Aarti Industries witnessed a 2.5% surge in its shares, reaching Rs 641.25, following the announcement of a supply agreement with a leading global agrochemical products and solutions company. The agreement pertains to a specialized agrochemical intermediate with a revenue potential surpassing Rs 3,000 crore. The scheduled deliveries under the contract are slated to begin in the current fiscal year.
The agrochemical intermediate in question serves as a crucial input for a commonly used herbicide applied in diverse crops like corn, soybean, cotton, sugarcane, sunflower, and more. The company anticipates a revenue exceeding Rs 3,000 crore over the nine-year duration of the contract. According to the company, fulfilling this agreement will not require any additional capital expenditure (CAPEX), as the existing manufacturing facilities across the company's units are deemed adequate to meet the contractual obligations.
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.
The change in dynamics is credited to enhanced cost efficiencies, global reach, and extensive manufacturing capacities, leading to increased outsourcing of intermediate manufacturing to countries such as China and India. India, in particular, has recognized substantial benefits, establishing itself as a net exporter of agrochemicals. Forecasts suggest a strong upward trajectory for the Indian agrochemical market, with an anticipated Compound Annual Growth Rate (CAGR) of around 9%. According to the company, this growth is expected to drive the market to achieve a valuation of $7.4 billion between 2021 and 2026.
“India has reaped the benefits and emerged as a net exporter of agrochemicals. The agrochemical market in India is expected to register about 9% CAGR to reach US$ 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".