SRF Ltd Management Discussions

Businesses

SRF Limited is a Chemical-based, multi-business conglomerate engaged in the manufacturing of industrial and specialty intermediates. The company is widely recognised and well respected for its R&D capabilities globally, especially in the niche domain of Chemicals. SRF Limited is a market leader in most of its business segments in India and overseas. The company has operations in four countries namely, India, Thailand, South Africa, and Hungary. SRF has commercial interests in more than hundred countries and classifies its businesses as Technical Textiles Business (TTB), Chemicals Business (CB), Packaging Films Business (PFB), and Other Businesses.

Technical Textiles Business

During the year, the Technical Textiles Business (TTB) focussed on three important aspects, namely, expanding product portfolio, broadening customer base, and strengthening its market position in order to derisk from the flagship Nylon Tyre Cord Fabric (NTCF) from a long-term perspective. On the Business endeavours in the area of sustainability, a large portion of energy requirements were met through clean energy sources.

We will now discuss the three segments under TTB individually -

Tyre Cord Fabrics

The NTCF market witnessed marginal growth during the year. Business increased the sales volumes of NTCF and Nylon Yarn in the domestic market with heightened focus on value-added Yarn portfolio.

During FY24, the business also successfully commissioned the capacity expansion of Nylon Yarn manufacturing for captive consumption and external sales.

Belting Fabrics

In FY24, the Belting Fabrics (BF) segment did well with healthy demand coming from the core sectors of coal, steel, and cement. These sectors grew rapidly during the year on the back of increased spending on infrastructure projects by the Government of India.

Having said that, the Belting Fabrics segment faced challenges due to cheap imports from China, leading to stress on the domestic margins. Several countermeasures were undertaken to tide over the challenges that included an increase in its high-end, value-added products (VAPs) offerings, thereby tapping into a wider customer base.

Polyester Industrial Yarn

During the year, the Polyester Industrial Yarn (PIY) performed well with strong demand from the

The Industrial Chemicals segment also witnessed increased competition due to new capacity addition from few domestic players as a forward integration strategy. Despite capacity addition and subdued demand from the Agrochemical and Pharma industries, our market share increased.

Geotextiles, Seat Belts and Belting verticals. In H2 FY24, we witnessed a surge in demand for products manufactured by quality players, to which the business responded well.

The TTB also successfully commissioned PIY capacity expansion by the end of the year and the expanded capacity is expected to be fully utilised in FY25.

Outlook

On an overall basis, the TTB is expected to deliver moderately improved results over FY24 with an enhanced focus on fully utilising capacities, reducing costs, and enhancing the portfolio of high-end, VAPs in BF and PIY. While margins will continue to remain under pressure in FY25, the increased volumes are expected to support the performance.

Chemicals Business

The Chemicals Business comprises two different product segments, namely Fluorochemicals and Specialty Chemicals.

Fluorochemicals

Refrigerants & Propellants and Industrial Chemicals FY24 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 stress on refrigerants prices and volumes due to Chinese dumping in India and the international markets. In addition, the refrigerants segment saw an increase in competition from the additional capacities that were put into use in India and the Middle East. US continued to destock HFC inventory. Prices were softer; and so was the demand. Additionally, global uncertainties like the Red Sea crisis and the Israel war increased lead time and cost of freight adding to pressure on margins. However, commodity prices remained low and supported the margins. Overall, the Ref Gas business remained under pressure in the domestic and international markets.

The Industrial Chemicals segment also witnessed increased competition due to new capacity addition from few domestic players as a forward integration strategy. Despite capacity addition and subdued demand from the Agrochemical and Pharma industries, our market share increased. Moreover, the Business continues to increase its market share in the Dymel?/ propellant segment in the domestic and international markets, entering new geographies and broadening its customer base.

On a positive note, the Business commissioned its PTFE plant during FY24. Approvals for various grades of the product are currently underway with major domestic and international customers. The Business also commissioned the F 32 plant, along with capacity expansion of the AHCl plant.

During FY24, both the sites reported safe and stable operations. With a number of operational excellence measures in place, several plants achieved the highest-ever production in FY24. The focus of the business will be to optimise raw material sourcing, cost saving initiatives, strengthening capabilities in new product portfolio with sustainability as the priority. Overall, the business performance was stable despite various tailwinds across segments.

Outlook

In FY25, the global and Indian economy is expected to perform better than FY24. In addition, the inflation rates are expected to come down. The Indian Air Conditioning industry is expected to witness growth, as a result, we expect to see an increase in the demand for refrigerants. US market is expected to remain subdued, however, the Middle East economy is expected to do well over FY24, thereby supporting demand. Pricing pressure on refrigerants is anticipated to go down.

Industrial Chemicals segment is expected to remain stable with an improvement in demand from the Agrochemicals and Pharma industries.

In our Fluoropolymers journey, while we have done good work on bulk, we are now moving into the new grades (free flow and fine cuts) and ramping those up. This is a learning journey and the knowledge that we have attained will help us streamline our new fluoropolymer projects at a faster pace.

Overall, the business is expected to do better over FY24 with maximum utilisation of capacities and commissioning of new specialty fluoropolymers plants.

Specialty Chemicals Business

FY24 has been a challenging year for the Specialty Chemicals Business (SCB). The Business faced headwinds due to excess inventory in the market, forcing agrochemicals customers to initiate inventory rationalisation measures. In addition, a lot of capacity has come up in China, which makes the landscape more competitive. However, the Business has taken several steps to combat this onslaught and emerge stronger.

The Business actively worked on our customers new products and their developmental projects, while ensuring the production capacities were optimally

utilised for existing products. Apart from commissioning new facilities, the team worked on cost structures, ensuring we run our plants most efficiently. In FY24, both the Bhiwadi and Dahej sites improved operational efficiency, managing an expanded portfolio of innovative products. We enhanced our capabilities and cultivated expertise in novel chemistries. Our inroads in pharma are showing positive traction. In order to seize future market opportunities, we commissioned nine dedicated facilities at the Dahej site in FY24.

During the year, the SCB secured the Boards approval to build an intermediate plant to cater to a new product, which is currently under implementation.

In addition, the Business took several initiatives towards decarbonisation, including energy optimisation and carbon footprint reduction. The Business continues to make investments toward safer, cleaner, and leaner operations, and further strengthen its sustainability initiatives.

Outlook

The SCB will continue to actively work on Agrochemicals and Pharmaceuticals segments, collaborating with global innovators to drive process development, commercialisation, and the production of complex, innovative molecules. The Business positions the customers at the core of its strategic