Aarti Industries enters into a Rs 3000 crores nine-year contract with a global agrochemicals company

Aarti Industries Limited (AIL), a leading global speciality chemicals company, announced that it has entered into a 9-year long-term supply contract for the supply of a niche agrochemical intermediate with a global agrochemical products and solutions company.

This agrochemical intermediate serves as a crucial input component for a widely used herbicide applied in diverse food and cash crops (such as corn, soybean, cotton, sugarcane, sunflower, etc). The global market for this herbicide is large and steadily growing.

The contract offers AIL a revenue potential of approximately over Rs 3,000 crores over a period of 9 years, with the contract supplies commencing from current fiscal year. This product (agrochemical intermediate) is an integral component of AIL’s existing integrated product portfolio, with AIL being a leading manufacturer of this product in India. AIL’s current CAPEX plans, across its existing manufacturing locations, are sufficient to meet this contract requirement and the company does not anticipate any additional CAPEX for this.

The global agrochemical market is valued at US$ 74 billion and is growing at a CAGR of about mid to high single-digit. Over the past decade, the easternisation of sourcing of the agrochemicals and its intermediates had been increasing steadily. This can be attributed to better cost competencies, global scale and size of manufacturing capabilities, challenges posed by energy crisis in developed economies, amongst others. This trend has resulted in an increased outsourcing of intermediate manufacturing to costcompetitive regions such as China and India.

Frequent disruptions in plant operations in China, driven by Government policies, have expedited the trend of innovators diversifying their sourcing strategies. 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.

Commenting on this development, Mr. Rajendra Gogri – Chairman & Managing Director at Aarti Industries Limited said, ″This contract win is yet another step towards making our business more robust, resilient and predictable. Entering this contract in such a challenging macro environment is a testament to the efforts of our team and will go a long way in strengthening our integrated product value chain. We have established longstanding relationships with various customers across different end-user categories including the global industry leaders. And this contract underscores our commitment to transforming these relationships into additional future long-term opportunities. 

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.″