Sigachi Industries Limited — Q2 FY26 earnings call

Call held 24 Oct 2025

Management summary

Sigachi Industries reported a total operating income of Rs.110.5 crores and a net profit of Rs.10.5 crores for Q2 FY26, despite a temporary disruption at its Hyderabad facility. The company is actively expanding its MCC capacity by 12,000 MTPA at Dahej and is on track to commission its CCS plant by Q3 FY27. A new API R&D center is now fully operational, and management expects to recover approximately Rs.70 crores from insurance claims related to the incident.

Highlights

  • Total operating income reached Rs.110.5 crores in Q2 FY26.

  • Net profit stood at Rs.10.5 crores, achieving a PAT margin of 9.59%.

  • MCC capacity expansion of 12,000 MTPA at Dahej is fast-tracked, increasing total capacity to 30,000 MTPA by Q3 FY27.

  • New API R&D Center in Hyderabad is fully operational, consolidating API development and analytical capabilities.

  • CCS project is on schedule for commissioning by Q3 FY27, representing an important step into high-value excipients.

Concerns

  • Hyderabad facility incident caused temporary disruption, with restoration progressing in phases and future course to be finalized post-investigation.

  • Gross margin fell by approximately 170 bps year-on-year due to increased transportation costs from shifting operations post-incident.

  • Promoter share pledging and subsequent sale for repayment raised concerns among individual investors regarding corporate governance.

Key financials

  1. Total Operating Income ₹110.5 Cr
  2. EBITDA ₹7.5 Cr
  3. EBITDA Margin 6.8%
  4. Net Profit ₹10.5 Cr
  5. PAT Margin 9.6%

What they filed

Q1 FY27: revenue down 11.4%, net profit up 106.6% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue109 105 114 111 84 −23%92 −12%92 −19%98 −11%
EBITDA18 21 19 24 7 −63%7 −66%12 −35%13 −45%
Net profit22 10 7 -99 12 −46%3 −70%5 −30%7 +107%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

Share of Revenue
₹97.98 Cr Total
  • MCC ₹66.4 Cr 67.8%
  • API ₹18.41 Cr 18.8%
  • O&M ₹13.17 Cr 13.4%

Capital allocation

medium confidence
  • Capex Capex disclosed
    • 12,000 MTPA MCC capacity expansion at Dahej SEZ facility ₹100 Cr
    • CCS plant additional investment ₹60 Cr
    • Civil works and alterations at all three plants (Dahej and Jhagadia primarily)
    for the MCC 12,000 metric tons, it would be around Rs.100 crores CAPEX is there... And CCS, we need to spend maybe around Rs.60 crores additionally... Yes, the buildings only we have constructed and wherever some alterations are required or even restrengthening done in some cases, and this is completely for the civil works we have invested, Suresh. Of course, yes, that is at the plant level only, all the three plants, majorly for Dahej and Jhagadia.
  • Debt Debt disclosed
    This IPO utilization of Rs.1,000 crores is not there. That is anyway shareholders approval is there for any borrowing limits... for time being, the total debt limit is required up to Rs.700-800 crores and then after taking the new debts and paying off the initial debt, then it will come down automatically. But there should not be any overlapping and because of non-availability of the limits, we should not miss the opportunity. That is the reason companies take the higher limit. It does not mean that the company will take a debt of Rs.1,000 crores.

Guidance & targets

Capacity

  • Total MCC Capacity Capacity · Q3 FY27 · High confidence 30,000 MTPA
    Once completed, this will enhance our total MCC capacity to 30,000 MTPA. We expect this unit to be commissioned by Q3 FY27.

    — Amit Raj Sinha

  • CCS Plant Commissioning Capacity · Q3 FY27 · High confidence Commissioned
    On the CCS front, the project continues to move forward steadily, and we are on schedule to commission the plant by Q3 FY27.

    — Amit Raj Sinha

Revenue

  • Revenue from new 12,000 MTPA MCC capacity Revenue · Full capacity · High confidence Rs.250 crores
    the 12,000 metric tons additional capacity, it will generate on its full capacity around Rs.250 crores.

    — O.S. Reddy

  • Total Operating Income Revenue · FY26 · Medium confidence not less than 575 crores
    we hope we will be achieving not less than 575. But there is a possibility to increase further also by end of March.

    — O.S. Reddy

EBITDA Margin

  • EBITDA Margin for new Dahej facility EBITDA Margin · High confidence minimum 20%
    Yes, minimum 20% would be there.

    — O.S. Reddy

  • EBITDA Margin for O&M segment EBITDA Margin · High confidence 20%-22%
    Yes, almost in O&M, around 20%-22% margin is there.

