Sigachi called off Rs 200 crore issue after dilution concerns

Sigachi Industries Limited called off its proposed Rs 200 crore preferential issue after shareholder and investor objections to issuing shares at Rs 26.4 when the market price later rose to nearly Rs 39, leaving internal accruals, insurance proceeds, debt and equity under consideration for roughly Rs 200 crore of planned capital expenditure.

Why did Sigachi call off the preferential issue?

Sigachi called off the proposed Rs 200 crore preferential issue because management received objections to dilution at Rs 26.4 a share after the market price rose to nearly Rs 39. Management said the Rs 26.4 price had been calculated under Securities and Exchange Board of India, or SEBI, rules when the issue was decided and disclosed to stock exchanges.

Management said it received calls from prospective investors and people it described as well-wishers after the proposed price and the later market-price increase. Their concern was that issuing new shares at Rs 26.4 would dilute existing shareholders too heavily relative to the subsequent price of nearly Rs 39. The transcript does not disclose the number of shares proposed under the issue.

The promoters would have been the main beneficiaries of the proposed issue, according to management. After discussions, management said the promoters supported cancelling the proposal in the interest of Sigachi and its shareholders. The company made that explanation during its October 31, 2026 earnings call, rather than disclosing a revised issue price or altered share-allotment structure.

Can Sigachi still raise equity for its expansion?

Sigachi has not ruled out another preferential issue, but management did not disclose a new price, size or timetable on October 31, 2026. In response to a direct question, management said it was not appropriate to discuss a fresh proposal at that point and that it would make an announcement after deciding the next funding action.

Equity remains one of two external financing routes that management identified for the roughly Rs 200 crore capital-expenditure programme. Management said both debt and equity were open options, with the eventual funding mix yet to be decided. It did not provide a target debt balance, net-debt-to-earnings ratio or a date for a financing decision.

Management also said its bankers were supportive and that debt could be available at a competitive price. That statement was not accompanied by a sanctioned borrowing amount, interest rate or repayment schedule. The cancelled Rs 200 crore issue therefore changed the immediate financing route, but management did not say it had reduced or cancelled the underlying expansion plans.

How much capex has Sigachi planned and spent?

Sigachi estimated total capital expenditure of roughly Rs 200 crore, including around Rs 100 crore for a microcrystalline cellulose, or MCC, project and around Rs 90 crore for a project referred to in the call as CCS. Management said cumulative spending across the projects was nearly Rs 29 crore, indicating that most of the programme remained to be funded or spent.

Management said the projects had about one year remaining for completion, with civil work continuing before equipment installation. It said plant and machinery would be ordered during the final two or three months of the process, while most equipment would be sourced domestically. The source does not provide a separate approved budget beyond the roughly Rs 200 crore aggregate.

The planned 12,000-metric-tonne MCC capacity is expected by the end of Q2 FY28, subject to a possible one- or two-month variation, according to management. It had earlier been expected sooner, and that delay was one reason management reduced its FY27 revenue expectation from Rs 650 crore to around Rs 600 crore.

What internal sources could support Sigachi’s capex?

Sigachi said internal accruals would be used to start the capex programme, alongside expected insurance proceeds. Management put the total insurance receivable at around Rs 49 crore, although it said the insurer had indicated a discount of about 5% to 10%. The final receipt amount and timing were therefore unresolved as of October 31, 2026.

Management said it had responded to additional insurer queries and that the insurer had auctioned the related scrap. It expected the insurance proceeds in November or December, after discussions between the surveyor and insurer. This expected inflow is not reported cash received and cannot by itself establish how much external funding Sigachi will require for the Rs 200 crore capex plan.

The company reported operating income of Rs 130.45 crore in Q2 FY27, earnings before interest, tax, depreciation and amortisation, or EBITDA, of Rs 19.2 crore, and net profit of Rs 8.78 crore. EBITDA margin was 14.72%, while net-profit margin was 6.82%, providing the reported operating backdrop for management’s reference to internal accruals.

What operating milestones could affect Sigachi’s funding requirement?

MCC remained Sigachi’s largest reported segment in Q2 FY27, contributing Rs 91.22 crore of revenue, compared with Rs 16.67 crore from active pharmaceutical ingredients, or API, and Rs 13.93 crore from operations and maintenance, or O&M. The segment mix means that MCC capacity utilisation and product mix are central to the cash generation management expects before the Q2 FY28 project completion target.

Management reported first-half utilisation of about 79.91% at Dahej and around 79% at Jhagadia. It attributed the level partly to safety audits and equipment upgrades after the Hyderabad plant accident, saying one remaining installation was expected in November. Management expected utilisation to rise in Q3 and Q4 after the safety work was completed.

MCC and allied-product production and sales totalled about 7,128 metric tonnes in the first half of FY27. Management said quarterly output was about 3,500 metric tonnes in Q1 and roughly 3,600 to 3,700 metric tonnes in Q2, with a target of 4,500 metric tonnes per quarter by Q4. These operational targets could influence revenue and internal funding availability, but remain management expectations.

Management also pointed to improving sales realisations and a shift toward special and co-processed grades. Average realisation was 262.83 in Q2 FY27, up from 241.36 in Q1 FY27, while the first-half average of 252.16 exceeded 216.42 in the prior-year first half. Management attributed the increase to sales mix and said it expected second-half margins to improve from the roughly 15% level cited during the call.

The new 12,000-metric-tonne MCC capacity could generate about Rs 243 crore of revenue after commissioning, based on management’s stated utilisation and pricing assumptions. That is a projection rather than reported revenue, and it depends on project completion, ramp-up, customer demand and the mix of standard, special and co-processed products after Q2 FY28.

Conclusion

The cancellation of Sigachi’s Rs 200 crore preferential issue reflects management’s response to objections over dilution at Rs 26.4 a share after the market price reached nearly Rs 39. The expansion programme remains in place, with roughly Rs 200 crore of planned capex and nearly Rs 29 crore already spent, but its final financing structure has not been disclosed.

The next disclosures to watch are management’s promised decision on debt or equity, the expected insurance receipt in November or December, and completion of the final safety installation in November. Project execution will also be measured against the target for 4,500 metric tonnes of quarterly MCC output by Q4 and the expected Q2 FY28 commissioning of the 12,000-metric-tonne MCC capacity.