Sigachi Industries Q1 FY27 earnings call

Sigachi Industries Limited reported a total operating income of INR121.27 crores for Q1 FY27. The company achieved an EBITDA of INR16.5 crores, resulting in an EBITDA margin of 13.6%. Net profit for the quarter stood at INR8.14 crores, with a PAT margin of 6.76%. The MCC segment contributed INR82.74 crores, O&M INR13.06 crores, and API INR21.68 crores to the total revenue.

The company's cellulose-based excipient capacity is currently 18,000 metric tons per annum, with exports accounting for over 53.5% of production. The 12,000 metric ton MCC capacity expansion at Dahej-2 is on track for commissioning by Q2 FY28, which will increase total capacity to 30,000 metric tons per annum. Additionally, the 1,800 ton Croscarmellose Sodium facility at Dahej SEZ is advancing, and a new product, HiCel SMCC Nutra, a microcrystalline cellulose and magnesium aluminometasilicate blend, was launched for nutraceutical formulations.

The average realization for MCC in Q1 FY27 was INR241.36 per kg, a significant increase from INR216 per kg in Q4 FY26. Management attributed this to the company's reputation for quality and regulatory compliance, which creates entry barriers despite other players expanding capacity. Historically, the Asia Pacific region has seen a 7-8% CAGR, with the market expected to reach $1.4 billion by 2035. The company acknowledged losing approximately 6,000 metric tons of capacity due to a past incident at its Hyderabad facility, leading to temporary market share loss.

The API segment contributed INR21.68 crores in Q1 FY27. Management expects significant ramp-up in API revenues in subsequent quarters, driven by new molecules such as Sparsentan, Zestrapin, and Bempedoic acid, which offer higher margins. The company aims to achieve a quarterly run rate of over INR100-110 crores for the API business. The cystic fibrosis product is also progressing, with revenues expected by next year, though current capacity is focused on existing products.

The Indian CCS market is estimated at $100 million, with realizations ranging from INR1,200-1,500 per unit. Management confirmed that CCS margins are significantly healthier than MCC due to the more complex chemistry. The company plans to procure Carboxymethylcellulose (CMC), the raw material, from China, citing cost-effectiveness. The CCS facility is primarily focused on exports, with orders already being received from existing MCC customers who require both binders (MCC) and disintegrants (CCS).

Sigachi reiterated its FY27 revenue guidance of INR650-675 crores and an EBITDA margin target of 18%. Management expressed confidence in achieving these targets, expecting revenues to increase quarter-on-quarter in the second half of the fiscal year. The margin improvement is anticipated through operating leverage, as fixed costs remain constant while revenues grow, coupled with a better product mix, including higher-margin co-processed products and API offerings.

The insurance claim for property loss is still pending, with an assessment completed and e-auction initiated. Management expects to receive either the full claim with a discount or an ad-hoc amount by September. For capital expenditure, the company plans to incur over INR100 crores in FY27 and INR150-200 crores in FY28. These investments will be funded through internal accruals, borrowings, and potentially a preferential equity issue, with the company currently being debt-free.

The company is actively working to reduce its receivables days, with a current figure of 93-94 days. The aim is to bring this down to around 90 days by the end of the current fiscal year, with a further target of 75-80 days in the future. This focus on improving receivables is part of the broader strategy to enhance operational efficiency and liquidity.