SRF Limited

Income statement (INR crore unless stated)

Sources: S&P/SA standardised income statement (data as of Jul 2026); net income and revenue reconcile to Co. results. EPS derived as net income ÷ 29.642 crore shares; FY24 (45.06) and FY25 (42.20) match reported EPS. Dividends per share derived from cash dividends paid ÷ shares (cash basis lags declaration).

Company-reported metrics (differ in definition from S&P):

FY25 EBITDA derived from FY26 EBITDA of INR 3,705 crore and reported 24.7% growth. FY26 exceptional item: INR 84.95 crore one-time impact of new Labour Codes (Co. results).

Revenue CAGR FY2022–FY2026: 6.2% (derived: (15,787/12,434)^(1/4) − 1).

Commentary. The five-year record is a full commodity-and-destocking cycle. FY2022–FY2023 were peak years: refrigerant pricing was strong, specialty chemicals benefited from global supply-chain diversification away from China, and BOPET spreads were exceptional; net margin held near 15%. FY2024 marked the inflection down — revenue fell 11.6% as agrochemical customers destocked, BOPET was oversupplied (Chinese capacity) and refrigerant prices softened; net income fell 38%. FY2025 revenue recovered 11.8% on film volumes (PFB +23.7%) but net margin compressed further to 8.5% because specialty chemicals stayed weak in H1 (Q1 and Q2 FY25 chemicals EBIT fell 33% and 29% YoY), finance costs rose to INR 376 crore and depreciation stepped up on new capacity. FY2026 was the recovery year: revenue grew only 7.4%, but operational EBIT rose 29% and PAT 47% to INR 1,835 crore as fluorochemicals delivered record results on higher HFC volumes and realisations domestically and in exports, PFB EBIT rose 39% and interest costs fell 27%. The trend continued into Q1 FY2027 (PAT +76%, EBITDA margin 24.6%), though management attributed part of the quarter to inventory gains.

Quarterly run-rate — FY2026 and Q1 FY2027 (INR crore)

Sources: Co. results; Q2 revenue derived from H1 FY26 revenue of INR 7,459 crore; Q3 revenue derived as FY26 total minus other quarters.

Balance sheet (INR crore, as at 31 March)

Source: S&P/SA balance sheet (last updated 22 Jul 2026). Total consolidated assets reached INR 25,453.6 crore at 30 Jun 2026 (DSIJ, citing results). Company-reported debt-to-equity: 0.32 at 30 Jun 2026 vs 0.35 a year earlier (Co. results via Equity Bulls) — lower than the S&P-basis 0.36 at Mar 2026 because of definitional differences (e.g., lease and short-term facility treatment).

Commentary. SRF's balance sheet is moderately levered and deliberately so: debt rose from INR 3,655 crore to INR 5,031 crore over FY22–FY24 to fund the INR 2,800+ crore annual capex peak, then stabilised as capex was cut in FY25. Roughly 60% of debt is short-term (working-capital lines, current maturities, and short-term borrowings), which is typical of Indian industrials but increases refinancing sensitivity. Intangibles are negligible — the asset base is almost entirely PP&E (INR 15,709 crore at FY26) — reflecting an organic growth model. CWIP more than doubled in FY26 (INR 811 crore → INR 1,889 crore), signalling the new capex wave (Odisha, Indore, Dahej). Equity compounding (BVPS +64% in four years) with low payouts means leverage ratios have improved despite rising absolute debt.

Cash flow (INR crore)

Source: S&P/SA cash flow statement (data as of Jun 2026).

Commentary. SRF is a reinvestment story: cumulative FY22–FY26 capex of INR 9,934 crore absorbed 82% of cumulative OCF (INR 12,144 crore), leaving only INR 2,209 crore of five-year FCF, of which INR 1,118 crore went to dividends. FY2025 FCF (INR 1,256 crore) was a deliberate capex pause, not a structural change; FY26 capex already rose to INR 1,815 crore, and management guided FY26 capex of INR 2,200–2,300 crore including INR 282 crore of Odisha land (ICICI Direct Q3FY26 note) and roughly INR 5,000 crore over two to three years. FY26 OCF growth (+2.7%) lagged PAT growth (+47%) because of a INR 417 crore working-capital build (inventory +INR 374 crore, receivables +INR 306 crore) — a point to monitor.

Ratios

Method: All derived from S&P/SA data. ROIC = EBIT × (1 − 25%) ÷ (equity + net debt). DIO and DPO use S&P "cost of revenue" (materials only), which overstates days versus a full-COGS definition; trend is meaningful, absolute level less so. Screener.in reports ROCE of 15.9% and ROE of 14.8% on its own basis (latest snapshot).

