Ladies and gentlemen, good day. Welcome to SRF Limited Q1 FY 2024 earnings conference call, hosted by Investec Capital Services. As a reminder, all participant lines will be in the listen-only mode. There will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star, then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Anshuman Gupta, Lead Analyst, Chemicals, Pharma, and Healthcare. Thank you. Over to you, Mr. Gupta. Good afternoon, everyone, thank you for joining us today. We at Investec are pleased to host SRF Limited's Q1 FY 2024 results conference call. We have with us today Mr. Rahul Jain, President and CFO of SRF Limited. I would like to invite Ms. Nitika Dhawan, Head of Corporate Communications at SRF, to initiate the proceedings for the results call. Thank you. Good afternoon, everyone, and thank you for joining us on SRF Limited's Quarter 1 FY 2024 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 would now like to invite Mr. Jain to make his opening remarks. Thank you, Nitika. Good afternoon, everyone. I extend a warm welcome to you all, and thank you for joining us today on SRF's Q1 FY 2024 earnings conference call. I trust all of you had the opportunity to go through our financial 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 under review, following which we will open the forum for a Q&A session. We reported a decline in our profitability during the quarter, primarily due to the expected down cycle witnessed in the packaging films business. Additionally, the chemicals business saw lower sales within the Fluorochemicals Business. Nevertheless, amidst the challenges of global macroeconomic scenario, our core Specialty Chemicals Business delivered a commendable performance, reporting healthy growth over last year. In Q1 FY 2024, gross operating revenue declined by 14% YOY to INR 3,338 crore. EBIT stood at INR 595 crore, translating to an EBIT margin of 18%. Profit after tax came in at INR 359 crore, down by 41% YOY. During the quarter, the board has approved an interim dividend amounting to INR 3.6 per share, which will lead to a cash payout amounting to INR 106.72 crore. Coming to our segmental performance, the chemicals business reported revenues of INR 1,660 crore, down 3.6%. Despite a weak environment and inventory unwinding with agro customers globally, the Specialty Chemicals Business delivered healthy growth in margin and sales over the corresponding period last year. We continued to expand our new product portfolio and launched two new products, each in agro and pharma space in Q1. In the past few quarters, we have commissioned some flexible and dedicated facilities, which are expected to augment the overall performance going forward as we ramp up utilization levels in the second half of the year. There is significant global inventory unwinding taking place, which is visible from the commentary of global majors. We have also experienced some of the same. The business also witnessed customers engaging in some inventory rationalization, along with rescheduling of some orders. We believe this trend is transitory and is expected to continue only for a few quarters. In essence, some temporary hiccups are being witnessed. Countermeasures are being implemented. Fundamentally, India's momentum as an alternate specialty chemicals manufacturing base remains intact, and the China Plus One theme remains strong. Our CapEx momentum also remains strong. Moreover, multiple ongoing projects are on track and are anticipated to be operational in the upcoming quarters, further enhancing the prospects of the specialty chemicals business. SRF remains committed to growing strong collaborations with innovators, especially for developing complex and downstream products and active intermediates. With the introduction of new products, the business will continue to expand its customer base, strengthen market presence, and enhance growth potential. During this quarter, our fluorochemicals business was impacted both in terms of volume and price of HFCs. Volume drop was primarily due to a weak domestic summer, and the Chinese dumping witnessed across key geographies, post reopening of their economy led to price reduction. Further, the demand for chloromethane remained sluggish in both domestic and international markets owing to overall weakness in agrochemicals and pharma industries. Despite the near-term impact on risk assets, the underlying potential for global and domestic HFCs remains strong, with significant traction from the US market, which should play out over the next few quarters. We expect our performance to improve in H2 FY 2024, and are confident of the long-term growth prospects of the fluorochemicals business. In line with our continued expansion endeavors, ongoing projects valued at nearly INR 1,100 crore are expected to be capitalized in FY 2024. We have initiated some trial runs in the new PTFE facility and expect to commission the facility soon. The board has also approved a project aiming at expanding the capacity of anhydrous hydrogen chloride, HCl, at Dahej. The expansion is intended to cater to the growing demand for HCl in pharmaceutical intermediates. With a dedicated workforce of over 400 plus professionals, R&D plays a pivotal role in driving the development of cutting-edge products and process technologies, catering to both Specialty Chemicals and the Fluorochemicals businesses. Bolstered by deep domain expertise, our company excels in handling some of the most complex chemistries in the world, firmly positioning us as front runners in managing challenging projects. The strength of our R&D capabilities is further exemplified by our extensive patent portfolio. Impressive total of 139 patents granted and 408 process patents filed to date, highlight our commitment to breaking new ground in our chosen areas of operations. Sustainable efficiency improvements through technology intervention remains one of the core pillars of our R&D. Moving forward, R&D will remain the driving force behind SRF's journey towards excellence, empowering us with the capabilities of process development, scale-ups, and successful commercialization of new chemistries. This includes new AIs as well as next generation environmentally responsible refrigerants. Coming to our packaging films business, this vertical continues to face significant headwinds due to the cyclical downturn, driven by huge capacity additions in India and overseas, and the global economic slowdown. SRF's value-added product portfolio, long-term customer contracts, and our easy-to-do business with strategy, collectively contributes to a distinct performance advantage over competitors. Considering the uncertain environment, we anticipate that it may still take some time before the demand-supply situation