TANFAC INDUSTRIES LIMITED

TANFAC makes hydrofluoric acid, called HF, and a set of chemicals made from it. It runs one large plant in Cuddalore, Tamil Nadu. It buys two cheap raw materials, a mineral called fluorspar and sulphur, and turns them into acids and fluorine chemicals. Because it makes everything itself from start to finish, its costs are among the lowest in India.

Its chemicals go into solar panels, air conditioners, steel, glass, medicines, farm chemicals and batteries. It sells to more than 100 customers across 10-plus countries.

The one thing that sets it apart: it is the only company in India that makes solar-grade DHF, a very pure acid used to clean the silicon wafers inside solar panels. Making it that pure is hard, and nobody else in India does it yet.

It is owned by Anupam Rasayan, a listed specialty chemical company, and TIDCO, a Tamil Nadu government body. FY26 revenue was ₹711 cr. HF and HF-based chemicals are about 85% of sales, the rest is sulphuric acid and specialty fluorides.

The whole story sits on top of what is happening in refrigerant gas around the world.

Refrigerant gas is the gas inside air conditioners. Climate rules are now forcing it to be cut back. Instead of letting anyone make as much as they want, governments hand out production quotas. China, the biggest maker, has capped its output, and just three Chinese firms control most of it. With supply tight, R-32, the main AC gas, hit a ten-year high price in mid-2026, up about a third in a year. China's exports also fell sharply because of shipping trouble near the Strait of Hormuz.

India moves to the same quota system from 1 January 2028.

This cuts both ways for TANFAC. Tight supply and high prices help an exporter. But the same squeeze is pushing up the cost of its own raw materials, fluorspar and sulphur.

TANFAC is doing two big things at once.

It has built India's only solar-grade DHF plant and is now filling it with orders. This part is real and already earning.

It is also building a plant to make R-32 refrigerant gas. At ₹495 cr this is the biggest project in its history, and it is the part the market is excited about. Target start is around the end of 2026.

It paid for this with a ₹250 cr share sale in June 2026, its first in over 30 years.

Management builds one project at a time. Done: doubled HF (2024), built solar DHF (2025). Now: R-32. Next: more HF and a second solar DHF line, around mid-2027. In the lab: chemicals for semiconductors, batteries and specialty plastics.

The next two years have a clear run of events.

The rule that matters: if TANFAC is making R-32 before 31 December 2027, it gets counted and gets a share of the quota. If it misses that date, it is shut out for years. It either makes the gate or it does not.

TANFAC has signed a lot of contracts, but they are not all the same.

The solar DHF orders are firm and already being delivered. The big ₹3,612 cr of R-32 contracts sound impressive, but management admitted there is no penalty if TANFAC cannot supply, because it all rests on getting the quota first. So treat that ₹3,612 cr as intent, not money in the bank. Only about a quarter of the headline order book is truly locked in.

Profit fell in FY26, which makes the P/E look scary. Most of the fall was one-off.

FY25 was an unusually good year, sulphur got expensive, an old HF line broke and lost about ₹70 cr of production (now fixed), and depreciation went up because the new solar plant switched on before it started earning.

So the plant is carrying full costs while running only part full. That is why FY26 profit is a poor number to judge the stock on.

Management guides FY28 revenue of ₹1,600 to 2,000 cr, at a 15-18% margin, rising 3 to 4 points once R-32 sells. Take the middle: revenue ₹1,800 cr at about 19%. That is roughly ₹340 cr EBITDA and about ₹210 cr net profit.

At today's ₹5,151 cr market cap, that works out to about 24 times FY28 profit and about 14 times FY28 EBITDA.

Is 24x fair? For a fast-growing fluorine company, yes, it is not expensive. Navin Fluorine trades near 36x on the same FY28 basis. So on management's numbers, the price is reasonable.

The problem is the word "IF". FY28 revenue of ₹1,800 cr is nearly three times FY26's ₹711 cr, and most of the jump is R-32. R-32 needs three things to all go right: the plant on time, a government quota, and the export contracts turning real. If the quota does not come, FY28 looks more like ₹1,000 to 1,100 cr with no R-32, profit is nearer ₹100 to 120 cr, and the same price becomes about 45x.

So the real question is not whether 24x is cheap. It is whether the quota comes. Cheap if it does, expensive if it does not.

If it works. The plant runs before the deadline, the quota comes, the export contracts turn real, and solar DHF keeps growing. Profit roughly triples by FY28 and the stock holds its rating.

If it drifts. Solar DHF and the base business grow, but R-32 gets a small quota or starts late. Profit rises, just not enough for the price. The stock goes sideways while earnings catch up.

If it breaks. The plant misses the deadline, no quota comes, and the export contracts fall away. Profit stays flat and the stock drops back toward what the base business alone is worth.

TenetFour Research. Educational analysis only. Not investment advice or a recommendation to buy, sell, or hold any security. Author may hold a position. Readers are responsible for their own decisions.