SRF Limited: Navigating Global Headwinds with Strong Q2 & H1 FY26 Performance

SRF Limited, a diversified chemical-based conglomerate, has reported an encouraging performance for the second quarter and first half of fiscal year 2026, demonstrating resilience amidst ongoing global uncertainties. The company's strategic focus on operational excellence, disciplined cost management, and innovation has enabled it to maintain steady momentum across its key business segments. For Q2 FY26, SRF's gross operating revenue grew by 6% year-on-year to INR3,640 crore. This growth was accompanied by a significant 56% increase in Earnings Before Interest and Tax (EBIT), rising from INR417 crore in Q2 FY25 to INR650 crore, reflecting an 18% margin. Profit After Tax (PAT) expanded by an impressive 93% year-on-year, reaching INR388 crore.

The Chemicals business emerged as a primary growth driver, reporting a robust 23% increase in revenue to INR1,667 crore in Q2 FY26. This performance was largely attributable to higher volumes for refrigerants and favorable realization trends. Both the Fluorochemicals and Specialty Chemicals segments benefited from enhanced operational efficiencies, contributing to a stronger margin profile. The Specialty Chemicals segment, in particular, saw improved performance driven by higher volumes, a favorable product mix, and continued cost optimization. The company also successfully launched one new Active Ingredient (AI), three new Agro products, and one new Pharma product during H1 FY26, further strengthening its product pipeline. The Performance Films & Foil business maintained stable revenues in Q2 FY26, delivering higher EBIT compared to the previous year. This was supported by improved volumes and realizations in BOPP and aluminium foil, alongside a stronger product mix and sustained cost optimization. International operations in Thailand and Hungary also performed well, contributing to higher margins. In contrast, the Technical Textiles business faced headwinds, with revenue declining by 11.4% to INR474 crore in Q2 FY26. This was primarily due to aggressive import pricing of Nylon Tyre Cord Fabric (NTCF) and belting fabrics from China, coupled with soft demand for Polyester Industrial Yarn (PIY) during a prolonged monsoon season.

Strategic Initiatives and Outlook

SRF is actively pursuing several strategic initiatives to bolster its long-term growth. A significant development is the strategic collaboration with the Chemours Company for the manufacture, supply, and distribution of certain fluoropolymers and fluoroelastomers. This partnership aims to leverage SRF's manufacturing expertise and Chemours' global technology leadership to cater to growing market demand across diverse industries. The capital expenditure for this project has been increased to INR745 crore, with completion expected by December 2026. Furthermore, SRF has entered into an agreement to acquire approximately 300 acres of land in Odisha for INR282 crore, intended to house large-scale chemical facilities and expand its manufacturing footprint.

Management anticipates the Chemicals business to surpass 20% overall growth for FY26. The ref gas market is expected to see better or stable pricing and volumes in H2. The total capital expenditure for FY26 is projected to be in the range of INR2,200 crore to INR2,300 crore. The HFO project is slated for commissioning in 2027, with initial revenue contributions expected in FY28. For the Technical Textiles business, market conditions are expected to improve in H2, supported by recovery in the automotive and industrial sectors following GST 2.0 implementation. The company is also ramping up new Belting Fabric capacity, which is expected to contribute higher volumes in H2.

Challenges and Mitigating Factors

Despite the positive performance, SRF acknowledges several market challenges. The Chemicals business faces deferred procurement from global agro majors and sustained Chinese competition, alongside uncertainties surrounding US tariffs. The Performance Films & Foil segment continues to grapple with global BOPET supply exceeding demand and aggressive pricing from Chinese suppliers in Southeast Asian markets. The Technical Textiles business is also impacted by cheap imports from China and soft demand for PIY. To counter these headwinds, SRF is focusing on cost structures, debottlenecking, and augmentation initiatives in its Chemicals business. The company is also expanding sales of Value-Added Products (VAPs) and sustainable film structures to enhance differentiation in the Performance Films & Foil segment. In Technical Textiles, the focus remains on value-added products and innovation-led differentiation to support recovery.

Conclusion

SRF Limited's Q2 and H1 FY26 results underscore its ability to deliver encouraging performance through operational excellence and strategic foresight. The strong growth in the Chemicals business, coupled with strategic collaborations and capacity expansions, positions the company favorably for future growth. While external market challenges persist, SRF's diversified portfolio, robust R&D capabilities, and proactive management strategies are geared towards navigating volatility and capturing emerging opportunities, reinforcing investor confidence in its long-term value creation.