normalizes, especially in BOPET. This is a down cycle that the business is witnessing, which is probably one of the worst that has been seen over the past few years. Only passage of time correct the situation as demand continues to grow and announced expansions get deferred or delayed. Having said that, the business will continue to focus on profitability enhancement through growth of value-added products in both BOPET and BOPP segments, and contractual sales, and continue to outperform the competition. We will also focus on sustainability initiatives driven by the three R approach: reduce, reuse, and recycle. The progress on the Aluminium foil project remains on track and is expected to be commissioned in Q3 FY 2024. With this, SRF will be among the select players offering customers all three major packaging products, including BOPET, BOPP, and Aluminium foil. Moving to our technical textiles business segment. The business witnessed pressure on margins and volume in our flagship Nylon Tyre Cord Fabric segment when compared to corresponding period last year. In addition, the decline in caprolactam prices impacted revenues. We have spoken about this earlier, of the nature of the business, where caprolactam prices are a pass-through. The other segment of the technical textiles business, namely belting fabrics and Polyester Industrial Yarn, witnessed growth during the quarter, with greater emphasis on high-end value-added product sales. During the quarter, the solid woven fabric, a crucial product for the belting fabrics portfolio, has been successfully commissioned. This milestone marks a significant step in meeting the growing demand for high-quality belting fabrics in the market. Overall, post some margin correction witnessed last year, this remains a stable business. Going forward, growth will be driven by the belting fabrics sub-segment as capacity expansions get commissioned next year. Additionally, the business will continue to focus on higher operating leverage and cost optimization through various interventions across our facilities. Lastly, in our other segment, we witnessed significant growth in both coated and laminated fabric segment. In the coated fabric segment, SRF maintains its prominent leadership position in the domestic market, achieving highest ever domestic sales and EBITDA. We witnessed a surge in demand across all categories, with notable emphasis on value-added products. In the laminated fabric segment, SRF sustained its pricing and volume leadership, operating the plant at full capacity and achieving its best ever sales in Q1 FY24. In the future, we expect demand to remain stable. Additionally, we also witnessed an increased interest outflow during the quarter from INR 32 crores corresponding period last year to INR 66 crores during Q1 FY24. This is due to the current interest rate scenario prevailing both globally and locally, as well as slightly higher borrowings. During the quarter, SRF Foundation, the social arm of SRF, was honored with the Bronze Award for its exemplary CSR preventive health project, Rural, at the seventh CSR Health Impact Awards, are organized by IHW Council. The project has made significant strides in enhancing preventive health care services in rural areas, positively impacting the community. In conclusion, SRF's remarkable success over the years stands testament to our well-established, diversified business model and commitment to innovation and technology leadership. This, along with our unparalleled R&D capabilities, should enable us to navigate uncertain times. While certain sectors may continue to face short-term headwinds, we are confident that our core chemical segment, driven by advancements from our R&D efforts, will drive healthy growth and create sustainable value for all stakeholders over the long term. On that note, I conclude my remarks and would 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 so much. Thank you very much. We'll now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, I request all the participants, please restrict to two questions per participant. If time permits, please come back in the question queue for a follow-up question. The first question is from the line of Sumant Kumar from Motilal Oswal. Please go ahead. sir, can you talk about the capitalization of the CapEx in FY 2024? Because we have mentioned in the PPT we are going to capitalize INR 1,100 crores. apart from this, is there any more capitalization in FY 2024? Sumant, thank you for your question. In FY 2024, the INR 1,100 crore number is essentially on the Fluorochemicals Business. In addition to this, there are about INR 1,400-1,500 crore of projects that will take place as capitalization in the Specialty Chemicals Business as well. If we aggregate all of the capitalizations that should take place during this financial year, we believe the number could be in the range of about INR 2,800-2,900 crore. Okay. Now talking about the chemical segment, margin trajectory. Similar to your previous question, this does not include Altech, because, if you include Altech, it will be another INR 450-500 crore of capitalization on the aluminum foil project. That I have not included here. Apart from INR 2,900, for, you are talking about INR 400 more? It will be higher than 400, but, yeah, that's the number. Okay. Now talking about the chemical segment, particularly in a specialty chemical side, you are talking about inventory realization. Can you talk about overall how the specialty chemical segment growth in this quarter, and how is the mix of the advanced intermediate we are supplying to patented molecule customer or in generic market? Also, how is the margin trajectory of overall chemical business? Okay. When you talk about the overall position of the Specialty Chemicals Business, when we compare it to corresponding period last year, we believe that it has still grown by about 10%. Again, we don't give number breakups here. That's been the position that we've taken on it for a long time, so that's how it will remain. In terms of the overall chemical business margin, if you compare it with previous quarter corresponding period last year, roughly the margin was about 30%, and this year the number is about 28%. Not a very significant decrease, but, yeah, some decrease. I would really say that a majority of this decrease is attributable to both volume and price, reductions that have happened in HFCs, while, Specialty Chemicals Business, even the EBITDA margin would have actually grown here. The trajectory, can we say from here, trajectory is similar? intermediates, AIs, as of now, it is 1 AI, P 32. That's the one that is continuing. There are a couple of other small ones that we've done. As we go out in time, some of these AIs will become more, more