SRF Q1 FY27 earnings call

Where management's figures differ from the filing

• Operational EBIT vs EBITDA: said Operational EBIT ₹1,116 cr, +61% YoY, margin 22%; filed EBITDA ex-other income ₹1,236.72 cr, +49.0%, margin 24.6%. Management reports operating EBIT; filed shows EBITDA excluding other income. Definitions differ by depreciation add-back.

What moved the numbers, as management explained it

• Middle East supply disruptions caused global capacity shutdowns; SRF operated at 100% utilization with non-domestic raw material sourcing and saw panic buying lift prices significantly (one-off). (one-off)
• Refrigerant gas pricing sustained at elevated levels; HFC facilities at high utilization with improved realizations offsetting elevated raw material costs.
• Higher volumes across refrigerants, industrial chemicals and fluoro polymers offset elevated raw material costs from supply chain disruptions.
• Specialty chemicals volumes and pricing showing directional improvement across core products, signalling potential cycle turn.
• Chemicals business is highly seasonal; Q2 typically weaker than Q1, so sequential normalization expected even with YoY growth.

The numbers management led with

• Operational EBIT margin: 22% in Q1 FY27
• BOPET thick film capex: Rs 250 crore for 25,000 MT per annum line; 24-month commissioning
• Electronics-grade films total capex: ~Rs 520 crore committed for capacitor and conductor grade films
• Agrochem AI peak revenue aspiration: USD 400-500 million at peak

Guidance on this call

By business

Balance sheet, capex and funding

• Board approved ₹5 per equity share interim dividend.
• Board approved ₹250 cr capex for new 25,000 MT BOPET thick film line in India (24-month commissioning).
• Capacitor-grade BOPP films project capitalized during Q1 FY27 following successful trials.
• Odisha investments (HFO plant, next-gen refrigerants, backward integration, specialty fluoropolymers) progressing in line with plans.
• PVDF plant on track to commission towards end of Q2 FY27.
• Strong balance sheet supporting strategic capex programme; no specific debt or cash figures discussed.

The industry, as management sees it

Management views the global operating environment as volatile and uncertain due to ongoing geopolitical developments, changing trade policies, and raw material volatility. Within chemicals, the company expects Q2 and Q3 to be seasonally weaker than Q1 from an India and Middle East standpoint, with H2 expected to be stronger than H1. Agrochem shows first green shoots on both volume and price, though broad-based recovery remains uncertain and dependent on the innovator registration cycle.

Risks management named

• Geopolitical disruptions and trade-policy uncertainty could weigh on demand and supply chains
• Raw material volatility particularly in refrigerant and packaging inputs
• Agrochem AI volume ramp dependent on innovator registration cycle, still early days
• Seasonality: chemicals business typically weaker in Q2 vs Q1
• Performance Films margins expected to normalize from Q1 blowout levels

Not answered directly

• Fluoropolymer detailed economics for Naushad Chaudhary (cut short by moderator time constraint)

Asked for a number, answered without one

• Specialty chemicals AIs scaling timeline: Directionally building on prior commentary; still early times, in pockets, not broad-based; H2 expected stronger than H1 but no specific date or volume.
• AI commercialization milestones: Same view as last call; innovator world still cautious on registrations; directional shift but still early days; no specific number of AIs or milestones.
• Aluminum foil sustainable EBIT margin: Margins expected to be north of 8-12% historical range due to export shift and aseptic; Q1 an aberration; no specific number given.
• Capacitor/conductor grade films economics: Pricing significantly better than vanilla film, less volatility, accretive to margins; less cyclicality vs thin film; no specific TAM or margin numbers.

Every question, with its answer

1. 1. Dihage capacity, agrochem AI scale-up, refrigerant gas pricing

   Sanjesh Jain, ICICI Securities13:14

   Question. Three questions: (1) On Dihage infrastructure, how much land is left given Odisha may take another two years — do you have enough land parcel to commission all the active ingredients being worked on? (2) When do we see active ingredients really getting to scale given you spoke about green shoots in specialty? Is it an H2 story or FY28? (3) On refrigerant gas, do you see pricing trends sustaining at Q1 levels or some softening post the harsh summer season?

