Aarti Industries (AIL) tumbled 5.75% to Rs 865.40 after the company said it received an early termination notice from a customer.
In June 2017, AIL announced a 10-year contract with a global agrochemical major to supply a high-value agrochemical intermediary. The contract was expected to generate revenue of about Rs 4000 crore over the 10 year period.On 15 June 2020, AIL received a notice from the customer, opting to terminate the said contract citing a change in strategy. The customer has chosen to source the active ingredient rather than manufacturing it.
However, due to early termination of contract, AIL is eligible for a compensation ranging between $120 million to $130 million.
Rajendra Gogri - chairman & managing director at AIL said, The project has been one of the major growth initiatives for us. The present notice was not something envisaged by us. However, the change in the strategy of the customer does not significantly undermine the inherent opportunity in this business. We are fully backward integrated and a strategic player in this value chain. We are confident to be able to cater to the market requirements in this high growing vertical of the agrochemical space. We shall be closely working with the Customer and various other players to provide solutions in this high growth herbicide business."
AIL is a global speciality chemicals company. Its consolidated net profit fell 11.90% to Rs 110.35 crore on a 5.69% decline in net sales to Rs 1076.15 crore in Q4 March 2020 over Q4 March 2019.
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