consistent products that we will start to sell. Thank you. Sorry to interrupt you, Suman, I'll request you to join the queue again. Requesting all the participants to restrict to two questions per participant. Next question is from the line of Rohit Nagraj from Centrum Broking. Please go ahead. Yeah, thanks for the opportunity. First question is again on the spectrum side. From the inventory Voice is not clear. If you could pick up the receiver and talk, it will be much easier for me to hear you. Yeah, is it better now? Yes. Yeah. Thanks for the opportunity. First question is again on Specialty Chemicals. We have said that the inventory destocking probably will have its impact in subsequent couple of quarters. Did we see the same during Q1 as well? Was it purely volume driven or there was price reduction as well? Thank you. Rohit, to be very frank about it, if I look at it, my margins in the specialty chemicals business have improved. Now, to a certain extent, and we've said this earlier also, these are largely contracted businesses in nature. What we have now seen is that some of the key raw material prices have started to come down. Therefore, there will be some of the debate in terms of passing on some of those raw material changes, given the commodity price cycle to some of the customers as well. As of now, in Q1, I have not seen any significant price pressure, but yes, there are certain reschedules that are happening. Again, we don't believe it is a demand burn that has happened, still remains a positive from our overall, let's say, annual growth perspective that we have here. Right, thanks. Second question is on PTFE. Do we expect any material revenues during this FY 2024, given that we are at the fag end of commercializing the facility? We are only at Q1, Rohit, at the end of Q1. We believe that the batch processes are now starting to take shape. There will be some of the customer approval, some of the products have to kind of get through from customer approval perspective. My sense is that end of September, early October, is when the project will get capitalized. Subsequently, there should be revenues that should come in. I can't give you an exact number in terms of what, but our overall thought process is that, let's say between 1,000- 1,500 MT of sales should come through this financial year. Sure. Thank you so much, and best of luck, sir. Thank you. Thank you. Next question is from the line of Arjun Khanna from Kotak Mahindra Asset Management. Please, go ahead. Thank you, sir, for taking my question. Just in terms of our thought process, we have mentioned that our longer-term projects remain on track, and we expect to keep our CapEx momentum intact. In the environment of a slowing economic cycle, what gives us this confidence of continuing the investments that we have already planned? Thanks, Arjun, for your question. To be very frank about it, if you look at it from a historical perspective also, to a certain extent, when you look at the projects that are currently going on, I think we, the confidence is the amount of products or, let's say, things that we are currently working on in our R&D, in terms of what can get capitalized or what opportunities can come through, which really does give us the confidence that we should be able to continue the CapEx position that we've created here. Obviously, Arjun, those projects that are currently on, right? It is not really appropriate to kind of shelve them out at this point in time. A majority of the amount in terms of the CapEx has already been spent, right? Again, even on those, the confidence is that we should be able to scale these up very, very fast. Sure. In the last quarter call, the MD did talk about the new active intermediates. We are looking at seven, eight coming through in the next few years. Given our conversations on the Spec Chem side, have we seen delays in terms of those projects coming through or any R&D related delays on the Spec Chem side? Thank you. Arjun, again, you correctly pointed this out. We had talked about the fact that it'll take six, seven AIs about two years to materialize completely. Again, it's only one quarter that has passed, and I don't see a significant reduction in the inquiry on that side. It's only three months, Arjun. I think we are in fairly good shape in terms of some of these AIs also coming through at a faster pace. Sure. Thank you. I'll return to the queue. Thank you. Next question is from the line of Ankur Periwal from Axis Capital. Please, go ahead. Yeah. Hi, sir. Thanks for taking the question. First one, on the Ref Gas side, you did mention that, you know, lower pricing as well as, you know, some bit of China dumping impacting the global international demand, primarily U.S. Any, any thoughts there in terms of, you know, action taken by the government or, you know, how do you see the pricing as well as volume growth specifically in U.S. market for this financial year? Two things, Ankur. On the volume growth, or the overall volume that we can sell, we've also said that during Q1, what we faced is the fact that volume was lower because of the weak summer that we've seen in the domestic market. Historically also, when you look at it, this is probably the best quarter that happened for the fluorochemicals or HFCs. Sorry, from a domestic market perspective. When we look at it from a export market perspective, we believe there is significant traction from the US market going forward, H2, therefore, should be much better than H1, is the view that we are having. Contracts will get executed over this quarter and the next quarter, with sales being affected probably more in Q3 and Q4. Sure. Just a clarification. On a volume, growth basis for the full year, we still believe a positive number there on an overall company basis? Yes. From a refrigerating gas, HFC perspective, from a year as a whole, when we compare it to last year, there should be some growth that we should witness. Sure. sir, second question on the two CapExes that the two big plants that are coming up, PTFE as well as Aluminium foil. When should we start seeing the ramp-up here, both in terms of revenues and? You mean the PTFE? On PTFE and Aluminium foil, on the revenue as well as on the margins front, for the respective business segment, when will these margins be accretive to the current margins? Arjun, sorry, Ankur, the PTFE, like I answered to the last question, we believe should get capitalized somewhere in the end of Q2 or early Q3, or early H2. Again, volumes will be very difficult to be able to predict, but let's say between 1,000-1,500 ton revenue should come through, is our current projection on this. On the Aluminium foil, I think the timeline is similar. In terms of the product approval cycle on Aluminium foil, it