Aarti Industries plans to beat pricing pressure in agrochemicals by selling more

By Nigel D'Souza, Reema Tendulkar

Mumbai-based speciality chemicals manufacturer Aarti Industries sees volume-led growth in the agrochemicals sector even as margin pressures persist. Last year, the company spent ₹1,325 crore in expanding production capacity; this year, it will spend ₹1,000 crore on greenfield investments, said Executive Director and CEO Suyog Kotecha.

Despite a 16% jump in 2025, the stock is down nearly 32% in the last one year. Data as at 10:58 am on July 2.

In the financial year ended March 2025, the ₹ ₹17,493-crore ($2 billion) agrochemical maker's revenue grew by 15%. but the earnings before interest, tax, depreciation, and amortisation (EBITDA) grew only 3%, largely due to competitive pressures from China.

"We see volume linked growth coming, but it is coming at a relatively, significantly lower margins compared to where it was, let us say, two-three years back, given kind of demand-supply imbalances we have globally, and that's the story we continue to have ," Kotecha explained.

Therefore, the company is focused on maximising utilisation of the capacities commissioned last year, including its expanded ethylation, nitro toluene, and methyl methacrylate (MMA) capacities, to shore up volumes and offset the margin squeeze.

The new greenfield facility in Zone IV is expected to become operational towards the end of the current financial year, with meaningful contributions anticipated from the next financial year onwards.

According to Emkay’s June 23 brokerage note, the US tariff scenario could open up new opportunities for a company like Aarti Industries. The brokerage has upgraded the stock to a 'Buy' from 'Add' and raised the target price to ₹525 from ₹500.

The added tariffs on Chinese products may allow companies like Aarti Industries to be more competitive in the US market. "MPD (Meta Phenylene Di Amine) is one of the product in PDA chain where in the near term we are seeing positive demand traction because it's not part of exemption and the competition was from China, so there is a clear-cut advantage," the management told analysts after the latest earnings.

However, the company doesn't have a similar advantage across its product lines. That's why Kotecha isn't projecting a sharp improvement in margins yet.

UBS, a global investment bank, recently upgraded Aarti Industries by two notches to 'buy' saying the recovery in volumes was already visible.

The company has provided an FY28 earnings before interest, taxes, depreciation, and amortisation (EBITDA) guidance of ₹18,000–22,000 crore, and Emkay believes it is on track to meet this target.