SRF Limited (SRF) Q4 FY23 Earnings Concall Transcript

SRF Limited (NSE:SRF) Q4 FY23 Earnings Concall dated May. 10, 2023.

Corporate Participants:

Nitika Dhawan — Head of Corporate Communications

Ashish Bharat Ram — Chairman and Managing Director

Rahul Jain — President and Chief Financial Officer

Analysts:

Ranjit Cirumalla — IIFL Securities Limited — Analyst

Sanjesh Jain — ICICI Securities — Analyst

Amar Mourya — AlfAccurate Advisors Private Limited — Analyst

Rohit Nagraj — Centrum Broking Limited — Analyst

Sumant Kumar — Motilal Oswal Financial Services Limited — Analyst

Vivek Ramakrishnan — DSP Mutual Fund — Analyst

Abhijit Akella — Kotak Securities — Analyst

Rohan Gupta — Nuvama — Analyst

Madhav Marda — Fidelity International — Analyst

Arjun Khanna — Kotak Mahindra Asset Management — Analyst

Dhruv Muchhal — HDFC Mutual Funds — Analyst

Vivek Rajamani — Morgan Stanley — Analyst

Suryanarayan Patra — PhillipCapital India Private Limited — Analyst

Dharmil Shah — Marcellus Investment Managers — Analyst

Vishnu Kumar — Spark Capital — Analyst

Krishan Parwani — JM Financial — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to SRF Limited Fourth Quarter FY ’23 Earnings Conference Call hosted by IIFL Securities Limited. [Operator Instructions]

I now hand over the conference to Mr. Ranjit Cirumalla from IIFL Securities Limited. Thank you, and over to you, sir.

Ranjit Cirumalla — IIFL Securities Limited — Analyst

Thank you, Jiku. Good afternoon, everyone, and thank you for joining us today. We, at IIFL Securities are pleased to host SRF Limited’s Q4 and FY ’23 year’s conference call. We have with us today Mr. Ashish Bharat Ram, Chairman and Managing Director; and Mr. Rahul Jain, President and CFO of SRF Limited.

I would now like to invite Ms. Nitika Dhawan, Head of Corporate Communications at SRF to initiate proceedings for the results call. Thank you, and over to you, ma’am.

Nitika Dhawan — Head of Corporate Communications

Good afternoon, everyone, and welcome to SRF Limited’s quarter four and FY ’23 results conference call. Joining us on the call today is our Chairman and Managing Director, Mr. Ashish Bharat Ram; and our President and CFO, Mr. Rahul Jain.

We shall start today’s call with our CMD’s remarks on the Company’s performance in FY ’23 and the overall strategy, business outlook and growth plans in the future. After which, the call will be opened for a Q&A with Mr. Jain.

Please note that anything we say that refers to our outlook for the future is a forward-looking statement and a disclaimer to this effect has been included in the earnings presentation shared with you earlier.

I would now invite our CMD, Mr. Bharat Ram, to make his [Technical Issues].

Ashish Bharat Ram — Chairman and Managing Director

Thank you, Nitika. Good afternoon to all of you. It is a great privilege to be able to share my thoughts on the business performance in the fiscal year gone by and the growth opportunities that lie ahead.

Financial year ’23 has been a good year for the Company. Our operating revenue increased by 20% to INR14,870 crores, EBITDA grew by 18% to INR3,708 crores, translating to an EBITDA margin of 25%. The Company’s profit after tax increased by 14% from INR1,889 crores in financial year ’22 to INR2,162 crores in financial year ’23.

While our Packaging Films Business and Technical Textiles businesses witnessed a drop in profits, the Chemicals Business performed extremely well. It gives me notable cause for optimism. SRF’s diversified business model continues to remain one of our key strengths. The opportunity ahead is significant and our strategy along with our execution capabilities give us a clear edge in our chosen space. I think from the perspective of the capital markets, the quality of earnings has improved and our Chemicals Business is now contributing even more significantly to the overall performance of the Company.

Moving to my view point on the future of each of our three market leading businesses. I’ll begin with the Chemical Business. During fiscal year ’23, the Chemicals Business grew around 41% and registered revenue of more than INR7,400 crores, which is higher than our earlier guidance. Looking ahead, I’m fairly confident that we can continue to achieve a 20%-plus growth in financial year ’24 as well. The return on capital employed for ’22 — for financial year ’22 and financial year ’23 were 25% and 32% respectively, which have been extremely healthy.

Going forward, we believe that to keep growing this business at 20% topline growth, the ROC levels may moderate a little bit from this level. We are seeing a strong traction from our customers and our focus will be on expanding our product portfolio. The new plants being scaled up at an even faster pace than before. As we speak, we have over these INR2,000 crores in capital work-in-progress at this stage with seven plants coming up in the Specialty Chemicals Business and three plants in the Fluorochemicals Business in financial year ’24. We believe our capex intensity will remain strong going forward as well.

More specifically in the Specialty Chemicals Business, we will continue to capitalize on the growing demand for key products. We’re expecting innovators to bring more complex and downstream products for the business and we are currently working on a significant number of projects that provide future growth visibility. To address some of the future product requirements and to keep pace with the market opportunities, we have invested substantially in people, assets and capability building. And I expect approximately seven to eight active intermediates projects to fructify in the next couple of years. Our focus on the pharma vertical is to ramp-up sales from our new intermediates plant in the near-term. Subsequently, we would like to move into a contract development and manufacturing organization role in this segment. This could be through organic or inorganic needs in the future.

Coming to our Fluorochemicals Business, in the refrigerant gas segment our focus would be on the domestic business in the first quarter and on the US market in the next couple of quarters. Having said that, the cool summer in India hasn’t been good for us, but we expect this to be a temporary setback. We are also looking at building our exports into the Middle East from quarter two. As a result, we may have a weak quarter in our ref gas business in quarter one, but are confident of making up lost ground later in the year.

On the projects front, our PTFE plant got delayed as the commissioning engineers could not travel to — could not travel due to COVID-linked restrictions from China. With in-house talent and expertise, we are now going ahead with the commissioning ourselves and samples have been produced to the market. We see this actually as a positive step as will only aid in talent development and experience building for all our future expansion to Fluoropolymers.

Our strategy on the net generation HFOs gas have shaped up well and we will share more on the project as soon as groundwork is complete. We expect to have globally competitive non infringing processes in our portfolio by the time these plants come up. We’ve also started work on our next range of industrial chemicals. This will open up a new area of growth for us beyond the chloromethanes chain and could be linked to opportunities arising out of import substitution.

On the infra side, we are in the process of signing an MOU for a parcel of land in close proximity to our existing site of Dahej, which will create huge synergies for us. Overall, I remain bullish on the Chemicals Business and strongly believe that this is India’s decade. While minor blips may hit the market, the sectorial story is very strong, especially at SRF where we have built robust capabilities. Having said that, the global economic scenario is showing recessionary trends, and we need to be careful of any unexpected bumps that can cause short-term demand blips.

Over to the Packaging Films Business now. The business continues to face strong headwinds with margins plummeting to all-time lows in the fourth quarter of financial year ’23. As stated earlier, this has been on account of several new lines getting operationalized on both BOPET and BOPP film segments in India and overseas. While SRF has been able to run its plants at reasonable levels, a lot of capacity has already seen projects happening due to cash losses. As an industry-leader and one of the bigger players in the packaging space, our forecast is for things to improve from here on as many players are dealing under tremendous pressure.