should take some time. Let's say, the full value of the revenues from the Aluminium foil, we will start to see in FY 2025 only. Sure. Thank you, sir. Thank you, Ankur. Thank you. Next question is from the line of Surya Patra from PhillipCapital. Please go ahead. Yeah, thank you for this opportunity. The first question is on the inventory rationalization aspect that you have mentioned for. Could you repeat, Surya? Inventory rationalization by customers or rescheduling of the orders by customers in the Specialty Chemicals side. You have seen some impact in the first quarter. In the light of that development, as well as the four scheduled specialty project, which is likely to be commissioned throughout the current financial year, do you see any challenge to your guidance number of a 20% plus growth in the Specialty Chemicals, sir? Surya, again, given where Q1 is, right, I see where you're coming from in terms of the overall revenue growth potential that we had talked about. I think it's not to be looked at it from a linear perspective. There is an inventory destocking that is happening. There is positions that the customers are starting to take. There is a certain position Chinese companies are starting to take around this. Again, that's the negative side of it. On the positive side, there are new projects that are getting commissioned. FCB is witnessing more traction on the U.S. markets. I would really say that if there are some hiccups that we are experiencing in that we've experienced in Q1, I think we will have to kind of wait out Q2 to be able to give you a better picture in terms of where growth position and positions are. I think it will be better to talk about it at that point in time, rather than today. If I start to talk about it today, it will probably come out as a bit of a negative. I think, given where the macroeconomic environment is, we will have to wait out and see what happens in Q2 to be able to give you a better picture here. Okay. Just an extension to this. This is about obviously the specialty chemical projects, but given the kind of general demand scenario that is prevailing currently globally, and we also know that many of our projects are generally pre-contracted with customers. Knowing all those things, is it better to say that even those 8 odd projects are likely to be commissioning this year, but the realistic ramp-up benefit will be seen in the current, subsequent financial year? I think we've said this in the past as well, that when we look at specialty chemicals also, or even any chemical plant, it takes some time to stabilize it. We will commercialize it. Our intent is to be able to ramp this up at a very fast pace. We will certainly look at doing that. Again, I would really say that our intention to achieve growth is certainly there. The only challenge that is being posed today is the global economic scenario that is prevailing out. Right? That's the only challenge. I think it's not a negative from our side. We still believe growth is possible, and that's how we are looking at it, Surya. Okay. You're absolutely right when you say that there are contracted positions that we have created. There should be the positive trait that should help us out in order to be able to achieve this. Okay. Sir, my second question is on two clarifications with. Whether and what was the kind of inventory loss that you have witnessed in the packaging film business this quarter? This is one. Secondly, on the Ref Gas also, you have mentioned in your presentation that there is a destocking scenario in the HFCs. What is the level? Do you think that there was a kind of a large inventory that was lying at the HFCs, for HFCs in the, let's say, U.S. market? What is the length of their inventory stocking generally that happens in the Ref Gas in the U.S. market? If you can give some clarity there, this link. Sure. Here in budget, one, on the inventory loss in the packaging film business, again, I don't see a very large number of an inventory loss given where PTA prices are, because it's to be calibrated from, let's say, Q4 closure, right? Yes. While when we are talking about inventory pricing or long-key raw material pricing, we are comparing corresponding period last year versus this year. That's the difference here. No major losses that are embedded in these numbers. That's one. In terms of overall stocking and overall inventory positioning, what's happened over time, Surya, is that when we look at the positions that some of the customers are creating, the need for product was very high, given uncertainty around suppliers. As China has opened up, suppliers have come in, the delivery schedules or the willingness to keep a larger inventory has come down a bit. That's what kind of creating a position where customers are happy to keep a lower inventory. That's the shift that is happening today. I don't think they will come to a situation where everything will get below before they start to refill it. It's a dynamic situation that is playing out. Thank you. Sorry to interrupt you, Surya. I'm requested to join the queue again for a follow-up. Requesting all the participants to restrict to two questions per participant. Next question is from the line of Abhijit Akella from Kotak Securities. Please go ahead. Good afternoon, Rahulji. Thank you so much for taking my questions. I just have two, sir. One is first on the refrigerants business. You know, there are multiple dynamics playing out in that business in the near future. I mean, right now, we are seeing this aggressive competition from China, plus we have the Indian companies, including yourselves, setting up new capacities during the course of this year. At the same time, there is going to be a production cut in the USA in early 2024, later on in next year, maybe, you know, the additional demand coming in from the truck segment, where the Indian government has mandated ACs. I mean, in your assessment, if you could please just share your perspective on how you expect this business to sort of shape up over the next, you know, few quarters or several quarters. That'll be very helpful. Thank you. Again, Abhijit, thank you for your question. Again, I think I pointed this out in the base commentary also, that while there are certain short-term pressures that we are witnessing, there is a near-term impact that we have seen. The underlying potential of the global and domestic HFC space, given the things that you pointed out in terms of production cuts happening in the U.S., in terms of inventory positions that China got created because of their base year for last year and huge inventories that got created. We also are seeing some of the U.S. manufacturers looking at cutting their production out. I think both globally and locally also, the