SRF Limited (SRF) Q4 FY22 Earnings Concall Transcript

SRF Limited (NSE: SRF) Q4 FY22 Earnings Concall dated May. 10, 2022

Corporate Participants:

Ankur Periwal — Vice President of Media and Logistics

Nitika Dhawan — Head of Corporate Communications

Rahul Jain — President & Chief Financial Officer

Analysts:

Rohit Nagraj — Emkay Global — Analyst

Sanjesh Jain — ICICI Securities — Analyst

Amar Mourya — AlfAccurate Advisors — Analyst

Ankur Periwal — Axis Capital — Analyst

Kumar Saumya — AMBIT Capital — Analyst

Madhav Marda — Fidelity International — Analyst

Surya Patra — PhillipCapital — Analyst

Atul Tiwari — Citigroup — Analyst

Sumant Kumar — Motilal Oswal — Analyst

Nitin Agarwal — DAM Capital — Analyst

Abhijit R. Akella — IIFL Research — Analyst

Arjun Khanna — Kotak — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the SRF Limited Q4 and FY ’22 Investor 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 — Vice President of Media and Logistics

Thank you, Faizan. Good afternoon, friends, and welcome to SRF Limited’s Q4 and FY ’22 Post-Results Earnings Conference Call. The call will be initiated with a brief management discussion on the earnings performance, followed by an interactive Q&A session. Management team will be represented by Mr. Rahul Jain, President and Chief Financial Officer, SRF Limited. I would like to hand over to Ms. Nitika Dhawan, Head of Corporate Communications at SRF, to initiate the proceedings for the conference call. Over to you, Nitika.

Nitika Dhawan — Head of Corporate Communications

Good afternoon, everyone, and thank you for joining us for the Q4 and FY ’22 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 this call, I would like to point out that some statements made in this call may be forward looking and a disclaimer to this effect has been included in the earnings presentation shared with you earlier. I will now request Mr. Jain to make his opening statement. Thank you.

Rahul Jain — President & Chief Financial Officer

Thank you, Nitika, and good afternoon, everyone, and I extend a warm welcome to all of you, and thank you for joining us on SRF’s Q4 and FY ’22 earnings conference call. I trust you, your families and colleagues are doing well. I will initiate the call by briefly taking you through the key operational highlights for the period under review, following which we will open the forum for a Q&A session. SRF delivered a robust performance during the period under review, ending fiscal ’22 on a strong note. We achieved notable growth in all our segments with our Chemicals business performing remarkably well. In Q4, gross operating revenue increased by 26% Y-o-Y to INR3,549 crores. EBITDA grew 46% Y-o-Y to INR944 crores, translating to an EBITDA margin of 27%. The company’s profit after tax increased 59% from INR381 crores to INR606 crores in Q4 FY ’22 when compared to corresponding period last year. Even in comparison to our Q3 FY ’22, our profit after tax grew by about 30% to INR606 crores as compared to INR506 crores last quarter. Given the persistent challenging macroeconomic environment, the company has delivered yet another solid performance during the quarter. Moving on to our segmental performances. The Chemical business recorded a strong growth of 36% Y-o-Y to achieve revenue of INR1,572 crores.

Our Fluorochemicals business delivered a strong performance on account of higher volumes in refrigerants, blends and the chloromethanes segment in both domestic and export markets. Our continued focus on growing our exports markets, especially in the U.S. has gone through well. We are well placed to seize future opportunities in the U.S. market. During the period, SRF continued to grow its global market share of R134a pharma-grade gas marketed under the Dymel brand, with presence in India, Bangladesh, Argentina and Thailand. We have further expanded to new geographies such as Greece and Taiwan and have a healthy order book in the new locations as well. The price of in both international markets and domestic markets have increased, given trade measures in both internationally and domestically as well. We are of the view that this can continue and firmer price action will be witnessed. Given now, new capacities that cannot be added — that can be added only until December ’23, SRF is in a position to cater to the growing demand. In the chloromethane segment, higher sales realizations and optimized product mix helped business perform well. Our capabilities on the backward integration allows us to control our costs as well and propel the business forward. Having said that, some inflationary pressures on prices of key raw material utilities, higher capex costs on account of commodity price inflation are certain risks that we continue to keep a close watch on.

In this segment, I am happy to share that all our capex plans are on track. The Fluorochemicals business is in the midst of implementing large CapEex’s and the like PTFE and CMS are likely to be commissioned over the next two quarters. I believe that this along with other projects will auger well for the growth of the business. Additionally, the Board in its meeting yesterday approved the proposal to expand the R22 capacity at a cost of approximately INR30 crores. During the quarter, our Specialty Chemicals business did remarkably well as well, driven by strong demand in both domestic and export markets. Our new product portfolio is being enhanced continuously, which also helps strengthen our client base. In addition, our customers are demanding more and more of the complex molecules that we produce, which has been met by our robust in-house R&D team, giving SRF an overall edge in the marketplace. During the year, we launched six new products, four in agro and two in pharma. Furthermore, demand for existing products continues to be healthy. We are also seeing traction in the AI space and building our capabilities in this front and are excited about a couple of AIs that are currently under discussion.

