Economic gloom has left no sector untouched as an exports-oriented player with a diversified portfolio has also been hit in the past two quarters. Aarti Industries, a specialty chemicals player that gets 42% of its business from exports saw its revenue decline 18% YoY in Q2FY20. This was a result of weakness in the specialty chemicals and pharma segments. As the company grapples with macro problems, its stock has been volatile. From a 52-week low of Rs.650 in February 2019, the stock hit an all-time high of Rs.950 in May 2019. But due to sluggish FY20 results, the stock now trades at Rs.840.

However, some analysts believe that the weak results are a temporary blip and the company’s performance will improve going forward. “After growing at 20% CAGR (Revenue/EBITDA/PAT) over FY16-19, Aarti Industries’ near term growth has slowed down due to external macros,” states a Spark Capital report. They expect over 15% earnings growth in FY20-22. According to the note, commissioning of projects worth Rs.20-25 billion will increase capacity and high margin CRAMs contract will drive growth. They are of the view that the company has several factors acting as a ‘strong moat’, which can deliver growth even amidst the macro haze; and have initiated coverage on the stock with target of Rs.950. Reliance Securities (Institutional Equity Research) is also upbeat on the stock due to Aarti Industries’ “leadership position, multi-year long-term deals, aggressive capex and focus on value-added products.” They have a ‘buy’ rating with a target price of Rs.929.

But mutual funds and foreign investors do not seem too enthused. Their holding has largely remained stable over the past two quarters. While foreign investors increased their stake from 7.43% in March to 7.67% in September, mutual funds increased their holding marginally from 15.01% to 15.03% over the same period. A clearer picture will only emerge after the Q3FY20 holding disclosure as the stock has moved from Rs.749 to Rs.835 over the October-December quarter. The biggest domestic institution, HDFC MF, has kept its stake at 8.23% from May to September, whereas L&T MF has reduced from 1.63% to 1.50%. But Axis MF had increased its holding from 0.42% in March, 0.65% in June to 1.24% in September.

At the same time, promoters are booking profit. Chairman Emeritus of Aarti Indusrties, Chandrakant Gogri, sold shares worth Rs.104 million on December 24. Overall, Gogri along with other promoters and promoter entities sold shares worth Rs.1.64 billion between January 1 and December 31, 2019. After the recent sale, promoter holding now stands at 48%.