Chemicals maker Aarti Industries Ltd (AIL) on Monday said its long-term contract with a global firm to supply agrochemicals worth Rs 4,000 crore has been cancelled. In a regulatory filing, AIL informed that the company in June 2017 had entered a 10-year contract with a global agrochemical major to supply a high-value agrochemical intermediary with application in herbicides. The contract was expected to generate revenue of about Rs 4,000 crore over the 10-year period.
"We would like to inform, that on June 15, 2020, AIL has 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," the company said.
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 USD 120 million (Rs 913 crore) to USD 130 million (Rs 989 crore)," AIL said.
Rajendra Gogri, Chairman and Managing Director, at AIL 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," he said.
The company is fully backward integrated and a strategic player in this value chain, Gogri said, and expressed confidence that the company would be able to cater to the market requirements in this high growing vertical of the agrochemical space.