Our operations in Hungary suffered heavily last year due to exponential increase in energy costs. We are still seeing some moderation in the Energy Index and are confident of a better performance this year. We have also debottlenecked the capacity in South Africa by 15%, which will give us some added benefits in the year ahead.

For SRF, our strong relationships with our customers, which stems from our easy-to-do-business-with mantra and a focused concentration on VAP sales has come to our rescue. The Aluminium Foil project is likely to start towards the end of quarter two in financial year ’24. We have increased our capabilities to manufacture thinner gauge foils, as well as improved quality parameters, which has led to some increase in project costs. However, there IRRs of project remains healthy.

So the Aluminium Foil project coming on stream, it will make SRF one of a handful of companies globally that provides three of the major substrates BOPET and BOPP and Aluminium Foil. We believe that the ability to cross-sell all three will be unique to SRF. As demand pivots towards global suppliers with multi-location facilities and with our focus on operational efficiencies, cost reduction initiatives to mitigate volatility and a strong customer relationships, we remain cautiously optimistic about the prospects of this business.

Moving to our Technical Textiles Business. Trends are showing a slight improvement in demand for nylon tire cord fabric. This is based on our interactions with the customers and we opened sustainable. Our focus will be on ramping up capacity utilization this year. In the future, we will build on the non-target market in order to derisk Technical Textiles from NTCL. We expect the demand for belting fabrics to grow in the near future due to an increased government focus on infrastructure development.

Sales of high end VAPs and commercializing solid woven products will be our focus in the belting fabric segment. The polyester industrial yarn demand is expected to go up with key drivers being Geo Textile and seatbelts. Overall, this business will experience moderate growth. Core to our purpose, is a need to uplift everyone and equal importance and community engagement initiatives and constantly strive to give back to society. With a focus on education transformation and rural India, the SRF Foundation is working on the physical infra growth, quality of academics and school leadership development as focus areas. Presently, we have reached 382 government schools across 23 locations in 12 states directly and indirectly by collaborating with like-minded partners, providing quality education to over 150,000 students and training more than 2,500 teachers and headmasters.

In conclusion, I believe that our Chemicals Business will continue to do well and become a bigger part of the pie. In that sense, we are becoming more of a chemical company. Our Packaging Films business is expected to have a tough year, but we will find countermeasures as we go along. This is part and parcel of business cycles.

Depreciation, interest will both grow substantially because of the high capitalization of projects and as a result of the elevated interest cycle that exists today. This is a reality that we will have to accept. If interest rates start falling towards the end of financial year ’24, we can expect to see the benefits of this next year.

With a strong balance sheet, we will continue to invest aggressively in our Chemicals Business and work towards capitalizing the many attractive growth opportunities we see in this business.

Overall, we are optimistic about the future growth opportunities and of our capabilities to deliver a solid performance and drive returns for our shareholders. Thank you.

Questions and Answers:

Operator

Should we begin the Q&A session? Okay. Thank you very much. [Operator Instructions] Our first question is from the line of Mr. Sanjesh Jain from ICICI Securities. Please go ahead.

Sanjesh Jain — ICICI Securities — Analyst

Thank you. Good afternoon, everyone, and thanks for taking my question. I got few of them, but I will restrict it for three. First on the fluoro specialty, it has been another phenomenal year five years in a row. Great show. But what we are hearing in the market is slightly a mixed trend. Innovator have maintained a positive outlook, while generic has seen a sharp dip in realization over 30% to 40% in few products. We are also hearing some inventory build-up in America market, as well. Can you share how is your discussion with the customer progressing particularly for a PO in 2023? I know you have given a 20% guidance that clearly states that we are looking a very healthy rate, but some more insight like whether you’re looking at a same product growth or it is more driven by the new product addition that will be appreciated. Thank you.

Rahul Jain — President and Chief Financial Officer

Thank you, Sanjesh, for the question. Again, we’ve discussed this internally. What you are saying, maybe right to a certain extent in terms of generic products that are coming from China being at price lower today to a certain extent linked to the fact that there were COVID restrictions in China, but majority of our business and we’ve discussed about this internally is largely 80%, 85% of the business is innovator-driven.

From a customer perspective, from a new product perspective, from the positioning with respect to all of the majority of our customers, we have not seen any, let’s say, demand reduction or demand burn that is a starting point. In fact, would like our Managing Director pointed out, we are in fact looking at a position where we are capitalizing on new opportunities on the AI side that are coming in. Like he said, seven to eight AIs are the ones that we are looking at which should get positioned over the next two years. So that’s how we are looking at it. Again, not seeing any negatives on that side because we are more linked to the innovators, rather than being linked to, let’s say, generics. Hope that answers you, Sanjesh.

Sanjesh Jain — ICICI Securities — Analyst

Fair enough. Fair enough. And this 20% guidance is for the Specialty Chemicals, right, not for the Chemicals entirely?

Rahul Jain — President and Chief Financial Officer

So, generally speaking, we give the guidance for the overall business is what MD had said. But yeah, when we look at it from an overall basis, 20%-plus is what we are expecting for Specialty as well.

Sanjesh Jain — ICICI Securities — Analyst

Got it. Fair enough. Second, on the refrigerant gas, again, a very strong performance. Prices continue to remain firm and strong, but going into 2024, there is a 30% consumption cut notified in the US and India is adding another 30,000 metric tonne in R22 including 15,000 by us. How should we see the realization and probably geographical change in FY ’24 out of US to more Middle East and other markets, which MD sir has highlighted in his opening remark as well. So how should one see this realization on the blended basis for SRF?

Rahul Jain — President and Chief Financial Officer

So, Sanjesh, you are right that the US will have a 30% cut in starting January 1, 2024. Two or three things to understand here. The first thing is, it’s not just the consumption cut, it’s a production cut also. Based on our calculations, we believe that US will remain a net importer of HFC. Now, it could be a change in mix, it could be a change in the positioning of HFC that could happen, but net-net US still remains a net importer of HFC. And therefore, that’s a positive for us.

When you look at it from a overall perspective in terms of the 30,000 tonne in terms of the 15,000 tonne new plant of 32 that is coming up for SRF, the way we’ve ramped it up is probably over the next 12 months to get to about 70% utilization and in the second year, probably get to about 100% utilization. So we believe that there are markets for this available in the Middle East, which we have — which are already home market for us, where we have a position that we can create. So that’s something that we’re are looking to do, Sanjesh.

We are fairly confident of the fact that we should be able to ramp-up our production of the new 32 pretty soon with, let’s say, 12 months’ time post its initial commissioning, 12 to 18 months.

Sanjesh Jain — ICICI Securities — Analyst

Got it. But, Rahul sir, just a small clarification. I thought that we have to sell that entire capacity in CY ’24 to get eligible for the quota for the baseline calculation. Is it —

Rahul Jain — President and Chief Financial Officer

So the baseline calculation from an India perspective are not production-based. They are total consumption based. And within those consumption, what you’re selling into the Indian market.

