeavor to create sustainable value for all our stakeholders in the future.
On that note, I'll conclude my remarks, and we'll be glad to discuss any questions, comments or suggestions that you may have. I would now like to ask the moderator to open the line for Q&A session. Thank you very much.
[Operator Instructions] The first question is from the line of Rohit Nagraj from Emkay Global.
First question is on the Packaging Films business segment. You indicated that on BOPET we may feel some pressure in terms of margins because of the new lines coming up. Just wanted your perspective given that there is a volatility of polymer prices currently because of spike through prices, will there be any impact on the demand side and given that the post-COVID…
I am unable to hear you clearly. Could you lift the handset and talk?
Is it better?
Yes, it's much better, Rohit.
So I was talking about Packaging Films business that given that there is a crude-related volatility, is there any demand impact? And given that the post-COVID demand is now normalizing, are there any indications that demand is relatively stabilizing and probably may have impact because of the higher pricing environment?
Thanks, Rohit for your question, and thank you for understanding. The point that you make in terms of volatility on crude, certainly, there is some volatility on crude. I think what we've been able to do Rohit is take strategic sourcing decision. We've taken multiple positions in terms of where we are from our key raw material perspective, PTA and MEG for our BOPET Films and PTE resin for our BOPP Films. So we've taken multiple initiatives on that side. Yes, there is some volatility. But again, I think the market does price the films based on the delta of the basic raw material. So I don't think that is too much of a worry.
The second question that you have raised is with respect to the pricing or the demand for PET and P2 films. Luckily, on that side also, we've seen strong demand coming in. There is some normalization that had happened post, let's say, the COVID high that we saw in '20. But I think that's pretty much passed. All of that is now coming in fairly on a consistent basis. We are seeing in the domestic market anywhere between 8% to 10% or slightly higher than that in terms of the demand increase that is happening. Internationally also, we are seeing a pretty decent increase in demand. So I don't think demand is an issue, but the pricing, logistics and some of those might be a small issue, but we are tackling.
All right. Got it. This was really helpful. Sir, the second question is again on the Technical Textile business. Now in Q1 and Q2, we had an EBIT run rate of almost INR 130 crores, and there was some volume contraction in Q3. And in your comments, you also again said that NTCF had some issues in Q4. So given the normalized volumes, run rate of INR 130 crores -- quarterly run rate of INR 130 crores is sustainable. I understand that because of the volatility in caprolactam prices, the percentage EBIT margins could vary, but the absolute run rate, should it be, say, INR 130 crores when the normalized volumes again come back?
I don't understand the INR 130 crore number, Rohit. My sense is you are talking about EBITDA rather than talking about EBIT, which is the one that is published.
In Q1 and Q2, I'm talking about the EBIT numbers that we give, segmental EBIT.
So Rohit, the point to make is, yes, to a certain extent, there has been some renegotiation that has happened in terms of our customer contracting. Some of that is currently going on. Even in Q1 last year, I told you that some of the contracting has happened, which is annual. We are working on some of the other contracts for the next financial year also. INR 130 crores, purely as a number, it will be difficult for me to be able to comment whether that can be a good run rate to achieve. But I can certainly tell you that from an overall perspective, we see demand to be higher on the NTCF side.
We see certain cost measures that we are taking on the production side, which will probably lead to better EBIT margins and overall better EBIT number going forward. Now whether that will be INR 130 crores or INR 100 crore or INR 91 crores, which is last quarter, I can't really comment on that. But I think there is a fairly good understanding that between, let's say, INR 100 crores to INR 120 crores, we should be able to achieve overall.
Right. Got it, sir. Sir, just one last clarification. Last year, our net debt has been constant on a year-on-year basis, but the interest cost has reduced. So what is your reason for that? And what would be the average cost of interest for FY '23, if you have any view on that?
Rohit, wherever we were from an FY '22 perspective, I believe with the international interest rates rising, with Indian domestic interest rate also likely to rise, I think anywhere between 30 to 50 basis points, there could be an overall impact on us on a year as a whole. Our endeavor will be to minimize that impact by doing appropriate interventions at the appropriate point in time. But certainly, we are not out of the market. There will be some impact on the increased interest rates that we will see across domestic and international markets.