On the cost aspect, we have indeed faced certain supply chain challenges in terms of availability and prices of key raw materials. The team has found countermeasures to effectively deal with such challenges and focus on diversifying raw material supplier dues to offset the risk to the supplies. This combined with process optimization, assets, optimal utilization and other initiatives to reduce environmental manufacturing costs has enabled us to lay emphasis on further cost reduction and focus on sustainability. We are pleased to announce that the Board has approved a proposal to certain dedicated facilities to produce certain key specialty products at the range at an estimated cost of INR115 crores. We believe the current opportunity together with recently commissioned and forthcoming capacities will further boost our market position in both the agro and pharma industries. As we grow our revenue, we plan to continue investments in this segment to sustain healthy growth rates over the next few years. We believe this is commendable owing to a notably higher base, which have witnessed significant growth over the past few years. During the year, the business grew around 30% and registered sales of more than INR3,100 crores, which is higher than our earlier guidance.

We are also fairly confident of a 20% plus/minus growth that we can achieve in FY ’23 as well. Moving on to our Packaging Films business, which registered a solid performance during the quarter, with growth in sales across domestic and international businesses. The performance was driven largely owing to ramp up in capacities in Hungary and Thailand with supported volume growth. During the quarter, demand for BOPP and BOPET films remained strong while we continue to prioritize efficiency and cost effective to improve productivity. In addition, our performance was further supported by improving sales growth from value-added products. SRF strengthened its easy to do business with and solidifying its position as a global industry leader. With over 100 countries and multi-country multi-substrate presence, we effectively broadened our footprint. Our sustained focus on quality and delivery parameters have held us reach a broader and deeper consumer base around the world. In the upcoming quarters, the demand for BOPP films is likely to remain healthy. However, we expect pressure on the BOPET margins on account of several new lines that are likely to come up in the future. Here, we believe that we have an edge over our competitors with multi-country presence across the globe.

Regarding our recent announcement of following into the manufacture of aluminum foil, I am happy to share that we have incorporated SRF Altech Limited as a wholly owned subsidiary of SRF Limited. And the civil works or construction of this facility will begin soon. Our Technical Textiles segment achieved healthy revenues on the back of highest ever sales volume from our Belting Fabrics and Polyester Industrial Yarn segments during the quarter. This contributed to partially offsetting the weak demand of nylon tyre cord fabrics. Despite the uncertain market environment, the business demonstrated promising results as SRF continues to improve its operating efficiencies in the segment. While demand for MTCF remained weak over the last quarter, we are witnessing some revival in the space going forward. Lastly, in our other business segments, SRF maintained its domestic market leadership position in the Coated Fabrics business, with a focus on improved sourcing initiatives and superior operating performance. Domestic demand that was initially sluggish owing to the order postponement is currently ramping up and likely to firm up significantly.

In our Laminated Fabrics Division, SRF retained its pricing and volume reduction with the facility operating at full capacity in Q4 and reaching its highest quarterly sales record. On the balance sheet front, I am happy to share that we’ve been able to maintain net debt in similar levels around INR2,700 crores when compared to last year. This was despite a capex investment of close to INR2,000 crores and higher working capital on account of inventory and receivables greater, new plant start-up and increasing sales. Our capital expenditure plans for the ensuing financial year are also progressing well. We envisaged an additional capital allocation in the range of INR2,500 crores to INR2,700 crores during FY ’23. Most of these capexs will be funded through internal accruals and cash generation. While there may be some additional debt that may be required, it could range only between INR200 crores to INR300 crores over FY ’23. Despite the other, our balance sheet remains strong. We will cash other opportunities that may come through. However, the driving interest rate scenario and continued volatility, interest rate and liquidity management will remain a key focus area for us.

The commitment to capex clearly showcases two key metrics: A, our confidence in our business and its ongoing strategies; and B, the majority of cash flows that have been generated are being reinvested in our future and growth prospects. FY ’22 was a volatile year with geopolitical tensions, COVID impact, supply chain disruptions impacting all aspects of business. In spite of the challenging external environment and dynamic business strategy to counter the same, we maintained a heathy balance sheet position. The same is reflected in reaffirmation of the company’s ratings by the rating agencies. During the year, exchange rate volatility remained a key concern, especially in emerging markets. However, and risk management strategy has been put in place to minimize its impact on businesses. At SRF, we lay equal importance to community engagement initiatives and constantly strive to give back to society. During the quarter, SRF collaborated with Election Commission and Child and Women Development departments to conduct voting awareness, activities at Dehradun and Greater Noida, encouraging citizens to cast their vote.

In addition, we imparted training on digital skills to empower more than 5,000 teachers at five locations. It is also heartening to see our efforts are being appreciated and SRF Foundation was recently awarded CSR Times Award 2021 in gold category for its rural education program. To conclude, we are confident about the future growth and market prospects that each of our businesses present. Even in an uncertain global and domestic operating situation, we continue to remain cautiously optimistic. Over the years, we have invested meticulously in building world-class infrastructure and unparalleled R&D capabilities. Given our solid foundation and unmatched capability and resources, we are confident of achieving excellent outcomes, and it is our ongoing endeavor to create sustainable value for all our stakeholders in the future. On that note, I’ll 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

[Operator Instructions] The first question is from the line of Rohit Nagraj from Emkay Global. Please go ahead.

Rohit Nagraj — Emkay Global — Analyst

Yeah, thanks for the opportunity and good afternoon all sir. First question is on the Packaging Films business segment. You indicated that on BOPET we made in terms of margins because of the new lines coming up. Just wanted your perspective given that there is a volatility of polymer prices currently because of spike through prices, will there be any impact on the demand side and given that the post-COVID —

Rahul Jain — President & Chief Financial Officer

I am unable to hear you clearly. Could you lift the handset and talk?

Rohit Nagraj — Emkay Global — Analyst

Is it better?

Rahul Jain — President & Chief Financial Officer

Yes, it’s much better, Rohit.

