SRF Limited (NSE: SRF) Q2 2025 Earnings Call dated Oct. 23, 2024
Corporate Participants:
Ankur Periwal — Moderator
Nitika Dhawan — Head of Corporate Communications
Rahul Jain — President & Chief Financial Officer
Analysts:
Nitesh Dhoot — Analyst
Rohit Nagraj — Analyst
Sanjesh Jain — Analyst
Vivek Rajamani — Analyst
Praful Kumar — Analyst
Rajat Srivastava — Analyst
Ranvir Singh — Analyst
Abhijit Akella — Analyst
Unidentified Participant
Arjun Khanna — Analyst
Rohan Gupta — Analyst
Archit Joshi — Analyst
Krishan Parwani — Analyst
Bhaskar Chakraborty — Analyst
Vishnu Kumar — Analyst
Ranjit — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the SRF Limited’ Q2 and H1 FY ’25 Results Conference Call hosted by Axis Capital Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ankur Periwal from Axis Capital Limited. Thank you and over to you, sir.
Ankur Periwal — Moderator
Thank you, Ridhi. Good afternoon, everyone and thank you for joining us today. We at Axis Capital Limited are pleased to host SRF Limited’s Q2 and H1 FY ’25 results conference call. We have with us today, Mr. Rahul Jain, President and CFO of SRF Limited. I would now like to invite Ms. Nitika Dhawan, Head of Corporate Communication at SRF to initiate the proceedings for the results concall. Over to you Nitika.
Nitika Dhawan — Head of Corporate Communications
Good afternoon, everyone, and thank you for joining us on SRF Limited’s quarter two and H1 FY ’25 results conference call. We will begin this call with brief opening remarks from our President and CFO, Mr. Rahul Jain, following which we will open the forum for an interactive question and answer session.
Before we begin the call, I would like to point out that some statements made in this call may be forward looking. A disclaimer to this effect has been included in the earnings presentation shared with you earlier. I would now like to invite Mr. Jain to make his opening remarks.
Rahul Jain — President & Chief Financial Officer
Thank you, Nitika, and good afternoon, everyone. I would like to extend a warm welcome to all of you and thank you for joining us today for SRF’s Q2 and H1 FY ’25 earnings conference call. I trust that you have had the opportunity to go through our results and the presentation shared with you earlier.
I will begin the call by briefly taking you through the key financial and operational highlights for the period in the review, following which we will open the forum for a Q&A session. The company reported an expectedly weak quarter primarily owing to the ongoing subdued environment in the chemicals business. The ongoing challenges have impacted our performance in fluorochemicals and specialty chemicals business during the quarter. However, we believe that the worst is now behind us, and we anticipate an improvement starting Q3 with a stronger finish expected in Q4.
In Q2 FY ’25, our gross operating revenue stood at INR3,424 crores, up 8% on a Y-o-Y basis, while EBIT came in at INR417 crores representing a 12% margin. Profit after tax was INR201 crores. From an H1 perspective, our gross operating revenue stood at INR6,888 crore, up by about 6% and our profit after tax was INR454 crore.
Coming to our segmental performance, our chemical business reported revenues of INR1,358 crore, a decline of 5%. In our specialty chemicals segment, the agrochemicals market continued to face a slowdown impacting the business’s overall performance. High inventory levels due to subdued demand from agro customers have led to rationalization and lower offtake. However, recent product launches have started gaining traction, and growth in new products provides strength to our overall outlook for the specialty chemicals business going forward.
Our work on agrochemical intermediates is also proceeding as per plan and the ongoing discussions with customers are positive and encouraging. During the first half of the year, we successfully launched three new agro products and three new pharma products. Innovators are increasingly partnering with us for more complex and downstream offerings, highlighting our R&D capabilities in delivering sophisticated solutions. Additionally, our sourcing efforts have yielded positive results with the approval of various new raw materials and suppliers, further strengthening our supply chain and enhancing operational flexibility.
Last year, we invested around INR1,800 crore in commissioning several new plants. Our current focus is on ramping up production in FY ’25 and over FY ’26 as well, while also advancing environmental initiatives and automation to improve safety and efficiency of these facilities.
Additionally, we will also prioritize debottlenecking and augmentation projects for key products to enhance production capacity, with an expectation of gradual recovery in demand during Q3. Owing to a strong order book, we foresee a positive impact on performance in the second half of the year.
In our fluorochemicals business, refrigerant gases segment performed well in the domestic market, with an increase in overall volumes. We further increased our market share in both the room air conditioner RAC and the mobile air conditioner MAC markets. However, margins in Q2 were under pressure due to lower export realization. We are optimistic about the second half as we expect improving export volumes and realizations alongside the start of the domestic season. Additionally, pricing of certain key refrigerants are now witnessing stability and some uptrends, which should augur well for the future, while growing domestic demand, further supporting the upward trend.
Coming to the chloromethane segment, we are focusing on expanding our export portfolio for CMS as well. Pricing pressures due to current overcapacity situation still remain. Margins were lower than expected in the first half. However, we started to witness some improvement towards the end of Q2. Meanwhile, ETSA [Phonetic] is witnessing healthy growth in the domestic market with ongoing trials for free flow and final cut rates progressing as planned.
We are also preparing for commercial sales of final cut products targeted at high end application processes in export market which should start to witness some traction in Q4. Further, the board has approved a project to develop fourth generation refrigerants which are distinguished by the significantly lower global warming potential, GWP and reduced carbon footprints. This capex, with an estimated investments of around INR1,100 crore, is slated for completion in around 30 months. The project highlights SRF’s leadership as one of the pioneering technology developers in global refrigerant space. As an Indian company, we take immense pride in this advanced and eco-friendly technology with a significantly lower carbon footprint and global warming potential, developed in-house. Our robust in-house R&D capabilities, which have been integral to our success for over two decades will enable us to leverage our proprietary processes and technologies to innovate and drive the development of these next generation refrigerants under our own brand. The same is initially looking to target the global markets that are transitioning to these low GWP alternatives and post 2032, the Indian market as well.
