Sigachi Industries Ltd Management Discussions

Global economic review¹

The global economy demonstrated resilience, while navigating several macroeconomic challenges. While volatile commodity prices surged inflationary pressures in both advanced and emerging economies, geopolitical turmoil, notably in Ukraine-Russia and more recently in the Middle East exacerbated the condition. Consequently, fiscal and debt vulnerabilities aggravated in the developing nations. Furthermore, with central banks implementing interest rates hikes, it weighed upon the global economic growth. Moreover, with Chinas economy exhibiting signs of strain as it grappled with real-estate issues and subdued consumer confidence, it is expected to negative ramifications on global economy.

However, on a brighter note, emerging markets such as India, Vietnam and Mexico experienced stronger-than-expected growth and attracted significant foreign investments. Advanced economies, such as the US, has also surpassed its pre-pandemic growth. As over 85% central banks worldwide tightening monetary policies, it significantly reins in inflation across many regions. Few low-income and frontier economies reclaimed their market position as well.

Outlook

Global growth is expected to sustain its trajectory at 3.2% in CY 2024 and CY 2025. With the debottlenecking of supply chains and effective monetary policies, inflation is expected to recede faster than anticipated across most regions. Additionally, global headline inflation is projected to decrease to 5.8% in 2024.

In advanced economies, growth is expected to decrease from 1.6% in 2023 to 1.5% in 2024, before rebounding to 1.8% in 2025. This reflects the potential of economic growth upon easing restrictive monetary policies and the withdrawal of fiscal stimulus. On the other hand, global trade is anticipated to grow by 3.3% in 2024 and 3.6% in 2025.

Source: IMF staff calculations. Note: Inflation is based on the consumer price index. Core inflation excludes volatile food and energy prices. Emerging market and developing economies core inflation from January 2022 WEO Update is estimated using available data. WEO World Economic Outlook

Indian economic review²

In FY 2023-24, India maintained its growth momentum despite a sluggish global economy. The Indian economy achieved an impressive GDP growth rate of 8.2%, surpassing that of major global economies. Its growth rate surpassing the previous years rate of 7%, demonstrates the resilience of the Indian economy.

Effective monetary policies focusing on aligning inflation with target levels, has been one of the key drivers to support sustained medium-term growth. The continued emphasis on stability has bolstered consumer confidence and improved economic stability, stimulating demand across various sectors. The reported year also observed a notable surge in capital expenditure, rising from H 10.5 lakh crore in FY23 to

H 12.7 lakh crore in FY24. This uptick has further spurred private investment and facilitated economic activities nationwide.

Theeconomyhasalsobenefitedfromrobustdomesticdemand, primarily fuelled by increased private consumption. These progressions, combined with prudent fiscal management, are expected to sustain economic expansion in the future.

The positive economic momentum is reinforced by strong performances in key high-frequency economic indicators such as credit growth, GST collections and the Purchasing Managers Index (PMI) in both services and manufacturing sectors. Notably, the service sector is recording high PMI, consistently exceeding 60 points, reflecting robust growth in this sector. These indicators collectively affirm dynamic economic activity and a sustained recovery, positioning India for continued growth and stability in the forthcoming years.

Outlook

The Indian economy exhibits promising growth prospects. This growth can be primarily attributed to substantial investments in infrastructure, bolstered by robust fiscal strategies and ongoing policy enhancements.

Furthermore, a young workforce coupled with targeted development initiatives in smaller cities, is poised to drive demand across various sectors. Consequently, this fosters sustainable long-term economic expansion.

With global economic conditions improving and central banks easing monetary policies, India is well-positioned to attract investments. This is not only anticipated to bolster exports but also reduce fiscal deficit. Meanwhile, significant investments are expected to alleviate inflation challenges and aid in stabilising prices and sustaining economic momentum.

Industry overview

Global pharmaceutical industry⁴

The pharmaceutical sector stands as a formidable force within the healthcare domain, developing life-saving treatments and shaping public health outcomes. The industry, comprising an intricate network of companies, research institutions and regulatory bodies, plays a pivotal role in introducing new medicines to market and elevating global health standards.

The market observes certain companies holding key positions. While the United States is at forefront with its pharmaceutical giants taking dominant market shares, Europe and Asia are also emerging as notable contenders.

With a diverse range of medications, the pharmaceutical industry observes branded drugs retaining a majority of the market share. However, it is indicated that there will be a potential decline in their market share as generics providing cost-effective alternatives are steadily becoming popular. Furthermore, biologics, a category of drugs derived from living organisms, are also gaining momentum.

