Sigachi Industries Limited is entering the capital market with an IPO of 7,695,000 equity shares having a face value of Rs 10. The issue opens on Nov 1, 2021, and closes for subscription on Nov 3, 2021. The company is planning to mop up Rs 125.43 crore at the upper end of the price band of Rs 161-163 per share. The market lot size is 90 shares. A retail-individual investor can apply for up to 13 lots. The equity shares of the company will be listed at BSE and NSE.
The company has already garnered Rs 37.62 crore from two anchor investors ahead of IPO and finalised allocation of 23,08,500 equity shares to anchor investors, at a price of Rs 163 per equity share. The anchor investors that invested in the company are the 3 Sigma Global Fund and Nexus Global Opportunities Fund.
The net proceeds from the IPO will be utilized towards the funding capital expenditure mainly on three projects namely, expansion of production capacity for MCC at Dahej, Gujarat 28.15 crore; for expansion of production capacity for MCC at Jhagadia, Gujarat 29.24 crore and funding capital expenditure to manufacture CCS at the proposed Unit 32.29 crore beside general corporate purposes.
- Offer Opens: Monday, November 1, 2021
- Offer Closes: Wednesday, November 3, 2021
- Issue Type: Book Built Issue
- Price Band: Rs 161–163 per equity share
- Minimum Bid Lot: 90 Equity Shares and in multiples
- Share allotment: November 10, 2021
- Refunds: November 11, 2021
- Listing: November 15
Verdict: Apply
The Company
Sigachi Industries is engaged in the manufacturing of Microcrystalline Cellulose (MCC). Presently, the company manufactures 59 different grades of MCC which is widely used as an excipient for finished dosages in the pharmaceutical industry. MCC has varied applications in the pharmaceutical, food, nutraceuticals, and cosmetic industries. The company manufactures various grades ranging from 15 microns to 250 microns and the major grades of MCC manufactured and marketed by the company are branded as HiCel and AceCel.
The company operates three manufacturing units namely, Unit I situated at Hyderabad, and two manufacturing units, Unit II and Unit III situated at Jhagadia and Dahej, in Gujarat. As of March 31, 2021, the company’s total MCC manufacturing capacity is 13,128 MTPA from three locations.
Pluses
The company has several pluses – First it is one of the leading manufacturers of MCC in the country with market presence in India and abroad. With a wide product portfolio and ability to serve diverse end-use applications due to strategically located, multi-locational manufacturing facilities it has a long-term relationship with customers in diverse industry verticals. The company has an in-house R&D division equipped with the necessary facilities to carry out all necessary trials to develop new molecules from concept to commissioning. The company was incorporated in 1989. It has received various quality certifications.
The only risk is its dependency on a few customers for a significant portion of its revenue.
Verdict
Considering the product portfolio and the financials we feel the company’s offer price is reasonable as it is going to list at a P/E of around 15.10. There are no listed companies whose business is comparable with that of the company’s business. We assign a “Subscribe” rating to this IPO.