   Answer, Sameer Gupta, President & CFO, SRF Limited. On Dihage: reasonable space specifically for specialty chemicals available; structures in place to expand over the next 24 months — adequate for the interim period. On AIs: first signs of recovery visible — volumes improving and prices trending marginally upwards on key products; opportunistic buying seen in Q1 and pockets of customer support; still not broad-based, but directionally upward. On refrigerant gas: prior view that RG pricing would stay or get better is playing out in Q1; Q2 and Q3 specifically from India and Middle East standpoint are softer on both volume and price versus Q1; will still see strong YoY growth in ref gas through the rest of FY27.

2. 2. Performance films drivers, chemicals growth drivers, pharma roadmap

   Jayant, IDBI Capital18:27

   Question. Two questions: (1) What drove the strong outperformance in performance films this quarter? (2) With green shoots in agrochem and strong refrigerant gas pricing, what are the big growth drivers for the chemicals business going ahead, including color on the pharma piece?

   Answer, Sameer Gupta, President & CFO, SRF Limited. On performance films: the war has perversely helped — rest of world shutting plants while SRF operated flat out at 100% capacity with robust raw material supply chains owing to DTA unit and global sourcing; second factor was significant panic buying which drove prices up. Two big drivers behind the Q1 outcome. On chemicals growth: 15-20% FY27 guidance maintained — Q1's 26% positions well to deliver; ref gas and value-added fluoro polymers remain big drivers; pharma progressing toward the stated 20-30% of chemicals revenue goal by 2030, with growing molecule count and customer base — step-function changes expected once a meaningful product comes to fruition, currently smaller volumes.

3. 3. Sequential Q2 outlook, aluminum foil sustainability, BOPET/BOPP, PTFE/Chemours

   Arjun Khanna, Kotak Mahindra24:55

   Question. Three questions: (1) On the sequential Q2 weakness commentary — does it refer to Q1 to Q2 sequential or YoY? (2) On aluminum foil, EBIT moved from roughly 10% to 17% — what are sustainable levels for the rest of the year? (3) On PTFE scaling and BOPET/BOPP outlook.

   Answer, Sameer Gupta, President & CFO, SRF Limited. On sequential: Q1 was a blowout versus which Q2 will correct, but YoY growth will hold. On aluminum foil: structural progress — close to half or more of volume now moving into exports/Europe versus the past; participating in new end-uses with better realization; significant progress on aseptic packaging with leading players, in testing stage, expected to open a new segment by early next fiscal; aluminum price spike partially rationalized but at lower levels vs peaks. No aluminum foil capacity expansion on the cards right now — focus is on markets and value-added grades; Jhagadia site has ample space when ready. On BOPET/BOPP: Q1 had disproportionate pricing from Middle East crisis; if crude holds in the $70 range that bodes well for plastics pricing; Q2 will correct but no steep cliff. On PTFE: progressing well on higher grades, small capex on track; PVDF plant set to commission end of Q2 FY27; Chemours design changes (with European-only equipment vendors) have slipped FEP3/FEP4 timelines by 3-4 months from December targets.

4. 4. Capacitor film economics, value-added film strategy

   Naushad Chaudhary, Aditya Birla Capital30:58

   Question. Two questions: (1) On electronics-grade films (capacitor and conductor grade, ~Rs 520 cr CapEx), what is the TAM, key drivers, and how does margin profile and volatility differ from core packaging films? (2) Started on fluoropolymers but was cut off by moderator.

   Answer, Sameer Gupta, President & CFO, SRF Limited. On capacitor film: trials completed and project capitalized earlier in the quarter; in middle of testing with set of customers (testing is significantly more extensive than vanilla film); early-stage revenue expected later this quarter, full capacity by Q1 or Q2 next year. Pricing is significantly better than vanilla film and only accretive to margins — reflects broader strategy to derisk from thin-film volatility through value-added plays (metallized, coated, capacitor, BOPET). Limited number of Indian players producing this set of film; customer interest and universe growing. Cyclicality is not as volatile as thin film — part of the rationale for the play. Second question on fluoropolymers could not be addressed due to time constraint.