The next question is from the line of Sanjesh Jain from ICICI Securities.
Rahul-ji, congratulations on an exceptional performance. A few questions. First, on the specialty chem, in our presentation, we have said that we have lined up the new products for the upcoming MPP 4. And this year, we have launched 6 new products. What is the number of new product launches we are anticipating for FY '23 considering that we are starting with a new MPP, will it be a considerable jump over FY '22?
So to answer your question, MPP 4 versus new products may not be the right correlation to do. MPP 4, we are looking to ensure that it gets full in terms of what products we are doing. There are 5 or 6 products that we can do in the MPP 4. We are looking to ensure that all of those we are able to do from day 1 or as soon as the plant gets stabilized.
With respect to new products Sanjesh, the question should be different in terms of what are you looking at doing from a new product perspective. This year, FY '22, we have done almost 6 new products from a launch perspective. I think the run rate should be similar or higher in FY '23 also. But I don't think there is a need to link it to MPP 4.
Okay. So you are telling irrespective of MPP, we will be launching the product?
Yes, please.
Okay. No, that's fair. Second, on the refrigerant gas for FY '22, what was the utilization rate for us for particularly HFC? And with this INR 30 crores of debottlenecking CapEx of R22, how much more capacity will be able to adding in there?
So roughly speaking across HFC, 70%, 75% would have been the overall utilization, given Q1 was slightly tight, what we saw. There were certain technical things that we had also witnessed. All of that is now past us. We are now running at full capacity for almost all of our HFCs.
The second question that you've asked in terms of R22, I think the debottlenecking that we are doing with the INR 30 crores CapEx is roughly in the range of about 2,500 to 3,000 tonnes per annum, largely captive in nature is what we are looking at.
Okay. For the emissive use is mostly you are telling -- non-emissive use?
Non-emissive use, which could be sales or also internal consumption.
Got it. So it is fair to assume that for next year, we have enough capacity as a whole in the ref gas to grow even on the HFC side because of the weaker first half in FY '22. That is the right way to think, right?
Most certainly. We have, let's say, additional capacity available. We had also commissioned in December a new plant for our HFC. So all of that has happened. And therefore, there will be no capacity available to utilize in FY '23 than it was in FY '22.
Fair enough. Sir, last question from my side. We have given a guidance of INR 2,500 crores to INR 2,700 crores for FY '23 CapEx. Can you help us with the breakup for this CapEx? And #2, why a separate company for an aluminum foil?
To answer first, INR 2,500 crores to INR 2,700 crores, I think roughly in the range of about INR 1,700 crores to INR 1,800 crores would be the Chemicals business. Roughly, within that, I think INR 1,100 crores to INR 1,200 crores is fluoro, and the balance is specialty. Some of those that are running as well as some of those that are in progress. The other largely is the PIY and the technical textile debottlenecking and the value chain CapEx that we are doing, plus some other CapExes with respect to the Packaging Films business and Altech as well as the BOPP line that will come up in July. So that's more or less the breakup of the INR 2,500 crores to INR 2,700 crores.
Also, I can tell you today, given where we are, we believe those CapExes that have been sanctioned and approved and are currently running are probably in the range of INR 2,300 crore to INR 2,400 crore. Therefore, we are giving you a number of INR 2,500 crores to INR 2,700 crores because there will be new CapExes that will get sanctioned during this financial year so that we will have to incur money on it. So this is the cash spend that I'm talking about.
The second question that you have asked is Altech. Again, 2 things suggests there are certain tax positions that we are also creating with Altech. The manufacturing company tax positions are in the range, I think will depend until March of '24, if you are setting up your new manufacturing company, you are allowed a certain differential tax regime. So that's a positive. We are looking to expand this business to a very large extent. We believe it can become a significant substrate within our Packaging Films business. And therefore, with those 2 things in mind, we have set it up as a new company. I hope it explains, Sanjesh.