traction on HFCs will remain strong going forward as well. The inventory positioning should play out over probably next quarter, maybe Q3 as well. When we look at it that, from a longer term perspective, we are fairly confident that this is a business that gives us advantage. You also talked about some of the new capacities that are coming in India. Again, I think, and we've talked about this earlier as well, that while there will be some new capacities that play out, we believe that our position in terms of the overall HFC capacities that we've created and the backward integration that we've talked about from an HFC perspective, puts us in a fairly strong position when you look at HFC domestic market. That's how we would look at it. There is a short-term position that has got played out, but in the long term, we are fairly confident that our technological play, our backward integration, our market penetration, our relationships in the U.S. market should keep us in very good stead here. Thank you. That is helpful. Just the other thing I just had was on the PTFE and Aluminium foil projects. At current, you know, prices or in the current market scenario, if you could please just share your perspective on what might be a sort of economics we should be looking at full utilization for these projects, from a revenue and margin perspective. Thanks a lot. Abhijit, again, I think I have answered that twice already. PTFE should get commercialized end of September, early October. It is a complex product. It's a different, it's the first time that we are doing a fluoropolymer. It has given us ability to do future fluoropolymers as well. We will get, have to go to the market and, let's say, do the selling of that. It's very difficult to be able to give you a number here. Like I said, in an answer to a previous question also, is that we believe between 1,000- 1,500 tons, we should be able to manage. Aluminium foil will have to go through some of the ramp-up in terms of the product approval as well. Hopefully, that should come through in more in FY 2025 than in FY 2024, from a revenue and margins perspective. That's how we would look at it, Abhijit. Yes. What I was just hoping to understand is whether there's any sort of significant change from the original expectations you might have had in terms of the economics of these projects at full utilization, compared to your initial expectations. I don't think there is significant change in terms of initial expectation when you look at it from a longer-term perspective. Shorter term, we've seen prices of certain products go up very significantly, PTFE specifically, and therefore, it should give us larger economic value than smaller ones. Thank you. Abhijit, I'll request you to join the queue again for a follow-up question. Next question is from the line of Krishan from JM Financial. Please go ahead. Yes. Hi, Rahul Jain. Thank you for taking my question. Two questions from my side. First is, going forward, how will your mix change between dedicated and multipurpose capacities, as in the incremental CapEx would be more towards contracted business or how would it be? Again, when we look at it, dedicated, plants today would probably be, let's say, about 16. Twenty-six. Dedicated. Just the total dedicated plant would be about 15, 16. Revenue from dedicated plant would probably be in the range of about 80%-85%. That's how we would look at it. Again, as we go out and commercialize more dedicated plants, the revenue shift towards dedicated should be higher. That's how the position will play out. Again, the most of the new plants that we are capitalizing today are largely or looking to capitalize in H2, are largely dedicated in nature. As a concept, as they ramp up, revenue from dedicated one should go up. Perfect. That's helpful. Just one small clarification. I don't know. I mean, I think I missed it. Did you mention that you would try to achieve 20% kind of a growth, but things would be more clearer in 2Q? Is that correct understanding? Yes, to a certain extent, I would say, I'm saying that, being able to give you a better guidance on growth, we will have to probably wait out a bit. Understood. Understood. Fair enough. Thank you, sir. Thank you. That's it. Thank you. Next question is from the line of Rohan Gupta from Nuvama Wealth Management. Please go ahead. Yeah, hi, sir, good evening, thanks for the opportunity. Sir, first question is on refrigerant gases. We have seen the current quarter see significant price drop. Though you mentioned that you didn't see much inventory-led losses in the current quarter, which are there, do you see that the impact of? Just to clarify, I have said that there are no inventory losses, so it's not an inventory markdown that has happened. What I've said is. Yeah. Prices have gone down because of that inventory, or let's say, to a certain extent, there is jumping happening. That's what I know. No, sir, I meant inventory markdown only. There is no inventory markdown? No inventory markdown. Right. With the falling prices and now prices have stabilized, do you see that the current quarter Q1, the worst is over, or you see that a further pain in terms of further volume decline or margin pressure in, Ref Gas business going forward? Rohan, when you look at Ref Gas, overall, I think, I don't want to say the worst is over, but what I can tell you is that what we are seeing is significant traction. We believe, Q2 should be better than Q1, and H2 should be certainly better than H1 in total. That's how we would look at it. Again, I would really tend to think that the U.S. market is giving a good traction and given, let's say, some delays, there may be some domestic positioning that are also getting created here. The Q2 are not the season for the Ref Gas as far as the domestic market are concerned. The season is over, Rohan. There was a mild-ish April, May in terms of the heat in the country, we are seeing sustained heat coming in. Maybe there is a delayed season that we are seeing here. We don't know today. You are seeing some kind of volume recovery, at least in Q2, and definitely much better in H2, also coming from the U.S. markets as well? Correct. Absolutely, bang on. Okay. Sir, second question is on this packaging film, sir. We have been talking about our packaging film business and how robust we had made it over a period of time with the moving towards more towards value-added products and all. It's a second quarter in a row when we are working on such a deficit margin of 3.5%-4.5%. I understand it's a slightly commoditized business, and you have always mentioned that the falling commodity prices will also have impact on your margins also, but probably current quarter and last quarter margins look extraordinary. Do you see this