Aarti Ind signs ₹3,000 crore contract with a global agrochem; share rises 2.5%

Aarti Industries shares rose over 2.5% to ₹641.25 today after the company signed a supply agreement with a global agrochem products and solutions company for a specialised agrochemical intermediate, having a revenue potential exceeding ₹3,000 crore. The contractual deliveries are set to commence from the ongoing fiscal year.

This agrochemical intermediate plays a vital role as an input component for a widely used herbicide, applied across various food and cash crops such as corn, soybean, cotton, sugarcane, sunflower, etc. The contract promises a revenue expectation of over ₹3,000 crore during its nine year period, according to the company.

It reported that no additional capital expenditure (CAPEX) will be necessary for fulfilling this contract, as the existing manufacturing plans across the company’s units are deemed sufficient to meet the contractual requirements.

Aarti Industries highlighted the shift in the dynamics of agrochemical sourcing, emphasising India's transition to a net exporter status, particularly amid disruptions in plant operations in China. The company also pointed out the increasing trend of easternisation in the sourcing of agrochemicals and their intermediates over the past decade.

“The global agrochemical market is valued at $74 billion and is growing at a CAGR of about mid to high single-digit,” it states.

This shift is attributed to improved cost efficiencies, the global scale, and substantial manufacturing capabilities, resulting in heightened outsourcing of intermediate manufacturing to regions like China and India.

India has realised significant advantages, positioning itself as a net exporter of agrochemicals. Projections indicate a robust growth trajectory for the Indian agrochemical market, anticipating a Compound Annual Growth Rate (CAGR) of approximately 9%. This growth is anticipated to propel the market to reach a valuation of $ 7.4 billion between 2021 and 2026, the company states.

“India has reaped the benefits and emerged as a net exporter of agrochemicals. The agrochemical market in India is expected to register about 9% CAGR to reach US$ 7.4 billion between 2021 and 2026,” it adds.

Rajendra Gogri, Chairman & MD of Aarti Industries, says, “We have established long standing relationships with various customers across different end-user categories including the global industry leaders. In addition to fortifying our association with this prominent customer, who is amongst the leading players for this end-use, this contract provides us an opportunity to grow in the high-value agrochemical space.”

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