Sigachi Industries Limited IPO

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History of Sigachi Industries
The Company was incorporated as a private limited company in 1989, with the business to manufacture chlorinated paraffin and hydrochloric acid in our manufacturing unit situated at Hyderabad. In the year 1990, the Company diversified its product portfolio to manufacture microcrystalline cellulose (“MCC”). The Company commenced its export operations in the year 1996 by exporting its first order of MCC to Bangkok. Owing to the consistent efforts of the Company, the sale from the export operations constituted 32% of the total sales during the financial year ending March 31, 2004.

In the year 2000, with an aim to diversify its business activities, the Company started manufacturing premium grade microcrystalline cellulose by successfully commissioning a spray drier and a multi-fuel furnace, which in turn also increased the manufacturing capacity from 720 metric tonnes per annum to 1,080 metric tonnes per annum. Presently, they manufacture 59 different grades of MCC at the manufacturing units, situated at Hyderabad and Gujarat with an aggregate installed capacity of 11,880 MTPY.

With over 30 years of continuous growth, three multi-locational manufacturing facilities and consistent focus on delivering premium quality product, the Company is one of the leading manufacturers of MCC (cellulose based excipients) in India (Source: Research Report on Microcrystalline Cellulose (MCC) & Croscarmellose Sodium (CCS) Industry). They have also entered into operations and management agreements with Gujarat Alkalies and Chemicals Limited (“GACL”) for operating and managing the manufacturing units owned by GACL and for contract manufacturing of sodium chlorate, stable bleaching powder and poly aluminium chloride in the said units

Products of the Company
The company is engaged in manufacturing microcrystalline cellulose (“MCC”) which is widely used as an excipient for finished dosages in the pharmaceutical industry. The inert non-reactive, free flowing and versatile nature of MCC has varied applications in the pharmaceutical, food, nutraceuticals and the cosmetic industries. It manufacture MCC of various grades ranging from 15 microns to 250 microns.

The major grades of MCC manufactured and marketed by the Company are branded as HiCel and AceCel. It also manufacture various grades of this product in combination with various chemicals like colloidal silicon dioxide, carboxy cellulose sodium, mannitol etc. to cater to the growing market of the co-processed excipients.

Manufacturing Units
Presently, the company manufactures 59 different grades of MCC at the manufacturing units. The company operate three manufacturing units namely, Unit I situated at Hyderabad and two manufacturing units, Unit II and Unit III are situated at Jhagadia and Dahej, respectively located in Gujarat. Unit I manufactures both HiCel and AceCel and caters to the domestic and international customers such as end users, merchants, distributors and exporters. Unit II manufactures AceCel and supplements the sale in the domestic market. Unit III is situated at Special Economic Zone (“SEZ”) at Dahej and is engaged in the manufacture of HiCel and special grades which is exported to overseas customers and distributors.

Competitive Strengths
i. Pan India and International market presence
ii. Well experienced management team
iii. Comprehensive product portfolio

Objects of the Sigachi Industries Limited IPO:

The Company proposes to utilize the Net Proceeds from the Issue towards the following objects: 1. Funding capital expenditure: a. for expansion of production capacity for microcrystalline cellulose (“MCC”) at Dahej, Gujarat b. for expansion of production capacity for microcrystalline cellulose (“MCC”) at Jhagadia, Gujarat c. to manufacture Croscarmellose Sodium (“CCS”), a modified cellulose used as excipient at Kurnool, Andhra Pradesh 2. General Corporate Purposes
DRHP of Sigachi Industries Limited IPO
RHP of Sigachi Industries Limited IPO

Sigachi Industries Limited IPO Details:

Open Date: Nov 01 2021
Close Date: Nov 03 2021
Total Shares: 7,695,000
Face Value: ₹ 10 Per Equity Share
Issue Type: Book Building
Issue Size: 125.43 Cr.
Lot Size: 90 Shares
Issue Price: ₹ 161 - 163 Per Equity Share
Listing At: NSE,BSE