Turning to our packaging films business, we delivered a healthy revenue growth of 27% year-on-year in Q2 FY ’25, reaching INR1,421 crore. EBIT margins improved slightly, supported by record production levels and sales of value-added products. Despite ongoing demand and supply imbalances, BOPET film margins in India showed slight improvement this quarter, contributing to enhanced results of packaging film business.
In contrast, operations in Thailand continue to face challenges due to Chinese dumping. The BOPP film segment performed in line with our expectations. We have made significant progress in developing BOPP and BOPET wraps with seven new BOPET and eight new BOPP wraps developed in the first half. Additionally, aluminum foil production has stabilized, supported by rising domestic volumes and sampling for exports. We expect ramp up in H2 and the proposed imposition of anti-dumping duty on Chinese imports, margins are expected to further enhance going forward.
In terms of capex for this business, the board has approved the establishment of a new manufacturing facility or the BOPP, BOPE film line in Indore at our DTA2 site. This project enables us to expand our existing BOPP substrate and wrap offerings and explore the innovative olefin BOPE substrate. Furthermore, it aligns seamlessly with our sustainability goals as polyolefin substrate like BOPP and BOPE are recognized for their eco-friendliness, attributed to their mono family advantage and recyclability. The estimated cost of this venture is around INR445 crore with operations expected to commence in approximately 25 months.
In our technical textiles business, revenues continue to grow by 6% to INR536 crore in the quarter, driven by steady contributions from Nylon Tyre Cord Fabric and polyester industrial yarn segments. However, margins for belting fabrics were weak, resulting in moderate performance despite higher volumes.
We maintained our focus on boosting higher margin wraps by strategically expanding into new geographies and commercializing eight new belting fabric wraps during the first half. Lastly, in our other segment, the coated fabric business maintained its domestic market leadership in both volume and pricing. We achieved record domestic and wrap sales in the first half and expect stable performance going forward. Our goal is to enhance profitability by focusing on increased domestic volumes and expanding that in our new product offerings.
In laminated fabrics, we sustained price leadership while operating at full capacity. Although the market remained oversupplied, putting pressures on margin, we successfully stabilized the new hot lamination machine [Phonetic]. We expect demand pickup in Q3, especially with the festive season which should improve margins.
Our finance costs had increased compared to previous year, leading to higher expenses in our P&L statements. However, with the global interest rate cycle starting through to show some downward trends, we anticipate reduction in our borrowing costs in the near future. We remain committed to making strategic investments that align with our long-term growth objectives.
Furthermore, I am glad to share that SRF has been honored with multiple prestigious awards at the 6th India Procurement Leadership Forum and Awards 2024 organized by the Institute of Supply Chain Management, ISCM. The company stood out in three categories, India Procurement Champion 2024, Best Approach to managing Global Risk in Procurement, and Best End to End Alignment of Procurement with Supply Chain, reflecting our commitment to excellence in procurement practices.
As we reflected the second quarter and the first half of FY ’25, we are delighted to share with you the remarkable progress and impactful initiatives undertaken by SRF social wing, the SRF Foundation. Our commitment to fostering sustainable development and enhancing the quality of life in the community we serve has been unwavering. From the inauguration of the digital bus in Bhopal by Honorable Chief Minister of Madhya Pradesh, Dr. Mohan Yadav, to successful completion of basic electrician training program in Bhind, MP, our efforts continue to make a significant difference.
Our projects in Kamrup, Assam have also seen substantial progress with renovations of toilets, libraries and boundary walls in five project schools, ensuring a better learning environment for the students. These initiatives, along with many others, have collectively benefited thousands of individuals across various locations, reinforcing our dedication to community development and empowerment.
In conclusion while some businesses have faced difficulties due to the global macro environment, we believe they have bottomed out, and we remain optimistic about our future performance. This optimism stems from our position as a globally recognized multi business entity which enables us to leverage technology and innovation across all our offerings to enhance performance. With our world class infrastructure, qualified personnel and exceptional R&D capabilities, we are well positioned to develop a pipeline of cutting-edge products across various segments. As the market situation improves, we are confident in our ability to deliver strong performance and create lasting value for all our stakeholders.
On that note, I conclude my remarks and we’ll be glad to discuss any questions, comments or suggestions that you may have. I would now like to ask the moderator to open the line for Q&A session. Thank you very much.
Questions and Answers:
Operator
Thank you very much. [Operator Instructions] The first question is from the line of Nitesh Dhoot from Dolat capital. Please go ahead.
Nitesh Dhoot
Thanks for the opportunity. So, my question is on the chemicals business, where in some key molecules there has been a sharp price erosion. We had earlier emphasized on improving cost structures and volume growth to aid margins. With the recovery seen in the second half, along with the new molecules gaining traction, will we be able to make up for the margin erosion, or do you want to downward revise your EBIT margin outlook of 23%, 24%?
Rahul Jain
Nitesh, thank you for your question. To be very frank about it, yes, to a certain extent what we have seen is some of the key products or the legacy products that we have been doing well with, have had some impact of both price erosion as well as certain volume positioning. Now the volume positioning effectively stems from the inventory overhang that is continuing. I think given where our order book for this is, we believe Q3 is going to be slightly better than what we have seen, while Q4 should probably take up much, much better volumes going forward as well.