scenario? You have mentioned in your presentation also the scenario looks quite gloomy going forward also. Maybe it will only improve gradually. Do you see that the recovery in this business will take another 1 year or 2 year? With this kind of margin, and if you have a higher share of value added, then probably the competitor should be leading and making losses, isn't it, if you have a high share of value added? Rohan, that's a comment. What's the question? Sir, my question is that, if we are working on 4.5%, 5% kind of EBIT margin, first of all, is the competition losing money or we are also aligned? I mean, there is no part of the value added, and our margins are also as good as a commodity margin. That's what the question is, number one. Second, when do we see that the recovery panning out in the packaging film business? Okay, got it. Rohan, you're right, that, there is our, let's say, business proposition here is easy to do business with contracted sales, value-added products, and that's something that's helping us out in being able to even get to that 4.7% EBIT margin that you're talking about, which is visible from the numbers where we are. Now, when you look at it, and I'm sure you will do the comparison of the peer's numbers here, right? My sense is you will find us to be slightly differentiated here. We should be doing better than some of our competition here. Look at any metric on this side, like EBIT margin, EBITDA margin, or for that matter, return on capital employed, I think we should be doing better, given the traits that I just talked about. In terms of recovery, I think data will take some more time to recover, BOPET, I think, is doing all right. Hopefully, it wouldn't go through an extended cycle, we should be slightly better off. Rohan, please understand that this is probably one of the worst cycles this business has seen, right? To a certain extent, also driven by the super normal profits that were being made in FY 2021, 2022, right, because of new capacities that have got added. Demand is still growing, albeit at a small, at a lower pace, which should take this up going forward. Therefore, we believe that's the way BOPET let's say, pan out over time. I hope that answers it, Rohan. Thank you. Sorry to interrupt you, Rohan. I'll request you join the queue again for a follow-up question. Next question is from the line of Vivek Rajamani from Morgan Stanley. Please go ahead. Hi, sir. Thank you so much for the presentation. Just one clarification and one question on specialty chemicals. You mentioned the inventory rationalization that you're seeing. I presume that's predominantly on agrochemicals, correct? Or is this happening a bit more broad-based across a few other sectors? If it's possible, could you give us a sense of how much of your portfolio is exposed to this? The second question I had was, you'd mentioned that- Yes, please continue. The second question was, you'd mentioned that because of these, you know, inventory rationalization, PO rescheduling, you guys are already taking some remedial measures. I just wanted to understand, if you could give some color on what kind of measures can you take, given that it's a very global situation, right? Thank you so much. Two questions were raised. Let me just try and answer both. Majority, you are aware of this, and we've talked about it, this in the past. Majority of our revenue is dependent on largely agrochemicals. Now, the inventory rationalization that we are seeing is also majority in the agrochemical space. Again, when we look at it from a futuristic perspective, there are some customers that have talked about some ordering, management, some delays, but luckily, we've not seen any demand burn happening here. There are no cancellations that we have witnessed. That's a positive. Again, you're right when you say that there is. This is a global scenario, how will we implement countermeasures? I think, again, we've also created our inventory positions in terms of being able to supply to the customer on a contracted basis. The countermeasures being implemented are, let's say, faster depletion of those inventories as well. We are taking various measures. We're also looking to, let's say, advance some of the products which were probably scheduled slightly later for sale, in order to manage the margins and revenues of this side. Those are probably some of the countermeasures that we are taking. Sure, sure. Thank you so much. All the very best. Thank you. Next question is from the line of Vishnu Kumar from Spark Capital Advisors. Good evening. Thanks for your time, sir. Sir, on 1Q Specialty Chemicals, based on your commentary, is it right to conclude that Ref Gas had a big negative or rather had a bigger negative and agrochemical was still mildly positive? How should we read the growth, at least? The overall revenue negative is roughly about 3.6% when you look at it, corresponding period last year. Correct. Right. Again, like I said, Specialty Chemicals has grown, and by corollary, that means. Agro. Fluorochemicals has de-grown in that sense. I can't give you the exact numbers because like I, like we do, Vishnu, we don't disclose a quarterly breakup of these numbers. That's the position, which is, yes, the right interpretation here. Got it, sir. Sir, in this commentary, I mean, if this is the approach, I mean, we've not seen the bigger negative or, when you say the inventory rationalization, it means that we still probably did not get the growth we've targeted. Is that the right approach? Because if you're still kind of positive. Distinguish, between the two businesses. Specialty Chemicals, we've seen both growth in, revenues and margins. Fluorochemical, it's a negative in terms of volume and therefore margin as well, because price has come down. Got it. One final one, sir, on the pricing? When you look at inventory rationalization for the future, we are kind of talking about some space that is getting created and what we have seen in the Spec Chem Business. For the Fluorochemicals Business, we've also said in the, in the previous answers, that we are seeing traction in the U.S. market. We believe H2 is going to be better than H1. That's the way you should look at it, Vishnu. Got it, sir. On the specialty chemical, especially the agro side, you did mention that some RM is coming down and we may look into passing through some. Generally, in terms of pricing some of these products, we look at a percentage margins or on a per ton basis. How do you look about it? Generally speaking, depends on contract. What's the contract that you have with the customer? Generally speaking, it's a dollarized margin that you have tied up. It's also therefore, the most difficult part here to price the product, Vishnu. Got it. My question would