Commentary. Returns peaked above 20% ROE in FY22–FY23, troughed below 10% in FY25 and recovered to ~13% in FY26 (14–15% on average-equity bases). Interest cover nearly halved between FY23 and FY25 before recovering. The deterioration in the cash conversion cycle to 68 days in FY26 — the worst of the period — is driven by receivables (DSO up ~5 days) and inventory and is consistent with export growth and pre-buying of raw materials in a volatile geopolitical year.

Management guidance

• Chemicals revenue growth of 15–20% in FY2027, with potential for the upper end after a strong Q1.

• Performance Films margins to normalise in Q2 FY27 from Q1's inventory-aided peak but at a structurally higher baseline.

• Capex of ~INR 5,000 crore over two to three years, anchored by Odisha (~INR 2,300 crore, completion Feb 2028).

Consensus expectations

Consensus revenue growth of ~13–15% per year over three years (Simply Wall St forecasts referenced at 13% after FY25 results and ~15% in late 2025), with net margin expected around 13%. Consensus EPS figures were n.v. this cycle.

Bull case (three arguments)

1. Refrigerant up-cycle plus HFO optionality: Fluorochemicals delivered record FY26 results on HFC volume and price; quota tightening in the US/EU and India's 2028 freeze could sustain pricing, while ~10,000 TPA of in-house HFO capacity would make SRF one of very few non-Western HFO producers.

2. Operating leverage already visible: Q1 FY27 EBIT rose 61% on 32% revenue growth, with every segment expanding margins (PFB EBIT +149%, TTB +186%) — evidence the FY24–FY25 trough is over.

3. Balance sheet capacity: Net debt/EBITDA ~1.1x and D/E 0.32 allow the INR 5,000 crore capex wave without equity dilution.

Bear case (three arguments)

1. Peak-margin risk: Management itself attributed part of Q1 to inventory gains and expects films normalisation; Citi's Sell thesis centres on R-32 pricing pressure in CY26–27.

2. Cash conversion and returns: Five-year FCF of INR 2,209 crore versus INR 7,973 crore of net income, a widening cash cycle, and ROIC of ~11.6% leave little margin for error at ~34x trailing earnings and ~5x book.

3. Supply overhang and regulation: KAMA's planned sale of up to 3% by March 2027 and unresolved Indian quota allocation rules could cap the stock irrespective of fundamentals.

Catalysts and monitorables (next 12 months)

• Q2 FY27 results (late October 2026): degree of films normalisation; chemicals growth versus 15–20% guidance.

• India's HFC quota allocation framework and treatment of HCFC baselines.

• Odisha project milestones (land development, first-phase orders, environmental clearances).

• Timing and execution of KAMA's sell-down (block deals vs. open market).

• Specialty chemicals order book: agro destocking recovery and new pharma molecules.

• Capacitor BOPP and BOPET thick-film ramp; any revival of the deferred Indore BOPP project.

• Working-capital normalisation and FY27 FCF.

• US trade policy and West Asia stability for exports.

Analyst verdict

SRF enters the second half of FY2027 in its strongest operating position since the FY2023 peak. FY2026 PAT rose 47% to INR 1,835 crore and Q1 FY2027 set an all-time quarterly record (PAT INR 759 crore, EBITDA margin 24.6%), with broad-based margin expansion across chemicals, films and textiles. The strategic direction is coherent: deepen the fluorine value chain (HF integration, HFOs, fluoropolymers) while running films and textiles for cash and selectively upgrading them toward value-added products. Management has also shown capital discipline, deferring a INR 490 crore BOPP project when the market turned.

Yet the stock has de-rated sharply — down roughly 13% since the record quarter and about 20% year-to-date — and the market's scepticism is not unreasonable. Earnings quality in Q1 was flattered by inventory gains; refrigerant pricing is a regulatory construct that can reverse; and SRF's history shows thin free cash flow, a lengthening cash cycle and ROIC that has not returned to FY22–FY23 levels. At ~34x trailing EPS, ~18–19x EV/EBITDA and ~5x book, the valuation already discounts a durable recovery. The promoter's planned sale of up to 3% adds a technical headwind through March 2027.

On balance, SRF is a high-quality, execution-proven franchise whose medium-term value hinges on two binary-like variables: the design of India's refrigerant quota regime and successful, on-budget delivery of the Odisha HFO complex by February 2028. Investors with a three-year horizon are being offered a better entry point than at any time since mid-2025, but near-term upside likely requires evidence that FY27 chemicals growth lands at the upper end of the 15–20% guidance and that films margins hold above FY26 levels after Q2 normalisation. We would characterise the risk-reward as constructive but not yet compelling, with the Q2 FY27 print and quota clarity as the decisive near-term tests.