SRF shuts Dahej chemical plant following Gujarat pollution board directions

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Published: April 2, 2019 2:43:40 AM

SRF manufactures refrigerant gas, fluorospeciality chemicals and chlorinated solvents at its Bhiwadi and Dahej facilities.

ICICI Securities said the closure of the plant came at a time when the chemicals business was expected to post strong growth.

Chemical-based multi-business company SRF has shut down its chemicals manufacturing plant in Dahej, which contributes one third of its revenues, following directions of the Gujarat Pollution Control Board (GPCB).
The company will file a reply clarifying its position with regard to the issues raised. “For the time being, in compliance with the directions of GPCB, the company is in the process of closing the operations at the site,” it said.

Alleging that the Dahej industrial plant was not complying with the provisions of the Water (Prevention and Control of Pollution) Act, 1974, GPCB had issued directions to SRF to stop operations at the plant. A SRF spokesperson did not offer comment on the development.

The SRF management has told financial investors that it is in negotiating with the authorities and the violations were minor and technical in nature.

The Dahej plant closure is significant as it contributes 70% of chemical business revenue of SRF, which, in turn, is a significant contributor of one third of total SRF revenue.

Citigroup analysts said the closure of the plant was a “big but likely temporary setback”. “While we do expect the stock price to react negatively to this news, chances are high that the matter will get resolved in some time (exact duration uncertain). The quantum of impact on earnings is difficult to ascertain at this point,” Citigroup said. The SRF stock fell 6% on Monday in early trade following the development to finally end at `2,356, down by 1.88% on the BSE.

ICICI Securities said the closure of the plant came at a time when the chemicals business was expected to post strong growth.

The brokerage said the closure of Dahej operations would also impact SRF’s recently commenced agrochemical active ingredient facility for a MNC, and would likely delay commercialisation of its new HFC capacity. For the third quarter ended December 31, 2018, SRF’s consolidated gross sales grew by 41% from `1,397 crore to `1,964 crore in Q3FY19 when compared with the corresponding period last year. The firm’s earnings before interest and tax increased 15% from `225 crore in Q3FY19.

The company’s profit after tax (PAT) rose 26% from `131 crore to `166 crore in the quarter.

Analysts at ICICI Securities said the chemicals business contributed 29% and 27% to SRF’s revenue and EBIT, respectively, in nine months of the current fiscal year.

SRF manufactures refrigerant gas, fluorospeciality chemicals and chlorinated solvents at its Bhiwadi and Dahej facilities.

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