RatingSubscribeIssue OfferIssue Opens on Nov 01, 2021Issue Close on Nov 03, 2021Total IPO size (cr) 125.43Fresh issue 125.43Offer For Sale (cr) NilPrice Band (INR) 161-163Market Lot 90Face Value (INR) 10Retail Allocation 35%Listing On NSE, BSEObjects of the issue ⮚ CAPEX of MCC at Dahej, Gujarat ⮚ CAPEX of MCC at Jhagadia, Gujarat ⮚ CAPEX of CCS at Kurnool ⮚ For General Corporate Purposes.Issue Break-up (%)QIB Portion 50NIB Portion 15Retail Portion 35Share Holding Pattern %Promoters & Promoter group 64.6 48.5Public 35.4 51.5Indicative TimetableFinalisation of Basis of Allotment 10-11-2021Refunds/Unblocking ASBA Fund 11-11-2021Credit of equity shares to DP A/c 12-11-2021Trading commences 15-11-2021
Sigachi Industries was incorporated as a private limited company in 1989, with the business to manufacture chlorinated paraffin and hydrochloric acid in its manufacturing unit situated at Hyderabad.
In the year 1990, Company diversified its product portfolio to manufacture microcrystalline cellulose 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 have varied applications in the pharmaceutical, food, nutraceuticals and cosmetic industries. The company manufactures MCC of various grades ranging from 15 microns to 250 microns.
- The major grades of MCC manufactured and marketed by our Company are branded as HiCel and AceCel. It operates 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.
- The company has an in-house research and development division located in Unit II and Unit III with the objective to implement a performance-oriented approach with the help of technologies developed in-house.
- Received a certificate of suitability from the European Directorate for the Quality of Medicines and HealthCare on December 4, 2020
- The company commenced its export operations in the year 1996 by exporting its first order of MCC to Bangkok
- The company foresees an increase in demand for MCC and to tap the growing market, it intends to utilize the Net Proceeds of this Issue to enhance the production capacity 154 of MCC by increasing the existing capacity of Unit II and Unit III and manufacturing of CCS in the Proposed Unit at Kurnool.
Outlook & Valuation
The company had consistent revenue growth in the last 3 years where they grew at a CAGR of 13%. In FY21 revenue was at Rs 196 crore VS Rs 133 cr in FY19 while profit grew at CAGR of 17% and in FY21 net profit was Rs 30 cr Vs Rs 19 cr in FY19. The margins of the company are improving gradually. The CAPEX from the IPO would also help the company to increase its revenue further.
The Indian foods and beverage market, as well as the pharmaceutical market, are growing rapidly which should drive MCC’s demand forward.
Due to the small size of the IPO the company is going to list in the T2T Segment. The IPO is arriving at a PE of 14x on the average EPS of the last three years i.e. Rs. 10.88 and P/BV of 2.19 which seems to be reasonably priced for investors. Thus, we assign a “SUBSCRIBE” rating to the IPO for listing gains and long term.
IPO Note
SIGACHI INDUSTRIES LTD
KEY MANAGERIAL PERSONNEL
- Swami Das Nigam is the Chairman of the Board and Non-Executive Director of the Company and has been associated with the Company since the year 2014.
- Rabindra Prasad Sinha, 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
- Chidambarnathan Shanmuganathan is the Whole-time Director of the Company and is one of the Promoters associated with the Company since its inception
- Amit Raj Sinha, is the Managing Director, Chief Executive Officer and is one of the Promoters of the Company
- Vijaykumar Amrutlal Bhavsar is the Whole-time Director of the Company. He has an experience of more than two decades in the chemical and pharmaceutical industry
- Dhanalakshmi Guntaka is an Additional Independent Director of the Company. She was appointed as an Additional Director of the Company with effect from October 18, 2021.
- Lijo Stephen Chacko is an Independent Director of our Company
- Sarveswara Reddy Sanivarapu, aged 56 years is an Independent Director of the Company. He is an associate of the Institute of Company Secretaries of India and has also received the certificate of practice as a company secretary.
COMPETITIVE STRENGTHS
- One of the leading manufacturers of MCC (cellulose-based excipient) in India with over 30 years of experience.
- Pan India and International market presence.
- Well experienced management team with proven project management and implementation skills.
- A comprehensive product portfolio enables them to serve diverse end-use applications.
- Presence across diverse industry verticals with long-standing relationships with customers.
- Growth led by continuous investment and focus on R&D.
- Quality Assurance and Quality Control of products
- Strategically located manufacturing facilities
KEY STRATEGIES
- Increasing manufacturing capacity to focus on the growing demand for core products.
- Increasing focus on its core business segment
- Diversifying and increasing penetration in markets
- Increasing its global presence
KEY CONCERNS
- Depending on a few customers, for a significant portion of their revenue
- The company has received a Demand Notice from Saffron Capital Advisors Private Limited, under the Insolvency and Bankruptcy Code, 2016
- The company has benefited from certain export benefits from the Government of India, which is withdrawn or modified may have a significant impact on results operations.
- There are outstanding litigations involving the Company
- The company is subject to foreign exchange control regulations which can pose a risk of currency fluctuations.
IPO Note
SIGACHI INDUSTRIES LTD
COMPARISON WITH LISTED INDUSTRY PEERS
There are no listed companies in India that engage in a business similar to that of the Company. Accordingly, it is not possible to provide an industry comparison in relation to the Company. However, The IPO is arriving at a PE of 14x on the average EPS of the last three years i.e. Rs. 10.88 and P/BV of 2.19 which seems to be reasonably priced for investors.
FINANCIALS (RESTATED CONSOLIDATED)
Particulars (Rs. In Lacs) FY 2021 FY 2020 FY 2019Equity Share Capital 768.25 768.25 307.30Other Equity 8,651.69 5,690.27 4,180.97Net Worth 9,419.94 6,458.52 4,488.27Total Borrowings 2092.70 3,037.94 2,519.11Revenue from Operations 19,275.58 13,906.26 12,898.81EBITDA 4,204.44 2,965.00 2,985.12Profit Before Tax 3,848.37 2,534.39 2,472.84Net Profit for the year 3,026.03 2,031.55 1,901.27
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