SRF Limited (503806) Earnings Call Transcript

Ladies and gentlemen, good day and welcome to SRF Limited Q1 FY '21 Earnings Conference Call hosted by ICICI Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sanjesh Jain from ICICI Securities. Thank you, and over to you, Mr. Jain.

Thank you, Nirav. Good afternoon, everyone. Thank you for joining us on SRF Limited Quarter 1 FY '21 Results Conference Call. Today, we have with us Mr. Rahul Jain, President and Chief Financial Officer, SRF Limited. I would like to invite Ms. Nitika Dhawan, Head of Corporate Communication of SRF to initiate proceeding for SRF conference. Over to Nitika.

Good afternoon, everyone, and thank you for joining us on SRF Limited Quarter 1 FY '21 Results Conference Call. We will begin this call with the opening remarks from our President and CFO, Mr. Rahul Jain. Following this, we will open the forum for an interactive question-and-answer session. Before we begin this call, I would like to point out that some statements made in this call may be forward-looking, and a disclaimer to this effect has been included in the earnings presentation shared with you earlier. I would now like to invite Mr. Jain to make his opening remarks.

Thank you, Nitika, and good afternoon, everyone. I would like to extend a warm welcome to all of you, and thank you for joining us today on SRF's Q1 FY '21 results discussion. I hope you, your team and loved ones are safe and in good health. I will initiate the call by briefly taking you through the key operational highlights for the quarter gone by, following which, we will open the forum to have a detailed Q&A session. I am glad to share that SRF Limited delivered an encouraging performance during the quarter under review, despite each business facing its own set of challenges. In Q1 FY '21, our consolidated revenues were lower by 12% year-on-year at INR 1,545 crore. We did face disruption in operations due to the lockdown, which adversely affected our overall performance. We were, however, able to resume operations in a calibrated manner in our businesses after having all requisite approvals in place and taking into account all prescribed safety measures. However, some businesses took more time in resuming operations, which is being discussed in the business-wise performance. Due to the agility of our team, we were able to stabilize the supply chain and distribution operations to support our customers' requirements efficiently. Despite lower revenues, EBIT impact for the quarter was stable at INR 295 crore and INR 177 crore, respectively. I am also pleased to share that the Board of Directors have approved an incurring dividend at the rate of 50% amounting to INR 5 per share. This will result in a cash outflow of INR 28.74 crores. Let me now share an update on the segmental performance beginning with our Chemicals business, which comprises of Fluorochemicals and Specialty Chemicals businesses. During the quarter, our Specialty Chemicals business recorded robust performance despite COVID-19 pandemic. Demand scenarios remained healthy, leading to faster ramp-up of capacities. Our ongoing efforts to commercialize molecules for both the Agro and Pharma segment are very well on track. As discussed earlier, we are confident of registering the growth numbers that we had indicated in our previous calls. Also on a full year basis, we should be able to make up and meet all our customer requirements despite the impact of the lockdown during the quarter under review. During the quarter, we also launched one new product in the Pharma category, and we continue to maintain a strong product pipeline, which augurs well for the future growth of the business. Overall, while there were logistical challenges, we recorded a healthy uptick as the demand for Specialty Chemicals continues to remain strong. The world first started looking at the -- looking outside China about 3 to 4 years ago due to lack of transparency, IPR management and several other factors. It was at that point that companies began looking for business partners and suppliers who incorporated environmentally responsible operations and sound business practices in their manufacturing processes. Companies are increasingly looking to derisk their supply chains, which have been fairly dependent on China in further cases. In addition, the Specialized Chemistry talent available in India is another factor that can drive the growth of the Chemical sectors. Post COVID-19, we see an opportunity for the chemical industry in India to show a significant growth. Having said that, it will depend on each company in India as to how they leverage this opportunity, plus a lot will depend on how we can speed up the regulatory approval processes as well. You would remember that the Board had approved a proposal to set a dedicated facility at a cost of INR 238 crore in February 2020. We have now realized the CapEx to meet the revised demand projections of the customers and churning of products between dedicated plants and the multipurpose plants will continue. Coming on to the Fluorochemicals business, it delivered a subdued performance during the quarter as sales of automobiles and white goods were severely affected, which particularly impacted the refrigerant segment. Margins were impacted due to lower fixed cost absorptions both on account of lower sales and newly commissioned HFC facilities, which are in the ramp-up phase. We did see significant lower HFC sale volumes to the OEMs in the auto segment, given the worst clump witnessed in auto sector in recent times and COVID related to enclosures. You would also recall that the ref gas business has an element of summer-related seasonality due to which Q1 is typically the most important quarter for the business. However, due to COVID-19 pandemic, sales and production were impacted. We do believe that as we recover from the pandemic, sales and margin for the business will be back on its growth path. 0:07:20.Also, during the meeting held yesterday, the Board approved setting up of an additional facility to produce about 95,000 metric tonnes per annum of chloromethanes at the hedge at a projected cost of roughly about INR 315 crore. This will take our total capacity to about 190,000 metric tonnes, making SRF a global player in chloromethanes, which are also key raw materials for ref gases. Homegrown technology provides swing advantages between core products. We look at the product as an integral part of our larger vision to be a key player in the global