Very clear, sir.
The next question is from the line of Amar Maurya from AlfAccurate Advisors.
My first question is basically on the Specialty Chemicals. You indicated that this year, as a whole, we did a INR 3,100 crores kind of a revenue. So does this include the chlorinated chemical part or this is excluding only the -- I mean, pure Specialty?
What chlorinated chemicals are you talking about?
So basically, MEG [Foreign Language], is it included into this?
Amar, I think there is a confusion. We don't do any MEG. I'm talking about total turnover of the Chemical business being INR 5,200 crores, roughly for the year FY '22. Out of which, roughly, let's say, INR 3,100 crores is Specialty, which effectively means that the total turnover is 60% specialty, 40% fluoro, which includes ref gases and industrial solvent.
So basically, that is what I'm trying to understand. Industrial solvent is not part of this. INR 3,100 crores is a pure specialty, Fluoro Specialty Chemical, right?
Absolutely. Industrial Chemicals is always a part of the Fluorochemicals business, which is ref gas, industrial solvents.
Okay. Got that. And secondly, sir, in terms of the guidance we are talking about, 20% growth rate. So what I'm trying to understand is that now given that the kind of new orders your competitors are getting, so is that the intensity for you also in the Specialty Fluorochemicals business is increasing largely from the agrochemical perspective?
I would end up saying, Amar that there is a pretty good traction for us from the AI space, agrochemical space and even the pharma teams have been strengthened to meet the growth requirements for the Specialty Chemicals business. You've seen us invest significantly almost on every quarter basis, we are sanctioning new plants. There is INR 115 crore CapEx that we have recently sanctioned.
The MPP 4 is also something that is coming up very, very soon. And we are looking to take that up. The PIP, which is a Pharma Intermediate Plant, is also something that we have recently done, and we are working on putting that up probably in the next 6, 8 months. So all of those are in good shape. We are facing, let's say, a bit of a demand positive from the agrochemical side, that's something that I believe is a positive.
The other thing also is that the number that I told you 20% plus/minus, is also based on my current order book, my current positioning. We are starting the year, and those variables are there. So I go back last year when we were talking about the 15% to 20% growth, you've seen us deliver a much better number even this year. So based on our current performance, based on our current order book, we are kind of projecting the growth going forward. I am hopeful that we will be able to beat the number again.
The next question is from the line of Ankur Periwal from Axis Capital.
Sir, first question on the Specialty Chemicals side and partly you agreed, you just answered.
If you could be a bit louder, I'm unable to hear you.
Sorry. So the 20% plus growth guidance that we are giving in and I'm putting in context, earlier, we had mentioned that Pharma business should be increasing in terms of overall contribution within Specialty Chemical. So this -- and the 6 product launches that you talked about, is the growth largely driven by the existing products, either in agro or pharma or the newer ones also will be a bigger contributor here?
So Ankur, I would say this, that there are new products that we've launched over the next, let's say, over the last 12 months, 18 months. All of those are witnessing great traction, large demand. There is new products that are -- therefore, I would call them as growth that is being driven by new products. Also when I look at it from an overall perspective, existing products and more complex products like the P32, P35, all of that is also growing. So I would typically say that it is driven by both the sites rather than just one.
Sure. And pharma will be growing faster here given the contribution of pharma is expected to rise?
Sure.
Sure. Sir, second question on the overall chemical business margin here, and given the RM volatility that we are seeing, the pass-through there. So any comments there?
So I would say you are right, Ankur, that there is a small issue in terms of the fact that Specialty Chemicals is a contracted business. I would say we have kind of passed through about 20% to 30% of some of our increased costs through to our customers over the next, let's say, 6 to 12 months. We believe this number can go to 60%, 75% in terms of the pass-through of cost, that will certainly come through. But then I think it's the contract, it's a long-term relationship that we are more worried about or more concerned about for it to be maintained and some small adjustments that we need today from a margin perspective, we are pretty much happy to do.