    — O.S. Reddy

  • EBITDA Margin for CCS segment EBITDA Margin · High confidence up to 30%
    Yes, margins are higher in CCS up to 30%, even better than MCC.

    — O.S. Reddy

Capacity Utilization

  • Existing capacity utilization Capacity Utilization · FY26 · High confidence nearly 90%
    Going forward, we will utilize almost nearly 90% capacity.

    — O.S. Reddy

  • New capacity utilization (12,000 MTPA) Capacity Utilization · Half-year FY27 · Medium confidence 50%
    In half-year FY27, maybe little 50% of new capacities will be utilized or even better.

    — O.S. Reddy

API Approvals

  • CEP approvals for API segment API Approvals · next two or three quarters · Medium confidence Cleared
    I believe that we should be in a position to have it cleared within the next two or three quarters.

    — Amit Raj Sinha

Market context

  • Global MCC demand Market Size · by 2034 · High confidence $1.4 billion
    So, MCC, the global demand is expected to touch $1.4 billion by 2034.

    — Amit Raj Sinha

  • Global CCS demand Market Size · by 2035 · High confidence $800 million or $900 million
    CCS by 2035 is expected to touch about $800 million or $900 million.

    — Amit Raj Sinha

What to watch in Q3 FY26

Hyderabad facility resumption clarity

by end of Q3 FY26
Current Investigation ongoing, restoration in phases
Target Clarity on resumption

Why it matters

Resumption of the Hyderabad facility is crucial for full operational capacity and reduced reliance on other plants.

It is, as of now, the safety protocol and all the sites, even here also, after seeking the regulatory approvals, then we will go ahead. Maybe we will get clarity by the end of this quarter.

Risks & concerns

  • Hyderabad facility incident and operational disruption

    high

    A localized dust explosion at the Pashamylaram facility caused temporary production relocation and ongoing investigation, impacting Q2 operations.

    Management acknowledged

  • Gross margin compression due to operational shift

    medium

    Gross margin declined by ~170 bps YoY due to increased transportation costs from shifting production to other facilities post-Hyderabad incident.

    Management acknowledged

  • Promoter share pledging and sales impacting investor confidence

    medium

    Analyst raised concerns about promoter share sales linked to loan against shares (LAS) renewal, which management explained as repayment driven, with no plans for further reduction.

    Analyst downplayed

  • Potential blacklisting or loss of state incentives due to incident

    low

    Analyst cited a news article suggesting potential blacklisting or loss of incentives, to which management stated they had no information.

    Analyst not addressed

Q&A highlights

4 direct, 1 evasive
Competition from Chinese MCC suppliers and pricing aggression Direct
So, in the regulated markets, Chinese MCC players do not stand a chance. Yes, they have not stood chance and regulated market is much more stringent and we have not seen them competing against us on any particular customer base or targeted markets.

Management asserts that Chinese competitors are not a threat in regulated markets due to stringent requirements, implying a competitive edge for Sigachi.

Asked by Rehan Syed

Discrepancy between pulp price reduction and MCC realization increase Direct
In some, there are different grades of pulp. In certain grades, there are $50 per ton, there is a reduction. But still, it did not have impact on the selling price. Selling price, despite of the decrease, it has increased because the demand also is there for the MCC, and enough supply is not there of MCC in the market. That may be one of the reasons.

Explains that despite some pulp price reduction, MCC realizations increased due to strong demand and supply shortfall, indicating pricing power for Sigachi.

Asked by Pritesh

Customer reaction to Hyderabad incident and potential supplier shifts Partial
We have tried to balance out and prioritize some of our critical customers who do not have a second line of supplier. But there are some customers who we have kind of told them that we will take a couple of months before we can come back with added capacities. So, we have had some mutual comfort, mutual understanding, and we have indicated that we will take a couple of quarters before we come back, until then, they will be looking at alternate suppliers.

Reveals that while critical customers were managed, some customers had to seek alternate suppliers temporarily, indicating a short-term impact on customer relationships and market share.

Asked by Lakshminarayanan KG

Insurance claim for Hyderabad incident and expected compensation Direct
Yes, there is around Rs.51 crores we will get it from the insurance towards the fixed assets loss. And also, the business interruption policy is there towards loss of profit, that would be around Rs.16.5 crores. Around Rs.65, 66 crores is expected from the insurance, and the stock loss of around 7.66, we have claimed, and now 4.65, we have reversed the balance around 3 crores we will get it from the insurance. Rs.69.5 or around Rs.70 crores we are expecting.

Provides a clear estimate of the expected insurance payout (around Rs.70 crores) covering fixed assets, loss of profit, and stock loss, which is crucial for financial recovery.

