SRF - A Bet Worth Rs. 15,000 crore ♻️

In business, survival is about adaptation, and SRF Ltd. has built its empire on strategic reinvention. What started in the 1970s as a tyre cord manufacturer has transformed into a multi-billion-dollar leader in chemicals, packaging, and technical textiles.

At every critical juncture, SRF has pivoted—most notably in the 1990s, when it expanded into fluorine chemistry, paving the way for its dominance in specialty chemicals,which find its use cases in critical sectors such as pharmaceuticals and agrochemicals.

Now, it stands at another inflection point. With a bold Rs. 15,000 crore capex plan, SRF is doubling down on high-growth areas like specialty chemicals and fluoropolymers. But after two tough years of demand slowdowns, margin compression, and rising competition from China, the question is—can SRF pull off its next big leap?

A Story of Evolution: From Tyre Cords to Specialty Chemicals

SRF’s journey has been defined by bold pivots. In the 1990s, it made a crucial shift from technical textiles into the chemicals space, with a sharp focus on fluorine chemistry.

This move turned out to be a game-changer, positioning SRF as a leading supplier in pharmaceuticals, agrochemicals, and refrigeration gases.

Today, SRF operates across three key segments:

Segment	FY24 Revenue Share	Key Products
Chemicals	48%	Fluorochemicals, refrigerants, and specialty chemicals
Packaging Films	34%	BOPP & BOPET films for flexible packaging
Technical Textiles	14%	Nylon tyre cord fabric (NTCF), polyester yarn, and belting fabrics
Others	4%	Coated Fabrics and Laminated Fabrics

This diversification has allowed SRF to scale, but recent challenges across all segments have put its growth to the test.

SRF’s Slowdown: What Went Wrong?

The past few years haven’t been kind to the chemicals sector, and SRF hasn’t been immune to the downturn.

Chemicals Business: Faced a slowdown due to inventory destocking, a weak agrochemical cycle, and sluggish demand in pharma. Falling refrigerant gas prices and competition from China added further pressure.
Packaging Films: The business struggled due to a global oversupply of BOPP and BOPET films, pushing margins down.
Technical Textiles: Margin pressures and volatility in caprolactam prices made profitability tougher.

The financials tell the story: FY24 revenue declined by 12% to Rs. 13,139 crore, while EBITDA margins dropped to 20% from 24% in FY23. The pain continued into FY25, with margins falling further to 18% in the first nine months.

Despite these headwinds, early signs of recovery are emerging. Demand for fluorochemicals is improving, and price stabilisation in specialty chemicals is offering a much-needed breather.

The Rs. 15,000 Crore CAPEX Plan: Building for the Future

SRF isn’t waiting for the cycle to turn—it’s taking charge with an ambitious Rs. 15,000 crore expansion plan aimed at strengthening its chemicals and fluorochemicals portfolio by FY28.

Specialty Chemicals Focus: With Rs. 12,000-13,000 crore earmarked for specialty chemicals and fluorochemicals, SRF is setting itself up for leadership in high-growth areas like semiconductors, EVs, and coatings.
Expansion at Dahej: Nine new facilities were commissioned in FY24 to support pharma-grade specialty chemical production, strengthening SRF’s presence in the global pharma supply chain.
Fluoropolymer Growth: Investments in PTFE and R32 plants are ramping up production of hydrogen-based refrigerants—crucial as the world moves towards eco-friendly cooling solutions.
New Product Development: SRF is also working on next-gen fluoropolymer grades, which have applications in high-margin industries like EVs and advanced coatings.

By FY24, SRF had already deployed Rs. 6,850 crore (~50%), marking significant progress towards its long-term vision.

Valuation: How Does SRF Stack Up?

With chemical stocks rebounding after two years of pain, valuations have started reflecting optimism. But is SRF’s premium justified?

Company	Revenue Growth (Next 2 Years)	EBITDA Growth (Next 2 Years)	ROCE	Capex/Revenue	1Y Forward P/E
SRF	18%	36%	13%	58%*	42x
Navin Fluorine	24%	26%	15%	14%	46x
Vinati Organics	21%	24%	20%	24%	33x
Deepak Nitrite	9%	30%	22%	15%	30x

*SRF’s capex/revenue include the remaining capex of the total planned capex of Rs. 15,000.

SRF is trading at 42x forward earnings, making it one of the most expensive stocks in its sector. However, three key factors have driven its 35% YTD surge: (i) aggressive capex, (ii) early signs of recovery, and (iii) operating leverage benefits translating into superior earnings growth versus the industry.

For these valuations to hold, execution will be critical—SRF must successfully scale its capacity expansions and sustain margin recovery.

Opportunities & Challenges

Opportunities

India’s push for self-reliance in chemicals gives SRF an edge over Chinese imports
Expansion in fluorochemicals and specialty chemicals positions it well for growth in pharma, semiconductors, and EVs
Innovations in fluoropolymers and next-gen refrigerants unlock high-margin opportunities

Challenges

Supply chain disruptions, such as Red Sea bottlenecks, could impact operations
Cyclical downturns in Packaging Films and weak demand in agrochemicals remain risks
Execution delays in CAPEX projects could affect growth timelines

Conclusion: A High-Stakes Bet on the Future

SRF has thrived by continuously evolving its business mix—and now, it’s betting big on the next phase of growth in specialty chemicals and fluorochemicals.

With a Rs. 15,000 crore war chest, it aims to cement its leadership in high-growth sectors like pharma, EVs, and eco-friendly refrigerants. While past downturns have tested its resilience, early signs of a turnaround are visible.

The stakes are high, but so is the potential reward. If SRF executes well, this could be the next big leap that defines its future.