Rohit Nagraj — Emkay Global — Analyst

So I was talking about Packaging Films business that given that there is a crude-related volatility-, is there any demand impact? And given that the post-COVID demand is now normalizing, are there any indications that demand is relatively stabilizing and probably may have impact because of the higher pricing environment?

Rahul Jain — President & Chief Financial Officer

Thanks, Rohit for your question, and thank you for understanding. The point that you make in terms of volatility on crude, certainly, there is some volatility on crude. I think what we’ve been able to do Rohit is take strategic sourcing decision. We’ve taken multiple positions in terms of where we are from our key raw material perspective, for our BOPET Films and for our BOPP Films. So we’ve taken multiple initiatives on that side. Yes, there is some volatility. But again, I think the market does price the films based on the delta of the basic raw material. So I don’t think that is too much of a worry. The second question that you have raised is with respect to the pricing or the demand for films. Luckily, on that side also, we’ve seen strong demand coming in. There is some normalization that had happened post, let’s say, the COVID high that we saw in ’20. But I think that’s pretty much passed. All of that is now coming in fairly on a consistent basis. We are seeing in the domestic market anywhere between 8% to 10% or slightly higher than that in terms of the demand increase that is happening. Internationally also, we are seeing a pretty decent increase in demand. So I don’t think demand is an issue, but the pricing, logistics and some of those might be a small issue, but we are tackling.

Rohit Nagraj — Emkay Global — Analyst

All right. Got it. This was really helpful. Sir, the second question is again on the Technical Textile business. Now in Q1 and Q2, we had an EBIT run rate of almost INR130 crores, and there was some volume contraction in Q3. And in your comments, you also again said that NTCF had some issues in Q4. So given the normalized volumes, run rate of INR130 crores — quarterly run rate of INR130 crores is sustainable. I understand that because of the volatility in capital prices, the percentage EBIT margins could vary, but the absolute run rate, should it be, say, INR130 crores when the normalized volumes again come back?

Rahul Jain — President & Chief Financial Officer

I don’t understand the INR130 crore number, Rohit. My sense is you are talking about EBITDA rather than talking about EBIT, which is the one that is published.

Rohit Nagraj — Emkay Global — Analyst

-In Q1 and Q2, I’m talking about the EBIT numbers that we give, segmental EBIT.

Rahul Jain — President & Chief Financial Officer

So Rohit, the point to make is, yes, to a certain extent, there has been some renegotiation that has happened in terms of our customer contracting. Some of that is currently going on. Even in Q1 last year, I told you that some of the contracting has happened, which is annual. We are working on some of the other contracts for the next financial year also. INR130 crores, purely as a number, it will be difficult for me to be able to comment whether that can be a good runrate to achieve. But I can certainly tell you that from an overall perspective, we see demand to be higher on the NTCF side. We see certain cost measures that we are taking on the production side, which will probably lead to better EBIT margins and overall better EBIT number going forward. Now whether that will be INR130 crores or INR100 crore or INR91 crores, which is last quarter, I can’t really comment on that. But I think there is a fairly good understanding that between, let’s say, INR100 crores to INR120 crores, we should be able to achieve overall.

Rohit Nagraj — Emkay Global — Analyst

Right. Got it, sir. Sir, just one last clarification. Last year, our net debt has been constant on a year-on-year basis, but the interest cost has reduced. So what is your reason for that? And what would be the average cost of interest for FY ’23, if you have any view on that?

Rahul Jain — President & Chief Financial Officer

Rohit, wherever we were from an FY ’22 perspective, I believe with the international interest rates rising, with Indian domestic interest rate also likely to rise, I think anywhere between 30 to 50 basis points, there could be an overall impact on us on a year as a whole. Our endeavor will be to minimize that impact by doing appropriate interventions at the appropriate point in time. But certainly, we are not out of the market. There will be some impact on the increased interest rates that we will see across domestic and international markets.

Rohit Nagraj — Emkay Global — Analyst

Sure. Thank you so much and best of luck.

Rahul Jain — President & Chief Financial Officer

That was the reopening thank you.

Operator

Thank you.The next question is from the line of Sanjesh Jain from ICICI Securities. please go ahead.

Sanjesh Jain — ICICI Securities — Analyst

Rahul-ji, congratulations on an exceptional performance. A few questions. First, on the speciality chem, in our presentation, we have said that we have lined up the new products for the upcoming MPP 4. And this year, we have launched six new products. What is the number of new product launches we are anticipating for FY ’23 considering that we are starting with a new MPP, will it be a considerable jump over FY ’22?

Rahul Jain — President & Chief Financial Officer

So to answer your question, MPP four versus new products may not be the right correlation to do. MPP 4, we are looking to ensure that it gets full in terms of what products we are doing. There are five or six products that we can do in the MPP 4. We are looking to ensure that all of those we are able to do from day one or as soon as the plant gets stabilized. With respect to new products Sanjesh, the question should be different in terms of what are you looking at doing from a new product perspective. This year, FY ’22, we have done almost six new products from a launch perspective. I think the run rate should be similar or higher in FY ’23 also. But I don’t think there is a need to link it to MPP four.

Sanjesh Jain — ICICI Securities — Analyst

Okay. So you are telling irrespective of MPP, we will be launching the product?

Rahul Jain — President & Chief Financial Officer

Yes, please.

Sanjesh Jain — ICICI Securities — Analyst

Okay. No, that’s fair. Second, on the refrigerant gas for FY ’22, what was the utilization rate for us for particularly HFC? And with this INR30 crores of debottlenecking capex of R22, how much more capacity will be able to adding in there?

