Aarti Industries shares fell as much as 7.32 per cent to hit an intraday low of Rs 850.95 after a global agrochemical major term gave a notice for an early termination of long term contract. Aarti Industries had on June 15, 2017 entered into a 10-year contract with a global agrochemical major to supply a high-value agrochemical intermediary with application into herbicides, Aarti Industries said in a press release. The contract was expected to generate revenue of approximately Rs 4,000 crore over the 10 year period, Aarti Industries said.
“We would like to inform that on June 15, 2020, Aarti Industries has received a notice from the Customer, opting to terminate the said contract. They now are looking to focus on the final formulation and would like to source the active ingredient rather than their original plan to manufacture it”, Aarti Industries 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 AIL is estimated to be in the range of $120 million to $130 million, Aartti Industries 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,” Rajendra Gogri, Chairman & Managing Director at Aarti Industries said.
As of 1:54 pm, Aasrti Industries shares fell 7 per cent to Rs 854, underperforming the Sensex which was down 1.9 per cent.