chemical industry. Certain key cost advantages of integrated manufacturing processes, captive use of chloroform, technological ability and economies of scale will add to our position in the global market. You will remember that the Board had also approved setting up of an integrated PTFE plant at a cost of INR 424 crore in August 2019. Due to the global economic environment, the setting up of the PTFE plant has been delayed by approximately one year. The cash flows are balanced in FY '21, as the PTFE project is being deferred and the chloromethanes project is being implemented. We have also sanctioned an investment of INR 140 crore for enhancing the steam and power requirements of at Dahej to cater to our present and future requirements. Moving on to our Packaging Films business. The segment delivered robust results in a challenging period augmenting the overall performance of the company. This was driven by consistent demand for both BOPET and BOPP Films, leading to enhanced realizations. While domestic demand was weak, our marketing teams were able to swiftly engage with our international customers and were able to ramp up our exports. The segment did not have any major disruptions during the quarter as it came under the essential goods value chain. And our teams were able to obtain requisite clearances for plant operations post lockdown in an expeditious manner. Our focus on sales of value-added products further contributed to the overall performance. Our second BOPET Film line at our facility in Rayong, Thailand was commissioned successfully during the beginning of the quarter. It was a first of its kind online commissioning demonstrating ability of our teams process capability and technological ability. This will help enhance volumes as the year progresses and plant fully ramp up. We also would like to inform that our new site in Hungary was delayed due to COVID-19, but we expect the line to be commissioned shortly. The expected capitalizing of the plant in Hungary will further boost volumes during the current fiscal. However, from a marketing perspective, as inventory stocking reduces and as we come out of the pandemic, there may be some impact on demand and thereby related margins going forward. And some margin decline is likely in H2 FY '21. Overall, we expect the demand for hygienic packaging to remain strong. And in the post COVID-19 scenario, business delivering robust results. Coming to our Technical Textiles business. This segment was probably the worst affected due to the COVID-19 and a sharp slowdown in auto sales and a weak domestic demand for tires. The Belting Fabrics and the Polyester Yarn segments delivered stable performance, contributing positively to the overall performance. Our TTB manufacturing facilities remained close during the lock down. Some due to restrictions imposed by local authorities and some due to closure of part of the customers, that is, the tire manufacturers. This lockdown period was efficiently utilized to carry out plant maintenance activities that led to further enhancement of operational excellence parameters. Better demand across all segments was witnessed from June 2020 and continues. Further, we expect an uptick in sales with an improving demand scenario towards the end of the second quarter, which in turn should stabilize the performance in the second half of the fiscal. In terms of competing products from China, have also been facing certain headwinds and removal of certain types of tires from the OGL list is likely to further strengthen the domestic demand. Coming to our other business segment. In Coated Fabrics and Laminated Fabrics, markets have shown signs of recovery with demand beginning to pick up from June 2020 onwards. Q1 is traditionally the peak season for this business, which has also helped in gaining some momentum. While the Laminated Fabrics manufacturing facility at Kashipur remained close during the lockdown, we will continue to focus on development of eco-friendly material which serves as a replacement to fix. On to our balance sheet and the overall position. The company ensured liquidity through various term facilities, money market operations and debt management during the quarter. Efficient liquidity measures led to lower interest costs and higher interest incomes. This also ensures business continuity in difficult times. The company has not availed any moratorium and ensured all payments that were due and payable either to financial institutions or its vendors have been forwarded in a timely manner. Thus, the liquidity position remains strong and healthy. And recently, the rating of the company have been reaffirmed by both CRISIL and India Ratings. During the current financial year, strong operating cash flows, working capital management and reduced interest costs are likely to result in lower debt levels and improved financial leverage and coverage parameters. Through a CSR wing, SRF Foundation, we continue to work towards alleviating the offerings of the community. SRF Foundation, has been implementing COVID-19 relief work by donating health and safety equipment, food and other essential items. We supported the local administration across 8 manufacturing sites, aiding 23,000 plus individuals and families. We provided monetary support to NGOs working in areas of livelihood, health care and child rights, and to hospitals with dedicated COVID-19 wards. In addition, educational support to students studying in intervention schools by transition to online platforms and launching initiatives like the digital summer camps, et cetera, were undertaken. We also collaborated with Aryogaya Seva and distributed 32,000 sanitary napkins to 2,000 women, residing in slum area of Kadugodi, Bengaluru, while creating awareness on health and hygiene. To conclude, I would like to state that despite the ongoing challenges in some of our businesses, we had built a renowned multi-business entity over the years. This has enabled us to overcome unprecedented -- the current unprecedented environment. Our strategic innovations, led by a robust R&D, has helped the company challenge external uncertainties. With a robust infrastructure in place, superior R&D capabilities, we are hopeful of delivering a healthy performance and deliver value to all its stakeholders going forward. On that note, I conclude my remarks and would be happy to discuss any questions, comments or suggestions that you may have. I would now like to ask the moderator to open the line for Q&A. Thank you very much.

