Company manufacturing product with potential market value of $115 million- Sigachi Industries IPO

Sigachi Industries IPO will open for subscription between 1 Nov to 3 Nov. Shares will be offered at a price band of Rs.161-Rs.163. The minimum investment value is set at Rs.14,670 (90 shares) with a Face value of Rs.10 each. The listing date is set as 15 November. 

About the company:
Sigachi Industries, incorporated in 1989, is a company that manufactures Microcrystalline Cellulose. This component is used as an excipient for finished dosages in the pharma sector. The company manufactures various different grades of this component starting from 15 microns all the way to 250 microns. The company manufactures 59 different grades of MCC at its three manufacturing plants in Gujarat and Hyderabad. The total MCC manufacturing capacity as of 31st March, 2021 stands at 13,128 MTPA from all its locations. 

Financials:
Sigachi has seen a continuous growth across all the parameters. Revenue exhibited a sharp rise of 36.2% YoY growth from Rs.144 crores in FY20 to Rs.198 crores in FY21. Profit after tax also grew by a whopping 49% in FY21. The PAT Margin witnessed a growth of 100bps i.e. a growth of 15% in FY21. 

About the IPO:
The company plans on raising approximately Rs.125 crores through this IPO. Sigachi is offering 76.95 lakh equity shares with a face value of Rs.10 each. The promoters of the company are Rabindra Prasad Sinha, Chidambarnathan Shanmuganathan, Amit Raj Sinha and RPS Projects & Developers. The promoters hold 53.32% stake in the company. The total shareholding of the promoters and the promoter group stands at 64.64%. The book running lead manager to this issue is Unistone Capital. 

Main objectives of the IPO:
    • Funding the capex for expansion of production capacity at the two Gujarat manufacturing facilities
    • General corporate purposes

Why should you invest in this IPO?
The market for Microcrystalline Cellulose is estimated to be valued at $115 million by FY23 and a 4 year CAGR of 6.3% is stated by analysts. This high growth is attributed to the increase in demand of cosmetics, processed foods and personal care products. Along with the uses mentioned above, MCC is also widely used as an anti-caking agent in various food products and also as a hot and cold stabilizer. Keeping this in mind we can also see that the Indian food and pharma market is ever growing and this high growth isn't about to plateau anytime soon.