Sigachi Industries IPO Review

Sigachi Industries IPO is entirely an issue of fresh equity shares (7,695,000 equity shares) of the face value of ₹10 aggregating up to ₹125.43 Crores. Sigachi Industries IPO is the smallest issue among the latest tranche of primary markets offerings that open on Nov 1, 2021.

Sigachi Industries IPO Details:

•Issue Opens: Nov 01, 2021
•Issue Closes: Nov 03, 2021
•IPO Details:  fresh issue of 76.95 lakh shares 
•Issue Size in Rs. Cr: Rs. 125.43 Cr
•Price Band: Rs. 161 –  Rs. 163
•Minimum Order Quantity:90 Shares
•Face Value: Rs. 10 per equity share
•Retail Quota: 35% ; 26,93,250 shares
•Applications need for 1x retail :  0.3 Lac

ANCHOR ISSUE:

Fino Payments Bank garnered Rs 539 crore from 29 anchor investors ahead of its initial share sale.
Investors included names like Fidelity, HSBC Global, Pinebridge, Aditya Birla Sun Life Mutual Fund (MF), Tata Mutual Fund, SBI Life Insurance Company, Invesco etc.

Sigachi Industries IPO Review : Video Presentation

About Sigachi Industries

Sigachi is a Manufacturer, Exporter and Supplier of Micro Crystalline Cellulose, Filter Aid Cellulose, etc.
The Company manufactures high-quality cellulose-based excipients predominantly for the pharmaceutical, supplement and food industries.
Sigachi Industries Limited is one of the leading manufacturers of MCC in India
Sigachi manufactures 59 different grades of MCC at its manufacturing units located at Hyderabad and two units at Jhagadia and Dahej in Gujarat.

Sigachi Industries IPO: Financials

Particulars / Rs. In Cr. Q1FY22FY21FY20FY19
Operating Revenue 55192.8139.1129
EBITDA12.238.824.826
PBT11.638.525.324.7
PAT930.320.319
Share Capital7.77.77.73.1
FV10   
Equity Post IPO30.74   
IPO Price163   
EPS (FY21)9.86   
PE 16.54   
Market Cap501   
Market Cap  /  Sales2.6   

Salient Points

  • Company 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 aluminum chloride in the these units.
  • Funds raised by Sigachi Industries Ltd in the IPO would be largely utilized for expanding its MCC capacity.
  • Out of the IPO proceeds m Rs.33cr will go towards setting up a new brownfield facility at Kurnool to manufacture Cross Carmellose Sodium (CCS) which also has use in Pharma products

Cons

Commercial success is largely dependent on company’s ability to develop and devise innovative grades of cellulose-based excipients.

The company is highly dependent on the major raw material (wood pulp) and has only a few key suppliers and is imported.

Due to IPO there is significant rise in share capital,

Receivables of the company are increasing and comprise more than 25% of the assets.

Sigachi Industries IPO: Assessment

  • Sigachi Industries has a worldwide presence with clients in more than 40 countries.
  •  Exports as a % of sales have been growing and for FY 21 stand at 73% of total revenues, up from 55% in fy18.
  • Sigachi Industries is an existing profit making and has been consistently profitable in all the three previous fiscal years.
  • For FY21, Sigachi Industries Ltd reported net profits of Rs.30.26 crore on revenues of Rs.144 crore.
  • The performance for Q1Fy22 is on track with reported profits of Rs. 9 crore in Jun-21 quarter.
  • The company has posted consistent growth in bottom lines and has paid dividends consistently @ 10% per year for the last three fiscals.
  • Sigachi Industries IPO is valued at P/E of 16.6x on post issue equity share capital and based on FY21 earnings. Thus the company appears to have priced the IPO at reasonable valuations.
  • Sigachi Industries  is commanding Rs. 120 plus GMP .
  • The listing in “T” group may curtail price moves in the initial stage.
  • I intend to apply in Sigachi Industries IPO.

Standard disclaimer:  I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering & Management . Also Certified in some exams like NISM-Series-V-A: Mutual Fund Distributors Certification, NISM-Series-X-A: Investment Adviser (Level 1) Certification and NISM-Series-X-B: Investment Adviser (Level 2)  Examination. This post is my view on the subject matter and is only academic and exploratory in nature. It is not meant to influence investment decisions of investors.  I may have bias/vested interest in covered Stock/Mutual Funds/NCD etc. due to my own investment or  leaning. Further my understanding of the areas on which I write may be imperfect or incomplete and data could be wrong due to limited time and resources at my disposal. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.

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