[Operator Instructions] First question is from the line of Vihang from Samsung Asset Management.

So firstly, on the chemical segment, what I wanted to know that -- was that you reiterated that you maintain your guidance for the Agro side of the piece will be like around -- just to reiterate, you said around, I think, 40% or 50% top line growth. So just that. And if you reiterate that guidance? And on the ref side, within the Chemicals business, could you give some color on how has the growth been impacted because of auto and white goods? And how are you looking at -- like on a full year basis, do you think you would still be able to grow within that period?

So Vihang, 2 things. The first is that I never said 40% to 50% growth. That was the last year's comment. This year, we are saying that with the enhanced base of the Specialty Chemical business, which is roughly about INR 1,600 crores, we are expecting a 20% to 25% growth in the Specialty Chemicals business. On the Fluorochemicals Chemicals business, I would say that the growth will be driven by ramping up of the facilities on HFCs that have recently been commissioned, probably somewhere in October '19. And once they ramp up fully, we will see volume and value-related growth coming through from that. How much of that would be this year, we have never commented on it, and we would like to remain like that on that one as well.

Despite the impact of auto and white goods, you're saying the rest piece would still grow because of capacity commissioning and everything, right?

Capacity commissioning that had happened, yes, we believe that there is still a possibility in the next 3 quarters on an overall basis for the business to grow.

Okay. Got it. And on the margin side, it would be safe to assume that basically the 13% would be primarily driven by underutilization because of the auto, white goods impact and it would kind of go back to the 18%, 20% guidance that's given?

Again, the Chemicals business is a component of both the Specialty Chemicals business and the Fluorochemicals business. Now I would say, to a certain extent, what you're saying is right, that as the sales ramp-up happens, the fixed cost absorption should be better. And therefore, the operating leverage should play out give us better margins. How much will that be is something that only time can tell.

Got it. And just the second question I had was on Packaging Films, you had mentioned that on 2H you would expect some sort of margin pressure. So if you could just highlight how exactly the margins are looking like based on the demand/supply situation that you are seeing for the current year and for probably next year as well?

See, again, I would say that during the Q1, you've seen the kind of margins that have come through, right? Q2, we believe there is still some positive on that side that remains in terms of people coming back and ramping up their production. Some of the production capacities had not fully ramped up due to COVID, while we were able to ramp it up very, very fast. So to that extent, there is some benefit available still in Q2. But as new lines come up fully and the ramp-up of the existing facility happen after COVID, we believe that there would be some erosion in margins that would happen. That's all that I can comment. How much of a percentage of margins we would have in H2 is difficult to comment.