The pharmaceutical industry, an innovation-centric sector, remains steadfast in its commitment to research and development (R&D). Most of the pharmaceutical companies heavily invest in this pivotal stage to ensure that they can outperform their peers.

The journey from discovery to market is rigorous and tedious. On average, researchers may need to evaluate 5000 to 10000 compounds to identify the suitable choice. This is followed by meticulous testing for safety and efficacy. These time-intensive processes reflect the substantial resources and perseverance required to bring new medications to the public.

Outlook⁵

The global pharmaceutical industry recorded a valuation of $222.4 billion in FY 2023-24. This projection highlights the industrys economic significance and its contribution to driving global healthcare expenditure⁶. It is expected that the pharmaceutical product market will reach $352.98 billion by FY 2032 owing to increasing demand for innovative treatments.

3https://www.statista.com/statistics/263771/gross-domestic-product-gdp-in-india/

4https://www.skyquestt.com/report/pharmaceuticals-market#:~:text=Pharmaceuticals%20Market%20size%20was%20valued,is%20used%20for%20 medical%20purposes ⁵https://www.pwc.com/us/en/industries/pharma-life-sciences/pharmaceutical-industry-trends.html ⁶https://www.skyquestt.com/report/pharmaceuticals-market#:~:text=Pharmaceuticals%20Market%20size%20was%20valued,is%20used%20for%20 medical%20purposes.

Forecasted growth of Indian pharmaceutical sector in comparison to some other big pharmaceutical sectors worldwide (source: BRICs and Beyond, Goldman Sachs, November 2007).⁷

Indias pharmaceutical industry⁸

Indias pharmaceutical sector has been at the forefront in research and innovation, underpinned by a robust scientific and technological foundation, increasing governmental support, thriving domestic market and competitive manufacturing costs.

India is the worlds largest provider of generic medicines by volume, holding a 20% share of the total global generic supplies. It produces around 60,000 different generic brands across 60 therapeutic categories and accounts for 20% of the global supply. As of recent estimations, there are 500 active pharmaceutical ingredient (API) manufacturers contributing approximately 8% to the global API Industry.

India also dominates the vaccine market with a 60% market share, meeting 40 -70% of the WHO demand for Diphtheria, Tetanus and Pertussis (DPT) and Bacillus Calmette–Gu?rin (BCG) vaccines, as well as 90% of the WHO demand for the measles vaccine. Affordable HIV treatment and rising demand of Indian medications due to their low price and high quality have earned India the moniker of the pharmacy of the world.

The Indian pharmaceutical industry has sustained its average growth rate of 9.47% over the past years, reaching $42.34 billion. This growth can be primarily attributed to burgeoning exports and increasing domestic market demand. It is estimated that the pharma sector will become a $65 billion industry by the end of 2024 and surge to $120 billion by 2030.

Government initiatives⁹

The Government has implemented various measures to bolster research and innovation in the sector.

In its Vision Pharma 2047, the Indian Government aims to achieve several milestones

1. Global Leadership in Pharmaceutical Manufacturing:

India aims to establish itself as a global leader in producing affordable, innovative and quality pharmaceuticals and medical devices. The country aims to align its goals with the principle of Vasudhaiva Kutumbakam, or "the world is one family."

2. Innovation and Research: The nation seeks to emerge as a pioneer in innovation and research, particularly in delivering sustainable healthcare products.

3. Accessibility and Affordability: The country is relentlessly taking initiatives to ensure affordable products that meets patient expectations and can be accessed by all. Effective partnerships between industries, scientific communities and governments will enhance healthcare outcomes and facilitate universal health coverage.

4. Health System Contribution: India aims to contribute to a health system characterised by equity, efficacy and efficiency. The country is also focusing on

7https://www.researchgate.net/figure/Forecasted-growth-of-Indian-pharmaceutical-sector-in-comparison-to-some-other-big_fig1_352177631 ⁸https://www.investindia.gov.in/team-india-blogs/pharmaceutical-sector-spotlight-driving-innovation-india ⁹https://www.investindia.gov.in/team-india-blogs/pharmaceutical-sector-spotlight-driving-innovation-india developing a comprehensive product profile targeting Non-Communicable Diseases (NCDs), Anti-Microbial Resistance (AMR), and rare and neglected diseases.

