Aarti Industries inks agreement with Deepak Fertilisers for Rs 8,000 crore Nitric Acid supply arrangement

22 Nov 2022 , 03:32 PM

Aarti Industries Ltd (AIL) and Deepak Fertilisers & Petrochemicals Corporation Ltd (DFPCL) has announced that they have signed a binding term sheet for a 20- year period for offtake and supply of Nitric Acid.

The parties plan to execute the formal agreement before the close of this calendar year. The supply arrangement comes into effect from April 01, 2023.

DFPCL is the largest manufacturer of Nitric Acid in South East Asia and AIL is one of the largest Nitric Acid consumers in India. This arrangement is a landmark and first of its kind long term association between two Indian chemical majors to augment each other's business needs and mutual interests.

The deal provides specific volume commitments with supply or pay, take or pay obligations by either party thereby providing adequate assurance, financial security and protecting either party’s commercial interests. Using the foundation of the current relationship of over the past three decades, this deal further strengthens and elevates the current relationship to a long-term collaborative association for years to come.

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 RM from DPFCL, 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.

Commenting on this deal Rajendra Gogri, Chairman & Managing Director, AIL said, “The combination of these leading businesses with distinct strengths and capabilities will help in making the business more sustainable and help both of us to leverage and focus on individual growth opportunities. DPFCL has been a long term partner for us by supporting our key raw material needs. This deal enables us to focus on our forward integrated opportunities and helps channelize our resources effectively for driving more research driven long term and high growth avenues for global markets.”

Mr. Sailesh C. Mehta, Chairman & Managing Director, DFPCL said, “This landmark deal is a testament for the long term association with one of our largest customer. This deal also enables DFPCL 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 teams from both ends had put in tremendous effort to make this deal a reality and also to ensure the mutual interest for both of our entities are adequately protected. We see this as a start of a new collaborative journey of our relationship with AIL.”

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