Shares of AIL gained 4 per cent at Rs 679.90 on the BSE. In comparison, the S&P BSE Sensex was down 0.88 per cent at 61,123 at 01:48 am. However, despite today’s run-up, in past one month, the stock of DFPL (down 21 per cent) and Aarti Industries (down 1 per cent) have underperformed the market by recording negative returns, as compared to a 3 per cent rise in the benchmark index.
DFPL is the largest manufacturer of Nitric Acid in South East Asia and AIL is one of the largest Nitric Acid consumers in India.
The parties plan to execute the formal agreement before the close of this calendar year. The supply arrangement comes into effect from 1st April 2023, these companies said in press release.
The deal benefits AIL by way of a long-term supply security for a key raw material. This would meet a majority of AIL’s requirements. It also helps AIL have a greater assurance in sourcing the key raw material from DFPL, who is an existing and the largest integrated nitric acid producer in India with multiple production sites.
AIL, being a manufacturer for specialty chemical and downstream products, the present deal provides a strong supply security and enables AIL to focus on future growth opportunities, introduction of new value-added products and value chains for niche applications.
The long-term offtake agreement will enable DFPL to achieve market security for a significant portion of its Nitric Acid production and would result in revenue of more than Rs. 8,000 crore over 20 years, the company said.
DFPL’s management said this deal also enables the company to leverage on its competitive advantage for Nitric Acid, a critical building block intermediary chemical for the Specialty Chemicals sector. This alliance indicates the strong growth currents emerging from the ‘China plus One’ trend for the Specialty Chemical Sector in India. The available brown-field site at Dahej could give opportunities for cost effective capacity enhancements, the management said.
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