CREATING VALUE THE SRF WAY ANNUAL REPORT 2019-20 WHAT’S INSIDE 01 02 06 Company Message from Notice Information the Chairman 19 62 69 Management Discussion Corporate Governance Board’s Report Report & Analysis 88 100 190 Business Responsibility Standalone Consolidated Report Financials Financials COMPANY INFORMATION Auditors Bankers Registered Office M/s B S R & Co. LLP, • ICICI Bank (CIN: L18101DL1970PLC005197) Chartered Accountants • State Bank of India Unit Nos. 236 & 237, 2nd Floor, • Standard Chartered Bank DLF Galleria, Mayur Place, President & CFO • Citibank NA Noida Link Road, Mayur Vihar Phase I Extension, Rahul Jain • DBS Bank India Limited • HDFC Bank Delhi, India - 110 091 • Kotak Mahindra Bank Tel: +91-11- 49482870 Vice President • HSBC (Corporate Compliance) & • Axis Bank Corporate Office Company Secretary • Yes Bank Block - C, Sector - 45, Rajat Lakhanpal • MUFG Bank Limited Gurugram - 122 003, • Sumitomo Mitsui Banking Haryana, India Corporation Email: [email protected] • Mizuho Bank Limited www.srf.com • IDFC Bank • BNP Paribas Annual Report 2019-20 MESSAGE FROM THE CHAIRMAN Dear Shareholders, robust multi-business entity, which As I sit down to pen my message for holds us in good stead. Strategic the Annual Report FY 2019-20 at a innovations across businesses, desk in my home, I am reminded of a backed by strong R&D team have quote by one of India’s most revered helped the company effectively face poets, Rabindranath Tagore, “You can’t such external uncertainties. cross the sea merely by standing and staring at the water.” Staying resilient Coming to our specific Businesses, I and agile in difficult situations is the would like to talk about some of the only way we can respond efficaciously milestones achieved by each of our and adapt to changing times swiftly. business segments in FY 2019-20. With the COVID-19 pandemic In the Fluorochemicals Business, we paralyzing the world and causing commissioned multiple facilities during disruption to the magnitude never the year that enhanced our HFC experienced before, your company capacities further. We view this as a quickly shifted focus on safeguarding key expansion for the company that the safety and well-being of employees, will drive growth from this segment in ensuring business continuity while the coming years. I am also proud that considering all the relevant guidelines, and supporting the community we live R-467A, a drop-in substitute for F-22 On the and operate in. Driven by a strong that our R&D team developed in-house, belief that an organization’s strength received certification by the American business front, is in its employees, your company Society of Heating, Refrigeration and announced that there will be no job Air-Conditioning Engineers, commonly your company losses due to the COVID-19 situation referred to as ASHRAE. It is the first- at SRF. ever refrigerant gas from India to performed well receive this certification. An approval by ASHRAE is testimony to the fact and achieved Creating Value: The SRF Way that SRF is at the forefront of major On the business front, your company fluorine-based gas transitions set by performed well and achieved several several international regulations to reduce milestones in FY 2019-20, despite the the global emissions of greenhouse dynamic domestic and global macro- milestones in gases. During the year, the Business economic challenges. Viewed from a also announced the setting up of an FY 2019-20 financial lens, your company achieved a 55% increase in profit after tax at integrated Polytetrafluoroethylene `916 crore compared to `592 crore (PTFE) plant along with an R 22 plant last year. Your company’s revenue as feedstock. With this, your company for the year stood at `7,209 crore as is all set to enter the Fluoro polymer against `7,100 crore in the previous space, a new business segment and year, recording an overall growth further enhance our value chain in of 2%. This growth was primarily the Fluorine segment. The overall on account of strong performance performance of our Fluorochemicals reported in the Chemicals Business Business was stable during the and the Packaging Films Business. year despite prolonged and severe While we saw challenges in our slowdown in the auto and white goods Technical Textiles Business due to the sector, leading to a low demand of auto sector slowdown and an overall refrigerants. However, the volumes of sluggish pace of economic activity, we Chloromethanes contributed positively have, however, over the years built a to the overall revenues of the Business. 