Sigachi Industries IPO: Information analysis

Incorporated in 1989, Sigachi Industries is involved in the business of manufacturing Microcrystalline Cellulose (MCC) which is primarily used as a valuable additive for finished dosages in the pharmaceutical industry. MCC is a non-reactive component that is used to manufacture pharmaceutical products without compromising their medicinal properties. At present, the company manufactures MCC in 59 grades - from 15 microns to 250 microns, which not only has its application in the pharma industry but also in several other industries such as food, nutraceuticals, and cosmetic industries. Sigachi Industries has three manufacturing units in total, two units in Gujarat and one in Hyderabad with a total capacity of 12,588 million ton per annum. Sigachi Industries has also entered into a contract (June 2023) with Gujarat Alkalis & Chemical Ltd (GACL) for operating the manufacturing units owned by GACL. The company has a strong presence in the international market as they export to more than 41 countries such as Australia, the U.S., the U.K., Poland, Italy, etc. As MCC is a critical raw material for pharma products, none of their manufacturing units were shut down during the pandemic, and their products were categorised as 'essential goods'. The global demand for MCC is expected to increase due to increase in production of pharmaceuticals and packaged foods. The market for MCC is expected to grow at 7.25 per cent to 1.4 billion USD by 2025. As MCC is a raw material, its demand is in direct correlation with demand for pharmaceutical products, which accounts for a significant share in the MCC market. Thus, due to increase in production of pharmaceuticals and increasing application in various industries, MCC manufacturers are expected to benefit globally. Strengths: 1) Market leader: The company is one of the leading manufacturers of MCC under various grades in India. It also has a strong international presence, exporting to more than 40 countries with 73 per cent of its revenue from exports as of FY2021. 2) Attractive valuation: Post-issue, the company will trade at a P/E of 15 and a P/B of 4.5, which is attractive considering other players in the pharma market. 3) Consistent growth: The company has witnessed strong growth in financials with 22.2 per cent growth in revenue, 18.7 per cent growth in EBITDA, and 26.2 per cent growth in profits from 2019 to 2021. Weaknesses: 1) Revenue concentration: Ar