be that in case of a pricing comes down, would we still be able to maintain on a per ton basis, or it is going to be a margin? At least broadly, if you could just say that at least a majority of contracts would be on a dollarized per ton or on a percentage. I will have to check that out and give you an appropriate answer on it, Vishnu. I don't have a singular answer to it on whether the most contracts are dollarized or on a percentage margin basis. Please understand, it is not like technical textile business where let's say, key raw materials are pass-throughs. It's a product based contract that gets entered into here. very pretty much difficult to give that give any answer to that question, Vishnu. Got it, sir. Thank you. Thank you. Next question is from the line of Archit Joshi from B&K Securities. Please go ahead. Thanks for the opportunity. Just one question. Can you speak a bit about the new avenue that has opened up for us in the ref gases, which is through the mandatory installation of AC systems? Supplementarily, if you can also speak about what kind of gas, I'm actually assuming that will be R134A, and since our current capacity expansion is happening in R-32, does that change any of our plans at all? Thank you. Archit, again, this is a recent, very, very recent development that has happened through the announcement that came in very, very recently by the Minister of Transport, in terms of installing certain air conditioning systems in trucks as well. Again, you're absolutely right that this is a positive for the R134A, which is used for mobile air conditioning. The only point that I would make is that this is still something that will probably result in additional domestic volumes, probably in the next 18 months to 24 months, where then we will start to see some of the manufacturers install some of those air conditioning systems in the trucks. FY25 is when you will start to see some traction on that side. Again, I think the ability here, Archit, is to see how much we can manufacture. You know that we have flexible plants in our Bhiwandi plant, and therefore, our ability to manufacture 134A, both for domestic use and global use, depends on how the market demand shapes up. I don't think there is any other manufacturer of 134A, it should be an overall benefit to SRF, Archit. Got it, sir. Thank you. Thank you. All the best. Thank you. Thank you. Next question is from the line of Tarang Agrawal from Old Bridge Capital. Please go ahead. Hi, sir. Good evening. Three questions from my side. Sir, given that almost 85% of your Spec Chem business is from dedicated facilities, would it therefore mean that as and when, eventually when the product goes generic, you will also try to play into that market? Well, again, the agrochemical market is not like the pharma market, Tarang. The point is that our intent is to continue to supply to innovator. Now, whether innovator is doing a pure innovator product, which is only being done by him, or then he's starting to do branded generics also, we are happy to supply to the innovator. That's how it works for us. Dedicated plans will continue to grow as we keep growing the position on various products and more complexity gets added. Got it. Sir, I mean, how much would your market share be in these intermediates that you're supplying in these dedicated plants? Very difficult to comment, but on a more generic basis, I think, the way we look at it, in di and trifluoroalkyl intermediates, we are probably one of the largest in the world. Would it entail more than 40-45% market share? I will have to come back to you, Tarang, on it. In terms of just the% market share, my sense is it should be in that range. Got it. Sir, last question: packaging films over cycles, I mean, do you generally work with a 15% return on capital employed, as a thumb rule? In the past, when you look at the average, let's say, return on capital employed from the packaging film business, because we've always said that this is, to a certain extent, cyclical, we've seen return on capital employed average over the five to seven years, and that's what I would say, in excess of about 16%-18%. We have always also said that we are happy with the 15%-16% return on capital employed on the packaging film business overall, and I think that's the story that should continue. Thank you, sir. All the best. Thank you. Next question is from the line of Lavanya from UBS Group. Please go ahead. Hello. Thank you, sir. Thanks for the opportunity. Most of my questions are answered, but just wanted to understand your take on overall global agrochem business, like pricing and demand environment. From your commentary, I understand that Spec Chem is still doing well, but in general, how the environment is it? Thank you, Lavanya, for your question. Then this is something that we've heard from our customers. We understand from the ground level and the needs of the final farmer or the customer of agrochemicals, that those needs remain pretty much in good shape. We've also got this back as customer input, demand seems pretty much all right and in good shape. It's not that there is lowering of demand for products on the agrochemical side. That's something that's good news for us. Like we said, there is some inventory positioning that has got created, some due to overhang of COVID, some due to non-availability of product, which has also led to much higher inventory levels with some of the customers, which is kind of getting rationalized now. That's the position that's playing out. Okay, got it. On anything on the pricing, sir, is there any decline or how the pricing? The pricing, Lavanya, the pricing of majority of my specialty chemical products is contracted. Okay. While there will be some renegotiation, given where commodity prices are, our intent would be to hold it out as much. Got it. Just on packaging business, if I understand right, you expect it to be more gradual recovery, and it might take a few more quarters. Is my understanding right? That's correct. Any inventory loss that we have taken in packaging business? No, sir, nothing yet. No inventory loss, right? Okay, thank you. Thank you. Next question is from the line of Madhav Marda from Fidelity International. Please go ahead. Yeah, good afternoon. I just had a couple of questions on the CapEx. One was on the Pharma Intermediates Plant, where we put up a fairly large rose block. Just any updates on the ramp up there? Secondly, on the HFOs, where you indicated that the plan sort of is in the works, just any timelines on that as well, please. Thank you. Well, again, too early to say. PIP has got commissioned only, I think in May this year, which is probably a month from where it is. I think we had also said that we expect ramp-up of the PIP plant to