Detailed Rationale

Crisil Ratings has reaffirmed its ‘Crisil AA+/Stable/Crisil A1+’ ratings on the long-term bank facilities and commercial paper programme of SRF Limited (SRF).

 

The ratings continue to reflect the company’s strong business risk profile driven by market leadership, diversified revenue and high operating efficiency, and the healthy financial risk profile. These strengths are partially offset by high capital expenditure (capex) intensity with continuous enhancement in capacities in the chemicals and performance films and foil segments (PFB).

 

The operating income is expected to rise over the medium term driven by strong growth across all divisions; after reporting a healthy growth of 7% in fiscal 2026. The growth in fiscal 2026 was driven by the chemicals segment, especially fluorochemicals, where the company witnessed an increase in volume as well as realisation of hydrofluorocarbons (HFCs) and steady growth in specialty chemicals. This is likely to continue in the current fiscal, with healthy growth in performance foils and technical textile business.

 

The Ebitda (earnings before interest, taxes, depreciation and amortisation) margin of the company is expected to be in the range of 20–22% in fiscals 2027 and 2028. The operating margin increased to 21.6% in fiscal 2026 from 18.7% in fiscal 2025 largely due to robust profitability in fluorochemicals business in the chemical division and steady operating profits in the specialty chemicals and performance foils division. It is also driven by enhanced operating efficiency as a result of various cost reduction initiatives taken by the company. In the specialty chemical business, the margin has remained stable despite pricing pressure, achieved through cost reduction initiatives. Going forward, demand from agrochemical customers is expected to witness a gradual recovery with improved market conditions. In the fluorochemicals segment, improvement in realisation of HFCs led to higher margin and are likely to continue in current fiscal.

 

In the PFB segment, performance improved in fiscal 2026, with improved capacity utilisation and steady demand in biaxally oriented polypropylene terephthalate (BOPET) and biaxally oriented polypropylene (BOPP), ramp up in recently commissioned aluminium foil capacity, higher volume of value-added products (VAP) and enhanced operating efficiency. With sustenance of demand and contribution from VAP, the revenue and margin are expected to improve in this fiscal as well.

 

The technical textiles business performance moderated in fiscal 2026 due to challenging market environment, with continued influx of cheaper imports from China and the US tariffs affecting the belting fabrics. However, with ease in tariffs, recovery in demand is seen from the fourth quarter in belting fabrics and resilient demand in nylon tyre cord fabrics. Therefore, with improving demand and increased contribution from value-added products, revenue in the segment is projected to grow in the medium term.

 

In fiscal 2026, the company completed capex of ~Rs 1,815 crore for capacity expansion and setting up new facilities in the chemicals business and PFB segments. SRF has invested around Rs 2,000 crore per annum on average on capex in the past five years, except fiscal 2025, and the company has capex plan of Rs 2,400–2,600 crore in fiscal 2027, which will be funded through a mix of internal accrual and debt. Much of the planned capex will go into the chemical business for further capacity and product portfolio expansion. Consequently, the debt/Ebitda is expected to improve to 1.0–1.3 times over the medium term (as against ~1.5 times in fiscal 2026), supported by healthy Ebitda margin.

Analytical Approach

For arriving at its ratings, Crisil Ratings has combined the business and financial risk profiles of SRF and all its subsidiaries, as all the entities (together referred to herein as SRF) have the same management and operate in similar businesses.

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers - Strengths

• Market leadership:

The company is the market leader in most of its business segments. Due to extensive experience in handling fluorine, it is the sole producer of some key refrigerants in India. In the specialty chemicals segment, continuous investment in research and development (R&D), and improved manufacturing capability have made it a one-of-its-kind player, exporting products that find application in pharmaceutical and agro-based products. In the technical textile business, the company is the largest nylon tyre cord fabric manufacturer in India, and continued addition of new VAP in the belting fabrics and polyester industrial yarn segment (part of the technical textile business) should further enhance the market position. The market position in the performance films and foil business (PFB) is supported by large capacity and high volume of VAP. The healthy market position is likely to be sustained, given the leadership position, established track record, and large R&D capability leading to technical expertise.

 

• Diversified revenue and high operating efficiency:

SRF has a diversified revenue profile with presence across chemicals business (49%), PFB (37%) and technical textile business and others (14%) segments in terms of revenue as of fiscal 2026. The management has successfully diversified its geographical presence through investments in the PFB segment in South Africa, Thailand and Hungary. The diversified revenue profile protects against downswing in any one business and keeps the operating margin steady. Furthermore, cost efficiency measures in the technical textiles business and PFB segments, strong R&D capability in specialty chemicals, and market leadership in refrigerants have helped in keeping the margin higher than that of peers.

 

• Strong financial risk profile:

The financial risk profile remains strong backed by robust tangible networth, with expected gearing of 0.3–0.4 time as on March 31, 2027 (0.36 time as on March 31, 2026). The net cash accrual is expected to be above Rs 2,500 crore per annum in fiscals 2027 and 2028, resulting in comfortable debt protection metrics. The net cash accrual to adjusted debt ratio is expected to be ~0.5 time in fiscal 2027. The financial robustness is also explained by interest coverage ratio, which is expected to remain healthy at 11–12 times in fiscal 2027.

Key Rating Drivers - Weaknesses

• High capex intensity:

The company is continuously incurring capex in specialty chemicals of the chemical business segment and is also expanding manufacturing facilities of other segments. Capex was around Rs 1,815 crore in fiscal 2026. SRF has invested around Rs 2,000 crore every year on capex building in the last five years, except for fiscal 2025, and the company has further capex plan of Rs 2,400–2,600 crore for fiscal 2027, out of which majority will go into chemical business segment. However, profitability of a molecule in the chemical business segment depends on successful commercialisation and acceptability, while cyclicality is inherent in the PFB and technical textile business segments. Therefore, the ability to maintain strong revenue growth and sustain the operating margin will remain monitorable.

