Tuesday, December 5, 2023

SRF plans to make India hub for chemicals

New Delhi: SRF Ltd., the Gurgaon-based chemical manufacturer, is working on ways to bolster local supply chains of chemicals to reduce India’s reliance on Chinese imports amid robust economic growth, a top company executive said in an interview with Mint. 

The firm has earmarked a 2,500 crore investment for the current financial year, primarily for its chemicals business. This year’s investment is a part of a 12,000 crore planned outlay for a five-year period till FY28.

SRF is also focusing on boosting its research and development capabilities.

“…We are still dependent on China for so many of our chemicals, but with our economy now getting to a certain size, the theme of import substitution becomes much more of a viable option…We are planning on developing suppliers in India to be able to procure that from them instead… a theme which, at some stage, will become prevalent in our business strategy,” said Ashish Bharat Ram, chairman and managing director, SRF Ltd.

“Like in chemicals, India is just 3% of the worldwide chemical market. So, for us as a company, it’s a huge opportunity,” added Kartik Bharat Ram, joint managing director at SRF.

SRF’s investment strategy includes capital allocations to foster a supportive ecosystem within India, with 80-85% of 2,500 crore directed to its chemical division. 

“…Mostly, it will be all internal accruals and wherever necessary we can take some debt because our balance sheet allows us to borrow wherever we must. So, it will be a mix of debt and internal accruals, depending on the cash position at that point,” Ashish added.

The company is also keen to capitalize on the shift in Western procurement away from China, aiming to position India as an alternative chemical supplier. This aligns with the nation’s self-reliance initiative, Aatmanirbhar Bharat, and reflects SRF’s dual focus on domestic and international markets.

“…Especially, being a supplier for the US, as they have fractious relations going on with China, and we believe we can build our business from there by taking a bit of the Chinese share there. So, I think that’s an opportunity that exists for us in the speciality chemicals business,” he added. “But we have an equal focus on the domestic growth, and over the long-term, the Indian market will remain to be our focus area.”

SRF has historically pursued growth through acquisitions, but is currently emphasizing organic expansion across its Indian operations. 

Ashish also noted that a portion of the planned 12,000 crore investment will be used to enhance the company’s technical textiles and packaging segments, despite current industry challenges.

Last month, SRF’s board sanctioned 510 crore for two new projects – 235 crore for an agrochemical intermediates plant in Dahej, and 275 crore for a BOPP (Biaxially Oriented PolyPropylene) film production unit in Indore, signalling the company’s commitment to its strategic investment plans.

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