With respect to saying in terms of what’s the guidance, I think given where the environment is, Nitesh, it is very difficult to be able to provide a good guidance around this. We are fairly hopeful of a much better performance in Q3 and a significantly better performance in Q4 as well. I would really leave it at that. As things change, as there are some more positives that develop, we will come back to you. But giving guidance today is a bit tricky to my mind, and therefore, I would probably leave it at that. So that’s how I would look at it.
From a margin perspective, yes, you are right that we have said that over a period of time the margin should remain in the range of plus/minus 2% to 3% from our annual margins for FY ’24. I think we are still sticking to it. That is something that will continue to happen, and there should be some positive changes that we will start to see in more towards Q4, FY ’25. That how it should pan out, Nitesh.
Nitesh Dhoot
Thank you, sir. My next question is on, is on the capex. So, cash capex of around INR600 crores has been done in H1, while the commercialization has been around INR225 crores. We had given a capex range of INR15 billion to INR19 billion previously. And as I understand that the cash capex amount. So, two parts to this question here. One is, will we be within the range of the cash capex laid out? And second, how much shall we commercialize in FY ’25?
Rahul Jain
So, majority of these projects that are today running, I think the total cash capex that we have had is about INR650 crores. Majority of these capexes, I think, the overall cash capex this year will probably range between INR1,600 crores to INR1,800 crore overall is what we would probably end up with, including various other projects that are going on. So that’s something that will happen. The only point to make is that, yes, the capex is slightly lower than what we had much initially expected, but that’s fine in our view, and therefore we will continue to guide for the capex as things pan out. So, the new capex is on the fourth gen gases, and also the BOPP BCE lines will probably are slightly more timed out. So those will probably be incurred in FY ’26, ’27, most of the expenses in that sense. I hope that clarifies.
Nitesh Dhoot
Yes sir. Thank you so much and all the best.
Operator
Thank you very much. The next question is from the line of Rohit Nagraj from Centrum Broking. Please go ahead, sir.
Rohit Nagraj
Yeah, thanks for the opportunity. So, first question is on the ref gas side. So, we have in our PPT, we have given a comment that in developed markets, especially U.S., we are experiencing decline in HFC consumption. So, are we, will we be able to allocate those volumes to the developing markets? And if that particular market is declining, what is your perspective in terms of pricing of the HFCs? Thank you.
Rahul Jain
Again, Rohit, to be very frank about it, this is what was expected. As the cuts come through in the U.S. market, there will be lower volumes into the U.S. market. But you would have also seen the comments where we have said that the overall volumes in the domestic market have been higher. I think that’s a trend that will continue. There will be the HFC volumes that will probably be sold out into not just the Indian market but the Middle East and let’s say the southeast Asian markets as well. I think that will continue to happen. I think that’s something that we said in the past as well, Rohit. From a pricing perspective, we are seeing some stability pricing on key refrigerants. Hopefully some of that trend can continue going forward as well and some positive traction on that side.
Rohit Nagraj
Right. Thanks. Sir, second question, again, delving on the spectrum agrochemicals front, given that it is likely to be a gradual demand pickup in H2, when do we see the newer projects getting into optimal utilization? Will it be in FY ’26 or will it move to FY ’27 to counter impact the legacy molecules? Thank you.
Rahul Jain
So, when you say gradual demand pickup, I think we are fairly confident of the Q4 position given where the order books are. So that is something that will pan out as there are more sales that happen. We are sitting on the larger inventory position also as of now. I think to that extent, some of those inventors will dilute out, start to dilute in Q3 and grow out towards Q4. From a new project perspective, I think within 12 months, there should be some more traction that we should start to see the capitalizations that have been done in FY ’25, and that’s something that will pan out probably over the next, let’s say nine to 12 months is what we believe. I think also to a certain extent we are fairly happy about the fact that some of the new products that have started, I’ve already started to show some decent traction here. So, in overall good shape, I would say, Rohit.
Rohit Nagraj
Sure. Thanks a lot and all the best.
Operator
Thank you very much. The next question is from the line of Sanjesh Jain from ICICI Securities. Please go ahead.
Sanjesh Jain
Good afternoon, sir. Thanks for taking my questions. First, on the order book side, you said that Q4 order book now is showing a very healthy trend. So, what kind of an order book are we looking at in terms of volume? I can understand realization being slightly tricky in this market. Purely from a volume perspective, does it show that Q4, we will again claim back that 20% kind of a Y-o-Y growth, kind of a volume.
Rahul Jain
When you compare Q4 on Q4?
Sanjesh Jain
Yes, Q4 on Q4
Rahul Jain
Again, like I said, Sanjesh, it is very difficult to be able to give you a number in terms of 20% or 25%. The way we would look at it and the way we would feel about it is that what we are seeing is large traction, much larger volumes. I would typically say you track the volume on speciality chemicals on a monthly basis. You know that volumes are still decent. I think to a certain extent, pricing should also improve, and therefore, the margin profile overall should also be higher, is what I would tend to think. In order to be able to tell you what kind of order book, very difficult again, Sanjesh. I can’t tell you the exact volumes of product by product because there are so many different products that we are doing today. It is a combination of about 35, 40 products, so very difficult to be able to give you color on that.
Sanjesh Jain
No, no, that’s fair. I was just looking a broader number now that you would have planned for the production schedule or date. Does it appear that it could be the growth what we targeted earlier, at least Q4 exit trend will show that number.
Rahul Jain
Again, Sanjesh, I’m kind of [Speech Overlap] very frank about it, given the fact that whatever we have talked about, the environment has been much weaker than what we had initially anticipated. So, I’m unable to give you a percentage number. It could be 20%, it could be 25%, it could be 15%. I really don’t know, Sanjesh. What I can only tell you is that the traction is good. And overall Q4, we should be in much better shape than what we were in Q2. I think the worst from a Q2 perspective and from a specialty chemical business is probably behind us.
