Our Digital Annual Report is designed to be eco-friendly through the implementation of sustainable web design principles. We leverage advanced programming techniques to ensure that our digital presence is both efficient and environmentally conscious.
Eco-designed Annual Report
Dear Shareholders, On behalf of the Board of Directors of SRF Limited, I am pleased to present the annual report for the financial year ended March 31, 2024.
A milestone year has arrived for SRF in 2024. The year in which we celebrate our “Golden Jubilee”. 50 years of serving our customers. 50 years of commitment. 50 years of excellence and innovation. 50 years of improving lives and developing our communities; and most importantly, 50 years of vision set on the present and the future. We have, indeed come a long way since our first facility in Manali commenced operations in 1974.
It means our position remains strong and promising for delivering sustained performance, particularly as the end markets begin to rebound. And, despite the recent challenges, we firmly believe our foundation for future growth is set. This optimism stems from our 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.
This year, we honoured and bid farewell to two long-time members who collectively have served close to 25 years in support of our work – Mr. L Lakshman and Mr. Tejpreet S Chopra. At this point, I would also like to extend a warm welcome to Ms. Ira Gupta and Mr. Vineet Agarwal, who join the SRF Board (effective April 1, 2024) as Independent Directors, and we look forward to their perspective and guidance on the organisation’s future.
SRF’s performance in FY24 offers a glimpse at how our diversified model, business strategies, culture and purpose all came together to help us tide over a relatively difficult year for the company and of the many ways in which we’ve cleared the runway of obstacles to tap into the growth opportunities that lie ahead.
From a financial point of view, our operating revenue decreased by 12% to ₹ 13,139 crore, EBIDTA dropped by 26% to ₹ 2,744 crore, translating to an EBIDTA margin of 21%. The company’s Profit after Tax (PAT) decreased by 38% from ₹ 2,162 crore in FY23 to ₹ 1,336 crore in FY24. While our Packaging Films and Chemicals Businesses witnessed tough market conditions, the Technical Textiles Business saw marginal growth in FY24.
Moving to my viewpoint on the performance of each of our three market-leading Businesses now.
During FY24, the Chemicals Business registered revenue of ₹ 6,297 crore, declining 15%. We underestimated the slowdown to a certain extent at the beginning of the fiscal year, which turned out to be a more protracted inventory destocking cycle from our customers’ side and led to pressure on pricing for some of our products. While we will see some short-term challenges in the Chemicals Business, I am very confident that the recovery will be strong. On the CAPEX front, in FY24, the Chemicals Business has spent ~₹ 1,700 crore on various expansion projects.
More specifically in the Specialty Chemicals Business (SCB), FY24 was a challenging year. Having said that, the team took several steps to emerge stronger. We 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, we are working very diligently on our cost structures, ensuring we run our plants most efficiently.
In order to seize future market opportunities, we commissioned nine dedicated facilities at the Dahej site in FY24. Our funnel is very strong, all AIs that we are working on, are on stream. Over the last year, and specifically in the last six months, a large number of plants have been capitalised, to the tune of ~₹ 1,800 crore. Our focus will be to ramp them up now. We believe that from the second half of FY25, we will go back to higher capex intensity, in line with our aspirations for the future.
I am also excited about our inroads into the Pharma segment. This requires a different skill set and together with our Chemicals Technology Group, I believe, we are starting to see visible progress now.
Fundamentally, we are extremely positive about this Business.
Coming to our Fluorochemicals Business –
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. US continued to destock HFC inventory. Prices were softer; and so was the demand. Despite the near-term impact on refrigerant gases, the underlying potential for global and domestic HFCs remains strong with significant traction from India, the Middle East, and Southeast Asia, which should play out in FY25. Additionally, we believe that pricing will be more rational, and we should be able to accrue benefits of that in our refrigerant gases business.
On Industrial Chemicals, Chloromethanes is going through a weak cycle. Having said that, we are now beginning to see some signs of pick-up in the agrochemicals industry, which seems to indicate that demand may improve in the months ahead. In addition, we have already started work on our next range of Industrial Chemicals and we expect this to open up a new area of growth for us.
In the Dymel®/ propellant vertical, we continue to increase our market share in both the domestic and international markets, entering new geographies and broadening our customer base.
We capitalised ~₹1,200 crore of capex in the Fluorochemicals Business, in FY24, that includes the PTFE and R32 plants along with capacity expansion of the AHCl plant. 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 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 optimise raw material sourcing, cost saving initiatives, strengthening capabilities in new product portfolio with sustainability as our priority. Overall, the business performance is anticipated to improve over last year with maximum utilisation of capacities and the commissioning of specialty fluoropolymers plants.
Broadly, I estimate the Chemicals Business to grow at ~20% in FY25 and build a strong momentum for the years ahead.