Sure, sir. Just a clarification. If I look at our, let's say, H2 margin wherein the gas pricing, the efficiency there have helped the Chemical business margin per se. So we were give and take 20%, 22% in the first half, which increased around 30% in the second half. So will it be fair to say given the gradual RM pass-through and given the longer-term relations there, broadly on a full year basis, we should be sustaining these numbers?
It is pretty much possible, Ankur. Q4 margins are roughly in the range of 30%, 32% as I look at it. Q3 was about 29%. So there is a delta there. From an overall Chemicals business perspective, I think we can look at better margins going forward as well.
Sure. That's helpful. And sir, just one clarification. On the ref gas side, you said for the full year, we are operating at 75-odd percent utilization. Was that number right?
70%, 75%, depends on gas to gas.
Sure, sure, sure. So there is a volume uptick there apart from the 15…
Positive [indiscernible].
The next question comes from the line of Kumar Saumya from AMBIT Capital.
Sir my most of the questions have been answered. So just a couple of data points. So what was contribution of refrigerant in the overall Chemical segment?
Contribution of refrigerant in the overall Chemicals segment, I would have to calculate it. It's not a data point that I have readily available with me. But my sense is it would be probably in the range of -- one second, need calculator. Say about INR 1,400 crore, INR 1,500 crore. So if you want to calculate it like INR 1,500 -- say about 30%.
Okay. And sir, what was India's contribution from in the Packaging segment, sir? How much did India's capacity contributed in the Packaging revenue?
We have the standalone numbers, look at them.
The next question is from the line of Madhav Marda from Fidelity International.
I just wanted to understand that our CapEx number, I think last year we were doing about INR 1,500 crores to INR 2,000 crores. It's been up this year. How much of that is an impact just of higher steel and cement prices, et cetera, which is impacting our CapEx investment this year?
Very, very difficult question to answer. What I can tell you that steel prices have risen very, very significantly, stainless steel, PVDF, cement to a very low extent, but more from a, let's say, when I look at in the chemicals or exotic materials, those prices have gone up very, very significantly.
I would tend to say that it depends on project to project. But commodity price inflation is probably having an impact of anywhere between 8% to 15% on our projects on an overall basis.
And when I'm talking about this, this is not just -- see, the point Madhav is that those CapExes that we have had sanctioned 1 year ago, 1.5 years ago, have had that kind of impact. Those that we are sanctioning now are effectively taking into account all of those price inflations that are coming, right? So it's a very difficult question to answer. But my sense is anywhere between 8% to 15%.
Got it. Understood. And secondly, on the Chemical margins, I think you indicated that if I understood that, we can maintain these margins for FY '23, the 2H margins they can sort of remain new. Is that -- did I get that right?
If I would have been a predicting man, I would have given you the exact number, but we are -- in that range, we could.
Okay, sir. And sir, the refrigerant gas demand/supply environment continues to remain healthy, I'm assuming currently in the world?
Absolutely, both domestically as well as internationally. We have little material to sell.
The next question is from the line of Surya Patra from PhillipCapital.
Yes. Congrats for the great set of numbers, sir. Just one question on the refrigerant gas side. So recently, government has pronounced policies about restricting the imports as well as restricting the exports of HFCs. So how is it one thing, whether it is a beneficial aspect for us? Because while export was competitive a faster growing vertical for us, while in the domestic side the pricing, market share and the import substitution was an opportunity. So both put together, how should one really look at? And what is the implication on us?
To be very frank, I think, Surya, the way it was say that as we move into a more regulated regime, these are the first and initial steps the government takes. Because from an international perspective, they have to report in terms of what are the consumption that you are having, what is the import that you do, what is the consumption from a refrigeration perspective, emissive perspective and a non-emissive perspective. This is something that happened through CFC cycles, HCFC cycles, and now HFC cycles. Standard move.
But from our perspective, I think it is beneficial because export, we are the only ones in the country that manufacture HFC. So we have the ability to get the appropriate licenses and do the exports. That's not a problem.
Import, I think restricting that also effectively, which will lead them most misclassified imports are coming and therefore, that's also positive. Nothing of our doing, but overall this is, I believe it's a positive.