Sanjesh Jain
That’s fair. That’s fair. On the AI side of it, we had a strong pipeline. Any more color you want to add? Where is the pipeline? Have we started getting the approvals? Are there any more visibility on the commercialization?
Rahul Jain
So, there are a couple of products that have seen some traction. Again, the products are well approved, right. The only issue is when the customer looks to get their registration done and get their pipeline in order. Given where the macro environment is, some of the customers are kind of delaying that out. From our side, we are pretty much in readiness, Sanjesh. So as soon as the commercial quantity start to show up, you will probably start to see it earlier than what I even I do.
Sanjesh Jain
Got it. Got it. One last question on probably a data point.
Operator
I’m sorry to interrupt, Mr. Sanjesh, but can I please request you to return to the question queue for a follow up question as we have several participants waiting for their turn?
Sanjesh Jain
Okay, thank you. Thank you very much.
Operator
Thank you very much. The next question is from the line of Vivek Rajamani from Morgan Stanley. Please go ahead.
Vivek Rajamani
Hi, sir. Thank you so much for the presentation. So, a couple of questions from me. In the previous call, you’d mentioned that some customers are willing to lock into medium term contracts, but you are not agreeing because the pricing was not very favorable. Just wanted to understand how things work currently, if at the margin, the landscape has become a bit more favorable, or do you think you’re becoming more and more accommodating to the pricing requirements of the consumers?
Ankur Periwal
To be very frank, again, Vivek, I don’t think that situation has changed. It is also colloquial in the sense when we talk about the customer wanting to do certain medium-term contracts, this is something that strategically we have to look at where we are positioned from a medium to long term perspective, and again, within a quarter, those things really don’t change there.
Vivek Rajamani
Sure, sir, that’s clear. And just a clarification on the Q4 order book, I understand that it’s obviously much better than how things are, but just in terms of the conversations that you’re having with the customer, what is your sense of how de-risk this order book could be? Or do you think that in terms of the actual offtake, things could still be very dynamic depending on how things pan out, say in Q3 and then eventually Q4?
Rahul Jain
So, you’re right to a certain extent. We have a fairly strong order book, but at the end of the day, it will get decided by the customer in terms of when he is looking to do the pickup. And again, we have quantities to a certain extent manufactured. We have certain things that are there on the shelf. We have inventory WIPS and SGWIPS kind of catered out to. So, all of that is in good shape. As the final commercial quantities or the final order dispatch orders start to come in, we will start to see more traction on this. Difficult to be able to say what’s the percentage, but I would really say, let’s say the delta on this could probably be in the range of 15% to 20% in terms of what we are seeing today versus what it could pan out to be. It could be both sides. It could be a positive as well as a negative. So, I think that is something that will come through over only over a period of time, where we will come to know of this. But yes, today it seems in pretty good shape, Vivek.
Vivek Rajamani
Sure. So that’s helpful. I’ll rejoin the queue. Thank you so much and all the very best.
Operator
Thank you very much. The next question is from the line of Praful Kumar from Dymon Asia. Please go ahead.
Praful Kumar
Hi. Am I audible?
Rahul Jain
Yes, please, you are. Go ahead.
Praful Kumar
Sir, just broadly, a couple of things. In terms of the U.S.– sorry, I missed that part. In terms of pricing, how is the pricing in U.S. right now in terms of the trend?
Rahul Jain
Sorry, your voice is cracking a bit.
Praful Kumar
Sorry, I will come back in the queue.
Operator
The next question is from the line of Rajat Srivastava from Tata Mutual Fund. Please go ahead.
Rajat Srivastava
Yeah. Hi, good afternoon. Am I audible?
Rahul Jain
Yes, you are. Please go ahead.
Rajat Srivastava
Sure. Thanks for taking my question, sir. Just one question, also, when I go through your presentation, I see multiple places almost in every segment you are mentioning that you are seeing increased competition from China or the Chinese are getting aggressive, or in India we are seeing cheaper imports from China. So, given that context, how — what is giving you the confidence that things will improve going ahead? Because this to me looks like a more like a structural change which is happening. And this is not just specific to you across the chemical industry, we are seeing them. So, can you just give us a color, like how do you get the confidence that this will improve going ahead?
Rahul Jain
So, thank you for your question, Rajesh. Again, when you look at it, the cheaper imports from China or the China competition, again, I think we have talked about that in two or three places. One, where we are looking at the packaging films business more and more towards in Thailand, that’s where we talked about it. The second probably also is on the fluorochemical side where some of the red gas imports were on the high from China, so that’s something we talked about. I think we’ve also talked about it in the specialty chemicals phase, more on the, let’s say certain older products that we have had, where we are now starting to see Chinese competition. Where our confidence comes from and that’s your precise question, Rajesh, is again, like I answered the last question, is the order book. Customers, peers that are in hand for dispatches between Q3 and Q4 is something that is giving us that confidence. And I think that is essentially the position that we are taking on this. There are various customers that have talked to us about it.
The second and the other element of this is that we are getting into more complex chemistries and more complex products as well, and traction on our — let’s say the product pipeline, not just for the current ones, but the new products that have been launched and much larger future product pipeline is pretty much well in shape. And that’s why we are saying that we are pretty confident that we should be able to stay through this one as well. I hope that answers it, Rajesh.
Rajat Srivastava
Sure. Thanks. This is Rajat from Tata Mutual Fund. Thanks.
Rahul Jain
Rajat, I thought it was Rajesh.
Operator
Thank you very much. The next question is from the line of Ranvir Singh from Nuvama Health. Please go ahead.
