Tanfac Industries Limited makes a corporate announcement

Latest reported AHF utilization is approximately 75% in Q1 FY27. Management also referred to HF utilization at 73% in the same call, so the precise figure depends on whether the company is using the broader HF-plant measure or the AHF segmental measure. The latest Annual Report recorded 95% hydrofluoric-acid utilization for FY26 on approximately 30,000 TPA of capacity. ^{[1] [2]}

How it aligns with the Annual Report

• The expansion doubled HF capacity from 14,850 TPA to 30,000 TPA, with the new unit commissioned in October 2024. ^[3]
• FY26 therefore demonstrated that the expanded platform could operate at a high run rate, with 95% utilization and record production volumes. ^[4]
• However, the Annual Report does not set a separate numerical AHF volume-growth target. Its disclosed growth framework is capacity- and downstream-led: solar-grade DHF capacity of 20,000 TPA, with orders covering close to 85% of annual capacity through FY29, and future HFC-32 production targeted from a new plant. ^{[4] [5]}
• Management subsequently indicated confidence in achieving more than 90% utilization in the coming year, but that is an earnings-call expectation rather than a target stated in the Annual Report. ^[6]

Interpretation: the current 75% rate is below the FY26 95% benchmark and implies that the expanded AHF asset has not yet returned to its reported peak run rate. It is nevertheless broadly consistent with the Annual Report’s volume-growth strategy, because part of the HF stream is being redirected into solar-grade DHF and, once commissioned, HFC-32 rather than being sold as merchant AHF. Management stated that approximately 15,000 tonnes of AHF would be required for R-32 and 10,000 tonnes for solar grade, limiting near-term merchant AHF volumes even as downstream volumes grow. ^[6]

Management partially offset Fluorspar volatility rather than fully neutralising it. The FY24 response combined supplier diversification, selective customer pass-through, foreign-exchange hedging, lower Fluorspar consumption through process improvements, and tighter inventory controls. However, the 20.57% FY24 EBITDA margin—down from 22.1% in FY23—shows that lower realisations and cost pressure still exceeded the benefit of these measures ^{[7] [8]}.

FY24 cost-management mechanisms

• Procurement diversification: Fluorspar and other imported inputs were exposed to US-dollar movements and China concentration. Tanfac broadened its supplier base beyond China and evaluated alternative sources to improve supply resilience and reduce procurement-cost risk ^[9].
• Customer pass-through: The company stated that it passes raw-material price increases on to customers and, more generally, passes through cost changes where appropriate ^{[10] [9]}. A formal indexed pricing formula, automatic surcharge clause, or specific Fluorspar pass-through lag could not be confirmed for FY24.
• Currency protection: Tanfac used structured foreign-exchange hedging to cover operating exposures and protect margins and cash flows; this addresses the currency component of imported Fluorspar cost, not the underlying commodity price itself ^{[10] [9]}.
• Consumption efficiency and product mix: Reduced AHF losses and improved scrubber efficiency lowered Fluorspar usage. The company also emphasised specialty HF and value-added fluorides, which should provide better pricing resilience than relying solely on commodity-like products ^{[11] [9]}.

What the FY24 numbers imply

Fluorspar consumption cost increased from Rs 114.86 Crores in FY23 to Rs 139.51 Crores in FY24, a derived increase of approximately 21.47%. Yet total material consumption declined from Rs 228.81 Crores to Rs 220.44 Crores, or approximately 3.66% lower, indicating that savings in other materials, efficiency, procurement, or product mix partly absorbed the Fluorspar increase ^[12].

That offset was incomplete at the earnings level. FY24 sales rose only marginally to Rs 378.15 Crores from Rs 374.95 Crores, while EBITDA fell to Rs 77.79 Crores from Rs 82.68 Crores; management attributed the pressure primarily to lower realisations despite record production volumes ^[8]. The implication is that pass-through was selective or lagged, rather than sufficient to preserve the prior margin.

Inventory strategy and latest margin

The reported inventory strategy was conservative working-capital management, not evidence of deliberate Fluorspar stockpiling:

• Finished-goods inventory declined from Rs 0.58 Crore at the start of FY24 to Rs 0.54 Crore at year-end, producing a Rs 0.37 Crore inventory decrease during the year ^[12].
• Inventory turnover fell from 4.80x to 3.96x, so inventory moved more slowly even though closing finished-goods stock declined; this points to some working-capital drag, but does not establish a Fluorspar-specific buffer strategy ^[13].
• Raw materials were valued at the lower of cost and net realisable value using a weighted-average cost method, with raw materials considered recoverable at cost when the related finished products were expected to sell above cost ^[14].

The latest clean annual margin figure, FY25, improved to 23.67% from 20.57% in FY24 ^[15]. That recovery is more consistent with operating leverage, improved cost structure, higher-value product mix and the HF capacity expansion, which management said improved supply security and cost efficiency, than with a one-off inventory gain or a clearly quantified Fluorspar pass-through benefit ^{[16] [15]}.

The latest investor presentation indicates an 80%/20% revenue split, but the extracted chart text does not preserve the legend identifying which slice is commodity versus specialty chemicals.^[17] Accordingly, the safest reading is that TANFAC remains commodity-heavy, with specialty chemicals a minority share, but the exact commodity-to-specialty mapping cannot be independently confirmed from the cited segment text.

Analyst read: TANFAC is still at an early stage of mix migration. The disclosed 80%/20% profile, subject to the chart-label caveat, suggests that commodity chemicals remain the economic base, while Solar DHF and the planned HFC-32 project are intended to expand the specialty/value-added pool. The company has articulated a clear strategic transition, but it has not provided a quantified specialty-revenue target or timeline, so the gap between the current mix and the intended endpoint cannot be measured precisely.