Asked by Deepesh J Sancheti

Rs.1,000 crore IPO utilization fund announcement and its purpose Direct
This IPO utilization of Rs.1,000 crores is not there. That is anyway shareholders approval is there for any borrowing limits... for time being, the total debt limit is required up to Rs.700-800 crores and then after taking the new debts and paying off the initial debt, then it will come down automatically. But there should not be any overlapping and because of non-availability of the limits, we should not miss the opportunity. That is the reason companies take the higher limit. It does not mean that the company will take a debt of Rs.1,000 crores.

Clarifies that the Rs.1,000 crore approval is for broader borrowing limits (up to Rs.700-800 crores) to ensure flexibility for future opportunities, not an immediate debt raise, addressing concerns about capital structure.

Asked by Devang

Promoter share pledging and subsequent selling, and its impact on investor confidence Partial
As of now, there is no plans for further selling or further reducing. But only this thing, there was a clause as I told to the previous question. There was a renewal already one year over and then at the time of renewal, either we have to pledge more shares or we have to repay, because of that, some shares were sold and then repaid, otherwise, nothing is there.

Addresses investor concerns about promoter shareholding changes, attributing past sales to loan repayment obligations rather than a strategic reduction, but the explanation is somewhat defensive.

Asked by Karthik

News article regarding potential blacklisting and loss of state incentives Evasive
We do not have any information on this.

Management's lack of information on a potentially significant reputational and financial risk (blacklisting) leaves investors with uncertainty.

Asked by Shivaji Mehta

3 min read 6 chapters

Detailed narrative

Hyderabad Incident and Operational Resilience

Sigachi Industries faced a localized dust explosion at its Pashamylaram facility in Hyderabad, leading to temporary disruption. Production has been relocated to Dahej and Jhagadia facilities to ensure uninterrupted supply to customers. The company has provided interim compensation and ex gratia financial assistance to affected families, taking full responsibility for medical expenses. The future course for the facility will be finalized post-investigation, with clarity expected by the end of Q3 FY26. Management expects to receive approximately Rs.70 crores from insurance claims, covering fixed assets, loss of profit, and stock loss, with an ad hoc amount anticipated in Q3 FY26.

Capacity Expansion and Future Growth Initiatives

The company is aggressively pursuing capacity expansion, fast-tracking a 12,000 MTPA MCC expansion at its Dahej SEZ facility. This will increase total MCC capacity to 30,000 MTPA, with commissioning targeted by Q3 FY27. This new capacity is expected to generate Rs.250 crores in revenue at full utilization with a minimum 20% EBITDA margin. Additionally, the CCS project is on schedule for commissioning by Q3 FY27, marking a strategic entry into high-value excipients with an anticipated EBITDA margin of up to 30%. The company aims to utilize nearly 90% of its existing capacity by the end of FY26 and expects about 50% utilization of new capacities by H1 FY27.

API Segment Development and Regulated Market Focus

Sigachi has achieved a significant milestone with its new API R&D Center in Hyderabad becoming fully operational. This center consolidates API development and analytical capabilities, aiming to improve speed-to-market and integration with manufacturing. The company is actively pursuing approvals from the European Directorate of Quality and Medicine for its API portfolio, with CEP clearances expected within the next two to three quarters. This strategic focus is intended to strengthen Sigachi's position in regulated markets and expand its API portfolio.

Q2 FY26 Financial Performance and Margin Dynamics

For Q2 FY26, Sigachi reported a total operating income of Rs.110.5 crores. EBITDA stood at Rs.7.5 crores, resulting in an EBITDA margin of 6.78%. Net profit for the quarter was Rs.10.5 crores, with a PAT margin of 9.59%. The MCC segment contributed Rs.66.4 crores, O&M Rs.13.17 crores, and API Rs.18.41 crores. The gross margin saw a year-on-year decline of approximately 170 bps, primarily attributed to increased transportation costs incurred from shifting operations post-Hyderabad incident. Management expects stabilization in Q3 and Q4.

Raw Material and Pricing Environment

Despite some pulp price reductions (around $50 per ton for certain grades), MCC selling prices have increased. Management attributes this to strong demand and a prevailing shortfall in MCC supply in the market. This dynamic has allowed Sigachi to maintain or increase realizations. The company noted that Chinese MCC players are not competitive in the more stringent regulated markets, where Sigachi operates, due to higher quality and compliance requirements.

Capital Structure and Shareholder Confidence

The company clarified that the recently announced shareholder approval for Rs.1,000 crores is for broader borrowing limits (up to Rs.700-800 crores) to seize future opportunities, not an immediate debt raise. Management emphasized that this is a common practice for companies to have higher approved limits. Concerns regarding promoter share pledging and subsequent sales were addressed, with management explaining these were due to loan against shares (LAS) renewal and repayment, asserting no plans for further stake reduction. They reiterated their commitment to upholding the highest standards of safety and compliance across all facilities.

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