Sigachi Industries Limited

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.

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.

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.

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.

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.

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.