Do you see -- do you think the margin pressure from the current levels of 33% or do you expect -- because last year, 2H margins was, I think, around 20% to 23%. So that's what I was asking do you expect the [Technical Difficulty] to go there? Or do you kind of expect the 23% also to go lower?

See, I don't believe that I'm in a position to give you a percentage number. I'm saying there will be margin that will get lower. Whether it remains between the 22% to the 33% range, only the market will tell at that point in time. Yes, there will be some erosion, whether it will be that much is difficult to comment as of now.

Okay. Sure. And just if I could squeeze one last one on the Chloromethanes expansion. If you could just clarify how much exactly the capacity you're increasing by? And how are you sort of looking at the -- what is the rationale behind this expansion in terms of like what demand for this product you're seeing?

So essentially within the Chloromethanes range, there are 3 products, MDC, CTC and chloroform. Each of these -- both -- out of these 3, the total capacity that we are putting up is about 100,000 tonnes. So each of them are co-produced. Both MDC and CTC are salable products. And even till date are imported in India. And therefore, we believe it offers a very large import substitution possibility. Our own homegrown technology gives us the ability to switch between the products. The MDC could range between 35% to 50%, 55%. CTC can be increased from a general level of 10% to 15%, 20%. And chloroform is the balance. So to that extent, we believe our ability to swing the plant and be able to produce what the market is needing at that point in time gives us great ability in the Chloromethane space.

Any asset turns for this expansion?

I've not looked at it, so unable to comment.

Next question is from Tarang Agrawal from Old Bridge Capital.

I have the following 3 questions. The first one, if I look at your chemicals SBU and considering the industry-wise performance as is mentioned by you also, both in your Fluorochemicals business and your commentary on Specialty Chemicals, one gets a sense that your mix in the segment must have been significantly skewed in favor of Specialty Chemicals this quarter. Yet, when I look at your margins, I was a little baffled to see a dent in your profitability margins. Because the fall in your Fluorochemicals business was more than adequately made up by the rise in Spec Chem revenues. So I'm just trying to figure out was, is it all only on account of new HFC plant and a lower offtake? Because your Spec Chem has more than made up for it, so logically your margins should have expanded by a significant level?

See the point is, I think you are comparing Q4 to Q1. I think you are -- that's the error that is happening. You should look at Q1 versus Q1. You will see both the margin expansion happening and also you will see a value expansion happening in EBIT terms. So that's probably what I would like to say. Also, I will not say that the Specialty Chemicals was completely, let's say, isolated from the COVID-19 pandemic. Had there been no pandemic, we would have had even better sales than this, both in the Fluorochemicals business and the Specialty Chemicals business.

No sir. I am comparing it to the June '19 quarter, hello?

There is margin expansion that has happened.

Yes. Sir, I'm comparing it from the June '19 quarter. So margin in June '19 in Chemical segment was 13%. And in June '20, it's 12.6%. And if I recall correctly, June '19 was a weak base for us because of the shutdown in Dahej.

Yes. And again, we are talking about 40 basis points. In Q1 last year, there was no commissioning of the HFTs that had happened. HFT is commissioned in October, which was probably in Q3 of last year.

But sir, our Dahej was under shutdown.

At that point in time, the HFC sales were very, very strong.

Okay. Okay. Sir, the second question is when you say you've launched a new product in this quarter, what does it mean? Does it mean that quantities of the products have been contracted by the Pharma customers and we should see offtake of this molecule going forward?

So when I say we have launched the product, we've supplied qualification lots and the qualification lots have been approved. A contraction of that product will get done over a period of time.

Got it. And sir, last question in your Packaging business. We see absolute growth in your EBIT. So did your spread per tonne increase? Or volume uptake was higher? Or was it a mix of both?

In fact, I would say volume uptake was flat. The overall -- please, I would say, the value-add products were higher than last year and even for that matter, last quarter. And therefore, there has been an expansion in [Technical Difficulty] the industry is, we -- you would also have seen the fact that over Q3 -- Q1 last year, the sales were lower. So roughly a small amount, but still lower, which was essentially because of the key raw materials prices going down. However, the -- let's say, the negativity on the conversion margin was much lower. So to that extent, we had positive in terms of the costs going down more than the price going down.

