Dear Shareholders,
On behalf of the Board of i 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.
The past year was one of geopolitical volatility and macroeconomic
uncertainties. Most of the developed economies saw growth slowing down due to record
inflation indices. While everyone's focus has been to bring inflation down, several
factors held back the recovery. Some reflect the long-term consequences of the pandemic,
the war in Ukraine, and increasing geoeconomic fragmentation. Others are more cyclical in
nature, including the effects of monetary policy tightening necessary to reduce inflation,
withdrawal of fiscal support amid high debt, and extreme weather events.
Despite the highly uncertain external environment, at SRF, our capable
team, yet again, proved to be a dependable, and future-ready partner for our shareholders.
Celebrating 50 Years of Manufacturing Excellence
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.
What does it mean to SRF to reach this milestone?
It means our position remains strong and promising for delivering
sustained performance, particularly as the end markets begin to rebound. And, despite
therecent 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.
Board Changes during the Year
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.
FY24 Performance
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.
Chemicals Business
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
therecovery 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.
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.
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.
Packaging Films Business
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.
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.
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.
Technical Textiles Business
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.
Other Businesses
(Coated and Laminated Fabrics)
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 incapturing 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.
Our Approach to Environmental, Social, Governance (ESG), our People,
& Philanthropy
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.
Maintaining Momentum on Diversity, Equity, and Inclusion
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', whichfocusses on women in the mid-to-senior
level roles at SRF, among other such tailor-made learning modules.
SRF Foundation
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.
Concluding Remarks
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,
Ashish Bharat Ram
Chairman and Managing Director SRF Limited