Rahul Jain — President & Chief Financial Officer

So roughly speaking across HFC, 70%, 75% would have been the overall utilization, given Q1 was slightly tight, what we saw. There were certain technical things that we had also witnessed. All of that is now past us. We are now running at full capacity for almost all of our HFCs. The second question that you’ve asked in terms of R22, I think the debottlenecking that we are doing with the INR30 crores capex is roughly in the range of about 2,500 to 3,000 tonnes per annum, largely captive in nature is what we are looking at.

Sanjesh Jain — ICICI Securities — Analyst

Okay. For the.

Rahul Jain — President & Chief Financial Officer

Which could be sales or also internal consumption.

Sanjesh Jain — ICICI Securities — Analyst

Got it. So it is fair to assume that for next year, we have enough capacity as a whole in the ref gas to grow even on the HFC side because of the weaker first half in FY ’22. That is the right way to think, right?

Rahul Jain — President & Chief Financial Officer

Most certainly. We have, let’s say, additional capacity available. We had also commissioned in December a new plant for our HFC. So all of that has happened. And therefore, there will be no capacity available to utilize in FY ’23 than it was in FY ’22.

Sanjesh Jain — ICICI Securities — Analyst

Fair enough. Sir, last question from my side. We have given a guidance of INR2,500 crores to INR2,700 crores for FY ’23 capex. Can you help us with the breakup for this capex? And number two, why a separate company for an aluminum foil?

Rahul Jain — President & Chief Financial Officer

To answer first, INR2,500 crores to INR2,700 crores, I think roughly in the range of about INR1,700 crores to INR1,800 crores would be the Chemicals business. Roughly, within that, I think INR1,100 crores to INR1,200 crores is fluro, and the balance is specialty. Some of those that are running as well as some of those that are in progress. The other largely is the PIY and the technical textile debottlenecking and the value chain capex that we are doing, plus some other capexs with respect to the Packaging Films business and Altech as well as the BOPP line that will come up in July. So that’s more or less the breakup of the INR2,500 crores to INR2,700 crores. Also, I can tell you today, given where we are, we believe those capexs that have been sanctioned and approved and are currently running are probably in the range of INR2,300 crore to INR2,400 crore.

Therefore, we are giving you a number of INR2,500 crores to INR2,700 crores because there will be new capexs that will get sanctioned during this financial year so that we will have to incur money on it. So this is the cash spend that I’m talking about. The second question that you have asked is Altech. Again, two things suggests there are certain tax positions that we are also creating with Altech. The manufacturing company tax positions are in the range, I think will depend until March of ’24, if you are setting up your new manufacturing company, you are allowed a certain differential tax regime. So that’s a positive. We are looking to expand this business to a very large extent. We believe it can become a significant substrate within our Packaging Films business. And therefore, with those two things in mind, we have set it up as a new company. I hope it explains, Sanjesh.

Sanjesh Jain — ICICI Securities — Analyst

Very clear, sir. And thanks for all the answers and best of luck for the coming quarters.Thank you.

Rahul Jain — President & Chief Financial Officer

Thank you.

Operator

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

Amar Mourya — AlfAccurate Advisors — Analyst

So thanks a lot for opportunity. My first question is basically on the Specialty Chemicals. You indicated that this year, as a whole, we did a INR3,100 crores kind of a revenue. So does this include the chlorinated chemical part or this is excluding only the — I mean, pure Specialty?

Rahul Jain — President & Chief Financial Officer

What chlorinated chemicals are you talking about?

Amar Mourya — AlfAccurate Advisors — Analyst

So basically, MEG [Foreign Speech], is it included into this?

Rahul Jain — President & Chief Financial Officer

Amar, I think there is a confusion. We don’t do any MEG. I’m talking about total turnover of the Chemical business being INR5,200 crores, roughly for the year FY ’22. Out of which, roughly, let’s say, INR3,100 crores is Specialty, which effectively means that the total turnover is 60% specialty, 40% fluro, which includes ref gases and industrial solvent.

Amar Mourya — AlfAccurate Advisors — Analyst

So basically, that is what I’m trying to understand. Industrial solvent is not part of this. INR3,100 crores is a pure specialty, fluro Specialty Chemical, right?

Rahul Jain — President & Chief Financial Officer

Absolutely. Industrial Chemicals is always a part of the Flurochemicals business, which is ref gas, industrial solvents.

Amar Mourya — AlfAccurate Advisors — Analyst

Okay. Got that. And secondly, sir, in terms of the guidance we are talking about, 20% growth rate. So what I’m trying to understand is that now given that the kind of new orders your competitors are getting, so is that the intensity for you also in the Specialty Fluorochemicals business is increasing largely from the agrochemical perspective?

Rahul Jain — President & Chief Financial Officer

I would end up saying, Amar that there is a pretty good traction for us from the AI space, agrochemical space and even the pharma teams have been strengthened to meet the growth requirements for the Specialty Chemicals business. You’ve seen us invest significantly almost on every quarter basis, we are sanctioning new plants. There is INR115 crore capex that we have recently sanctioned. The MPP four is also something that is coming up very, very soon. And we are looking to take that up. The PIP, which is a Pharma Intermediate Plant, is also something that we have recently done, and we are working on putting that up probably in the next six, eight months. So all of those are in good shape. We are facing, let’s say, a bit of a demand positive from the agrochemical side, that’s something that I believe is a positive. The other thing also is that the number that I told you 20% plus/minus, is also based on my current order book, my current positioning. We are starting the year, and those variables are there. So I go back last year when we were talking about the 15% to 20% growth, you’ve seen us deliver a much better number even this year. So based on our current performance, based on our current order book, we are kind of projecting the growth going forward. I am hopeful that we will be able to beat the number again.