Got it. Got it. So your absolute spread per tonne increase because of...

Right. So which will tell the conversion margin, that increased.

Next question is from Rohit Sinha from Emkay Global. Sir, the participant line dropped. Next question is from Ritesh Gupta from AMBIT.

I just wanted to get a sense on the new line that are being added on Packaging Films. Sir, I understand, I mean, the guidance on the margin rate is not possible. But I mean like 33% is clearly much higher. And like it's a data of 2011 in some sense because after 2011, we almost took 3, 4 years to come back. I understand there was a chewing tobacco issue, et cetera, at that time. But just want to get a sense that is there -- could this kind of margins trigger significant supplies? And you've historically said that there are 2 suppliers you have, you have some sense on the supplies that are coming in. So if you could just elaborate a bit on the supplier side additions for both BOPET and BOPP that would be very helpful, sir?

So Ritesh, yes, what you're saying is right in terms of 2011, 2010, where a lot of lines got added. I would say these type of margins would encourage people to put up more lines. But given the current state of affairs, we believe new lines can come up only in an 18 to 24-month time frame. We are also -- you know that we have also put up the BOPET line in Thailand and the Hungary line in Thailand is also coming up. So all of those things are happening. There are other lines that are in the process. Some will get commissioned in the next, let's say, 6 months to about 8 months. But given the current -- so one thing that has changed fundamentally from that time, I think, is also because of the pandemic where the demand for hygienic packaging has gone up very, very significantly. And to that extent, this should continue for a longer period of time. I would also say that the sustainability angle of it is also something that we are working very closely with and therefore, multiple value-added products and multiple products that are kind of monolayer structure are also being put up by us, which give us the advantage and the first-mover advantage in the industry for that matter, Ritesh.

Understood. But any quantification in terms of how much is the supply increase and what kind of demand increase you might have seen just because of COVID, any broad sense?

Overall, in terms of COVID?

Yes. I mean, any...

COVID also had various impacts on various types of producers, Ritesh. Some were able to start-up quickly, some are not able to start-up quickly, and therefore, also for the demand/supply gap that got created. We believe that in Q2 and H2, all of these, if the pandemic does go away faster, will start-up and there will be more supply available. And therefore, is what we are guiding in terms of H2 margins being slightly lower or lower than H1 margin.

Understood, sir. I mean, the only challenge is that we have a range of 14%, which you did, let's say, 1, 1.5 years back, to 33% that you have done this quarter. So that marginal is a very, very long range for us. But in the less time, that's helpful. The second on the...

Ritesh, I would only say that you should be happy, right?

Sure. Sure. Just one more question, sir. On the margin side for Chemicals also, I understand that last year you had plant closures, et cetera. And I think the impact of plant closures in quarter 1 last year was much more than what you probably had this quarter. And to that extent, I would have expected margins to improve a little bit also because Specialty would have grown reasonably well because last year first quarter base was also pretty soft. So how do I understand the margins being flat? I know the previous participant also asked it. But is there a drop in the realization or EBITDA per tonne for -- so just the represent how sharp is the margin drop because I would understand it would be gross margin drop or per tonne unit drop and volume drop, all 3. So how -- can you guide us like what kind of Speciality Chemicals EBIT margins you might have done and at a very rough level, would it be flat?

As you are aware that we don't distinguish. And again, it's not on a quarter-on-quarter basis that we would like to look at the business. So it's unfair to be giving you breakup of margins for the quarter. So it's also an integrated business, you have to understand. So I won't be in a position to give you a breakup of either revenues or margins. What I can only tell you is that overall, the Specialty Chemicals business did very well despite the pandemic. And yes, what you are saying is right that during Q1 FY '20, there was a larger impact on the business because of the shutdowns that had happened. It did go through some impact on, let's say, because of the pandemic this quarter also and had the pandemic not been there, would have done even better than what...

Next question is from Ankur Periwal from Axis Capital.

Sir, first question on the R&D initiatives that we have been taking. So there is a decent uptick in terms of trends as well as the molecules that are under synthesis for us. And as I understand, this R&D is both for Chemical as well as the Packaging Films. So just your sense on how should one look at it, especially from a chemical business perspective? And a related question to it that how much contribution, incremental, let's say, revenue contribution comes from the newer products and the older products there?

