Sigachi Industries Limited

Sigachi Industries Limited was established in 1989, with the business to manufacture chlorinated paraffin and hydrochloric acid in the manufacturing unit situated at Hyderabad. In the year 1990, Company diversified its product portfolio to manufacture microcrystalline cellulose ('MCC'). Company commenced its export operations in the year 1996 by exporting its first order of MCC to Bangkok. Owing to the consistent efforts Company, the sale from the export operations constituted 32% of total sales during the financial year ending March 31, 2004. 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. They manufacture MCC of various grades ranging from 15 microns to 250 microns. Company 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. 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. Company has a legacy of more than three decades in the cellulose-based excipient industry. They manufacture MCC of various grades and market them under Company brand names, such as HiCel, AceCel, HiCel MCG, Ace Fibre, HiCel SMCC, etc. They believe that consumers have a strong loyalty to their brands, which has enabled the growth. The R&D Division is augmented by niche research skills along with promoters' extensive experience and technical capabilities.  As per financial performance, Sigachi Industries has posted total income/net profits of Rs. 132.88 Cr. / Rs. 19.01 Cr. (FY19), Rs.143.94 Cr. / Rs. 20.32 cr. (FY20), Rs.196.01 Cr . / Rs. 30.26 Cr. (FY21) and Rs 55.12 Cr/ Rs 8.98 Cr. (Q1 F22). So company has posted good growth over last couple of years. They have posted an average EPS of Rs. 10.88 and average RoNW of 51.54% for last 3 fiscals. Issue is priced at a P/BV of 3.64 as per NAV of 44.79 on 30.06.21. If we attribute latest earnings of FY21 on fully diluted equity post issue, then asking price is at a P/E of around 16.49 and if we annualise FY22 earnings, P/E is 13.86, which looks reasonably priced. As per RHP, there are no listed peers in market. On BRLM's front, one lead manager is associated with this IPO, and have handled around 5 IPO in last three fiscals. From last Five IPOs, one is opened below issue price and remaining are opened above issue on the day of listing. As of now, Two are trading below issue price and other are trading above issue price. ( As on 26.10.21) As per financials, Sigachi industries has shown good growth, RoNW is 32.12% and P/E is around 16.49 as per FY21 earnings, which looks reasonably priced. Company is in speciality chemicals sector and manufactures products related to pharmaceuticals. This sector is expected to grow at good rate. Performance of BRLM is average. So, we are giving SUBSCRIBE rating to this IPO for listing gains as well as long term.

• 1 Rabindra Prasad Sinha
• 2 Chidambaranathan  Shanmuganathan
• 3 Amit Raj Sinha
• 4 RPS Projects & Developers Private Limited