During FY24, the Packaging Films Business (PFB) registered revenue of ₹4,489 crore, declining 14%. PFB continues to face significant headwinds due to the cyclical downturn, driven by huge capacity additions in India and overseas. Having said that, SRF’s Packaging Films Business remains the best performing amongst its competitors, on account of its value-added products portfolio, long-term customer contracts, implementation of cost-saving strategies, and the Business’ ‘Easy to Do Business With’ mantra that collectively contribute to a distinct performance advantage over competitors.
However, considering the uncertain environment, we anticipate that it may still take some time before the demand-supply situation normalises, especially in the BOPET film segment. Our facility in Hungary has gone through tough times, but with the energy prices stabilising now, we expect the performance there to improve.
On the positive side, our state-of-the-art aluminium foil facility got commissioned in FY24, making SRF amongst the very few players globally who offer a wide portfolio of packaging substrates – BOPET, BOPP and Aluminium Foil under one roof.
Moreover, I am happy to share that work on the upcoming, dedicated Capacitor Grade BOPP film line, which is aimed at expanding in business adjacencies, is progressing as per schedule. This is our foray into manufacturing of higher value-added products to cater to the demand emerging from the manufacture of electronics and EV sector in India.
The Business will also continue to focus on the sustainability initiatives, driven by the ‘3R’ approach – Reduce, Reuse and Recycle.
In FY24, we reported healthy performance in the Technical Textiles Business and registered revenue of ₹ 1,898 crore. The Technical Textiles Business has had a good year, and I am pleased to share that we are now supplying Tyre Cord Fabric (TCF) to all the major tyre companies in India, which is a first for us.
The demand for our Belting Fabrics and Polyester Industrial Yarn segments was healthy during the year due to an increased Government focus on infrastructural development. Our new investment in Polyester Industrial Yarn got commissioned in FY24 and the progress in the expansion project for Belting Fabrics remains on track.
Unfortunately, Cyclone Michaung, which made a landfall in Chennai, India in December 2023, affected our facility in Manali. However, I am glad to share that all our employees are safe, and our team was able to restore and restart the machinery in record time.
Our Coated Fabrics Business attained all-time high domestic sales and EBITDA, primarily driven by a strong demand for our flagship and value-added products. This is a result of our team’s perseverance in capturing the maximum share of the growth that has happened in the market, and as the outlook suggests, we hope for continued healthy demand in the near term. The Laminated Fabrics Business has done well too, despite an oversupplied market.
Corporate citizenship & sustainability are core to our business strategy. It ensures we remain focussed on resource optimisation 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. In fact, our approach to ESG remains under constant review, responding to our operating environment as it evolves. This includes the rapidly changing ESG regulatory landscape and expectations of companies’ ESG disclosures. In 2023, we began necessary preparations for new sustainability reporting requirements, including the Business Responsibility and Sustainability Reporting (BRSR) reporting requirements.
I am also pleased to inform you that our Chemicals Business’ commitment to sustainability and pioneering work in the area of ESG continues to be recognised internationally, leading to our Dahej site being awarded a gold medal in FY24, in recognition of sustainability achievement by EcoVadis, which is one of the most recognised business sustainability ratings in the world.
Further information on our journey is available in the ESG section of this Report.
We are continuing our focus on building a more diverse organisation and an equitable and inclusive culture so that everyone feels welcome, valued, and included. By taking steps to ensure equal opportunity and non-discrimination, we are delivering on our ambition to make our teams more diverse and inclusive.
In addition, we support development for all with numerous offerings for our employees. As part of our annual training, this year, we introduced a special development journey, ‘Aspire to Inspire’, which focusses on women in the mid-to-senior level roles at SRF, among other such tailor-made learning modules.
Systemic change takes time and needs to be addressed at many levels to be sustainable. Through careful assessment and prudent investments, I believe we have been able to make considerable progress in our philanthropic journey.
Today, over 1,75,000 children have better access to quality education. In the realm of health, we have recently launched two innovative programmes that promote community health and provide awareness on preventive healthcare, diagnosis, and the treatment of basic illnesses. The Foundation is working on various other initiatives as well and I would encourage all of you to read the Foundation’s annual report to get a better understanding of how we are making a positive impact in the lives of the not so fortunate.
SRF Vidyalaya, Manali, India
I believe that FY25 will be better than FY24, for the Chemicals business and on an overall basis for the company as a whole.
While the Chemicals Business will show a recovery, possibly more towards the 2nd half of FY25, 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 downcycles, which in reality, is a part and parcel of this industry.
Before I close, on behalf of the Board, I would like to thank our passionate and talented employees for their commitment in driving SRF’s growth in a responsible, forward-thinking way. Thank you also to my fellow Board members and the entire SRF management team for your commitment and collaboration. I’m honoured for the opportunity to work with you. Lastly, we want to thank our shareholders for the trust you’ve shown in our growth strategies and leadership. We look forward to continuing this journey with you.
Sincerely,
Chairman and Managing Director SRF Limited
