Sigachi Industries IPO opens today, experts give 'subscribe' rating

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The initial public offering of Sigachi Industries will open for subscription today, the third IPO to be available for bids on the day along with Policybazaar and SJS Enterprises.

The price band for the offer, which closes on November 3, has been fixed at Rs 161-163 a share. Sigachi Industries, which makes cellulose-based excipients, plans to raise Rs 125.43 crore at the upper price band by issuing 76.95 lakh shares.

The Hyderabad-based company plans to utilise the proceeds for capital expenditure, expansion of production capacity for microcrystalline cellulose (MCC) and manufacturing of croscarmellose sodium, a modified cellulose.

Promoters Rabindra Prasad Sinha, Chidambarnathan Shanmuganathan, Amit Raj Sinha, and RPS Projects and Developers hold 53.32 percent stake in the company.

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Here's what experts say about the upcoming IPO:

Rajiv Kapoor, Vice-President at Trustline Securities | Rating: Subscribe

Sigachi Industries plans to raise funds through an initial share-sale to raise over Rs 125 crore at a price band of Rs 161-163 per share. This money will be utilised for expansion purposes. The company has a diversified portfolio with 59 different grades of MCC with a capacity of 11,880 MTPY. It is a leading manufacturer of MCC (cellulose based excipients) in India and exports to 41 countries and it exports around 60 percent of its revenue.

With Robust, two R&D divisions and two in-house labs enabled the company for the first time to register its Drug Master File (DMF) under the US FDA, helping it to augment its export operations. With long-standing relationships with customers in diverse industry verticals and strategically located multi-locational manufacturing facilities.

Expansion in manufacturing capacity to focus on the growing demand, diversifying and increasing penetration in markets, increasing focus on core business segment – all these strategies augur well for the business. This IPO can be subscribed for listing gains.

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Adand Rathi: Rating: Subscribe

At the upper end of the price band, Sigachi Industries Ltd is offered at a P/E ratio of 15.1x its TTM earnings, with a market capitalisation of Rs 5,011 million. Given that the company is one of the leading manufacturers of
microcrystalline cellulose in India with over 30 years of experience, pan-India and international market presence, experienced management team and investment led future growth with high RoNW of 32.12 percent in FY21 and reasonable valuation. We give this IPO a ‘subscribe’ rating.

Marwadi Shares and Finance Limited | Rating: Subscribe

Sigachi Industries Ltd is engaged in manufacturing of microcrystalline cellulose (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 MCC of various grades ranging from 15 to 250 microns. The major grades of MCC manufactured and marketed by
the company are branded as HiCel and AceCel. It manufactures 59 different grades of MCC.

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The company has received various quality certifications and operates three manufacturing units namely, Unit I at Hyderabad, and two manufacturing units, Unit II and Unit III at Jhagadia and Dahej, in Gujarat, with an aggregate installed capacity of 11,880 MTPY. It has an in-house R&D division equipped to carry out all necessary trials to develop molecules from concept to commissioning.

Considering the FY21 adjusted EPS of Rs 10.80 on the post-issue basis, the company is going to list at a P/E of 15.10 with a market cap of Rs 5,011 million. There are no listed companies in India whose business is comparable with that of the company’s business. We assign a ‘subscribe’ rating to this IPO as the company is one of the leading manufacturers of MCC (cellulose-based excipient) in India with a presence across diverse industry verticals and is available at reasonable valuation on an absolute basis.

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