5. Balanced Policy Framework: The Government seeks to create an equilibrium between social, economic and governance by implementing facilitative, balanced and progressive policies and regulatory frameworks.

6. Environmental Sustainability: Aligning with the vision of Panchamrita, India aims to reduce its carbon footprint in the pharmaceutical and medical technology sectors, striding towards Indias goal of Net Zero by 2070.

To achieve these objectives, various initiatives and policies have been put in place

The National Pharmaceutical Policy (2023) is being developed to address challenges faced by the industry and augment the overall ecosystem. It focuses on fostering global leadership, promoting self-reliance, advancing health equity and accessibility, enhancing regulatory efficiency and attracting investments.

Foreign Direct Investment (FDI) limits have been liberalised to attract investments, increasing inflows to the sector since April 2000.

Schemes such as Strengthening of Pharmaceuticals Industry (2022), Promotion of Bulk Drug Parks (2020), Human Resource Development in the Medical Device Sector (2023) and Promotion of Research and Innovation in Pharma MedTech Sector (PRIP), aim to strengthen the industry, promote domestic manufacturing and foster innovation and research.

Production Linked Incentive (PLI) schemes for Pharmaceuticals and Medical Devices have been launched to incentivise production, strengthen manufacturing capabilities and reduce dependence on imports.

Other initiatives facilitated by the Biotechnology Industry Research Assistance Council (BIRAC) and CSIR-Central Drug Research Institute, support research and development projects and drug discovery efforts.

Through these concerted efforts, Indias pharmaceutical sector is poised to maintain its leadership in research and innovation. The industrys scientific prowess, increasing governmental support and robust domestic market, make India an attractive destination for global pharmaceutical companies to conduct research and development.

Global food and nutrition market¹⁰

Increasing health awareness, especially post-pandemic, is driving the growth of the global food and nutrition market. This has resulted in a surge in demand for immunity-boosting supplements and dietary products. Mineral supplements, in particular, have witnessed high demand due to their role in boosting health.

The market is expected to reach USD 12.63 billion by 2030, with a projected Compound Annual Growth Rate (CAGR) of 9.9% between 2023 and 2030.

Drivers for Market Growth

Increasing Demand for Sports Nutrition: The increasing focus on health and fitness, driven by fitness enthusiasts and professional athletes, is bolstering the growth of sports nutritional market. With rising awareness about diseases such as diabetes, obesity and cardiovascular diseases, people are seeking sports nutrition to mitigate these risks.

Growing Influence of E-Commerce: The convenience and accessibility offered by online and retail channels have significantly contributed to market growth. E-commerce platforms have improved product visibility and broader reach across various demographics.

Opportunities for Market Expansion

Increasing Adaptation of Vegan Food: The rising popularity of plant-based foods and superfoods has spurred the development of new nutritional products in appealing forms such as gummies and soft chews. This trend has especially been beneficial for individuals who seek alternative options to traditional tablets or pills.

Lack of vital nutrients: Modern diets lack essential nutrients, increasing ailments caused due to nutritional deficiencies. With heightened consumer awareness concerning the significance of proper nutrition, the demand for nutritional foods to combat malnutrition is anticipated to surge, thereby, driving market growth.

Challenges

Availability of Nutritional Food: Limited access to nutritional foods in certain countries, especially in underdeveloped regions, poses a challenge to market growth due to a lack of product availability and awareness.

Market Scope

As the nutritional food market is highly segmented, it is important for market players to analyse industry segments and gain valuable insights to identify core market applications. It is important to understand the dynamics to develop products that can bolster the growth of the market.

Indias food and beverage industry¹¹

Indias food and beverage (F&B) industry stands as one of the largest and most rapidly expanding sectors, comprising numerous segments and sub-segments. It is estimated that the domestic food processing segment will maintain a substantial growth trajectory, reaching USD 470 billion by FY2025 from USD 263 billion in FY2021. This impressive growth can be attributed to various factors, including shifting lifestyles, rising incomes, increasing urbanisation and favourable government policies.

Indian food and beverage sector commands a significant 27% share in the Direct-to-Consumer (D2C) market space. With the emergence of new start-ups introducing innovative product ranges, the sector has significantly seen improvement in terms of sale. While the food and beverage industry contributes 3% to the GDP, it occupies nearly two-thirds of Indias overall retail market. The market is poised to reach nearly USD 504.92 billion by 2027.

