SRF held conference call on 27 January 2022 to discuss the performance for the quarter ended Dec21. Mr. Rahul Jain, President & Chief Financial Officer of the company addressed the concall.

Highlights of the Concall

• Chemical Business reported a strong performance during the quarter. Within the chemicals segment, specialty chemicals business delivered healthy performance owing to an expanding product portfolio, robust demand from overseas markets, increased capacity utilization of dedicated and multipurpose facilities, and focused cost reductions across all product lines.

• The company achieved highest ever production in some key chemical products and are constantly enhancing capacity utilization at its newly commissioned facilities while margins remained healthy. During the quarter, it launched 1 new pharmaceutical intermediate and successfully completed campaigns for 2 key agri products.

• The company is cautiously optimistic of an encouraging performance in chemical segment in the future as new products are being rolled out along with rampup of additional capacities. This is despite the ongoing third wave of the pandemic and continuing supply chain and logistical challenges.

• The company approved to set up a new pharma intermediate plant at SRF Dahej chemical complex at a cost of Rs 190 crore. It is commitment to increase the share of pharma products in its overall portfolio.

• The company also approved the establishment of a dedicated facility at Dahej to produce a key agrochemical product at a cost of Rs 61 crore. These capacities will allow it to take advantage of new and forthcoming commercial opportunities across all verticals in the future.

• Fluoro chemical business registered a robust performance as a result of improved prices for certain key refrigerant products, increased export volumes and positive contribution from chloromethane.

• The company expects the demand for refrigerants to remain healthy in the upcoming quarter and product margins remaining robust. Refrigerant gas season also kicks in Q4, which it expect to be better than Q4 last year as it has seen significant impact of the COVID pandemic during last year.

• Key capex such as chloromethane expansion, PTFE (poly tetra fluoro ethylene) and HFC (hydro fluoro carbons) are largely on track and augurs well for the future of the business.

• The company expects the positive momentum in demand to continue in both BOPP (biaxially oriented polypropylene films) and BOPET (biaxially-oriented polyethylene terephthalate) in the near term. However, margin pressure could accentuate as some of the new lines are expected to come on-stream in the upcoming quarters.

• The company has allocated a capex of Rs 425 crore to settle an aluminum foil manufacturing facility in Jaitapur, Indore, Madhya Pradesh. The plant is expected to be commercialized approximately 20 months around September, October '23. The plant will house state-of-the-art technology with capability to produce a wide range of products. Aluminum foil is extensively used in food and nonfood packaging, including pharmaceuticals.

• Currently in India, there is a domestic market size of around 2 lakh metric tonne per annum (mtpa) of aluminium foil which is expected to grow in the range of 8-8.5% annually. Further, India imports approximately 1 lakh metric tonne of aluminum foil which is likely to continue in the future despite entry of some other players. Therefore, the company sees a promising opportunity to enter this segment. This plant will help fulfill the growing demand for food packaging in both domestic and export markets. This will make SRF the only player in India to become a one-stop shop for its packaging film products ranging from BOPET, BOPP and aluminum foil.

• In addition, the company believes aluminium foil segment would eventually be a potential to emerge as an enabler to tap the upcoming electric vehicle space in the future. The project will achieve an asset turn, which range from 1.75 to 2 times and an IRR in the range of 15% to 18%.

• The company new BOPP film line which is currently under construction at Indore is on track and expected to be commissioned in the forthcoming quarters. Technical Textile Business segment performed reasonably well during the quarter despite weak demand for nylon tyre cord fabrics. Sales volume from Belting Fabrics and Polyester Industrial Yarn segments witnessed a good performance during the quarter. With the reopening of mines, demand for belting fabric increased significantly.

• SRF maintained domestic market leadership in coated fabrics due to improved sourcing initiatives and plant performance despite subdued demand scenario

• In Laminated Fabrics SRF recorded the highest-ever sales achieved as the plant operated at full capacity and continues to maintain volume & price leadership in the segment.

• The company expects capex of Rs 1900-2000 crore in FY22 and about Rs 2100-2200 crore in FY23