Yes, Ankur, I would say that we always give that information out in our quarterly presentation in terms of what are the patents that we have filed. I think during the quarter, there were 3 patents that were granted to us all work of our in-house R&D. We believe that there will be more such products and process patents. Though it's not products, at least process patents that we will keep filing. And therefore, distinguishing ourselves from the industry in terms of our overall performance. So that's something that's a core belief with us. We believe that the R&D spend is something that we will continuously look at and keep increasing depending upon the requirements for the future.

No, no, sir, I -- so let me rephrase it. So my question was that if I look at our molecules under censuses over the last maybe 3 to 5 years, there has been a decent jump in terms of absolute molecules on which we are working. And as I understand, from the annual report, we are working on both correlated as well as the non-correlated one. So my question exactly here was that how should one look at the chemical business growth? Historically, you have guided -- I'm not talking FY '21 specific, but more from a 2-, 3-year perspective, by when would these molecules we see as an incremental contribution to the revenue growth from the Chemicals business?

If you look at our revenue mix over the last 5 years, you will find that all of the new molecules that we have launched are a result of our own R&D. And therefore, the revenue mix has changed over a period of time. We believe that the revenue mix of the company will keep changing over a period of time as we add more molecules into the campaigns and dedicated plants for the Specialty Chemicals business. My sense is that over a period of time, we will see at least 3 to 4 products being launched on a yearly basis. Some of those will get converted into dedicated plants.

Okay. Helpful. And just second question, while you did allude it on the chemical margin front, but given ref gas was weaker Q1, there will be a ramp-up of the newer plant starting H2 and Chemical has been doing business for us. From a full year perspective, do you think there is a margin expansion there?

Again, Ankur, it's the same question that I answered even in the comment and probably to the last person as well. As the operating leverage plays out, there should be a margin expansion that should happen. And that is something which will be true both for the Fluorochemicals business and the Specialty Chemicals business. But look at the numbers from a Q-on-Q basis or from a -- from the fact we were living in very, very uncertain times, you will find enhancement that is happening between corresponding period last year. So that is something that we believe can continue and should continue.

Next question is from the line of Surya Patra from PhillipCapital India Private Limited.

Yes. Congratulations on a good set of numbers, sir.

Surya, can you be a bit more clearer? I am unable to hear you.

Okay. Okay. Sir, now is it fine, sir?

Better.

Yes. Sir, just wanted to understand, I think on the chemical business front, if I compare the last quarter -- corresponding previous quarter period margin and this quarter margin, see, the corresponding previous quarter was impacted by a few days of shutdown. Whereas this quarter, we have seen a larger number of -- almost a month kind of shutdown. So still, this quarter performance seems much better compared to that scenario. So what is here helping this quarter, sir, on the margin front of the Chemical business?

The fact is that the shutdown lasts -- it was a more prolonged shutdown. Here while the shutdown had happened at the end of March, some of that impact went into March. And from the first week of April, the ramp-up started happening in a calibrated manner. So not all brands started on one day, but by the end of April, almost all of Dahej was there, we hardly took some more time to be back. But largely, I think it is the Dahej piece. We saw that ramp up very, very significantly during, let's say, the first month of the quarter.

Yes. Okay. Secondly, sir, on the Packaging Film business, whether -- now it is already one month over after the June quarter. So whether the normalization in the spread in the Packaging Films business has already happened? Whether just...

Please look, I cannot give you what happened in July. I can only tell you what happened in June.

Okay. Okay. But in that case, the related question on that, sir. So that means we would not have seen any inventory loss this quarter in which possibly it could be a scenario this quarter, right?

In the Packaging Films business or in the Technical Textiles business?

No, in the Packaging Film business, sir?

There would have been some, but with the number that are registered...

Okay. And just on the net debt sir, net debt-to-EBITDA scenario, sir. See, we have seen a kind of significant business progress over last few year and also simultaneously is consistently been investing for growth. So that is how our net debt-to-EBITDA equation has been consistently in the range of 2.5 around. So going ahead over -- let's say, over the next 3- to 5-year period, what is the kind of directional indication that you can provide?