Okay. Sir, the second question is on the fluoro. See, last year, we have seen the expansion led growth as well as the price support, which help us deliver stronger growth both at the revenue level, at the EBITDA level and certainly in the PAT level.
Surya, I am unable to get your question. Could you repeat, please?
Last year, FY '22, financial performance was supported by 2 things. One is expansion, obviously, across segments as well as the price -- strong pricing situation. Going ahead, generally that I'm asking for all the businesses, because the similar price trend that we have been witnessing. So going ahead, if the prices are likely to remain flattish or to some extent, subsiding, then along with that, the whatever CapEx expansion plans that is going on. So considering those, what is the likely growth indication that one should have? And what implication on the overall margin scenario that SRF should be looking at?
It's a complicated question to answer, Surya, because we cannot answer it from a company as a whole perspective, each segment being separately depending upon some of the, let's say, the margins coming or let's say the prices coming down or commodity price inflation that we have talked about coming down, there will be some impact in terms of our sales prices, which will also lead to some of the impact in terms of our costs coming down, logistics, power, raw materials per lakh ton, be it for that matter fluorspar. All of those will also come down.
So my sense, we can still sustain margins, we can still do a good job in terms of the overall position of the company. Yes, there may be some better positions to be able to take from a CapEx perspective and some of those CapEx costs that have kind of gone up a bit coming down. We may be in a position to announce more CapEx as some of these high elements start to percolate or come down. Hopefully, that should be the way to look at it. But very complex to answer from a company-wide perspective, each business be separately or differently because given the nature and size of the business. I hope it explains.
Yes, sir, certainly complex situation. So on the Specialty Chemicals side, sir, if I just can have a sense. Last year performance was 30% growth. I think that was excellent performance, and it has been back-to-back. So whether price-led growth is also kind of an important factor here?
With what led growth?
Price-led.
Specialty Chemicals business has had some price benefits. But I think the margins would have been better had commodity prices or raw material prices remained lower than what we had assumed. So yes, to a certain extent, I would say we have passed on some of the commodity price increase, but probably less of it. And over FY '23, some of that will also happen. Less of price related, but more of volume.
Yes, sir. So just one clarification on the Specialty Chemicals business side. Whether on the gross profit side, it's a kind of around 80% margin scenario?
Can't comment, Surya. The business to business -- sorry to -- and again, I don't go into contribution position because that's...
This is the operator. Sorry to interrupt you, Mr. Patra. May we request that you return to the question queue for follow-up questions. [Operator Instructions] The next question is from the line of Atul Tiwari from Citigroup.
Sir, again, just one question on the capacities in the 2 key businesses. So could you just update us on the total ref gas capacity and total Packaging Film capacity as of now? And how these are broadly increasing over next 2 years?
Atul, I have told you so many times. You want it again?
Sir, you keep on expanding capacity all the time. So it's difficult to keep a track with your kind of growth.
Hello? Just one second, please.
Yes. Yes.
Ladies and gentlemen, the line for the management is disconnected. Request you all to please stay on line while we reconnect. Thank you.
[Technical Difficulty]
Ladies and gentlemen, thank you for patiently waiting. The line for the management is reconnected. Thank you, and over to you. Mr. Tiwari, please repeat your question.
Roughly speaking, the capacity for Packaging Films, is roughly about 310,000 tonnes per year, out of which 60,000 tonnes of BOPP is also coming in. The total capacity that we will have will probably by the end of this year become 370,000 tonnes.
Okay, sir. And on the ref gas side, sir, same number?
Ref gas, 32, we have a total of about 14,000 tonnes, 13,000 tonnes, 14,000 tonnes. 134a is roughly about 20,000 tonnes. There is the swing plant also that's there, so it can be plus/minus 4,000 tonnes. 125 is about 7,000 tonnes. 22 salable with both age and Bhiwadi is roughly in the range of 17,500 tonnes. Probably also another 12,000 -- no, 25,000 tonnes for total for 22. So that's how the capacity.