Ranvir Singh
Yeah, thank you for taking my question. I’m Ranvir from Nuvama Wealth. Sir, I think partly some, like some of my queries has been addressed. So just two clarifications here. Whenever in a three quarter in a row, three quarter in a row, we have been saying that inventory accumulation has been — inventory accumulation has been impacting the demand. So that I wanted to understand in a better perspective. So, inventory is accumulated at our client’s end due to Chinese competition or because China has done their products in the market, so that, you know, sales is not happening there. This is the reason, or what we are saying that demand itself has contracted and so the inventory is not getting liquidated. So, what is scenario here?
Rahul Jain
So again, the good thing here, essentially, Ranvir, is that we don’t see an overall end product demand contraction. The end product demand contraction has not happened. To a certain extent it is because of the China positions in terms of the raw materials. But also, I think to a certain extent, given where interest rates are, given where customers are and the customers had actually, to a certain extent, got used to very low interest rates, and therefore, very large inventories. Over the last, let’s say, three or four quarters or probably even earlier than that, you’ve seen your interest rate cycle now. And therefore, to that extent, some of the customers have really started to relook at their inventory positioning. The inventory positioning of certain products that used to be like 270 days, they kind of cut down on those inventories very significantly. I think it is a combination of the two, to a certain extent, China, to a certain extent interest rates, and to a certain extent, customers relooking at their supply chain. I think also to a certain extent, COVID had impacted this very significantly where availability was becoming a problem. As that has kind of weaned out, the fact is that the customers are now having the confidence that the inventory availability, let’s say, within a 30-day, 60 day timeframe is fairly well available, and therefore, some of their existing inventories, they are looking to cut out. So, I think it’s a combination of all of those factors that is having the impact rather than being able to point out one single factor here, Ranvir.
Ranvir Singh
Understood. So, when we see that pickup, maybe we can see going forward in second half. So, what we are assuming here that the demand will increase, or you say that we will capture more market share on other terms, like in pricing or, you know, competing with China. So that is what will drive, or you see that demand itself will grow?
Rahul Jain
See, again, demand, I would say overall demand has not been impacted at the end product level. That has still remained pretty robust in that sense. But again, because there was an inventory situation at the customer end, we’ve seen some, let’s say, orders getting delayed. I think that’s the situation overall. Very difficult to be able to comment whether it’s a pure demand situation or end product situation. So that’s something that we are currently getting a feel of from a market perspective. So that’s happening, Ranvir.
Ranvir Singh
Okay. And another one that we mentioned, the three new agro products and three new pharma products, we have launched in H1. So, what could have been the contribution of these new products?
Rahul Jain
When we say we have launched or commercialized, these are products that have now gone to the customer. Samples have been approved. They have been put out from either a multipurpose plant or a very large plant that has gone out. As those tractions come through, it will start to see more traction going forward. It doesn’t mean that there is a large contribution of some of these in the current quarter.
Ranvir Singh
No. But their peak revenue may be significant going forward in H2 or next year.
Rahul Jain
Some of those, yes, but very difficult to be able to pinpoint that out.
Ranvir Singh
Fine, fine. Thanks. Thanks a lot. And that’s it from my side. Thank you.
Operator
Thank you very much. The next question is from the line of Abhijit Akella from Kotak Securities. Please go ahead.
Abhijit Akella
Hi. Good afternoon. Thank you. Yeah, is this any better? Okay. For the first half of the year, could you help us with the specialty chemicals revenue growth, sir if possible?
Rahul Jain
So, overall, chemical business has been down by about 5%. Let’s say chemical — specialty chemicals would have been lower by about 4%, 4.5%. That’s the only thing that I can tell you.
Abhijit Akella
Okay. And with regard to the refrigerant realizations, this pressure on international prices, is it in any particular products, R125 in particular, or is it more broad based across the entire base?
Rahul Jain
R125, certainly. But even on 132 and 134a, we have seen lower pricing internationally. Domestically, we are still in pretty decent shape, Abhijit. And again, we have to look at it from a medium-term perspective for calendar ’24, ’25 and ’26, where we want to develop and produce as much as possible because those are the observation years from an India market perspective. So, I think I mentioned this over a call earlier as well, that the focus is to ramp up as much as we can because that will determine our future profitability also.
Abhijit Akella
Understood. Thank you, sir. All the best.
Operator
Thank you very much. The next question is on the line of Hinan Gadda [Phonetic] from UBS. Please go ahead.
Unidentified Participant
Hi sir, thanks for the opportunity. I just had two questions on the chemicals business. First, I understand that our order book is strong enough for a probable recovery in the second half. In that regard, have you seen any initial uptick in volumes in the recent weeks? Like if you could just give us some sense of how October has been panning out till date, and second, could you —
Ankur Periwal
Well, first, and then you can probably ask the second question. To be very frank, what we have said is that we will see a gradual recovery. The first Q3, we will see some positives coming through. But the Q4 is where largely the dispatches and the revenue recognition will start to happen. So, don’t kind of expect that immediately in first week of October or second week of October, we have seen a much larger uptick, not happening.
Unidentified Participant
Okay sir, I understand. And the second question, would you like to give any guidance on the specialty chemicals growth for FY ’25? I think we were earlier guiding for double digit, but would there be any change that we would be calling out now?
Rahul Jain
Again, I think I answered that question in a previous — as an answer to the previous question. I think the macro environment has remained very volatile today. Given the fact that while we had expected some things to happen in Q1, Q2, we kind of continued the inventory rationalization, the positions from the customer, and we have seen some deferment starting to happen. Not starting, had happened during and continued going forward. In the current macro environment, very difficult to be able to give you a revenue guidance. What we can assure you of is that the team is going all out in terms of making sure we are able to deliver the products to the customer. The customer traction is in decent shape, order book is fine, but I really would probably, if you would want to hear it that way. I am unable to give you a guidance from an FY ’25 revenue perspective. I think we will have to see it how overall revenues pan out, and how the order book shapes up. Like I had answered in a previous question, I think there is a certain delta in terms of where the order book is in terms of the pickup, but fairly confident that we should be able to manage it very well.