Amar Mourya — AlfAccurate Advisors — Analyst

Okay. That is what I wanted to understand from you. Thanks a lot, sir.

Rahul Jain — President & Chief Financial Officer

Thank you.

Amar Mourya — AlfAccurate Advisors — Analyst

Yeah. Thank you.

Operator

Thank you.The next question is from the line of Ankur Periwal from Axis Capital. Please go ahead.

Ankur Periwal — Axis Capital — Analyst

Yeah, hi, sir. Thanks for the opportunity. Sir, first question on the Specialty Chemicals side and partly you agreed, you just answered.

Rahul Jain — President & Chief Financial Officer

If you could be a bit louder, I’m unable to hear you.

Ankur Periwal — Axis Capital — Analyst

Sorry. So the 20% plus growth guidance that we are giving in and I’m putting in context, earlier, we had mentioned that Pharma business should be increasing in terms of overall contribution within Specialty Chemical. So this — and the six product launches that you talked about, is the growth largely driven by the existing products, either in agro or pharma or the newer ones also will be a bigger contributor here?

Rahul Jain — President & Chief Financial Officer

So Ankur, I would say this, that there are new products that we’ve launched over the next, let’s say, over the last 12 months, 18 months. All of those are witnessing great traction, large demand. There is new products that are — therefore, I would call them as growth that is being driven by new products. Also when I look at it from an overall perspective, existing products and more complex products like the P32, P35, all of that is also growing. So I would typically say that it is driven by both the sites rather than just one.

Ankur Periwal — Axis Capital — Analyst

Sure. And pharma will be growing faster here given the contribution of pharma is expected to rise?

Rahul Jain — President & Chief Financial Officer

Sure.

Ankur Periwal — Axis Capital — Analyst

Sure. Sir, second question on the overall chemical business margin here, and given the RM volatility that we are seeing, the pass-through there. So any comments there?

Rahul Jain — President & Chief Financial Officer

So I would say you are right, Ankur, that there is a small issue in terms of the fact that Specialty Chemicals is a contracted business. I would say we have kind of passed through about 20% to 30% of some of our increased costs through to our customers over the next, let’s say, six to 12 months. We believe this number can go to 60%, 75% in terms of the pass-through of cost, that will certainly come through. But then I think it’s the contract, it’s a long-term relationship that we are more worried about or more concerned about for it to be maintained and some small adjustments that we need today from a margin perspective, we are pretty much happy to do.

Ankur Periwal — Axis Capital — Analyst

Sure, sir. Just a clarification. If I look at our, let’s say, H2 margin wherein the gas pricing, the efficiency there have helped the Chemical business margin per se. So we were give and take 20%, 22% in the first half, which increased around 30% in the second half. So will it be fair to say given the gradual RM pass-through and given the longer-term relations there, broadly on a full year basis, we should be sustaining these numbers?

Rahul Jain — President & Chief Financial Officer

It is pretty much possible, Ankur. Q4 margins are roughly in the range of 30%, 32% as I look at it. Q3 was about 29%. So there is a delta there. From a overall Chemicals business perspective, I think we can look at better margins going forward as well.

Ankur Periwal — Axis Capital — Analyst

Sure. That’s helpful. And sir, just one clarification. On the ref gas side, you said for the full year, we are operating at 75-odd percent utilization. Was that number right?

Rahul Jain — President & Chief Financial Officer

70%, 75%, depends on gas to gas.

Ankur Periwal — Axis Capital — Analyst

Sure, sure, sure. So there is a volume uptick there apart from the 15 —

Rahul Jain — President & Chief Financial Officer

Positive —

Ankur Periwal — Axis Capital — Analyst

I believe the bank if it comes in sir. That is helpful. I’ll get back in the queue.

Rahul Jain — President & Chief Financial Officer

Thank you.

Operator

Thank you.The next question comes from the line of Kumar Saumya from AMBIT Capital. Please go ahead.

Kumar Saumya — AMBIT Capital — Analyst

Yeah, hi, sir, good evening, my most of the questions have been answered. So just a couple of data points. So what was contribution of refrigerant in the overall Chemical segment?

Rahul Jain — President & Chief Financial Officer

Contribution of refrigerant in the overall Chemicals segment, I would have to calculate it. It’s not a data point that I have readily available with me. But my sense is it would be probably in the range of — one second, need calculator. Say about INR1,400 crore, INR1,500 crore. So if you want to calculate it like INR1,500 — say about 30%.

Kumar Saumya — AMBIT Capital — Analyst

Okay. And sir, what was India’s contribution from in the Packaging segment, sir? How much did India’s capacity contributed in the Packaging revenue?

Rahul Jain — President & Chief Financial Officer

We have the standalone numbers, look at them.

Kumar Saumya — AMBIT Capital — Analyst

Trends yeah, good sir. Thank you.

Rahul Jain — President & Chief Financial Officer

That will be us. Thank you.

Kumar Saumya — AMBIT Capital — Analyst

Thank you.

Operator

Thank you.The next question is from the line of Madhav Marda from Fidelity International. Please go ahead.

Madhav Marda — Fidelity International — Analyst

Yeah, hi, sir. Good afternoon. Thank you so much for your time. Once again, I just wanted to understand that our capex number, I think last year we were doing about INR1,500 crores to INR2,000 crores. It’s been up this year. How much of that is an impact just of higher steel and cement prices, etc, which is impacting our capex investment this year?

