Aarti Ind jumps 13% in 2 days on winning long-term contract worth Rs 6K cr

Shares of Aarti Industries (AIL) rose 8 per cent on BSE to Rs 658.70 on in Friday’s intra-day trade amid heavy volumes.

The average trading volumes on the counter jumped over four-fold. A combined 6.04 million equity shares of the company changed hands on the NSE and BSE.

In the past two days, the stock of the specialty chemicals company has surged 13 per cent after it secured a four-year supply contract worth over Rs 6,000 crore with a multinational conglomerate.

At 10:42 am, AIL was up 7 per cent at Rs 655.20 as compared to a 0.94 per cent rise in the S&P BSE Sensex.

The stock had hit a 52-week high of Rs 661.40 on December 29, 2023.

AIL has signed a long-term agreement with a multinational conglomerate for supply of a niche speciality chemical. The contract is expected to generate revenue of over Rs 6,000 crore for the company.

The product has been an integral part to AIL's long-term growth strategy and its volume has consistently increased over the past 4-5 years, it said.

AIL's ongoing capital expenditure programs will meet the contract requirements and hence it does not see any additional capital expenditure for this contract.

Earlier on December 27, AIL announced that it has entered into a long-term supply contract with a global agrochem major for a niche agrochemical intermediate.

The contract offers AIL a revenue potential of nearly over Rs 3,000 crore over a period of 9 years with the contract supplies commencing from current fiscal year, the company said.

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).

The global market for this herbicide is large and steadily growing, it added.

Meanwhile, the management in Q2 earnings call said they maintain optimism about potential demand revival in the end use segments such as agrochemical, polymer additives and other discretionary applications going forward.

“We expect the worst to be over in H1FY24 and anticipate that it will take a few more quarters for normalised demand across various end segments/product lines. Thus we expect consequentially better performance in H2FY24 and foresee FY25 to be a normalising year given the current pace of recovery,” it said.

Analysts at Prabhudas Lilladher expect recovery post H2FY24 with higher capacity utilization of its products, increasing contribution from LT- contracts and volume growth from newer projects.