The next question is from the line of Sumant Kumar from Motilal Oswal.
Rahul-ji, so you said the H2 margin is going to sustain for the Specialty Chemical and Polymer segment. So going by the overall FY '22 margin for Chemical Polymer is coming around 26.7%. So can you talk about the next couple of years, margin sustainability of the Chemical Polymer business, rough idea?
Sumant, can I interrupt you?
Yes.
[Foreign Language] There is no Polymer segment.
Sorry, Chemical business.
Now ask your question.
Yes. So my question is, overall Chemical business, we have a 26.7% EBIT margin. And you were saying the H2 margin of 30.8% is going to sustain in FY '22, '23. So my question is for next 2 years, what is the range of margin for Chemical business?
Sumant, that's called blue sky gaming. I believe we can sustain these margins. But if you wanted to ask about FY '23, I will probably be able to give you a better picture than FY '24, '25, '26, because, again, business is dynamic, we are coming up with new products on a continuous basis. There is a large set of capitalization that will be done. All of that is going to happen. My sense is we can sustain these margins on existing products, but those that come through will probably start at lower base and take it up going forward. So that's how it will pan out. But given what we are seeing today in terms of the traction, we certainly believe margins are sustainable.
May we request to return to the question queue for follow-up questions.
The next question is from the line of Nitin Agarwal from DAM Capital.
Congratulations on the fantastic set of numbers. Sir, on the fluoro special -- on the refrigerant gas business, you mentioned that we're running right at peak capacity. So sir, now when you look through the next few quarters, does it lie -- the growth is going to be incrementally volume -- is there any volume growth possibility? Or it's going to be largely pricing-driven growth from here on from the base of Q4?
We are currently at peak capacity, I was talking more like April, May rather than the available capacity from an FY '23 perspective. When you compare FY '23 to FY '22, we will certainly have additional capacity that will come through, because like I said during the call as well, the total efficiency in terms of capacity available versus utilization would have been in the range of 70%, 75%. So yes, there is additional capacity available.
We also have the FY -- the 15,000 tonne HFC plant that is coming in, but probably towards the end of this fiscal. That will also add the additional capacity.
We'll take the next question from the line of Abhijit Akella from Kotak Securities.
Congrats on great set of numbers. Just 2 from my side. First one was on the raw material cost pressure in the Fluoro Specialties business. If it's possible to share any sense of roughly how much that might have impacted margins in 4Q? And as you mentioned, we expect to see at least 60%, 70% recovery of that in the next couple of quarters. So can we expect that to improve the margins further?
Over the year, Abhijit, my sense is roughly about INR 30 crore, INR 35 crores would have been the number in terms of had we been able to pass on all the costs in terms of EBIT or EBITDA from a Specialty Chemicals business perspective. Hopefully, that is one of the reasons we are saying that we could be better off in terms of when we negotiate new contracts with the customers, which is also giving us that positive.
Yes, that's very helpful, sir. And the second question I had was with regard to the refrigerant market scenario. You spoke a little bit about the factors that have led to this sharp increase in prices over the course of the last year or 2 quarters. If you could just help us understand your perspective on how all these drivers are shaping up at this point in time? Are they still -- does everything still remain the way it was? Or what changes are you seeing, if any, at the margin?
2 or 3 things, Abhijit. I think these factors that I've spoken about are not onetime factors that we are looking at. These are more in the nature of, let's say, sustained positions that the regulators have created. I don't see some of these going away. And the bigger part here, Abhijit also is that there are no new capacities that are getting added. India is probably the only one who can add capacity until December '23. Other than that, China, there are no new capacities that can be added. So to my mind, pricing will remain here or get formed up only. That is how we are looking at it. Obviously, there can be -- see, again, the world is today very hot with inflation, right? As this inflation comes down, there may be some demand negatives that come through. If that happens, there will be a negative. But I don't see that happening in current scenario.
[Operator Instructions] Next question is from the line of Arjun Khanna from Kotak.
