SRF Limited is structurally well positioned to benefit from the ongoing upcycle in refrigerant gases (“AC gas”)

$SRF The core bullish case rests on SRF’s Fluorochemicals segment, which is exposed to HFCs/HFOs used in room ACs, commercial cooling, cold chains, and automotive HVAC systems. With rising temperatures, rapid urbanisation, and penetration of air conditioners in India, underlying demand for refrigerants continues to expand at a high-single to low-double digit trajectory. This demand is not purely cyclical—it is structurally tied to climate and consumption upgrades. On the supply side, global refrigerant chemistry is undergoing a regulatory transition under the Kigali Amendment, pushing phasedown of older refrigerants (like R-22 and certain HFCs) and tightening quotas in developed markets. This creates periodic supply shortages and pricing power for compliant producers. SRF, with integrated fluorochemical capabilities, benefits disproportionately during such tightening cycles. A key driver in the current environment is the price strength in refrigerant gases (“AC gas”), where constrained global supply chains and higher replacement demand have supported spreads. SRF’s integrated production—from key intermediates to finished refrigerants—helps it capture margin expansion when pricing spikes occur. Additionally, China’s environmental tightening and intermittent capacity disruptions have reduced global oversupply pressure, improving realization potential for Indian producers. This supports the “China+1 chemical sourcing” trend, where global customers diversify suppliers, benefiting SRF’s export franchise. However, the investment thesis is not linear. The fluorochemicals business is inherently cyclical, with sharp margin expansion during tight supply and equally sharp normalization when new capacity comes online. Feedstock volatility, regulatory changes, and potential oversupply remain key risks.