Sanjesh Jain — ICICI Securities — Analyst

Okay. So that will not pressurize to sell this 100% [Speech Overlap]

Rahul Jain — President and Chief Financial Officer

But again, Sanjesh, you have to understand, this is not just from a gas-by-gas perspective, it is a total GWP positioning there as well.

Sanjesh Jain — ICICI Securities — Analyst

Oh, yeah, yeah, yeah. Fair, fair, fair. Got that point. Last is on the fluoropolymer. There’s a slight delay in PTFE, but if we look at Europe is slightly going stringent as far as the fluoro piece itself is concerned on the polymer side. Are we worried or do you think none of those regulations will have any negative impact on the fluoropolymer business which we are trying to build? And how should we see this fluoropolymer business for us from an FY ’24 perspective? Will it be more of a qualification and stabilization period and ’25 is the real right period for us versus the performance.

Rahul Jain — President and Chief Financial Officer

So, the first question, let me answer first in terms of [Indecipherable] of Europe. Now fluoropolymer for various applications, be it from a solar application, battery application or for that matter other applications, which are more generic in nature or industrial applications, it’s still a need. While Europe has started to talk about the regulation around it in terms of certain types of surfactant-free positioning that they have to create, it is something that is still in the pipeline, it has not come through. The need for fluoropolymer doesn’t go away.

Our sense is that the market is large enough, the market is growing. We have a positive position in terms of the fluoropolymers that we have, we will start PTFE soon and the three other that we’ve announced is a two-year project. We are fairly confident of our technology being PFOSE. So that’s also something that that’s a positive for us. Hopefully, in the future we can ramp that up at a significant pace.

Sanjesh Jain — ICICI Securities — Analyst

Thank you, Rahul sir. Thank you very much for answering all the question and best of luck for the coming quarter.

Rahul Jain — President and Chief Financial Officer

Thank you, Sanjesh.

Operator

Thank you. Our next question is from the line of Amar Mourya from AlfAccurate Advisors Private Limited. Please go ahead.

Amar Mourya — AlfAccurate Advisors Private Limited — Analyst

Sir, thanks a lot for the opportunity. Sir, first question is on the Specialty Chemical. I mean, I am little — like you said that 20% guidance is for the home chemical business as well, right? That is what you are saying or 20% guidance is for Speciality Chemicals.

Rahul Jain — President and Chief Financial Officer

Don’t drill into too much, Amar. 20% for specialty as well. 20% plus is what he said, and 20% plus is what we are maintaining. You also know our track record, Amar. So be positive about it.

Amar Mourya — AlfAccurate Advisors Private Limited — Analyst

No, that is what I’m asking, Sir. Last time you guided 20% and you delivered 29% growth. Now this time, you’re talking about 20%-plus, so basically going by the track record like it should be like more than 30% growth this year as a whole.

Rahul Jain — President and Chief Financial Officer

Okay. Amar, the way we look at it and when we look at giving you our positioning in terms of growth, what we essentially evaluate is what are the kind of positions that we’re taking on certain products, what are the kind of opportunities that we are seeing, what are the market scaling that we have done, let’s say, to a certain extent, what kind of orders do we already have on hand. Based on that, we calibrate that number and effectively give you a number.

As time passes, as quarters go by, we also get a better sense in terms of what is happening in the markets, which also then gives us the confidence to be able to tell you whether it will be higher or lower, right? So that’s how we calibrate it and my sense is, again, it’s better to be able to give you a smaller number and then outperform rather than the other way around. And I suppose you will agree with it.

Amar Mourya — AlfAccurate Advisors Private Limited — Analyst

Yeah. And secondly, sir, these new projects like seven in pharma products and three plants are likely to commission in second half of ’24 or in the first half of ’24?

Rahul Jain — President and Chief Financial Officer

Which ones are you talking about, Amar?

Amar Mourya — AlfAccurate Advisors Private Limited — Analyst

Sir, these new projects in Specialty Chemicals, something around INR1,000 crore capex likely to commission in Specialty Chemicals, let’s say, that will happen more in the second half of FY ’24 or in the first half of FY ’24?

Sanjesh Jain — ICICI Securities — Analyst

Some products that were announced earlier, will get capitalized during Q2 and to a certain extent Q1 as well some products will get capitalized, but let’s say majority, let’s say, 60% to 70% will get capitalized in H2 only.

Amar Mourya — AlfAccurate Advisors Private Limited — Analyst

Okay. And lastly, sir, in term of the Specialty Chemical’s profitability —

Rahul Jain — President and Chief Financial Officer

Sorry, you’re not clear, Amar. Could you repeat the question please?

Amar Mourya — AlfAccurate Advisors Private Limited — Analyst

I’m saying for the overall profitability of the Chemical Business, like, this year the profitability was largely driven by the R gas, now we are talking about in Q1 R gas is going to be a little weak, but are we confident on a full-year basis will be able to maintain the profitability for the overall Chemical Business related to the FY ’23?

Rahul Jain — President and Chief Financial Officer

Okay. Amar, when you look at numbers — pure numbers, again Q4, was a phenomenal quarter for the Chemical Business as a whole. As we go ahead in time, we will see, to a certain extent, some moderation happening, but again, with a 20% growth with ROCE that at certain levels that we are seeing, minor moderation is okay. It is still at very, very, very healthy levels that we’ve got to, we are fairly confident of the new product, let’s say, positioning that we have created both in the Specialty Chemical space as well as in the fluorochemical space. So those should aid to volume growth and revenue growth, hopefully margin accretive as well.

Amar Mourya — AlfAccurate Advisors Private Limited — Analyst

Okay. And PTFE will come in third quarter?

Rahul Jain — President and Chief Financial Officer

No, no, PTFE should commission by end of May, mid of June and subsequently there will be product that will come out, we will have to go for approval. Once that comes in, hopefully, Q3 and Q4, we’ll start to see some revenue positives.

Amar Mourya — AlfAccurate Advisors Private Limited — Analyst

So this full-year basis at least you will reach some 30% to 40% utilization in PTFE.

Rahul Jain — President and Chief Financial Officer

If we get to 50% of available capacity in H2, we should be happy about it.

Amar Mourya — AlfAccurate Advisors Private Limited — Analyst

Okay. Perfect, sir. Thank you. Best of luck for the future.

Rahul Jain — President and Chief Financial Officer

Thank you.

Operator

Thank you. Our next question is from the line of Rohit Nagraj from Centrum Broking. Please go ahead.

Rohit Nagraj — Centrum Broking Limited — Analyst

Thanks for the opportunity, and congrats on again very strong set of numbers on the Chemicals Business. First question is on the PFB segment. So in the earlier remarks and presentation, we have mentioned that margins pressure to continue in medium-term. So will it be for the next couple of quarters or for FY ’24. And will that be also accompanied by any volume impact too? Thank you.

Rahul Jain — President and Chief Financial Officer

Okay. Rohit to be very frank about it, it’s a generic statement, when we see new lines that have got added when we’ve seen majority new capacities that have got added. If you’ve seen in the presentation that was uploaded, we are also seeing significant stress in the market, where some of the capacities that have got added or lines are starting to get delayed. There are positions that are getting created. Whether it will be over the next two quarters or three quarters, I really can’t tell you. But over the medium-term, maybe this year, we should see some positives coming out of a very bad Q4 we should start to see some positives in this financial year is what we believe will happen.