Rahul Jain — President & Chief Financial Officer

Very, very difficult question to answer. What I can tell you that steel prices have risen very, very significantly, stainless steel, PVDF, cement to a very low extent, but more from a, let’s say, when I look at in the chemicals or exotic materials, those prices have gone up very, very significantly. I would tend to say that it depends on project to project. But commodity price inflation is probably having an impact of anywhere between 8% to 15% on our projects on an overall basis. And when I’m talking about this, this is not just — see, the point Madhav is that those capexs that we have had sanctioned one year ago, 1.5 years ago, have had that kind of impact. Those that we are sanctioning now are effectively taking into account all of those price inflations that are coming, right? So it’s a very difficult question to answer. But my sense is anywhere between 8% to 15%.

Madhav Marda — Fidelity International — Analyst

Got it. Understood. And secondly, on the Chemical margins, I think you indicated that if I understood that, we can maintain these margins for FY ’23, the 2H margins they can sort of remain new. Is that — did I get that right?

Rahul Jain — President & Chief Financial Officer

If I would have been a predicting man, I would have given you the exact number, but we are — in that range, we could.

Madhav Marda — Fidelity International — Analyst

Okay, sir. And sir, the refrigerant gas demand/supply environment continues to remain healthy, I’m assuming currently in the world?

Rahul Jain — President & Chief Financial Officer

Absolutely, both domestically as well as internationally. We have little material to sell. and assessments.

Madhav Marda — Fidelity International — Analyst

Okay, sir. Thank you so much.

Rahul Jain — President & Chief Financial Officer

Thank you

Operator

Thank you.The next question is from the line of Surya Patra from PhillipCapital. Please go ahead.

Surya Patra — PhillipCapital — Analyst

Yeah. Congrats for the great set of numbers, sir. Just one question on the refrigerant gas side. So recently, government has pronounced policies about restricting the imports as well as restricting the exports of HFCs. So how is it one thing, whether it is a beneficial aspect for us? Because while export was competitive a faster growing vertical for us, while in the domestic side the pricing, market share and the import substitution was an opportunity. So both put together, how should one really look at? And what is the implication on us?

Rahul Jain — President & Chief Financial Officer

To be very frank, I think, Surya, the way it was say that as we move into a more regulated regime, these are the first and initial steps the government takes. Because from an international perspective, they have to report in terms of what are the consumption that you are having, what is the import that you do, what is the consumption from a refrigeration perspective perspective and a noninvasive perspective. This is something that happened through CFC cycles, HCFC cycles, and now HFC cycles. Standard move. But from our perspective, I think it is beneficial because export, we are the only ones in the country that manufacture HFC. So we have the ability to get the appropriate licenses and do the exports. That’s not a problem. Import, I think restricting that also effectively, which will lead them most misclassified imports are coming and therefore, that’s also positive. Nothing of our doing, but overall this is, I believe it’s a positive.

Surya Patra — PhillipCapital — Analyst

Okay. Sir, the second question is on the fluro. See, last year, we have seen the expansion led growth as well as the price support, which help us deliver stronger growth both at the revenue level, at the EBITDA level and certainly in the PAT level.

Rahul Jain — President & Chief Financial Officer

Surya, I am unable to get your question. Could you repeat, please?

Surya Patra — PhillipCapital — Analyst

Last year, FY ’22, financial performance was supported by two things. One is expansion, obviously, across segments as well as the price — strong pricing situation. Going ahead, generally that I’m asking for all the businesses, because the similar price trend that we have been witnessing. So going ahead, if the prices are likely to remain flattish or to some extent, subsiding, then along with that, the whatever capex expansion plans that is going on. So considering those, what is the likely growth indication that one should have? And what implication on the overall margin scenario that SRF should be looking at?

Rahul Jain — President & Chief Financial Officer

It’s a complicated question to answer, Surya, because we cannot answer it from a company as a whole perspective, each segment being separately depending upon some of the, let’s say, the margins coming or let’s say the prices coming down or commodity price inflation that we have talked about coming down, there will be some impact in terms of our sales prices, which will also lead to some of the impact in terms of our costs coming down, logistics, power, raw materials per lakh ton, be it for that matter fluorspar. All of those will also come down. So my sense, we can still sustain margins, we can still do a good job in terms of the overall position of the company. Yes, there may be some better positions to be able to take from a capex perspective and some of those capex costs that have kind of gone up a bit coming down. We may be in a position to announce more capex as some of these high elements start to percolate or come down. Hopefully, that should be the way to look at it. But very complex to answer from a company-wide perspective, each business be separately or differently because given the nature and size of the business. I hope it explains.

Surya Patra — PhillipCapital — Analyst

Yes, sir, certainly complex situation. So on the Specialty Chemicals side, sir, if I just can have a sense. Last year performance was 30% growth. I think that was excellent performance, and it has been back-to-back. So whether price-led growth is also kind of an important factor here?

Rahul Jain — President & Chief Financial Officer

With what led growth?

Surya Patra — PhillipCapital — Analyst

Price-led.

Rahul Jain — President & Chief Financial Officer

Specialty Chemicals business has had some price benefits. But I think the margins would have been better had commodity prices or raw material prices remained lower than what we had assumed. So yes, to a certain extent, I would say we have passed on some of the commodity price increase, but probably less of it. And over FY ’23, some of that will also happen. Less of price related, but more of volume.