Unidentified Participant
Sure sir. Thank you and best of luck for the second half.
Operator
Thank you very much. The next question is from the line of Arjun Khanna from Kotak Mahindra Asset Management. Please go ahead.
Arjun Khanna
Thank you, sir, for taking the question. Sir, the first question is on the HFO piece. So, while we have announced a INR1,100 crore capex, could you help us with what is the tonnage output that we would get for the same? Have all the patent related issues been resolved? In the sense we understand they were process patents. So, if you could talk about that. And lastly, which HFOs are we planning on producing?
Rahul Jain
Okay, Arjun, unfortunately, all the questions that you have asked, I have no answer to. It is not that I don’t know, but fact is that some of these things are best kept under wraps given where we are. What I can assure you of is that this is being done through our own technology. Second, the patent regime has been well taken care of by the time we launch it, all of that will be well taken care of. The third is that the quantities are of a fairly decent size. It is not something that we are disclosing as of now. So, we want to keep that under the wraps as of now. So that’s what we would look at. Again, there are two products that we are looking to do, but as of now, not disclosing the names of those. So, unfortunately, we will have to live with it. Sorry.
Arjun Khanna
Fair enough. So, the next question is on the second capex. We announced the BOPP, BOPE. Given the current context where we are talking of a weak environment in packaging films. Just wanted to understand from you, why undertake such a large capex given that margins are below long-term trends. Does it indicate that we expect demand to incrementally be much stronger than supply and the market being into balance over the next 18 months to 24 months?
Rahul Jain
To a certain extent you’re right, Arjun, BOPP has not done very badly, and I think we’ve been saying that for a very long time. What we’ve seen is the demand supply imbalance more prevail in the BOPE segment. BOPP has done pretty much all right. And again, I think two or three things that tie into this is the sustainability agenda on the olefin side. The second being the fact that for us to be able to continue to do more work on value added products on the BOPP side, it is very important to have capacity to be able to do that. That second BOPP overall is three or four times the BOPE segment market also. Given where recyclability is, given where wraps are, I think it makes good sense for us to look at it. In any case, when you think about it from an SRF perspective, we’ve actually fully utilized our BOPE capacity, and even to that extent the BOPET capacity also, and historically also whenever we’ve set up capacity, we’ve kind of set up in a situation where the overall market is fairly balanced. I think two or three key things. Sustainability, straight getting into PE which is polyethylene, first time putting up a line, which is a hybrid line. All of those really tie up into the sustainability agenda and the wrap agenda for SRF as well. I think those are the key elements for announcing this capex.
Arjun Khanna
Sure, fair enough. So just to understand on the packaging bit, if you could just help me with the margins, possibility on the aluminium side because we talked of the ramp up, but we haven’t quite seen margins play out for the aluminum foil. So, are we yet in the ramp up Phase? And how would you look at the profitability performance?
Rahul Jain
Yes, I think the — from an aluminum foil perspective? What we are seeing is better volumes, better domestic volumes. The sampling for the export volume has also gone out. We are hoping that some of those will come back quickly to us, and we will start to do the export piece on the aluminum foil as well. The third element also is essentially a domestic anti-dumping duty that provisionally has already been announced. And hopefully within the next few months, there should be a duty that it should get announced. I think all of that put together should make sure that Q4 should be a much better for them from an aluminum foil perspective also.
Arjun Khanna
Sure. Thank you and wishing you all the best.
Operator
Thank you very much. The next question is from the line of Rohan Gupta from Nuvama. Please go ahead.
Rohan Gupta
Hi sir, good evening. First question is on our [Indecipherable] only. So last year when the industry was definitely witnessing.
Rahul Jain
Rohan, I missed your question. Could you repeat please?
Rohan Gupta
Am I loud and clear, sir?
Rahul Jain
Slightly better, yes.
Rohan Gupta
Okay. So, I was asking that last year when the industry was witnessing a downturn in agrochemicals, our confidence was emerging in terms of maintaining the margins and growth because we were supposed to launch six to seven new AI’s which was going to contribute to the revenues. However, I think that quarter by quarter we had been seeing some spillover. So, just wanted to check that this new AI’s and the contribution to the revenue which was supposed to come, I mean, it has been delayed from the customer side. They have not been able to launch the final AIs from their end or just only the industry dynamics are such that the overall inventory situation still remains, that’s why our customers are not willing to put any material in the market.
Rahul Jain
So, Rohan, again, even when you were talking about last year and AI situation, we had said it will take 12 to 18 months for us to be able to start that AI journey. I think we are in fairly good shape from an AI perspective, customer perspective as well. It is just that to a certain extent some of the customer registration processes have got delayed. Now, to that extent I can control those pieces, and therefore, that kind of some delay. But I don’t think we are very off from the timing that we have talked about, right. I think the impact that we are starting to feel in the specialty chemical business is more because of the fact that some of our flagship products have seen certain Chinese impact. Now we’ve also said that this in the past, that we are looking to be able to counterbalance that through our technological intervention, some of them have already panned out, and some will pan out over the next six months or so. To that extent, there is largely a counterbalance on some of the older products that will come through. AI will also add to that growth ability and growth visibility going forward. I think that is the way it should pan out, and I don’t think we are very off in terms of what we had committed earlier from an AI perspective.
Rohan Gupta
Yes sir. Second question is on the margin front. So, I mean the current quarter margins and even last quarter also. So, in chemical business I’m talking about, and from 21% to it went to 18% in current quarter. So, is it all because of the red gas volatility or spec and margins are also under pressure and which is driving this margin lower?
