Sigachi Industries, a manufacturer of microcrystalline cellulose, had a strong debut on November 15, above analysts’ estimates and commanding a grey market premium. The shares started at Rs 575 on the BSE, a 252.8 percent premium over the issue price of Rs 163, making it the largest ever offered.
Given that the largest manufacturer of cellulose-based excipients in India has no listed counterpart and expects to expand with the proceeds of the public offering, most analysts advocated retaining the stock for the long term. They also advised partial profit-booking and long-term holding of the remaining shares.
Sigachi Industries shares were in great demand since they were trapped in the 5% upper circuit, compared to an opening price of Rs 575. At 12:46 p.m., the shares had risen as much as 270.40 percent to Rs 603.75, against an issue price of Rs 163.
Tradingo’s founder, Parth Nyati, described the company as “India’s leading maker of MCC (microcrystalline cellulose) with diversified industrial verticals.”
With no public peers, the IPO was valued at 16 times FY21. If MCC’s demand remains strong in the long run, the company’s expansion plan following the IPO will generate earnings growth momentum.
Even if you missed out on Sigachi shares during allotment, advisers recommended buying the stock at current prices with a one-month objective of Rs 888 and a strict stop loss of Rs 530.
Sigachi Industries earned Rs 125.43 crore through a public offering that received a solid 101.91 times subscription from November 1-3. The proceeds from the offering will be used to expand MCC manufacturing capacity in Dahej and Jhagadia, Gujarat, as well as for capital expenditures in Kurnool, Andhra Pradesh, to manufacture croscarmellose sodium (CCS), modified cellulose used as an excipient.
Sigachi’s profit increased by 49 percent to Rs 30.26 crore in FY21, compared to Rs 20.31 crore the previous year, while revenue increased by 38.6% to Rs 192.75 crore in the same year.
Profit for the quarter ending June 2021 grew 48.4 percent to Rs 8.99 crore, while revenue increased 25.5 percent to Rs 54.95 crore year on year.
Investors should keep Sigachi Enterprises for the long term, according to different advisors.
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