Rohit Nagraj — Centrum Broking Limited — Analyst

Right. And will there be any volume impact?

Rahul Jain — President and Chief Financial Officer

Okay. The overall capacity utilization for SRF has been in the range of about 92% to 95%. We don’t believe there will be a volume impact, but there may be some minor volume impact that can come through. In fact, I would say with Hungary starting to perform better, our volume should actually be slightly higher only. Also to allude to the fact that our South Africa plant has got debottlenecked probably after with a decrease of 10% to 15% in terms of the overall capacity available, we should see a volume positive in terms of those.

Rohit Nagraj — Centrum Broking Limited — Analyst

Sure. This is helpful. Second question is, in terms of volume growth for FY ’23 and for Q4, can you spell out generally across the segments what has been the volume growth?

Rahul Jain — President and Chief Financial Officer

Okay. Very difficult to do in that sense, but let me just give you an overall guidance around it from a fluorochemicals business perspective certain volume growth would have happened given the fact that we’ve commissioned our CMS plant, higher volumes from the CMS business, have had higher volumes in HFC. So that’s a positive. So there would be certainly volume increase that is happening.

On the Specialty Chemicals Business, no doubt, new plants have got commissioned, new products have got, let’s say, instituted in the market and that’s why we believe there’s a — I’m sure there is volume growth on that side. I can’t give you exact numbers in terms of what’s the percentage volume growth. Packaging Film also, there we had lines that got commissioned over I think in July or August of ’22. So there is certainly volume increase on that side, but Hungary would have been a negative volume compared to FY ’22. So that’s the overall sense of this. Technical Textiles, again, we have said that the demand has been weak, and therefore we’ve kind of seen lower volumes on Technical Textiles, which should improve going forward.

Rohit Nagraj — Centrum Broking Limited — Analyst

Sure. Thanks a lot, and best of luck, sir.

Rahul Jain — President and Chief Financial Officer

Thank you.

Operator

Thank you. Our next question is from the line of Sumant Kumar from Motilal Oswal. Please go ahead.

Sumant Kumar — Motilal Oswal Financial Services Limited — Analyst

Yeah, sir. So, can you discuss — talk about the agro globally, the higher inventory of agrochemical, so is there any impact in our business, and you have assumed 20%-plus growth whatever the scenario currently in agrochemical industry?

Rahul Jain — President and Chief Financial Officer

So, again, I think somebody, Sanjesh had asked the question with respect to the generic play and the inventory positioning. I think the answer to that is similar Sumant. We are not seeing any negative impact in terms of our overall volume. We believe our position with respect to AI that is being created is a positive. We believe that the capital expenditure of seven plants that are currently under the works will be a positive going forward. So that’s how we would look at it Sumant. Again, the inventory creation is probably more generic in nature, which is not the innovator side and therefore a positive for us.

Sumant Kumar — Motilal Oswal Financial Services Limited — Analyst

And for the Chemical margin, we have seen in EBIT margin in FY ’23 is around 31.6%. So do you think, what you are saying that the minor correction, so can we assume a couple of percentage decline in margin or more?

Rahul Jain — President and Chief Financial Officer

So again, Sumant, when I am talking about some, let’s say, moderation happening, I’m probably talking more from a Q4 perspective rather than an annualized perspective.

Sumant Kumar — Motilal Oswal Financial Services Limited — Analyst

Okay. Okay. And the last question is the capex side —

Rahul Jain — President and Chief Financial Officer

Just let me complete, Sumant. On an overall basis, we are fairly confident that the margin profile should remain positive for us.

Sumant Kumar — Motilal Oswal Financial Services Limited — Analyst

Okay. So, we can assume ’24 will have a margin expansion Y-o-Y annually?

Rahul Jain — President and Chief Financial Officer

Okay. Sumant, I’ll leave that judgment to you like what do you want to consider as margin. I can only give you some guidance around it.

Sumant Kumar — Motilal Oswal Financial Services Limited — Analyst

Okay. And what is the capex for FY ’24-’25?

Rahul Jain — President and Chief Financial Officer

So as of now, we have roughly about — let’s say, about INR1,200 crores, INR1,300 crores of overall projects that are on the ground for cash to be spent in FY ’24, our sense is that on overall basis, we will get to about INR2,500 crores in terms of cash spent on capex.

Sumant Kumar — Motilal Oswal Financial Services Limited — Analyst

Okay. Thank you so much, sir.

Operator

Thank you. Our next question is from the line of Vivek Ramakrishnan from DSP Mutual Fund. Please go ahead.

Vivek Ramakrishnan — DSP Mutual Fund — Analyst

Hi. Sir, my question was going to be on capex only, so let me just turn it around. Given the fact that there are certain pockets where you are cautiously optimistic, would you look at pairing capex and indeed manage to debt levels extremely well to the longer large capex cycle. So what is the peak level of indebtedness that you see in the Company going forward in the next one year?

Rahul Jain — President and Chief Financial Officer

So again when we look at this, Vivek, the position is that we don’t look at — while we do look at the overall number on the debt, we are not looking at pairing the growth opportunities that we are seeing. So if there is a growth opportunity that is significant, we will certainly invest, given the fact that our overall net debt to EBITDA on the balance sheet side is still at 0.89 or so, right. With the capex cycle that we are running, we will probably get to a slightly higher number, but not very significantly different from where we are. It will, to my mind, certainly remain in the range of less than 1 for sure. So we’re happy to invest again, it’s best to invest to a certain extent when the opportunities presenting itself. I don’t see us pairing our capex growth for managing the balance sheet. I think the balance sheet is in fairly good shape.

Vivek Ramakrishnan — DSP Mutual Fund — Analyst

That I agree, sir. All the best, sir.

Rahul Jain — President and Chief Financial Officer

Thank you.

Operator

Thank you. Our next question is from the line of Abhijit Akella from Kotak Securities. Please go ahead.

Abhijit Akella — Kotak Securities — Analyst

Yeah. Good afternoon, Rahul ji. Thanks a lot for taking my questions. Just a few data points I was kind of hoping to get. One is on the Fluoro Specialty Business, would it be possible to share the revenues for the full-year FY ’23 or at least the growth rate Y-o-Y?

Rahul Jain — President and Chief Financial Officer

I am sure you would have asked that question, so on the overall basis my overall Chemical Business turnover was roughly about INR7,400 crores, give or take INR10 crores here or there, Specialty Chemicals did about INR4,200 crores this year and INR3,200 crores was Fluoro.

Abhijit Akella — Kotak Securities — Analyst

Got it. Thank you. That’s helpful. Also the CMD referred to this dip in ROCE potentially from 32% levels currently. So just sort of trying to get a sense of whether we should expect that to be driven by lower margins or is it just slightly increased capex, which will take its own time to sort of translate into revenues?

Rahul Jain — President and Chief Financial Officer

So again, the fact is that these ROCEs are in fairly good shape when we look at it from an overall perspective in FY ’23 and as well as in FY ’22. The fact is that even if there is an opportunity to, let’s say, drive out some other new products, which are if not ROCE negative, but will take more time in adding to the ROCE positive, we are happy to do it. Again, this is like in Hindi called [Foreign Speech] we are happy with 28%, 29% also. That’s how it is structured. So we are happy with ROCEs in excess of 25%, 27% for new projects that come in, so that’s how we look at it, Abhijit.

