Tanfac Inds. Q1 FY27 earnings call

TANFAC successfully completed a INR250 crores Qualified Institutional Placement (QIP), which received strong participation from institutional investors. Additionally, the board approved a proposed preferential issue of approximately INR100 crores, including INR61 crores from promoters. These initiatives have transformed the company's capital structure, making it net debt-free and providing significant financial flexibility for future expansions. The board also approved seeking listing on the National Stock Exchange to improve liquidity and broaden investor participation.

For Q1 FY27, TANFAC reported revenue from operations of INR187 crores, a 6.3% increase year-on-year, primarily driven by the continued ramp-up of its solar grade DHF business. However, operating EBITDA stood at INR28.6 crores, a slight decline from INR29 crores in Q1 FY26, resulting in an EBITDA margin of 15.3%. Profit after tax (PAT) also decreased to INR16.8 crores from INR19.4 crores YoY. Margins were impacted by elevated sulphur prices, higher fuel and power costs due to geopolitical situations and plant maintenance, and a deferred tax adjustment.

The 20,000 metric tons per annum HFC-32 refrigerant gas project is progressing well and remains on schedule for commissioning by the end of Q3 FY27. The company has committed INR315 crores against the total project cost of INR395 crores. Management highlighted that 65% of the plant's capacity is already covered by long-term commercial agreements for 5-8 years, providing strong revenue visibility and ensuring a fixed EBITDA margin for these volumes. The remaining 30% will be sold on the spot market.

TANFAC is strategically moving up the fluorochemical value chain, focusing on electronic grade chemicals, HFOs, high-performing fluoropolymers, and inorganic fluorides. Beyond the HFC-32 project, the company plans an additional INR300 crores capex for solar grade DHF expansion (INR30-40 crores), AHF expansion (INR120 crores), and electronic grade value-added products (INR150 crores). The total capex outlay for the next four years is projected to be INR1,500-1,700 crores, indicating a robust expansion pipeline.

The solar grade DHF business is fully ramped up and running at full capacity, with 80-85% of its output contracted. TANFAC maintains its position as the country's sole domestic supplier, benefiting from its rapid execution, proprietary/bought technologies, and stringent customer approval processes. Management expects this segment to continue witnessing strong demand, driven by the expanding solar manufacturing ecosystem in India, and plans to almost double its solar grade DHF capacity.

Management provided robust growth guidance, targeting at least 30% revenue growth for FY27 and over 60% for FY28, driven by new projects and ramp-ups. EBITDA margins are expected to improve to 16-19% from Q2 FY27 onwards and reach approximately 25% in FY28 once the HFC-32 project is fully operational. The HFC-32 project itself is expected to yield around 30% margins. The company also anticipates its export mix to increase from the current 10% to 50% post R-32 commissioning.

The company's R&D team, led by Dr. L.R. Ravichandran, is actively working on 5-8 products in the pipeline, including hydrofluoroolefins, fluoropolymers, and electronic chemicals. While near-term focus is on solar grade DHF and AHF expansion, the R&D efforts are geared towards commercializing HFOs and high-performing fluoropolymers in 2.5-3 years, with announcements expected in FY28 and execution by 2029-2030. For semiconductor grade DHF, management expects a 1-1.5 year approval cycle before commercial revenues.