Promoters And Management:

i. Swami Das Nigam, aged 78 years, is the Chairman of the Board and Non-Executive Director of the Company and has been associated with the Company since the year 2014. He holds a bachelor‘s degree in engineering (electrical) from Birla Engineering College, Pilani. He was initially appointed as an Additional Director on September 18, 2014 and his appointment was regularized on October 31, 2014. ii. Rabindra Prasad Sinha, aged 70 years, is the Whole-time Director, the Chairperson of the Company and one of the Promoters who has been associated with the Company since its inception. He holds a bachelor‘s degree in science (chemical engineering) from Bihar Institute of Technology and a master‘s degree in chemical engineering from Banaras Hindu University. He has an experience of over three decades in the cellulose and fine chemicals industry. He played an instrumental role in setting up of the wholly owned Subsidiary, Sigachi US Inc. and in expansion of the export operations iii. Chidambarnathan Shanmuganathan, aged 77 years, is the Whole-time Director of the Company and is one of the Promoters associated with the Company since its inception. He holds a bachelor‘s degree in science from University of Madras. He has qualified the postgraduate diploma in business administration from Annamalai University and the national certificate examination in supervision held by National Productivity Council, New Delhi. He has also cleared the associate membership examination held by the Indian Institute of Chemical Engineers.

Financials of Sigachi Industries Limited IPO:

Particulars (in lakhs) Mar 21 Mar 20
Revenue from operations 19275 13906
Cost of raw materials consumed 9791 7403
Changes in inventory 282 -194
Employee benefits expense 1737 1491
Other expenses 3586 2730
Operating Profit 3,879 2,476
OPM % 20.13% 17.81%
Finance costs 124 234
Depreciation and amortization 231 195
Other Income 325 488
Profit before tax 3,848 2,534.39
Profit for the year 3,026 2031
EPS 13.13 8.81
 

Comparison With Peers:

Company is engaged in manufacturing of microcrystalline cellulose (“MCC”) which is widely used as an excipient for finished dosages in the pharmaceutical industry. Company believe there are no listed entities similar to the line of business and comparable to the scale of operations, hence comparison is not possible.

Recommendation on Sigachi Industries Limited IPO:

Review and Recommendation of Sigachi Industries IPO by InvestorZone is 6/10 1. Sigachi Industries revenue has grown at 22% CAGR over 3 years. 2. PAT has grown from 18 Crores to 30 Crores in the last 3 years. It has shown 29% CAGR growth. 3. Company is debt free and raising funds from IPO for expansion of manufacturing units. 4. Sigachi Industries products are used in Pharmaceutical Industry, so growth is directly proportional to Pharmaceutical, and post covid, the industry is growing at very fast rate. 5. Raw material for making MCC is wood pulp sheets and company is majorly import wood pulp sheets from Canada, South Africa, Thailand, Indonesia and America. 6. EPS for FY21 = 9.84, P/E = 16x ( reasonable priced IPO)  

Lead Manager of Sigachi Industries Limited IPO:

  1. Saffron Capital Advisors Private Limited

Registrar of Sigachi Industries Limited IPO:

  1. Bigshare Services Private Limited

Company Address:

Sigachi Industries Limited 229/1 & 90, Kalyan’s Tulsiram Chambers, Madinaguda, Hyderabad- 500 049, Telangana, India Phone: +91 040 4011 4874 Email: cs@sigachi.com Website: https://sigachi.com/

Discussion on Sigachi Industries Limited IPO:

6 Comments

    Total Shares Outstanding after IPO = 3.0742 Crores….

    IPO Price = 163

    Mcap = 500 Crores….

    Revenue (FY21) = ~200 Crores….

    Mcap/Revenue = 2.5x….

    Reply

    Good company, shown good growth in the last 3 years, ROE of 31%……Coming at Good Valuation….

    Reply

    The commercial success of the business is highly dependent on our ability to develop products which do not have a substitute in the industry and which makes the products unique and irreplaceable..

    Reply

    Company is a leader in MCC based products which are used in Pharma, Beauty, Food and Nutraceutical. However, the continuous investment is required in the R&D to develop new products and remain competitive in the market…

    Last year they spend 1.05 Crores on R&D expense…..

    Reply

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