5. 5. Agrochem AI revenue, PTFE/Chemours timeline

   Rohit Nagaraj, 361 Capital34:39

   Question. Two questions: (1) On the AIs in our kitty — how many commercialized, where are we on revenue recognition toward the 400-500 million dollar peak revenue target, and what milestones remain? (2) On PTFE and Chemours — when will meaningful traction come on PTFE value-added grades and Chemours validation?

   Answer, Sameer Gupta, President & CFO, SRF Limited. On AIs: largely a function of registrations; no bottom to China pricing pressure has held and is now getting better — first green shoots visible on both volume and price across core products; innovator world expected to start moving once pricing pressure abates, but still early days; innovator caution to persist for the foreseeable future. On PTFE/Chemours: PTFE meaningful scale expected end of Q4 FY27/early Q1 FY28 with higher-grade capex on track; PVDF commission end of this quarter; Chemours slippage is mutually agreed due to requested design changes — adds 3-4 months versus December; timeline for meaningful fluoropolymer volumes across PTFE/PVDF/FEP3/FEP4 is end of FY28 and early FY29, with absolute full steam in FY28/FY29.

   Partly answered.

6. 6. AI asset readiness, base chemicals volume trajectory

   Archit Joshi, Nuwama39:22

   Question. Two questions: (1) On the specialty chemicals AIs — do we have asset readiness to launch the six or seven AIs, and should we read this as imminent approvals from customers with operating leverage in early quarters? (2) On base chemicals intermediates business — have we seen any volume growth despite China competition, with positive trajectory in current FY?

   Answer, Sameer Gupta, President & CFO, SRF Limited. On AIs: capacity is reasonably in place given flexible dedicated/multi-purpose plant configurations; chemistry readiness taken care of given conversations ongoing with innovators; capacity and product readiness not the constraint — only registration cycle and innovator launch timing are. No large sales-side infrastructure needed since not selling directly to innovators. On base chemicals: directional shift in volume seen over last quarter and Q1 — both volume and price improving on core set of products; not a step function yet but sequential positive; outlook is steady linear progress through rest of FY with H2 stronger than H1 — back-loaded recovery.

7. 7. Films margin baseline, US-China ref gas duties, Middle East volumes

   Ranjeet, IIFL Capital44:03

   Question. Three questions: (1) On packaging films baseline — overseas subsidiaries have been under pressure and 10-year EBIT margin trend has been 8-12%; should we now assume the new baseline is above this range? (2) On US duties on Chinese refrigerant imports up for renewal — any comments on progress? (3) On robust export volumes in refrigerants — Middle East was impacted earlier, how did volumes hold up?

   Answer, Sameer Gupta, President & CFO, SRF Limited. On films baseline: overseas locations have performed exceedingly well in last two quarters — Hungary improved significantly, Autec issues behind; expect margins north of the 8-12% range; Q1 is aberration, but sustainable margin better than that range driven by overseas shift, value-added product mix (capacitor pricing significantly different from vanilla film). On US duties on China: uncertainty around Mr Trump's actions, but no expected impact on shipments through rest of FY; pricing from China expected to hold through end of financial year — no pressure. On Middle East: Q4 had impact, Q1 actually did very well — Fluoron receiving differentiated pricing; some shipping timing disruptions but quarterly Middle East volumes robust with strong YoY growth.

8. 8. Aluminum foil ramp-up, Chemours revenue, contract duration changes

   Ankul, Access Capital49:56

   Question. Three questions: (1) On aluminum foil and Chemours contract — how quick is revenue ramp-up for both? (2) On contract duration in performance films and technical textiles — any change to longer or shorter-term contracts in last six months?

   Answer, Sameer Gupta, President & CFO, SRF Limited. On aluminum foil: already operating at optimal/full utilization; ~half of Q1 volume into Europe; aseptic expected to open up by Q1 next year, taking domestic side into better realization. On Chemours: revenue begins fairly soon after commissioning, within first year itself; FY28 lower, full steam by FY28/FY29. On contract durations: performance films saw a lot of opportunistic/panic buying in Q1, but existing long-term contracts with major FMCG players continue; some new customers entered portfolio due to reliability. Technical textiles saw raw material-driven spread renegotiation early in quarter — Q1 numbers reflect this, normalizes in Q2 but still better YoY; long-term contracts in place continue without significant directional change.

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In their words