The food and beverage industry sustains the livelihoods of over 7.3 million individuals, making it the largest single employment provider in India. It also serves as a pivotal growth catalyst for various ancillary segments of the economy. Within the industry, several sub-segments also exist, encompassing diverse categories such as dairy products, confectionery, frozen foods, convenience foods, processed fruits and vegetables, as well as alcoholic and non-alcoholic beverages.

When it comes to the food service segment, the industry is expected to grow from USD 57.2 billion to USD 78.8 billion by the year 2026. Within the organised food service market, revenues amounted to USD 27.1 billion, with USD 5.9 billion originating from organised chains and the remaining from independent establishments. The growth can be attributed to widespread internet accessibility, facilitating seamless one-tap payments and mobile wallet transactions.

Global MCC market¹²

The global market for Microcrystalline Cellulose (MCC) has witnessed remarkable growth in the recent years. The growth can be attributed to various factors, including heightened demand for pharmaceutical formulations, growing health consciousness and other influential factors. MCC has established itself as a preferred product across multiple industries.

The global MCC market can be segmented into product type, end-use industry, functionality and region. While under product type, it is categorised into powdered microcrystalline cellulose and granulated microcrystalline cellulose, end-use industry segmentation includes pharmaceutical, food and beverage, cosmetics and personal care, chemicals and textiles.

Among these segments, the pharmaceutical industry has played a crucial role in propelling the MCC market forward. The versatility to act as a binding agent position MCC as an excipient in various pharmaceutical formulations, particularly in tablets and capsules. Given the escalating global demand and widespread application of MCC in drug manufacturing, the pharmaceutical sector stands out as one of the most potent end-use industries for MCC.

11https://hospitality.economictimes.indiatimes.com/news/speaking-heads/trends-and-happenings-in-the-food-beverages-segment-in-2023-and-the-prospects-for-2024/106300783 ¹²https://www.skyquestt.com/report/microcrystalline-cellulose-market ¹³https://www.astuteanalytica.com/industry-report/india-nutritional-supplements-market ¹⁴https://www.futuremarketinsights.com/reports/microcrystalline-cellulose-market

MCC market are strengthening their production capacities. This is expected to propel the growth of Indian MCC market at a CAGR of 8% in the upcoming years.

Demand from the pharmaceutical industry- MCC is commonly employed as an excipient within pharmaceutical formulations, hence with the expansion of the industry, the demand for MCC is expected to increase.

Growing consumption in the food and beverage industry- As MCC are sourced from botanical origins, it finds widespread utilisation in food processing, notably in baking. Its versatility also extends to the manufacture of snacks, burger patties and dietary supplements.

Indias over-the-counter (OTC) industry¹⁵

OTC medications are used to treat minor illnesses. Pharmacists usually recommend patients OTC drugs that do not fall under Schedule K of the Drugs and Cosmetics Act of 1940 or any other restrictive schedules.

Market Insights

The Indian OTC drugs market has undergone rapid transformation owing to factors such as a burgeoning population, increasing ailment cases and affordability of the medications.

The development of medical infrastructure, introduction of patented drugs and the emergence of new business models have improved consumers access to medicines. While vitamins and minerals hold the largest OTC market share (36.84%), cold and cough remedies are expected to grow rapidly.

Market Drivers

With easy availability of information on the internet, consumers are shifting more towards purchasing OTC medications. Furthermore, health-conscious community are also increasing the sales of Vitamins and Mineral Supplements (VMS) in various formulations.

Market Challenges

While the market holds optimism, there are certain challenges that need to be addressed. Antibiotics taken without prescription result in developing resistance to the antibiotics. Misuse or dependence on drugs such as sedatives, analgesics, antacids and laxatives also pose as a potential risk of the unregulated OTC market.

Indias branded generic drug market¹⁶

The growth of Indias over-the-counter (OTC) drugs market can be attributed to growing shift in consumer attitudes towards self-medication, ongoing product innovations and pharmaceutical companies increasing preference for OTC drugs over prescription (RX) drugs. As the Indias population is increasingly relying on self-medication coupled with rising middle class with increased purchasing power, the demand for OTC drugs is expected to surge. Categories, especially, cough and cold formulations, gastrointestinal medications, analgesics and dermatological drugs are expected to record an increase in their sales.

However, India might face challenges in producing cost-effective alternatives if a recommendation from the proposed trade deal between India and the European Free Trade Association is implemented.¹⁷

Nevertheless, the utilisation of self-medication in India is most prevalent among the middle-economic families. Looking forward, the demand for OTC drugs in India is expected to substantially increase.

