Aarti Industries Limited has informed the Exchange regarding 'Regulation 30 of the SEBI (LODR) Regulations, 2015'.
AARTIIND · price
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On the reaction day the stock moved 1.3 pts more than Nifty Smallcap 250 and 1.7 pts more than its Specialty Chemicals peers, over the same two closes: a difference in percentage points, not a measure of what the filing did.
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Aarti Industries has amended its existing exclusive long-term supply agreement with a leading global chemical company to add backward integration. Under the change, Aarti will set up a new plant at Dahej SEZ, Gujarat to manufacture in-house a key feedstock that was earlier supplied by the customer, moving to an end-to-end integrated manufacturing model. The company will invest approximately ₹200-250 crores over the next two years for this facility. The remaining tenure of the original supply agreement is about 15 years. While management says top-line growth will not be materially affected, EBITDA margins are expected to improve over the contract period through integration efficiencies and operating leverage. The identity of the customer has not been disclosed.
Margin-accretive in the medium term as Aarti captures more value in the chain, but the market may focus on the ₹200-250 cr capex outflow over two years and the lack of top-line boost. Long-term revenue visibility with a global chemical major is reinforced, which is a positive for the stock.