Aarti Industries Limited (AIL) has announced a material amendment to its exclusive long-term supply agreement with a leading global chemical company, marking a deeper strategic partnership and an expansion of the existing engagement. The revised arrangement strengthens the long-term supply framework for a high-value speciality chemical intermediate and reflects increasing integration between the two companies.
Under the original agreement, a key feedstock required for the manufacturing process was supplied by the customer. As part of the expanded scope, Aarti Industries will now undertake a backward integration project to manufacture a significant portion of this feedstock in-house. The move is aimed at transitioning the supply chain to a more integrated end-to-end manufacturing model within Aarti Industries’ facilities.
The company expects to invest around ₹200–250 crore over the next two years to develop the upstream integration facility. The new plant will be established at the same location as the existing manufacturing unit in Dahej SEZ, Gujarat, ensuring seamless supply to the current production line that operates under the main agreement.
The integration initiative is expected to strengthen operational efficiency by enabling fully integrated production of the end product from Aarti Industries’ facilities. Producing the feedstock internally is also expected to optimise operating costs and reduce freight expenses compared with external sourcing, while improving supply chain resilience and enhancing safety in materials handling.
Although the backward integration is not expected to materially impact the company’s revenue growth, it is anticipated to improve EBITDA margins through operational efficiencies and better cost management. The main agreement still has a residual tenure of about 15 years, providing a long runway for these integration benefits to support margin expansion over time.