Abhijit Akella — Kotak Securities — Analyst

Got it. Helpful. Then just one last thing from me. There was also mention of plans to foray into the contract manufacturing or CDMO space in pharma and there was a mention that it could be through organic or inorganic means as well. So I mean, if you could just share some more detail around the thought process out there.

Rahul Jain — President and Chief Financial Officer

The way we are thinking about it Abhijit is that the PIP plants are starting to expand. In fact to a certain extent we believe if we want to populate the PIP plant completely, we can do that today itself. We are looking at more complex products, products that add more value, products that are margin accretive and over a period of time in order to be a large player in pharma, we will also have to look at a contract development manufacturing system or set up to be created. Whether it gets created organically over a period of time, adding capabilities, adding assets, investing in people or through an acquisition, we are happy to look at both is what he alluded to.

Abhijit Akella — Kotak Securities — Analyst

Perfect, sir. Also just a South Africa addition. does it add 10% to 15% to overall PFB volumes or is it basically South Africa.

Rahul Jain — President and Chief Financial Officer

No, no, no. We did add to South Africa volume.

Abhijit Akella — Kotak Securities — Analyst

10%-15% debottlenecking to South Africa. Got it. Thank you so much and all the best.

Rahul Jain — President and Chief Financial Officer

3,500 tons a month, the total annual monthly capacity goes to 3,500.

Abhijit Akella — Kotak Securities — Analyst

Thanks a lot. All the best, sir.

Rahul Jain — President and Chief Financial Officer

3,500 annually.

Abhijit Akella — Kotak Securities — Analyst

Yes. Understood. Thank you.

Operator

Thank you. Our next question is from the line of Rohan Gupta from Nuvama, please go ahead.

Rohan Gupta — Nuvama — Analyst

Hi, sir. Good evening, and thanks for the opportunity. Sir —

Rahul Jain — President and Chief Financial Officer

Rohan, heavy background noise. Could you come close to your phone?

Rohan Gupta — Nuvama — Analyst

Sure, sir. I hope it is better sir.

Rahul Jain — President and Chief Financial Officer

Slightly.

Rohan Gupta — Nuvama — Analyst

Sir, I was saying that on our PTFE plant, which is going on stream in the second-half you mentioned how soon we can expect the PTFE value chain product portfolio to improve, because I understand that initially we are definitely going to start on the commodity grade with a lower margin. So how you see that the ramp up in the product value chain we can achieve?

Rahul Jain — President and Chief Financial Officer

So, again, Rohan, I think the way we look at it is to be able to ramp the plant up fully initially as the confidence with respect to the product come through as we get more approvals coming through. We will move into more specialty grade. It’s not an overnight position to be created, my sense is as we take the PTFE journey, we will probably have to take 12 months to be able to start getting into more, let’s say, specialty grades.

Rohan Gupta — Nuvama — Analyst

So first, we will ramp it up to 100% from 75% and then next year will be the focus —

Rahul Jain — President and Chief Financial Officer

No, no. Don’t look it from a sequential perspective, look at it from a perspective that, let’s say, when we are getting to 50%, 60% and if the customer demand more specialty grades, we are happy to work on it and be able to deliver that. But it has to ramp up to a certain extent existing product has to get approvals before we, let’s say, ramp up very significantly on the specialty side.

Rohan Gupta — Nuvama — Analyst

Okay. And, sir, if I just read between the lines, then you are saying that is still in FY — I mean current year, we will definitely strive for growth. However, the headwinds are in Packaging Film, where the scenario is still weak over next couple of quarters and we are also guiding about pressure in that gas pricing scenario. So and the growth driver will be probably for the current year is Specialty Chemical business, where we are confident about 20%-plus growth. So on an absolute level the confidence, which you are bringing is still a growth momentum to be maintained. It just not able to do the math that how the profitability impact which will be there in two segments, large two segments in packaging and as of gases will be there. How we will be able to compensate from the other business mainly specialty because I don’t expect anything going to change materially in Technical Textiles?

Rahul Jain — President and Chief Financial Officer

Rohan, to be very frank, I’m lost with the question. What is it that you’re trying to ask?

Rohan Gupta — Nuvama — Analyst

Sir, I’m saying that in all your conversation you’re still guiding about that at the bottom line at the EBITDA level, we are still looking growth on an absolute number compared to last year, I mean FY ’23.

Rahul Jain — President and Chief Financial Officer

So let me clarify. When we said 20%-plus, we were talking about Chemicals Business. Okay? Packaging Films will hopefully grow from this level given South Africa addition and to a certain extent Hungary coming back in terms of overall volumes, which is what I had said earlier on the call as well. Again, on the Technical Textile piece I think we had alluded to it, saying that we are seeing a positive trend in terms of demand from customers, hopefully that should pan out as well. That’s how we are looking at it, but when we said 20% it was more reference to the Chemicals Business rather than Company as a whole. I hope that clarifies.

Rohan Gupta — Nuvama — Analyst

Yes, sir. I understand. But 20% also we are talking about on a revenue front, right? I’m looking more at the bottom-line or at EBITDA level performance for the current year. There seems to be two big headwinds, which we are going to face in the current year, which looks difficult to get compensated from the Specialty Chemical Business improvement. So I just needed some clarity, though it’s good to have ambitious target but aren’t we looking a slightly moderation or a degrowth kind of scenario in FY ’24 with these two segment headwinds? That’s what — I just needed some clarity on that.

Rahul Jain — President and Chief Financial Officer

Okay. So, Rohan, again, we’ve said that there may be some headwinds in Q1 for the Fluorochemicals Business given that there is — there might be — it’s not seemingly a very hot summer that we are seeing, but it is also to be pointed out that we’ve also said that we believe it could — it is temporary and we will ramp, let’s say in the course of let’s say Q2 and Q3 we will ramp up our Middle Eastern sales, we will ramp up our US sales. All of that is a positive. So I don’t believe that there are very, very significant headwinds, either in terms of price. From a full-year basis, the reference when we made to fluorochemicals price was more from the trend what we’re seeing in terms of the weather panning out in Q1.

Rohan Gupta — Nuvama — Analyst

Okay. So it is more in Q1 rather than full-year. Okay. Okay. Thank you, sir. Thank you so much.

Operator

Thank you. Our next question is from the line of Madhav from Fidelity. Please go ahead.

Madhav Marda — Fidelity International — Analyst

Yeah. Hi, sir. Good afternoon and thank you so much for your time. I just had one question, when you said, we want to enter the pharma CMO space and could look at in M&A. Just wanted to understand what exactly — what kind of capabilities or what is it that you’re looking at in the target when we are evaluating various opportunities? Is it like we are looking for CGMP plant or is it some certain other capabilities? Just wanted to understand.

Rahul Jain — President and Chief Financial Officer

So, to be very frank, Madhav, the way we are looking at is that we already have a CGMP, we already have a new PIP plant that has recently been commissioned. When we are looking at adding capabilities, obviously, in due course of time, if there is a specific AI which is a larger requirement, we will have to put up that plant. And like I said, we are happy to put up that investment to be able to capture that growth. Now, it could be a specific AI plant, it could also be to a certain situation where there are three products that are manufacturing, which are going into a single AI, I might be just doing a forward integration of that as well. So there are various permutations and combinations around it.

