Aarti Industries reports termination of Rs 4,000 cr contract, stock falls 7 pc

Mumbai (Maharashtra) [India], June 15 (ANI): Speciality chemicals major Aarti Industries said on Monday it received a termination notice from a global agrochemical customer with which it had entered into a 10-year contract worth Rs 4,000 crore.
The contract was to supply a high-value agrochemical intermediary with application into herbicides. The end-use is among the major growth initiative with a significant amount being invested for the purpose.
"On June 15, Aarti Industries Ltd received a notice from the customer, opting to terminate the said contract. We understand that the reason for the same is the customer's change in strategy. They now are looking to focus on the final formulation and would like to source the active ingredient rather than the original plan to manufacture it," it said in a statement.
The customer continues to remain confident and committed to growth initiatives as envisaged earlier and that the change in strategy will help it in enhancing the solutions for end-users, said Aarti Industries.
The company is strategically placed in this value chain and the assets put in will it enable it to continue to participate in this key growth driver agrochemical molecule, it added.
Upon the triggering of this termination event, the guarding provisions for compensation under the contract come into effect. As a result, the compensation to Aarti Industries is estimated to be in the range of 120 million to 130 million dollars (about Rs 912 crores to 988 crores).
"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," said Chairman and Managing Director Rajendra Gogri.
"We are confident to be able to cater to the market requirements in this high growing vertical of the agrochemical space. We will be closely working with the customer and various other players to provide solutions in this high-growth herbicide business," he said without naming the client.
At 2 pm, Aarti Industries was trading 6.91 per cent lower at Rs 854.75 per share. (ANI)