SRF has a portfolio of established businesses in industrial intermediates. It classifies its main businesses as Technical Textiles Business (TTB), Chemicals & Polymers Business (CPB) and Packaging Films Business (PFB). SRF’s net sales from operations were up by 17.64 per cent from Rs. 2,986.06 crores in 2010-11 to Rs. 3,512.73 crores in 2011-12.
Reflecting 15.21 per cent growth from Rs. 1,445.29 crores in 2010-11 to Rs. 1,665.19 crores in 2011-12, TTB continues to be SRF’s largest business segment, contributing to over 47 per cent to the total sales of the company.
The Nylon Tyre Cord Fabrics (NTCF) business segment has been a foundation business for SRF for several decades. In 2011-12, whilst the first half of the year saw robust demand in the transportation sector reflecting the healthy growth of the Indian economy, the second half was relatively subdued. Apart from the sluggishness of the economy affecting the transportation sector in the second half of the year, demand was also affected by the Supreme Court judgment related to the mining industry, which saw considerable population of trucks becoming idle for a significant period. The business was also adversely affected on account of higher commodity prices, particularly for chemicals and energy costs, which it was not in a position to pass on fully to its customers.
SRF invested in polyester tyre cord fabrics (PTCF) a few years back. This segment which caters to the radial tyre segment of passenger cars and light commercial vehicles is beginning to find its feet both in the domestic and overseas markets.
It is believed that the foundation being built now could be used on a later day as a launching pad. In addition, the company has initiated development of new products in the polyester industrial yarn space, which would enable it to improve its profitability and widen its portfolio.
Belting fabric
SRF has been a dominant player with over 60 per cent of the market share in the Belting fabric segment in India and has a significant global presence, being the second largest manufacturer in the world. This business segment was also adversely affected in the second half of the year on account of the fall in mining activity in the country and freezing of key infrastructure and power projects.
In the overseas markets, volumes were adversely affected in the last quarter with the slowing down of the world economy.
The company’s South African subsidiary, which posted excellent results in the previous year, had a difficult time during the year due to negative demand in the mining sector. This was largely because the customer industry had put its investments on hold for fear of nationalisation of mines in South Africa.
To offset the fall in demand in the South African market, the company has made inroads into Latin America, a step which would help it to offset the risk in the longer term.
Coated and laminated fabrics
The Laminated Fabrics business has started generating positive cash flows having commenced production in the fourth quarter of 2009-10 and has established itself well in the signage market. Towards the end of the financial year, it had reached full capacity utilisation and is now considering expansion of the plant to grow stronger in the coming years.
The new state-of-the-art coated fabric line at Gummidipoondi with a capacity of 170 lakh sq. metres per annum has commenced production. The products have been well accepted by the market.
This facility offers a wide range of products, including lacquered tarpaulins, fabrics for tensile structures, awnings, auto-canopies, hangar covers, etc. In addition, poly urethane (PU) coated fabrics have also been introduced for several applications.
SRF which offers the widest range of products in this segment, is poised to garner a major market share in India, and the coming year would see more rigorous efforts to build this segment.
Industrial Yarn Business
With the commissioning of the polyester industrial yarn project a few years ago, SRF is able to offer a basket of Industrial yarns (nylon and polyester) for conveyor belts, transmission belts, hoses, ropes, geo-textile applications, fishing nets, stitching threads, etc. The company continues to enjoy a significant market share in the critical segments of the industry.
The NTCF segment of the Technical Textiles Business, the largest business of SRF, mainly caters to bias tyres for bus and truck segment. Current radialisation in this segment is 18 per cent only. It is estimated that radialisation would touch a level of around 30 per cent by 2013-14 and 50 per cent by 2017-18. This would stabilise thereafter, as has been observed in other developing economies of the world.
With infrastructure & mining sectors expected to grow substantially in the coming years, tyres for ‘off the road’ (OTR) vehicles, which are already witnessing a high growth, are expected to grow to double digits on a sustainable basis. These tyres consume a large amount of NTCF per tyre, thus ensuring a reasonable growth rate.
It is, therefore, expected that in absolute quantity terms, demand for NTCF would grow marginally over the next five years, though the application portfolio would show a shift from buses & trucks to two-wheelers, OTR tyres and tractor tyres.
The passenger car (PC) tyre radialisation in India has reached a mature level now (over 90 per cent), which predominantly uses polyester tyre cord fabric (PTCF) as carcass for reinforcement. The car industry is expected to grow substantially in the coming years and, therefore, offers an opportunity to SRF to provide PTCF fabrics for radial tyres.
Currently, SRF is the only company in India to produce PTCF and is well positioned to benefit from the opportunity. Leveraging its relationship with the global majors on account of its nylon business, SRF has made progress in commercialising its products.
In belting fabrics, given the expectation of growth in the domestic mining industry and infrastructure, the outlook is positive in India. This augurs well for SRF, which has over 60 per cent share of this business in the domestic market. In addition, with demand for commodities continuing to grow at a high rate globally, mining is expected to be on a growth path, and this would offer opportunities to SRF.
Coated fabrics and laminated fabrics, through the investments made and being planned, are expected to grow substantially over the next few years to become the second largest segment in SRF’s Technical Textiles Business. With changing lifestyles, urbanisation and massive investments in infrastructure, it is expected that products such as signages, awnings and hangar covers would see a double-digit growth. With the increasing usage of tensile structures with fabrics, as seen in stadiums, homes and exhibition centres, the high-end products are sure to grow to double digits.
SRF is one of the first large sector companies to foray into this area in a significant way and it is expected that the company would be able to establish a leadership position in a short time. With its state-of-the-art facility, it would also have the option of considering exports, in addition to servicing the domestic market.