Madhav Marda — Fidelity International — Analyst

Could this M&A also be for certain like R&D capability or certain like chemistry capability of the target as we look at pharma CDMO or is it just move for the plant?

Rahul Jain — President and Chief Financial Officer

No, no, it could be both ways. It could be capacity, it could also be to a certain extent, R&D, it could also be providing a front, it could also be entry positioning into Europe, it could be multiple, let’s say, opportunities, and it will depend on the opportunity that it presents.

Madhav Marda — Fidelity International — Analyst

Understood. Okay. Thank you so much.

Operator

Thank you. Our next question is from the line of Arjun Khanna from Kotak Mahindra Asset Management. Please go ahead.

Arjun Khanna — Kotak Mahindra Asset Management — Analyst

Thank you for the opportunity and congratulations on a good set of numbers. Sir, just on this M&A activity, if you could just specify in sense may be more generic, are we looking at assets in India, outside India, do we have a ballpark in terms of capital to be deployed for the same?

Rahul Jain — President and Chief Financial Officer

Arjun, let me say it this way, we said it could be both organic and inorganic, we’ve not laid out any specific capital for us to be able to go out looking. We will keep our eyes and ears open if there is an opportunity that presents itself, but again like I said, in answering to the previous question, it could be both on the capability side or the asset side, it’s a bit too premature to be able to give you the details around it. I don’t have details. We are saying that once, let’s say, the pharma piece starts to ramp up, which we are already seeing, we will probably have to become a larger player in the segment through a CDN. That’s what we have to think about.

Arjun Khanna — Kotak Mahindra Asset Management — Analyst

But in a sense just in following through the thought process, are we looking at facilities in India or outside India?

Rahul Jain — President and Chief Financial Officer

I’m happy to get both Arjun, if you give me the opportunity to buy, send me a target and I will look at it, be it in India or in Honolulu.

Arjun Khanna — Kotak Mahindra Asset Management — Analyst

Sure. Sir, the second question was on the ref gas piece. You’ve been highlighting the Dymel, the pharma propellant doing well. So when we purchased it, I understand capacity was maybe 1,100 tonnes. Have we increased or expanded capacities there and please correct me, this would not be impacted by the massive cut that countries may have and given it’s in the pharma grade could continue as long as there is demand?

Rahul Jain — President and Chief Financial Officer

Okay. So let me answer the second question first. You’re absolutely right. HFC 134a pharma does not get impacted by it. So that kept separate, because there is no known product that can be used in FDI, so that’s the answer to the second question.

In terms of the overall positioning on this, when I look at it, the plant that we had set up was roughly about 2,000, 2,200 tonnes. We can do 2,500 tonnes of Dymel. As of now our total positioning around this is probably in the range of, say, about 1,100 tonnes — sorry, about 1,400 tonnes that we are doing. The plant has enough ability to do more, whenever there is more demand on it. We have the ability to debottleneck it to a certain extent.

Arjun Khanna — Kotak Mahindra Asset Management — Analyst

Sure. Very helpful. Just on a follow-up. In terms of pricing, so we see a lot of variance. Would this pricing be at a premium to normal 134a and could you just give us a sense of how much could that premium be? Thank you.

Rahul Jain — President and Chief Financial Officer

In total, I think it is at a decent premium. The pricing premium on 134a in this has ranged between $4 to $8, $10 depending on market size and market environment.

Arjun Khanna — Kotak Mahindra Asset Management — Analyst

Sure. That’s the premium over the HFC of 134a?

Rahul Jain — President and Chief Financial Officer

Yeah, it will also depend on what pricing HFC 134a is selling at.

Arjun Khanna — Kotak Mahindra Asset Management — Analyst

Perfect. Sure. Thank you very much.

Operator

Thank you. Our next question is from the line of Dhruv Muchhal from HDFC Mutual Funds. Please go ahead.

Dhruv Muchhal — HDFC Mutual Funds — Analyst

Yeah. Thank you so much. Sir, you mentioned about seven, eight molecules or AIs you are looking. So if you can just give some more details, are these agro, are these pharma? What is probably the opportunity size, the overall opportunity size, what are you trying to capture and are these contracted with your customers, or I mean what kind of launches are these?

Rahul Jain — President and Chief Financial Officer

So, we are talking about active intermediates. So clearly, these are not pharma, these are agro.

Dhruv Muchhal — HDFC Mutual Funds — Analyst

Okay.

Rahul Jain — President and Chief Financial Officer

Okay. I will have to come back to you in terms of what is the total market size or the market opportunity on the overall agro, overall let’s say AIs that we are talking about, I will have to do a market assessment of that and speak to business, will come back to you on that.

Dhruv Muchhal — HDFC Mutual Funds — Analyst

Sure. And sir, are these — I mean, contract with your customers, these are generics, these are patented molecules, what — if you can give some more color there, please.

Rahul Jain — President and Chief Financial Officer

So, they are largely patented products, we are talking to innovators only. But the other question was, you said patented product, but contracted. No, these are in the process of getting contracted.

Dhruv Muchhal — HDFC Mutual Funds — Analyst

Okay. Got it. And we have decent visibility that they will be commercialized over the next few years. Very good visibility.

Rahul Jain — President and Chief Financial Officer

Very good visibility. Yes.

Dhruv Muchhal — HDFC Mutual Funds — Analyst

Sure, sir. Sir, the second question is we have seen a good improvement in the chemical segment margins on a Q-o-Q basis which are already at a very healthy level. Sir, if you can give some more color what’s driving this what’s leading to this and probably you also mentioned the simple part is sustainable. So some color please.

Rahul Jain — President and Chief Financial Officer

So, again, I think to a certain extent Specialty Chemicals has added a positive, everyone has been saying that there has been a positive that has been added by the Fluorochemicals HFC sales that’s another positive. So those are the two key elements of the business and that’s where the positive is coming through.

Dhruv Muchhal — HDFC Mutual Funds — Analyst

Okay. So the delta in the —

Rahul Jain — President and Chief Financial Officer

[Indecipherable] margins during the financial year both Specialty Chemicals, as well as Fluorochemicals have expanded.

Dhruv Muchhal — HDFC Mutual Funds — Analyst

Okay. And particularly in Q4, it’s been in the both the segments both ref gases and the specialty?

Rahul Jain — President and Chief Financial Officer

Q-on-Q also margins have probably expanded, but I’ll have to just look at my numbers and come back to you.

Dhruv Muchhal — HDFC Mutual Funds — Analyst

Okay, sir. Sure. And — yeah, sir. That’s all. Thank you so much and all the best. Thanks.

Operator

Thank you. Our next question is from the line of Vivek from Morgan Stanley. Please go ahead.

Vivek Rajamani — Morgan Stanley — Analyst

Hi, sir. Congratulations on a good set of numbers. Couple of questions from my end. You mentioned earlier that the utilization rate at about 92% to 95%. I’m just wondering if you —

Rahul Jain — President and Chief Financial Officer

I didn’t catch it. Could you repeat, Vivek, please?