Rahul Jain
I would tend to say to a certain extent it is a combination of both. It is not just the spec and margins that have seen a decline, it is also the fluorochemicals margin. Sorry, fluorochemical margins have certainly seen a decline, but even on the specialty chemical side, the margins have been lower by say 2.5%, 3%. So, it is not just the fluorochemicals or the ref gas margins.
Rohan Gupta
Okay, and sir, while giving the earlier participant answer, you mentioned that spec chem in the first half, a very broad number, though the chemical business is down by roughly 5%. You mentioned spec chem is also not down by more than 3% to 4%.
Rahul Jain
So, 4% to 5% is what I kind of said. So, it is similar. It is not that there is a significantly larger decline in specialty chemicals or fluorochemicals. The decline in terms of overall revenues is kind of similar.
Rohan Gupta
Coming from both. It’s coming from both, ref gas as well as spec chem in the similar range. Okay. Thank you, sir. Thank you very much.
Operator
Thank you very much. The next question is from the line of Archit Joshi from B&K Securities. Please go ahead.
Archit Joshi
Hi Rahul sir, thanks a lot for the opportunity. Have a couple of questions. First on refrigerant gases. Sir, your observations, if I can ask, on the global supply demand landscape of ref gases. Earlier there were talks of some ref gas or R30 exports happening from the UAE and recently have started seeing some exports from some Mexican companies into the United States of R134a. It seems that the Chinese companies have been able to find channels either through the Middle East or through southern part of the American continent. Do you think that this is something that will continue to dampen the supply demand equilibrium, and prices will continue to be under pressure? What would be your take on the entire rev gas regime that we are seeing right now?
Rahul Jain
So again, I think we spoken about this in the past as well, the UAE or the Middle east capacity that you spoken about. Again, I have not seen very large exports coming out of that. There were, there were some export data that showed up, but today there is not seemingly very large exports that go out from the UAE. I have not heard about these Mexican imports into the U.S. market. I will check that out. But to be very frank, if there is certain circumvention that is happening, Archit, those things will keep playing out. I think what we can do to manage this is to be able to ensure that our customers and our market share in the U.S. continues to get maintained. I think that’s the only piece that we can do. If we kind of find out certain things, maybe go out and intimate this to the authorities is certainly what we will do. But I think it’s better for us to say what we can do well, rather than what is the other piece that we can’t control. So, I think that’s the way we look at it. I don’t think there is a very large disbalanced situation today, HFCs, certainly not. And again, over a period of time, as the cuts start to happen in the developed worlds, developed world, we will probably be seeing more, let’s say, better pricing on the HFCs. So that’s how it should play out.
Archit Joshi
Sure. So, second one, you can just help us explain the domestic salience of our specialty chemicals business. Has that trended upwards? Are we seeing any traction compared to last year?
Rahul Jain
So, see, again, when we think about specialty chemical business and it sales into the domestic market, I think largely they are the best of the global customers only, right? And therefore, when you think about it three years ago versus today, say where the sales were 90%, 95% export and balance 5% in the domestic market, the domestic sales are roughly, let’s say about 25%, 30%, right. Because of that, there may be some domestic traction that is building up, but frankly speaking, I think it is at the behest of global customers only. So that’s how it will continue to play out.
Archit Joshi
Sure, sir, that clarifies a lot. Thank you and all the rest.
Operator
Thank you very much. The next question is from the line of Krishan Parwani from JM Financial. Please go ahead.
Krishan Parwani
Yeah, hi sir, good afternoon. Two questions from myself. Firstly, clarification on ref gas. I think you previously also mentioned that you want to maximize your ref gas utilization for getting the quota. So when could we expect full utilization of ref gas capacity? Would it be by FY ’25 end or CY ’25 end?
Rahul Jain
So, calendar ’25, certainly we should get to full capacity from an HFC perspective. No doubt on that Krishan. I think capacity utilization even today is fairly in decent shape. There are no two ways about it. While, let’s say it is probably in the range of 75%, 80%, again, I think there will be more work that we need to do to be able to see what best mix we can get to.
Krishan Parwani
Noted and yeah, got it. And secondly, on the pharma side, how is the [Indecipherable]? Do you see material improvement in 4Q ’25 anything to do with jump in pharmacies? I think in the presentation you have also mentioned there are launch of new pharma intermediates so [Speech Overlap]
Rahul Jain
Again, I think we are talking about non-actives in pharma. As of now not talking about pharma intermediate, active pharma intermediates more non-actives on that side is what we are speaking about, yes, certain traction is building, but like I said in the previous meeting and previous calls as well, I think it is a more story which is to be playing out over 18 months, maybe 24 months rather than a quarter-on-quarter story. I don’t think it has changed very significantly quarter-on-quarter. Some traction, yes, visible, but not something that I want to kind of talk about.
Krishan Parwani
Got it. Thank you for answering my question, sir. Wish you all the best for the coming quarter.
Operator
Thank you very much the next question is from the line of Bhaskar Chakraborty from Jefferies. Please go ahead.
Bhaskar Chakraborty
Thank you. I just wanted to know, Rahulji, you envisaged that the seven active ingredients that you are working on and three of them were very promising, would any revenues accrue from.
Rahul Jain
Could you repeat please?
Bhaskar Chakraborty
I wanted to get your thoughts on whether any of the seven active ingredients that you are working on would contribute to revenues by end of FY ’25 as things stand right now.
Rahul Jain
At least two to three, we will start to see some traction in FY ’25. But again, like I said in an answer to a previous question also Bhaskar, it really does depend on the customer registrations, right? As they start to take calls on their registration, even start to see traction. Unfortunately, these things are kind of out of my control, and therefore, we have to go with what the customer needs.