Directionally, Surya, I believe the net debt-to-EBITDA should be coming down. We believe, as I said in the commentary also that the financial leverage parameters during -- by the end of this financial year should improve on 2 accounts: one, being higher EBITDA than last year; and second, not all of the cash that we generate getting invested, some of it getting to caring of debt, the overall number should be lower. I would probably look at net debt-to-EBITDA between range of 1.5 to 2.25 as a standard debt-to-EBITDA that we would like to maintain. But again, in heavy CapEx scenario, it goes off a bit. And in scenarios where the CapEx is a bit light, it goes beyond that also. But as a philosophy, we would like to keep it in that range.

So sorry to interrupt you, Mr. Patra. I request you to come back in the question queue for a follow-up question. [Operator Instructions] Next participant is Abhijit Akella from Indiainfoline.

Yes. Just a clarification regarding the outlook given for the Fluorochemicals business. You've mentioned in the presentation that in the second half, you expect some recovery in international demand for HFCs. So if you could just talk a little bit about what exactly you're seeing there and why this might happen?

See, again, geopolitical consideration between U.S. and China are going on. There are a lot of inquiries that we are receiving for HFCs demand, which starts probably at the end of Q2. So end of September, October, which is probably the season that they are looking at from November to March perspective because there are a long lead time there. So given the set of inquiries, given the set of customers wanting more product from us is where we are saying that H2 could be better than H1, and the demand could be very robust on that side.

Okay. That's helpful. And second question is just if you could give us an updated timeline for the Hungary project? And then -- sorry, one last thing I'll squeeze in. The INR 140 crore Capex, if you could just clarify what exactly it is for the steam and power cost reduction on Dahej?

So Abhijit, Hungary has got delayed. There is no doubt on that, but more because of the travel restrictions that have been imposed locally in Europe, we believe you should hear an announcement in the next 7, 10 days max, where the Hungary project should be capitalized. Trial runs have already happened. Machine testing is going on. Engineers are on site. All of that is in place. Hopefully, sooner we will see -- we will probably be doing commercial production. Approvals are already in place. So that's the state of the Hungary project. But I will also look to warn you to say that in Europe, it will take more time for the project to ramp up because of the fact that the approval process in Europe is, let's say, slightly stricter and probably not as fast as the Indian line. So it will take some more time, but we are still in good shape on that one as well. The second question that you asked was with respect to the steam and power CapEx INR 140 crores. See essentially, we believe by, let's say, when the new plants on the Chloromethanes and all of these are coming up, the overall requirement of steam and power is going down. Overall requirement -- availability of steam and power is coming and therefore we had to argument the capacity. The more requirement in this is actually of steam. So this power plant -- this plant gives me about 175 tonnes per hour of steam and about 15 megawatt of incremental power which would keep us in good stand for probably till '24.

Next participant is Mr. Sumant Kumar from Motilal Oswal.

Rahul, my question is regarding Packaging Film business. So we have seen a margin expense in Packaging Film in 6 consecutive quarter, Y-o-Y, I'm talking about. And your commentary says the supply demand is going to impact margin, in every 3, 4 quarters you are giving the guidance. But the higher value-added product growth and contribution has driven the margin. And also in this quarter, you said the spread is higher. So what is the scenario going forward for the demand/supply? What you were negative on margin side or decline in the margin side?

I think I already commented on this, Sumant. Fact of the matter is that Q1, we have done well. Multiple factors of it. COVID was one of the factors. We believe that we were able to start-up our plants faster than some of our competition. Domestic demand remained weak. We were able to actually ramp up our -- we were able to ensure that all our plants were running to full capacity despite low domestic demand and were able to ramp up our exports. So all of those were positives. But as more plants start running, as more capacity start kicking in, as more -- as we get out of the pandemic, also what was happening was that the inventory requirements and people looking to procure inventory for their production was very high. And as that goes down a bit, there may be some demand and supply mismatch that happens. And therefore, we are saying that while Q2 should be pretty much all right, there may be a slight negative that we see on H2. You can't -- don't ask me to quantify this, right? It could to be 2 percentage points, it could be 5, it could be 10, I don't know.

Okay. And what is the CapEx for FY '21?

Overall Capex?

Yes.