Vivek Rajamani — Morgan Stanley — Analyst

Sure, sir. You had mentioned earlier that your utilization rate was roughly in the range of 90% to 95%, if I’m not mistaken. Could I just trouble you to give a sense of —

Rahul Jain — President and Chief Financial Officer

Packaging Films segment is what I was talking about, Vivek.

Vivek Rajamani — Morgan Stanley — Analyst

Sure. Sure. Packaging films. Could I just trouble you for the utilization rates in the other segments as well, roughly?

Rahul Jain — President and Chief Financial Officer

Very difficult to be able to do that Vivek, given Specialty Chemicals there is, it’s practically impossible to give you utilization rate given the fact that we operate on a four multipurpose plant, about 12-13 dedicated plants. But let me also say it like this dedicated plants are almost pretty much full, MPVs will always have spare capacity availability, there are certain new products that we have commissioned over the last 12 months or so. So those will be the ramp up phase.

From a fluorochemicals perspective, again, I think let’s say the HFCs have ranged between 75% to 85%-95% as overall capacity utilization, for chloromethanes again we had set up the plant probably in October of last year that also to a certain extent in the phase of ramp up, other continued plant or the older plants are practically full in terms of utilization. On Technical Textiles utilization have been low, say about 75% to 76% overall.

Vivek Rajamani — Morgan Stanley — Analyst

Got it. Sir. Really helpful. Just one clarification. Could I just check, what’s the utilization at Hungary right now because you said it’s going to improve in FY ’24.

Rahul Jain — President and Chief Financial Officer

Hungary exit was about 55%, for the whole year it was roughly about 69% to 70% as such.

Vivek Rajamani — Morgan Stanley — Analyst

Okay. the exit was 65%. Okay, sir. Thank you so much. And just a last question from my end. On the packaging side. Just wanted to check if there was any one-off items in this quarter.

Rahul Jain — President and Chief Financial Officer

No, there were no one-offs. This is just been the way business is.

Vivek Rajamani — Morgan Stanley — Analyst

So even no inventory impact, stuff like that, it’s just —

Rahul Jain — President and Chief Financial Officer

Nothing big one to report separately.

Vivek Rajamani — Morgan Stanley — Analyst

Sure sir, thank you so much. And all the very best. Thank you.

Operator

Thank you. Our next question is from the line of Suryanarayan Patra from PhillipCapital India Private Limited. Please go ahead.

Suryanarayan Patra — PhillipCapital India Private Limited — Analyst

Yeah, thank you for this opportunity, sir. The first question is on the Specialty Chemicals business. So we have launched six new products this year and against that we are talking about seven to eight products new launches over next two year. So how should we see this because we have already done that six, or this six of the current year is not the AIs.

Rahul Jain — President and Chief Financial Officer

Okay. So the way we are looking at it, these are six or seven or eight additional AIs that we’re talking about are normal agro product launches. The pipeline is still pretty robust and those launches will happen.

Suryanarayan Patra — PhillipCapital India Private Limited — Analyst

Okay. Okay. Sir, one —

Rahul Jain — President and Chief Financial Officer

You’re kind of saying that there is a graduation positioning that is happening for us to start to getting into AI, which is probably more, let’s say, how should I say this [Technical Issues] in that sense.

Suryanarayan Patra — PhillipCapital India Private Limited — Analyst

Okay. Sir, is it possible to get a sense of what is the portfolio share of AIs in the overall Specialty Chemicals, revenue wise?

Rahul Jain — President and Chief Financial Officer

In today’s position the only large AI that we do is 32. I’ll come back to you in terms of the overall say about 12% to 15% as the overall contribution within the Specialty Chemical space?

Suryanarayan Patra — PhillipCapital India Private Limited — Analyst

Okay. Okay. Sir, one interesting trend that in terms of margins. So for the chemical business as a whole, if I see in last three year the margin has trended quite significantly upward. So let’s say in FY ’21 the average of EBIT margin was to kind of 19% to 20%, which has moved to 25% in ’22 and in FY ’23, it is 31%, so almost like a clear 5%, 5% kind of jump that we have witnessed. Now with the kind of improving product mix in the specialty and qualitative price — qualitative volume as well as the price above that in both the ref gas, as well as the specialty and the improving product mix within specialty considering this, what is the kind of sustainable margin trend that once you are trying to think about, sir?

Rahul Jain — President and Chief Financial Officer

Surya, if this would have been just a mathematical excel sheet, we would all have been able to create it. Business is dynamic, right? It will always have some volatility around, we didn’t know there are recessionary trends that are playing out, right. Again, I would say we are fairly confident of the margins that we’ve been able to deliver, there may be some, let’s say, tempering of the margins, when you look at purely the Q4 margin of the business to come through. But overall, again, like I said, if we are happy to grow the business at 20%-plus, margins even if they temper a bit, it’s okay.

Suryanarayan Patra — PhillipCapital India Private Limited — Analyst

Okay. Okay. And just a extension to the chemical business. Sir, see here when you said that you are looking at the CDMO opportunity. So what is the thought process here, are we restricting ourselves to the new intermediates so that there is no regulatory asset that would be required or even we are seeing thinking about regulatory asset addition also.

Rahul Jain — President and Chief Financial Officer

You are confusing. CDMO is more on the pharma side.

Suryanarayan Patra — PhillipCapital India Private Limited — Analyst

Yes. So, are we moving up to the API level, so that the regulator asset would be required.

Rahul Jain — President and Chief Financial Officer

So, again, if there is a need to get a regulatory approval for any of the products, which we start to manufacturer we will get that ability as well, Surya, why not.

Suryanarayan Patra — PhillipCapital India Private Limited — Analyst

Okay. Okay. Okay. Sure, sir. So just two simple clarification. One is that, what is the average finance cost for the current year? One. And secondly, you have talked about the HFO gas opportunity after a long gap. So how quickly that we can see that in the real revenue opportunity for us, sir?

Rahul Jain — President and Chief Financial Officer

So, again, when CMD talked about it, he was more referring to the fact that the opportunity that is presenting itself is something that we’re working on. We will look to enhance that opportunity. We are working in our overall, let’s say, positioning from a company-wide perspective looking at non-infringing processes that will come in. So that’s what we are looking at. We are fairly confident that we will be able to ramp that up, groundwork is already being done on around it. So that’s how we are looking at it, Surya.

In terms of overall average cost, again, I think the way we need to look at it is that we’ve seen effective, let’s say, benchmark rates both globally and locally move up more in H2 rather than in H1. So on a closing rate basis, March ’23 annually was probably about 4.2% as the average cost on a consolidated basis given various mix of products that we have. The overall — sorry, it was probably in the range of 4.5% for India, so that’s where it is. When we look at it from a futuristic perspective, we also see that there is now starting to talk about, let’s say, revision in interest rates, the Fed cuts starting to think about cutting of interest rates. So those stories will play out probably more during FY ’24. So that’s how it should work out.

Operator

Thank you. Sorry to interrupt. Mr. Surya, may we request that you return to the question queue for follow-up questions as there are several participants waiting for their turn. Thank you. Our next question is from the line of Dharmil Shah from Marcellus Investment Managers. Please go ahead.

