Specialty chemicals maker Aarti Industries expects a 3-4% impact on revenue after the European Union rejected the renewal of approval for herbicide S-Metolachlor.
Mumbai-headquartered Aarti Industries last week announced that it has entered into a ₹3,000 crore, nine-year contract with a global agrochemicals player for the supply of a niche agrochemical intermediate.
Rajendra V Gogri, Chairman and Managing Director said the intermediate that Aarti Industries makes also goes into other products. He also noted that EU constitutes only a around 6-8% of the total global market for S-Metolachlor.
Analysts are worried that the EU decision to not renew the approval for S-Metolachlor will lead to diversion of volumes from the EU to other markets. This could lead to pressure on prices and volume offtake for the advanced intermediate that Aarti Industries plans to manufacture.
A note by brokerage firm Equirus Securities stated that the long-term contract for the supply of the said intermediate is also at risk due to this.
The other company that could be impacted by this is UPL, which has capacities in place to produce the said product.
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Gogri is optimistic that the company will achieve an earnings before interest, tax, depreciation, and amortisation (EBITDA) of ₹950-1,000 crore in financial year 2024 (FY24) in line with its guidance. He anticipates a stronger second half of FY25, projecting EBITDA at ₹1,400-1,600 crore for the full year.
Aarti Industries stock ended the day with gains of nearly 2.7% at ₹620 apiece. The shares have lost around 5% year to date. The company has a market capitalisation of ₹22,475 crore.
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(Edited by : Shweta Mungre)
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