Surya Patra — PhillipCapital — Analyst

Yes, sir. So just one clarification on the Specialty Chemicals business side. Whether on the gross profit side, it’s a kind of around 80% margin scenario?

Rahul Jain — President & Chief Financial Officer

Can’t comment, Surya. The business to business — sorry to — and again, I don’t go into contribution position because that’s…

Operator

This is the operator. Sorry to interrupt you, Mr. Patra. May we request that you return to the question queue for follow-up questions. [Operator Instructions] The next question is from the line of Atul Tiwari from Citigroup. Please go ahead.

Atul Tiwari — Citigroup — Analyst

Yes, sir. Sir, again, just one question on the capacities in the two key businesses. So could you just update us on the total ref gas capacity and total Packaging Film capacity as of now? And how these are broadly increasing over next two years?

Rahul Jain — President & Chief Financial Officer

Atul, I have told you so many times. You want it again?

Atul Tiwari — Citigroup — Analyst

Sir, you keep on expanding capacity all the time. So it’s difficult to keep a track with your kind of growth.

Rahul Jain — President & Chief Financial Officer

Just one second.

Operator

[Technical Issues] [Operator Instructions] Thank you for patiently waiting. The line for the management is reconnected. Thank you, and over to you. Mr. Tiwari, please repeat your question.

Rahul Jain — President & Chief Financial Officer

Roughly speaking, the capacity for Packaging Films, is roughly about 310,000 tonnes per year, out of which 60,000 tonnes of BOPP is also coming in. The total capacity that we will have will probably by the end of this year become 370,000 tonnes.

Atul Tiwari — Citigroup — Analyst

Okay, sir. And on the ref gas side, sir, same number?

Rahul Jain — President & Chief Financial Officer

Ref gas, 32, we have a total of about 14,000 tonnes, 13,000 tonnes, 14,000 tonnes. 134a is roughly about 20,000 tonnes. There is the swing plant also that’s there, so it can be plus/minus 4,000 tonnes. 125 is about 7,000 tonnes. 22 salable with both is roughly in the range of 17,500 tonnes. Probably also another 12,000 — no, 25,000 tonnes for total for 22. So that’s how the capacity.

Atul Tiwari — Citigroup — Analyst

Okay, sir. Thanks.

Rahul Jain — President & Chief Financial Officer

Thank you

Operator

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

Sumant Kumar — Motilal Oswal — Analyst

Yeah. And so you Rahul-ji, so you said the H2 margin is going to sustain for the Specialty Chemical and Polymer segment. So going by the overall FY ’22 margin for Chemical Polymer is coming around 26.7%. So can you talk about the next couple of years, margin sustainability of the Chemical Polymer business, rough idea?

Rahul Jain — President & Chief Financial Officer

Sumant, can I interrupt you?

Sumant Kumar — Motilal Oswal — Analyst

Yes.

Rahul Jain — President & Chief Financial Officer

[Foreign Speech] There is no Polymer segment.

Sumant Kumar — Motilal Oswal — Analyst

Sorry, Chemical business.

Rahul Jain — President & Chief Financial Officer

Now ask your question.

Sumant Kumar — Motilal Oswal — Analyst

Yes. So my question is, overall Chemical business, we have a 26.7% EBIT margin. And you were saying the H2 margin of 30.8% is going to sustain in FY ’22, ’23. So my question is for next two years, what is the range of margin for Chemical business?

Rahul Jain — President & Chief Financial Officer

Sumant, that’s called blue sky gaming. I believe we can sustain these margins. But if you wanted to ask about FY ’23, I will probably be able to give you a better picture than FY ’24, ’25, ’26, because, again, business is dynamic, we are coming up with new products on a continuous basis. There is a large set of capitalization that will be done. All of that is going to happen. My sense is we can sustain these margins on existing products, but those that come through will probably start at lower base and take it up going forward. So that’s how it will pan out. But given what we are seeing today in terms of the traction, we certainly believe margins are sustainable.

Sumant Kumar — Motilal Oswal — Analyst

Thank you.

Operator

Thank you, Mr. Kumar. May we request to return to the question queue for follow-up questions. The next question is from the line of Nitin Agarwal from DAM Capital. Please go ahead.

Nitin Agarwal — DAM Capital — Analyst

Congratulations on the fantastic set of numbers. Sir, on the fluoro special — on the refrigerant gas business, you mentioned that we’re running right at peak capacity. So sir, now when you look through the next few quarters, does it lie — the growth is going to be incrementally volume — is there any volume growth possibility? Or it’s going to be largely pricing-driven growth from here on from the base of Q4?

Rahul Jain — President & Chief Financial Officer

We are currently at peak capacity, I was talking more like April, May rather than the available capacity from an FY ’23 perspective. When you compare FY ’23 to FY ’22, we will certainly have additional capacity that will come through, because like I said during the call as well, the total efficiency in terms of capacity available versus utilization would have been in the range of 70%, 75%. So yes, there is additional capacity available. We also have the FY — the 15,000 tonne HFC plant that is coming in, but probably towards the end of this fiscal. That will also add the additional capacity.

Nitin Agarwal — DAM Capital — Analyst

I think thank you.

Operator

Thank you We’ll take the next question from the line of Abhijit Akella from Kotak Securities. please go ahead.

Abhijit R. Akella — IIFL Research — Analyst

Good afternoon. Congrats on great set of numbers. Just two from my side. First one was on the raw material cost pressure in the Fluoro Specialties business. If it’s possible to share any sense of roughly how much that might have impacted margins in 4Q? And as you mentioned, we expect to see at least 60%, 70% recovery of that in the next couple of quarters. So can we expect that to improve the margins further?