Bhaskar Chakraborty
Understand. And what is the current utilization of your PTFE plant?
Rahul Jain
As of now, probably slightly low. But I think in the presentation also we have talked about the fact that the free sale and fine cuts in the domestic market are kind of doing all right. We are — we have already sent out samples for the export. That’s something that should start to see traction around Q4. [Indecipherable] which was kind of a constraint in this has now probably come through, probably very soon, we should start to get full quantities of HF that will also add to value here. So, all of those will probably see more visibility towards end of Q3 and early Q4.
Bhaskar Chakraborty
So, is it fair to say that we are likely to see a two to three times kind of jump from PTFE revenues over the next six months?
Rahul Jain
Three times, I think it’s a journey, Bhaskar, rather than just a jump that we are thinking about. I think three key things have to pan out. One, customer approval has to come through. Second, our production has to get in line with our capacity. And third is domestic plus exports market taking share and certain volume, certain pricing changes that we are expecting in the market to happen. I don’t think there will be a three times growth in PTFE revenues in six months’ time. That’s not going to happen.
Bhaskar Chakraborty
Understood. Thank you very much.
Operator
Thank you very much. The next question is from the line of Vishnu Kumar from Avendus Spark. Please go ahead.
Vishnu Kumar
Thanks for the time, sir. On the HFO new plant, when do we expect the first commercial sales? By which year? Is that something that you can help?
Rahul Jain
I think Vishnu, we have said clearly that it’s about 30 months from now. So probably get to September of ’27. So, FY ’28 is when commercial production probably starts. If not September, probably August of ’27. So, FY ’28.
Vishnu Kumar
Got it. And second, on the margins in the chemical business, like how much of it would be negatively impacted because of startup operations on PTFE? So, 18% would look like slightly better, I’m guessing if we eliminate the PTFE startup and low utilizations there, how much would that be?
Rahul Jain
Operating leverage has played out negatively here. When we think about it, the operating leverage probably is playing out negatively anywhere between 2% to 2.5%. Because plans have been capitalized, depreciation is there, and the depreciation is not fully used. There is a 2% negativity in terms of what margins you are seeing on paper. As those ramp up, some of that operating leverage will play out positively.
Vishnu Kumar
Got it, sir. And the journey from here, say if I remove this 20 to 23, 24 or our medium-term guidance of chemical business, what has to change here and in which segment you are a little bit more confident that over the next 12 months, 18 months this chemical business, let’s say, I mean, I’m removing the PTFE for now. So, 20 going to 24, which segment will probably drive you back there?
Rahul Jain
I’m unable to figure out just 20, 24. What are you talking about?
Vishnu Kumar
I’m saying, today we have about 18% in the chemical business. Since the negative operating leverage, if I remove off the 2%, then theoretically the other business is giving you 20% EBIT margin. So, the 20% EBIT margins which you are currently doing, if it has to go to 23%, 24% of our medium-term guidance, then which segment will drive this? And how confident are we of going back to the 24%, 25% margin in that range?
Rahul Jain
It is a combination of both, both the specialty chemicals and the fluorochemicals. I think the confidence is not specifically on just speciality or fluoro. I think there are pricing improvements in fluoro that we are seeing. There are product offspring that we are seeing. This is a seasonally weak quarter for the business also. And therefore, the seasonal adjustment that will start to happen will create the positive on the fluorochemical side, PTFE towards Q4. We should start to see better traction on that. So as a combination, all of those should pan out. Again, order book in the specialty chemical business, new products ramping up and some of the old legacy products also starting to come back is a combination of all of those rather than just either of the two.
Vishnu Kumar
Got it, sir. Thank you.
Operator
Thank you very much. The next question is from the line of Ranjit from IIFL securities. Please go ahead.
Ranjit
Yeah, hi sir, thanks for taking my question. In the presentation, we have mentioned that we are also debottlenecking the HF capacity. Is it to support our new HFO or within the existing scheme of things, we are also planning some expansion.
Rahul Jain
We had always said that the HF is the new ground that is coming up. That was a part of the 32 capex 32 already has come up. The HF will also come up. It got a bit delayed which has also kind of impacted our margin, and our overall, let’s say, ability to produce. But what I can tell you is that AHF is now getting there. We are, we are almost, let’s say doing some trial runs on it, getting some very encouraging results out of it, and therefore hopefully very soon the AHF bottleneck will probably get very sorted — pretty much sorted, Ranjit.
Ranjit
Sure sir. Thank you. And finally, we also mentioned cost saving measures are one of the few key molecules where we are seeing the realization pressure. If you can also elaborate upon how big that would be, whether it will be able to compensate the realization pressure even with 30%, 50% of that.
Rahul Jain
So, I don’t know what has changed. To be very frank about it. The molecule that you are talking about, we have seen some of the, let’s say, measures that we have taken up start to yield results where my cost is lower. Again, there are various other projects going on, on that side. Probably over the next six months, some of those will also play out, and my costs to produce will probably be lower on the product that you are talking about. But it’s a journey, Ranjit, rather than just a switch on, switch off. It is not a switch on, switch off in any case.
Ranjit
Right sir. But we will be able to at least have that vision from the realization pressure that we are seeing.
Rahul Jain
It’s not an excel sheet where we can plot a linear line, Ranjit. I think business will continue to have some volatility, but what you can rest assured of is that we will do all that is required from a tech perspective, from an intervention perspective, from seeing where we can sell, get to new customers, new geographies. All of that we will continue to do, Ranjit.
Ranjit
Sure sir. Thank you.
Operator
Thank you very much. That was the last question. I would now like to hand the conference over to the management for closing comments.
Rahul Jain
Thank you very much everyone. I hope I have been able to answer all of 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]