Congratulations on great set of number, sir. Maybe one question. Just one question I'll just ask, it's on fluoro polymer side. So essentially, on the PTFE plant, are we on schedule? We had earlier talked of maybe getting the plant on stream by September, October, November of this calendar year. The second part to the question is for the R22 expansion of INR 30 crore, I assume that if [ per TFE ] which we are using in PPE. So if you could just talk about what are our capacity and potentially, how do you see the fluoro polymer business shape up?
Arjun, long question. I understand that the question is regarding when the PTFE starts up. I think it is October '22, when we are looking to get the PTFE start up done. With respect to R22, when we were doing our overall balance in terms of salable materials, the market demand for nonemitting users also from our own capital consumption, not just for PTFE or PFE perspective, but also from the Specialty Chemical business, we found that there was a small gap. The INR 30 crore CapEx is largely a reactor where the downstream is available for us to be able to increase the R22 capacity. I'm not sure that I've been able to answer the full question that you have, hopefully.
Sir, just one more in terms of the fluoro polymer or in terms of PTFE. So initially, you're talking about 6,000 tonnes. So I just want to understand, is the utility et cetera, capable of doing more if you have probably a Phase 2 maybe a few years down the line?
Arjun, we'll speak separately. I am not able to hear you very well. It's just very muffled.
Sure.
We'll move on to the next question from the line of Ranjit from IIFL.
Congratulation on a good set of numbers. The question is on the spectrum side. So in the past, we have been a bit conservative and I've been alluding that the base is increasing, and so the growth has to be kind of a tapering off. But despite on a 30% growth, we are still confident enough to give a 20% growth guidance. So just wanted to understand where are you getting this confidence from?
And second bit of question would be on that now it's already at INR 3,100-odd crores of spectrum revenues. And as the base kind of gets increasing, how do we see diversification into this particular segment? I understand that we are getting a bit more into pharma and becoming a bit aggressive. But agri and pharma, are we looking at any new age segments to diversify this particular segment?
Ranjit, I am a bit confused as to how to answer your question. When I tell you 15%, 20%, you were disappointed. When today I'm telling me 20%, I am very confident of, you're telling where is the confidence coming from? I'm a bit disappointed with the question, Ranjit, but let me still try and answer it. The fact is what we have looked at in terms of being able to answer your question is what is our current order book, what are the new products that we have launched over the last 12 to 18 months in terms of the traction that they are building, and how are we looking at existing product and expansion? The MPP 4 which is scheduled to get commissioned very, very soon, we are fairly confident of building that up and getting it to peak capacity very, very soon. So all of those things are positive from our side, which has given the confidence.
Hopefully, given where the business is, we should be able to do a better job even than what I've talked about. So that's where the confidence is coming from. You are absolutely right when you say that there is good traction in pharma that we are witnessing, yes, that's true. We are also looking at and are very excited about a couple of AIs that we are working on. Hopefully, that should also come on stream, and we should be able to bring that up as some of our key products for the future as well. That's how the confidence is coming in, Ranjit. But maybe we speak separately about the confidence issue that you are facing.
Sure, sir. My question was more like the comment was largely that one would also see this 20% growth on a more conservative side.
I hope I have answered it appropriately, Ranjit.
Sure, sir. And the second one was more on the diversification front. In addition to pharma and agri, are you also looking at new age businesses?
I have said this multiple times, Ranjit. Yes, there are a couple of projects that are going on, but their current position is such in a nascent state, that I don't want to talk about and let's say get your hopes at high.
[Operator Instructions] May we request you to return to the question queue for follow-up question. Sir, should we take more questions?
I think the time is up. So I think it's time for closing remarks. Thank you.
Over to you, sir, for closing comments.
Thank you. I hope we've been able to answer all your questions. I wish that each one of you remain safe and healthy. If you have any further questions, we would be happy to be of assistance. We hope to have your valuable support on a continued basis as we move ahead. On behalf of the management, I once again thank you for taking the time to join us on this call. Thank you very much, everyone.
Thank you. Ladies and gentlemen, on behalf of Axis Capital Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.