Rahul Jain — President & Chief Financial Officer

Over the year, Abhijit, my sense is roughly about INR30 crore, INR35 crores would have been the number in terms of had we been able to pass on all the costs in terms of EBIT or EBITDA from a Specialty Chemicals business perspective. Hopefully, that is one of the reasons we are saying that we could be better off in terms of when we negotiate new contracts with the customers, which is also giving us that positive.

Abhijit R. Akella — IIFL Research — Analyst

Yes, that’s very helpful, sir. And the second question I had was with regard to the refrigerant market scenario. You spoke a little bit about the factors that have led to this sharp increase in prices over the course of the last year or two quarters. If you could just help us understand your perspective on how all these drivers are shaping up at this point in time? Are they still — does everything still remain the way it was? Or what changes are you seeing, if any, at the margin?

Rahul Jain — President & Chief Financial Officer

Two or three things, Abhijit. I think these factors that I’ve spoken about are not onetime factors that we are looking at. These are more in the nature of, let’s say, sustained positions that the regulators have created. I don’t see some of these going away. And the bigger part here, Abhijit also is that there are no new capacities that are getting added. India is probably the only one who can add capacity until December ’23. Other than that, China, there are no new capacities that can be added. So to my mind, pricing will remain here or get formed up only. That is how we are looking at it. Obviously, there can be — see, again, the world is today very hot with inflation, right? As this inflation comes down, there may be some demand negatives that come through. If that happens, there will be a negative. But I don’t see that happening in current scenario.

Operator

[Operator Instructions] Next question is from the line of Arjun Khanna from Kotak.

Arjun Khanna — Kotak — Analyst

Maybe one question Yes. So since just since just one question, I’ll just ask you to on the fluoro polymono side. So essentially, on the PTFE plant, are we on schedule. We had earlier talk of maybe getting the plant on stream by September, October, November of this calendar year. The second part to the question is for the R2 expansion of Pecos. I assume that per which we are using in PPE. So if you could just talk about what are our capacity and potentially, how do you see the floral business shape up… Organon question. I understand that the question is regarding when the PTC starts up, I think it is October 22, when we are looking to get the PPIsarteddone. With respect to IR-22, when we were doing our overall balance in terms of salable materials, the market demand for nonemitting users also from our own capital connection, not just for PCI or PIP perspective, but also from the specialty chemical business business, we found that there was a small gap.

The Caterocapex is largely a reactor where the downstream is available for us to be able to increase the any capacity. I’m not sure that I’ve been able to answer the full question that you have, hopefully… Sir, just one more in terms of the floor of polymer or in terms of PFC. — initially, you’re talking about 6,000 tonnes — so I just want to understand, is the utility is a capable of doing more if you have probably a Phase two maybe a few years down the line. Aeon separately. I am not able to hear you as well. It’s just very muffled… Mr. Can I please use the — thank you.

Operator

We’ll move on to the next question from the line of Ranjit from IIFL. Congratulation on a good set of numbers. The question is on the spectrum side. So in the past, we have been a bit conservative and I’ve been alluding that the base is increasing, and so the growth has to be kind of a tapering off. But despite on a 30% growth, we are still confident not give a 20% growth guidance. So just wanted to understand where are you getting this confidence from? And a second bit of question would be on that now it’s already at INR3,100-odd crores of spectrum revenues. And as the base kind of gets increasing, how do we see diversification into this particular segment? I understand that we are getting a bit more into pharma and becoming a bit aggressive. But agri and Pharma looking at any newage segments to diversify this particular segment — thank you… A bit confused as to how to answer your question. When I tell you 15%, 20%, we are disappointed. When today, I’m telling me 20%, I am very confident of you’re telling where is the confidence coming from? I’m a bit disappointed with the question this, but let me still try and answer it. The fact is what we have looked at in terms of being able to answer your question is what is our current order book, what are the new products that we have launched over the last 12 to 18 months in terms of the traction that they are building.

And how are we looking at existing product and expansion. The MTB which is scheduled to get commissioned, very, very soon, we are fairly confident of building that up and getting it to peak capacity very, very soon. So all of those things are positive from our side, which has given the confidence Hopefully, given where the business is, we should be able to do a better job even than what I’ve talked about. So that’s where the confidence is coming from. You are absolutely right when you say that there is good traction in pharma that we are witnessing, yes, that’s true. We are also looking at and are very excited about a couple of AI that we are working on. Hopefully, that should also come on stream, and we should be able to bring that up as some of our key products for the future as well. That’s how the confidence is coming in then. But maybe we speak separately about the confidence issue that you are facing. Sure, sir. My question was oddly like the comment was largely that one would also see this 20% growth on a more conservative side. I hope I have answered it appropriately. Sure, sir. And the second one was more on the diversification front. In addition to farm and ag, are you also looking at new since… I said this multiple times for Aneyes there are a couple of projects that are going on, but their current position is such in portal state, but I don’t want to talk about and let’s get your hopes at high. [Operator Instructions] Thank you, Mr. and may we request to return to the question follow-up question. Sir, should we take more questions?

Rahul Jain — President & Chief Financial Officer

I think the time is up.

Operator

So I think it’s time for closing remarks. Thank you. Over to you, sir, for closing comments.

Rahul Jain — President & Chief Financial Officer

Thank you. I hope you’ve been able to answer all your questions. I wish that each one of you remain safe and healthy. If you have any further questions, we would be happy to be of assistance. We hope to have the 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 very much, everyone.

Operator

[Operator Closing Remarks]