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Salient features of the IPO:

* Sigachi Industries Limited (SIL), incorporated in 1989, is one of the leading and key manufacturers of microcrystalline cellulose (MCC) in India. The company has over 30 years of experience in cellulosebased excipient.

* SIL will utilize net proceed of the issue to augment the production capacity

Competitive Strengths

* One of the leading manufacturers of MCC in India with over 30 years of experience

* Pan India and International market presence

* Well experienced management team with proven project mgmt and implementation skills

* Comprehensive product portfolio enables to diverse end-use applications

* Presence across diverse industry verticals with long standing relationship with customers

* Growth led by continuous investment and focus on R&D

Valuation: At the higher price band of Rs163, issue is valued at P/Ex of 16.6 on post issue FY21 EPS basis.

Below are few key observations of the issue:

* SIL is one of the leading and key manufacturers of microcrystalline cellulose (MCC) in India and world with over 30 years of experience in cellulose-based excipient. Owing to its chemical inertness, dry binding and cellulose based fat replacers, MCC is widely using as an excipient for finished dosages in the pharmaceutical industry, as a stabilizer, anti-caking agent, fat substitute and emulsifier in food & beverage industry and as a thickener and binder in cosmetics.

* Pharmaceutical industry has a dominant share in MCC market owing to high use of microcrystalline cellulose in pharmaceutical. On the basis of MCC end use, pharmaceuticals industry accounts for 35-40% market share in global MCC market, food beverage at 20-25%, cosmetics & personal care of 15-20% and remaining by other industries.

* Global microcrystalline cellulose is forecasted to reach at $1,400 bn by CY25 with a CAGR of 7.25% during CY20-CY25. MCC market in India is estimated to reach $93 mn by CY25 registering a CAGR of 13.8% during CY21-CY25. The growth of the MCC market is primarily triggered by rising demand of package & frozen food, beverages where MCC is used as fat replacer, stabilizer and anti-caking agent and the growing production of pharmaceutical, cosmetic and personal care products.

* SIL manufactures MCC of 59 different grades ranging from 15 microns to 250 microns. The company has three manufacturing facilities located in Hyderabad, Dhahej (Gujarat) and Jhagadia (Gujarat). Combined installed capacity of three manufacturing units is stood at 11,880 MTPY. In FY21, SIL’s capacity utilization was remained at 89%.

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