SRF Limited has received a significant customs duty and penalty demand totaling ₹38.49 crores from the Commissioner of Customs, Chennai-II, along with applicable interest. The company disclosed this development on January 22, 2026, under Regulation 30 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Nature of Customs Demand

The customs authority has imposed the demand citing wrong HSN (Harmonized System of Nomenclature) classification for import of raw materials and process chemicals. This alleged misclassification reportedly resulted in the company denying benefits under Free Trade Agreement (FTA) and exemption notifications.

Alleged Violations

The customs department has made several allegations against SRF Limited:

• Adoption of incorrect HSN classification for imported materials
• Consequent undue benefit availed under applicable FTA provisions
• Wrongful availment of benefits under exemption notifications
• Alleged wrongful availment of export incentives

Company's Response

SRF Limited's management has expressed confidence in challenging the customs demand. Based on legal advice received, the company believes the demand lacks legal merit and plans to contest it through appropriate legal channels.

Financial Impact Assessment

While the demand amount of ₹38.49 crores plus interest represents a significant sum, SRF Limited's management remains confident about successfully challenging the order. The company has indicated that based on legal consultation, they believe the customs department's position is not sustainable in law.

The disclosure was made by Rajat Lakhanpal, Senior Vice President (Corporate Compliance) and Company Secretary, ensuring compliance with stock exchange notification requirements under SEBI regulations.

SRF reported mixed Q3 results with consolidated revenue missing consensus estimates amid challenges in its specialty chemicals segment, even as the fluorochemicals business showed resilience. The company's chemicals division, which accounts for nearly half of its revenue mix, continues to face headwinds from Chinese competition.

Financial Performance Overview

The company's Q3 financial metrics fell short of market expectations across key parameters:

Chemicals Business: Tale of Two Segments

The chemicals business, representing 49% of Q3 revenue mix, demonstrated contrasting performance across its two main components. Fluorochemicals delivered solid results with higher realizations and increased volumes of hydrofluorocarbon (HFC) refrigerants. The outlook remains positive as global HFC prices have stayed firm, with management observing recovery in domestic demand after a weak first half due to prolonged monsoons.

Conversely, specialty chemicals remained a significant drag on performance. Growth was hampered by aggressive Chinese pricing strategies, leading to increased margin pressure and deferred offtake by key customers. The segment's challenges reflect broader industry pressures from low-cost competition.

Management Outlook and Revised Guidance

SRF expects the specialty chemicals business to show relative improvement in Q4, driven by strong volume-led recovery supported by pent-up demand and softer raw material prices. However, management indicated it may not achieve its earlier 20% specialty chemicals sales growth guidance for FY26, a development that has concerned investors given specialty chemicals' substantial revenue contribution.

According to JM Financial Institutional Securities, specialty chemicals represented 57% of the chemical business revenue mix in FY25 and is estimated at 56% for FY26. Analysts have tempered growth expectations, with Nuvama Research reducing specialty chemicals growth estimates from 25% to 15% for FY27, citing transitory pressures in agrochemicals.

Operational Challenges Across Segments

Beyond chemicals, other business segments faced their own headwinds:

• Packaging Films: Volumes declined in Q3FY26 with product pricing remaining rangebound amid Chinese dumping, while domestic demand suffered from GST rate rationalization disruption
• Technical Textiles: Pressure in belting fabrics due to cheaper Chinese imports and reduced US exports amid tariffs

Strategic Initiatives and Capacity Expansion

Despite near-term challenges, SRF continues focusing on growth initiatives and capacity additions. The company is maximizing HFC production while ramping up polytetrafluoroethylene capacity, expecting ramp-up from Q1FY27 onward. In specialty chemicals, new pharma intermediates and agro-active ingredients launches are expected to drive future growth.

While the benefits of additional capacity will accrue gradually, near-term performance remains dependent on the specialty chemicals business recovery and the company's ability to navigate competitive pressures from Chinese manufacturers.