Sigachi Industries, one of India’s leading manufacturer of cellulose-based excipients, is set to close its three day initial public offer or IPO on Wednesday, November 3. During the bidding process, the company has received high investments from investors across the country for its maiden offer. In the first two days already, the IPO has been subscribed over 22.133 times, with Wednesday still in hand for investors to invest in the stocks. Shares set aside for retail investors have been oversubscribed by 37.14 times on Day 2 of the bidding process of the initial public offer. The offer attracted bids for 12,45,28,680 equity shares against the gross issue size of 53,86,500 equity shares, as per data available with the National Stock Exchange (NSE). Keeping this in mind, let’s take a look at all the key details of Sigachi Industries IPO.
Sigachi Industries IPO Key Details & Objectives
The IPO comprises of a fresh issue of 76.95 lakh shares. With this, the Hyderabad based company plans to raise Rs 125 crore, at the upper price band. The price band for Sigachi Industries IPO has been fixed at Rs 161-163 a share. Being a totally fresh issue, there is no Offer for Sale or OFS in the Sigachi Industries IPO. Unistone Capital is the only book-running lead manager to the issue. For a retail investor, bids for a minimum one lot of 90 shares up to maximum of 13 lots have been invited.
The IPO allotment will be done on November 10 while the refunds will be initiated on November 11.
As far as objectives are concerned, the company plans to use the money from the IPO for expansion of production capacity purposes. The funds will be utilised to expand production at their Dahej and Jhagadia units in Gujarat. While Rs 2,815.82 lakh will be used in Dahej, Rs 2,924.13 lakh wil be used in Jharjharia for the expansion. Apart from this, Rs 3,229.87 will be used fund capital expenditure to manufacture CCS at a unit that is yet to be set up at Kurnool. The company also plans to use it for general corporate purposes.
Sigachi Industries IPO GMP
Sigachi Industries IPO was giving a grey market premium of Rs 180 on Wednesday, November 3, that is the last day of the bidding process, amid strong response from investors. The grey market premium was 112 per cent up over the higher end of the issue price of Rs 163. The high GMP indicated strong listing for Sigachi Industries shares on NSE and BSE later this month.
Sigachi Industries IPO Valuation
According to brokerage house Reliance Securities, “The IPO is valued at 16.6x FY21 and 13.9x FY22 annualized earnings, which looks attractive. While there is no listed peer for the company in MCC manufacturing, SIL maintains a leadership status in MCC product, with a market share of over 65 per cent.”
In a similar note, financial service expert Anand Rathi Group, the Sigachi Industries IPO will have a reasonable valuation. “At the upper end of the IPO price band, Sigachi Industries Ltd. is offered at P/E of 15.1x its TTM earnings, with a market capitalisation of Rs 5,011 Million,” it said.
Should You Subscribe to Sigachi Industries IPO?
Reliance Securities gave a subscribe rating to the Sigachi Industries IPO issue, agreeing with most investment experts. “Given the sustained demand environment for MCC from various industries, and the expansion programme, earnings growth momentum looks sustainable. Notably, SIL has been paying dividend consistently for the last three years, which bodes well. Additionally, the OCF yield at 5.9 per cent and RoE at 32 per cent as of FY21 augur well. Hence, we recommend SUBSCRIBE to the issue,” the group said in a note.
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