happen over the next 3-6 months. Hopefully, majority, and again, the mix here is very important. We will see a good mix of products from the PIP plant coming through, probably some at the end of FY 2024, Therefore, some large revenues in FY 2025. HFO, again, I don't think it can change in three months. We've told you that we are working on the HFO piece. There is significant groundwork that is happening. I don't think it can update in 3 months. That's the same thing that we had updated you when we talked to you last. Got it. Got it. Thank you. Thank you. Next question is on the line of Sanjesh Jain from ICICI Securities. Please go ahead. Yeah, thanks for taking my question. I got two question. Sanjesh, your voice is breaking. May I request you to come to a better reception area, please? Can you hear me now? Yes, we can. Yeah. Thanks, I will do. Thanks for taking the question. Two from my side. First, on the growth charity, our customers have downgraded their guidance from 15%-25%. Is it entirely what we can attribute is because of the inventory cleanup? When you say inventory cleanup, it is at the distributor end or the themselves for just fixed inventory. Where is the problem lying? Losing your audio. Oh, no, Sanjay, I've been unable to hear you, any, anything that you have said. Okay. Can you hear me now? We can hear you, but your voice is not coming clearly. One second. May I interrupt you again, please? Yes. Thank you. Next question is on the line of Vishal from Bandhan Asset Management. Please go ahead. Yeah. Hi. We've heard news of imports into the U.S. Vishal, I am unable to hear you. You are sounding very distant. Could you just pick up the handset and talk? Just a second. Is this better now? Yes, please. Okay. Sorry for that. A lot of material we are hearing is getting imported into the U.S., and this could be largely Chinese material that is being circumvented via some other countries. Are you seeing something of this sort happening? And these are likely slightly different blends, which can be made into the main consumption blends like 34A and 410A. I mean, how bad is this scenario of circumvented imports? You're right to a certain extent, Vishal, that we've also heard some of these stories in terms of various types of blends being imported and circumventing duties. We've made appropriate representations on these. Again, Vishal, while these may be some small positions that are getting created, we have to look at it from a longer term perspective and probably more medium-term perspective from our side, where we still believe customer demand is there. We believe U.S. traction will build out during FY 2024. There is contracting that is happening probably currently, and hopefully that should play out in our favor, Vishal. While these things will keep happening, you can only represent to the authorities on those. Okay. Would it be fair to assume that these circumvented imports, via Turkey or via Vietnam, are very small in quantity? Have these become meaningful in the last few months? Vishal, again, you can look at that import data and take a call. I have not been able to look at that import data and think through this, but maybe I can ask someone in the team to do that and then give us some better clarity on this. You are right, we've also heard some news around it. Okay. Thank you. Thank you. Next follow-up question is from the line of Sanjesh from ICICI Securities. Please go ahead. Thanks. Thanks for taking my question again. Apologies. One on the guidance cut by our customer, it's in the range of 15%-25%. When they say inventory destocking, is that inventory at the innovator level, or are they talking about the inventory at the distributor and retailer level? Where is the inventory pile-up happening in the entire ecosystem? Largely at distributor level, Sanjesh, is what we hear. It's largely distributor level. underlying demand, you are telling that it is intact, so we don't have to worry once this inventory is normalized. Is that the right understanding? From the ground, Sanjesh, from customers directly. Got it. Got it. Second, on the refrigerant gas side, how do you see domestic market prices recovering? Is it purely because of the demand slowdown, or you think the quota determination period will have slightly heightened competition? Where is this excess inventory coming? Is it coming from China to India? To a certain extent, 32, I would say yes, but not for 134 or blends. There will be competition as some of the players in the industry will come up with capacity. I think I answered this question in one of the previous questions, that look at our capacity there, look at our marketing ability there in terms of our channel partners, look at our backward integration on each of the products. I think we should be in fairly good shape, even with the competition coming in. Whether there will be a price fall or not, I really am unable to say anything about it. We will only see once they are able to come up with the product and supply, let's say, start to supply in the market. Got it. Have we seen increased import coming from China? Is that happening? R-32, yes, to a certain extent. It's actually very large, which is also therefore led to some price reduction on R-32 in the market. Okay. Not for R-134A or the R-125. India is not a direct one twenty-five consumer, Sanjesh. Yes, we have that R-410A, right? like I said, 125 is probably the smallest element of the HSGs. Got it. Got it. If you can give us some color, what is the price drop in 32 for India? By product, we don't give that, Sanjesh. No problem. You need to check and you come to know about it. That's not a problem. Just one last bit on the margin guidance. We said that in the last quarter, that we will do better than FY 2022. How do you see margins for FY 2024 in the chemical business? Where are we talking about FY 22? Sorry, FY 2023. My bad. FY 2023. We said that we will do better than FY 2023. The closing Q4 margins were on the higher side. There will be some, let's say, tapering of the margins that should happen. I think that's the story that we play. Again, even if there, we have not factored in the amount of the inventory rundown that we have seen here. To that extent, let's see what pans out. It's a, it's a dynamic situation that is playing out, and hopefully that is the one that will play out. We will probably give you more color on this as we go out in time. Thank you very much. Sorry to interrupt you, sir, but we think that was the last question. I now hand the conference over to the management for closing comments. Thanks, everyone. I hope we've 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. Thank you very much. On behalf of Investec Capital Services, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.