 

• Volatility in the chemicals and packaging industry:

Most of the revenue (more than 80%) of the company comes from the chemical business and PFB. The chemicals industry had been facing issues since the second quarter of fiscal 2024 due to China dumping and inventory rationalisation measures by key customers. Also, the packaging films industry has been facing issues since fiscal 2023 due to oversupply of BOPP and BOPET. However, both these industries have been recovering since the third quarter of fiscal 2025.

Liquidity Strong

SRF enjoys strong liquidity driven by expected cash accrual of more than Rs 2,500 crore per annum in fiscals 2027 and 2028 (~Rs 2,400 crore in fiscal 2026) and cash and equivalents of Rs 1,252 crore as on March 31, 2026. SRF also has access to fund-based limits of Rs 2,865 crore, utilised to the tune of 42% on average over the 12 months through December 2025. The company has long-term debt obligations of Rs 700–1,050 crore each, in fiscals 2027 and 2028, with capex of Rs 2,400–2,600 crore. The company can partly fund its debt obligations and capex requirement through internal accrual. It is expected to refinance balance debt obligations.

Outlook Stable

Crisil Ratings believes SRF will continue to benefit from its market leadership and healthy operating efficiency, while the financial risk profile should remain comfortable due to adequate cash accrual over the medium term.

Rating sensitivity factors

Upward factors

• Sustenance of the gross debt/Ebitda ratio at below 1.0 time
• Strong revenue growth, with sustained improvement in the operating margin, leading to high cash accrual 

 

Downward factors

• A sustained increase in the gross debt/Ebitda ratio to more than 2 times
• A sustained decline in the operating margin, with stagnant revenue leading to low cash accrual

 

ESG analysis

ESG profile of SRF supports its strong credit risk profile

Chemical manufacturers can have a significant impact on the environment owing to high water consumption, waste generation and greenhouse gas (GHG) emissions. The sector’s social impact is characterised by health hazards, leading to higher focus on employee safety and well-being and the impact on local community, given the nature of its operations. SRF has continuously focused on mitigating its environmental and social risks.

 

Key ESG highlights

• SRF’s share of renewable energy in its overall energy mix rose to ~13% in fiscal 2025 (from ~9% in fiscal 2023).
• SRF’s lost time injury frequency rate (LTIFR) stood at 0.48 time for employees, which was higher than the previous fiscal and 0.09 time for workers in fiscal 2025, which was lower than the previous fiscal (reported 0.18 time LTIFR for employees and ~0.19 time for workers).
• SRF reported a moderate increase in gender diversity of employees to ~10% in fiscal 2025 (vs ~8% in fiscal 2024) and an increase in attrition rate of employees to ~13% in fiscal 2025 (from ~10% in fiscal 2024)
• The governance structure is characterised by 60% of the board comprising independent directors, 20% women directors, presence of an investor grievance redressal mechanism and extensive disclosures.

 

There is a growing importance of ESG among investors and lenders. The commitment of SRF to the ESG principle will play a key role in enhancing stakeholder confidence given shareholding foreign portfolio investors and access to both domestic and foreign capital markets.

About the Company

SRF is a multi-business chemicals conglomerate engaged in the manufacturing of industrial and specialty intermediates. Incorporated in 1970, SRF started operations with a nylon tyre cord plant in Manali, Tamil Nadu. It is present in chemicals business, PFB, technical textile business and others business verticals, with revenue contribution of 49%, 37%, 14% respectively, in fiscal 2026. Under the chemicals business segment, the company manufactures fluorochemicals (including refrigerant gases, blends and chloromethanes) and specialty chemicals. In the PFB segment it manufactures BOPP and BOPET used in flexible package covers and labels and has established an aluminium foil facility in the previous fiscal. In the technical textile business segment, it manufactures nylon cord fabrics, belting fabrics, and industrial yarn. SRF has 13 manufacturing units in India and one each in South Africa, Thailand and Hungary. Its sales are spread across more than 90 countries, and it has a workforce of about 9,500 employees. India accounts for 50% of revenue followed by the US (8%), Switzerland (5%), Belgium (4%), South Africa (4%), Thailand (4%), Germany (2%), and rest of the world (22%). The parent company — Kama Holdings Ltd — holds 50.21% stake, while the other 49.74% is held by the public as of March 2026.

 

For fiscal 2026, operating income and profit after tax (PAT) were Rs 15,787 crore and Rs 1,835 crore, respectively, against Rs 14,717 crore and Rs 1,251 crore, respectively, for the previous fiscal.

Any other information: Not applicable

Names of entities consolidated	Country of incorporation	Proportion of ownership	Extent of consolidation	Rationale for consolidation
SRF Holiday Home Ltd	India	100%	Full	Strong business and financial linkages
SRF Global BV	Netherlands	100%	Full	Strong business and financial linkages
SRF Industries (Thailand) Ltd	Thailand	100%	Full	Strong business and financial linkages
SRF Industex Belting (Pty) Ltd	South Africa	100%	Full	Strong business and financial linkages
SRF Flexipak (South Africa) (Pty) Ltd	South Africa	100%	Full	Strong business and financial linkages
SRF Europe Kft	Hungary	100%	Full	Strong business and financial linkages
SRF Altech Ltd	India	100%	Full	Strong business and financial linkages
SRF Middle East	Dubai	100%	Full	Strong business and financial linkages