Dharmil Shah — Marcellus Investment Managers — Analyst

Hi, sir. Most of my questions have been answered, just a follow-up question on the seven, eight AI projects that Company is working on. Are these fluorine based AIs or just completely non-fluorine based?

Rahul Jain — President and Chief Financial Officer

So, I didn’t catch your question. Could you repeat please?

Dharmil Shah — Marcellus Investment Managers — Analyst

Yeah. So the seven, eight AI projects that we are working on right now with the innovators, firstly are these fluorine-based active ingredients or non-fluorine based?

Rahul Jain — President and Chief Financial Officer

Yeah. Again, I think, what we’ve said Dharmil in the past also, is that our intent is to move up the value chain. Our intent is to move into complex products, some of these products are actually — the AIs are actually products that integrated into some of the products that we are already doing, right. So that’s how we are looking at moving up the value chain, whether it is fluorine, non fluorine, I don’t think it matters at all.

Dharmil Shah — Marcellus Investment Managers — Analyst

Got it, got it. And these are the projects from our existing customers or these are new inquiries that company has got?

Rahul Jain — President and Chief Financial Officer

Both in nature.

Dharmil Shah — Marcellus Investment Managers — Analyst

Got it, got it. And just lastly on the similar lines, are these products 7-8 AI molecules. These are new for the innovators as well or these are already developed products, but we are looking for manufacturing partner.

Rahul Jain — President and Chief Financial Officer

I will have to check and come back to you.

Dharmil Shah — Marcellus Investment Managers — Analyst

Got it. Thank you. Thank you for taking the questions.

Operator

Thank you. Our next question is from the line of Vishnu Kumar from Spark Capital. Please go ahead.

Vishnu Kumar — Spark Capital — Analyst

Thanks for your time, sir. On the US restriction that starts next year with a similar event happened in the EU, we saw there was a really good spike in Europe imports one year before the restriction standard. So what should we anticipate from our exports. We expect the spike in exports on the ref gases side so far.

Rahul Jain — President and Chief Financial Officer

Again Vishnu we will have to look at it from a perspective where what happens to the overall market, not just in FY ’24 but FY ’25, ’26, ’27 and onwards. So the 30% cut that comes in from January of ’24 will be a GWP equivalent cut that comes in, for the next four years, sorry, for the next five years that now, like I said earlier. Also, based on our calculations, we believe that it is not just a consumption cut that is happening. It is also production cut that is happening.

US is likely to remain a net importer only and given that as the situation, while the production is cut, the demand can’t get cut immediately like that. Right. So the secondary market demand will remain which will then lead to probably some price positive that should also come in. Also what had happened during some of this is that they have all the Chinese that were manufacturing significant amounts and therefore setting kind of dumping even at a very low price. Now given that their quota regime requirement is completed by ’23. I think some of that sanity we should also return to the market.

Vishnu Kumar — Spark Capital — Analyst

Okay. So, sir. When you mean GWP this 134a and 410 these are the high had GWP and 32 is probably something that at least today for many —

Rahul Jain — President and Chief Financial Officer

32 is lowest.

Vishnu Kumar — Spark Capital — Analyst

32 Is the lowest. So 134a can’t get 32 right, mean for replacement.

Rahul Jain — President and Chief Financial Officer

134a is mobile applications. Yeah.

Vishnu Kumar — Spark Capital — Analyst

Correct. Okay.

Rahul Jain — President and Chief Financial Officer

So 134 used in some blanks which I know let’s say applications.

Vishnu Kumar — Spark Capital — Analyst

But it’s not on pricing, sustainably, in the last couple of years have gas prices has been quite high. How long do you think this is going to sustain. And do you expect this once post this cut next year.

Rahul Jain — President and Chief Financial Officer

I can’t comment on the price, Vishnu. What I’m only saying is generically demand is still rising, regulatory environment is restricting the product that is how the story plays out in all of these gases. So that’s how it should play out. I can’t tell you how long the prices sustained, market can be volatile, there could be certain market elements that play out. So all of that can happen, Vishnu.

Vishnu Kumar — Spark Capital — Analyst

Understood, sir. And finally on packaging film business at some point the demand should catch up on the excess supply. I mean any internal assessment by next year, mid or any expectation there.

Rahul Jain — President and Chief Financial Officer

I’m not putting a date or a number to it, Vishnu. Again, there are new lines that have been ordered, some of them will get delayed, but that’s what we’ve also mentioned over a period of time. There should be some, we are probably at the worst of the cycle. How long does it continue is very difficult to be able to say, but we are fairly confident and cautiously optimistic around it.

Vishnu Kumar — Spark Capital — Analyst

Got it. Sir. All the best.

Operator

Thank you. Our next question is from the line of Krishan Parwani from JM Financial. Please go ahead.

Krishan Parwani — JM Financial — Analyst

Yeah, hi. Rahul ji. Thank you for the opportunity. And congrats on the good set of numbers. Two questions from my side. So when do you see this R32 coming from our new plant, would it be beginning of July ’23 or are you expecting any delays.

Rahul Jain — President and Chief Financial Officer

Let’s say the plant capitalization currently, we believe should be June-July, product and availability should be starting August, September.

Krishan Parwani — JM Financial — Analyst

Okay. August-September. Okay, perfect. And the other one is on, I understand that you don’t give the profitability breakup of the chemicals segments, however, kind of, would it be possible to share the direction of the fluoro specialty chemicals profitability over it, let’s say, year-on-year and over last two, three years.

Rahul Jain — President and Chief Financial Officer

So again, I can’t give you percentages. What I can only tell you is that during FY ’23 what we’ve seen is margin expansion happen both on specialty and fluoro.

Krishan Parwani — JM Financial — Analyst

Okay. And over the last two, three years, I mean direction.

Rahul Jain — President and Chief Financial Officer

So it’s on an uptrend.

Krishan Parwani — JM Financial — Analyst

Okay, perfect. And how do you see it going forward. The reason I’m asking going forward because you are commercializing let’s say many projects on the specialty side, so would it be kind of lower yields could result in lower margin for fluorospecialty or not really.

Rahul Jain — President and Chief Financial Officer

So Vishnu, sorry, Krishan. Like I said earlier, the way we are looking at it is that the 20% growth is probably what we are targeting 20% plus growth. If to a certain extent, there is some tapering on the margin front that happens, that’s fine. Given where let’s say Q4 exit margins were. That’s okay.

Krishan Parwani — JM Financial — Analyst

Yeah. Okay, got it, got it. I was more checking from the year-on-year point of, I mean not — Q4.

Rahul Jain — President and Chief Financial Officer

Unfortunately, I can’t give you any better color. Sorry.

Krishan Parwani — JM Financial — Analyst

No, no, no worries, this is good enough. Thank you so much. And all the best.

Operator

Thank you. Due to time constraint, that was the last question of our question-and-answer session for today. I now hand the conference over to the management for closing comments.

Rahul Jain — President and Chief Financial Officer

Thank you everyone for being on SRFs Q4 and FY ’23 call. Hope we have been able to answer all your questions. If you have any further questions, we would be happy to be of assistance. We hope to have your valuable support on a continued basis as we move ahead on behalf of the management I once again thank you for taking the time to join us on this call. Thank you.

Operator

[Operator Closing Remarks]