2 Message from the Chairman Corporate Overview Corporate Given the COVID-19 impact on various Sustainability initiatives remain one we operate. We have an important industries, we expect the demand of our top priorities, going forward. role to play during the COVID-19 crisis for refrigerants from OEMs to remain The Government of India is working and commit ourselves to support the low in the near-term. Having said aggressively on reducing the use of communities, especially the migrant that, I am confident of the growth ‘Single-Use Plastics’. This directive workers who have lost their livelihood, momentum reviving and your company pertains to the use of single-use as well as the authorities who are is well positioned to leverage on our plastic products such as plastic plates, fighting tirelessly against the spread existing facilities to deliver superior cutlery, straw, plastic beverage bottles, of coronavirus. SRF Foundation, the performance in the future. etc. Our products do not cater to any corporate social responsibility arm of these end use products and multi of SRF Limited is working to provide The Specialty Chemicals Business has layered packaging is not a part of the emergency response through the done very well during the year and definition of single use plastics. With distribution of family essential kits, increased the capacities of most of the help of our in-house R&D, we will kits for frontline workers and hospital its flagship products. Moreover, the continue working out processes that support material. Additionally, the Business has made significant advances enable us to use more recycled chips team of SRF Foundation is working with in our film production. their partners to support the education to improve the overall efficiencies in all and learning needs of children across new products, with a focus on running our intervention schools by bridging all the plants to maximum capacities As stated earlier, the performance the digital divide through innovative and debottlenecking them as the need of the Technical Textiles Business methods. arises. A healthy demand from both the (TTB) was subdued due to a sluggish agrochemical and pharma segments domestic demand. However, the has been encouraging and with the Business continued to focus on In conclusion, I am confident of right investments that your company enhancing the operational excellence our growth potential and business has made in this Business, we are parameters at all its plant locations opportunities that each of our ready to seize all opportunities that through cost saving and energy segments exhibit. As the domestic and arise in the future. At the beginning efficient methodologies. international operating environment of the year, we had projected an improves gradually, I am optimistic of outlook of 40-50% revenue increase During the year, we also announced a healthy performance. This is possible in the Specialty Chemicals Business. the closure of the TTB plant at due to our investments in world-class I am happy to share that our overall Rayong, Thailand as it was becoming infrastructure, competent resources, revenues for the Business are in economically unviable to continue superior R&D capabilities and a strong excess of `1,650 crore, which is higher running the plant. While these adherence to safety protocols, which than what we had indicated. measures are difficult, they are also is a cornerstone of our sustainability necessary to enhance competitiveness. endeavors. I am also confident of creating sustained value for all our In addition, the Business is working stakeholders as we progressively step In Coated Fabrics, your company on sustainability with a more into FY 2020-21. determined effort to reduce our continues to maintain price and volume carbon footprint as well as use less leadership in the domestic market. By On behalf of the Board of Directors water in our processes. Overall, adding textile capacity on a regular of SRF Limited, I want to thank we continue to be optimistic that basis, we have not only increased our all employees of SRF and the new product opportunities will share but also made ourselves more management team for your hard work. emerge in both the agrochemical competitive. The Laminated Fabrics I would also like to thank the investors and pharma segments and exhibit a segment has also seen an increase in and shareholders for your continued positive trajectory for the Business, the sales volume on a year-on-year trust, confidence, and support. and we expect to report a healthy basis in an over-supplied market. performance in FY 2020-21 as well. This is despite a lot of States banning the use of flex material as a signage Sincerely, solution. The Packaging Films Business has had a good year. Our continued strides towards maximizing contribution by You would remember that in May 2019, keeping costs under control, improving the company had announced the sale the product mix and working towards of its Engineering Plastics Business to sustainability initiatives is what sets us DSM India. The closing conditions of Arun Bharat Ram Chairman apart. Both the BOPET and BOPP films the transition were completed in the segments delivered steady returns second quarter of FY 2019-20 and the to the overall performance. During sale of the Business has now been achieved.