Nutraceutical market

Market Overview

The India nutraceuticals market was valued at USD 26.87 billion in 2023. The market is expected to grow at a CAGR of 13.5% between 2024 and 2030. Some of the key drivers for the growth include rising popularity of healthy diets, increasing lifestyle-related ailments and a paradigm shift towards preventive healthcare. As consumers are understanding the connection between healthy dietary habits and pharmaceutical expenditure, consumers are embracing healthy food practices. This has also resulted in governments reducing healthcare and social security costs.

Market share and consumer trend

India accounted for 9.22% of global nutraceuticals market revenue in 2023. The ageing population adopting healthy food and products to combat heart ailments and obesity are especially driving the demand for nutraceuticals. Personalised nutrition for this demographic presents significant growth opportunities. Innovation has been one of the key drivers for the market. Companies are developing novel formulations such as fortified food and beverages to meet evolving consumer health needs.

Innovation and regulation landscape

The advent of technology and evolving consumer preferences have been crucial to foster innovation in the nutraceuticals market. Market players are developing advanced delivery systems, such as controlled-release technologies and nano-encapsulation, to enhance ingredient bioavailability and efficacy. Adherence to stringent regulations and government guidelines ensure product safety, quality and enforce efficacy. It also enhances consumer confidence, influencing consumer perceptions and purchasing behaviour.

Market dynamics and end user focus

Growing health concerns, rising geriatric population, surging healthcare expenses, increased awareness about nutraceuticals and changing lifestyles have been crucial for the propelling the growth of the market. Furthermore, end-user concentration remains a significant factor, with consumer demand shaping product development and market dynamics.

Nutrition market ¹⁸

In FY2023-2024, the Indian Nutritional Supplements Market was valued at USD 11.85 billion. It is projected to reach market valuation of USD 28.70 billion by 2032, growing at CAGR of 10.7% during the projection period.

Indias nutritional supplements market has experienced transformation owing to evolving dietary requirements and changing public health challenges. Growing health and wellness awareness is bolstering the growth of the nutrition market. The landscape of Indian nutrition is also marked by several critical issues that influence the supplement market.

Driver: Rising Health Consciousness

The Indian nutritional supplement market is witnessing a remarkable surge, predominantly driven by an escalating health consciousness among the population. A recent survey has revealed that approximately 65% Indian consumers are now more health conscious than they were five years ago. This surge in awareness has significantly contributed to the expansion of the market for nutritional supplements. This has also resulted in the increasing demand for vitamins and minerals; sales in this segment is projected to rise by 49% in the upcoming years.

The burgeoning middle class, representing over 300 million people, is also a vital contributor to this trend. Increasing disposable incomes coupled with rapid urbanisation are bolstering the growth of the nutritional supplements market. Currently, urban area account for nearly 70% of the total sales in the supplements market.

Trend: A Paradigm Shift towards Personalised Nutrition

The Indian nutritional supplements market is observing personalised nutrition as a significant trend. Personalised nutrition involves tailoring dietary supplements to meet individual health needs, lifestyle choices and genetic profiles.

As consumers are becoming aware about the unique nutritional requirements based on their profiles, followed by the advent of digital health technologies, the demand of personalised nutrition is gradually surging. These technologies, used by approximately 45% of Indias urban population, provide real-time health and dietary data. Consequently, the market for technologically integrated nutritional solution is expanding with an estimated growth rate of 25% annually.

Company overview

About the Company

Established in 1989, Sigachi Industries Limited (Sigachi) has been is one of the leading manufacturers of Microcrystalline Cellulose (MCC) worldwide. The Company has established its strong presence in the production of Excipients, Co-Processed Excipients and Preformulated Excipients spread across more than 60 different grades. While adhering to stringent international quality benchmarks, these cellulose-based excipients cater predominantly to the pharmaceutical, supplement and nutrition food sectors. The Company has a robust supply chain, with facilities and operations spread across 3 states. Sigachi maintains five state-of-the-art manufacturing facilities in Gujarat, Telangana and Karnataka to facilitate seamless delivery across India and worldwide. The Companys expansive sales and distribution network enables it to export its products to over 60 countries spanning the Middle East, Europe, Asia, Australia and the Americas. Sigachis commitment to continuous innovation and strengthening of its research and development (R&D) capabilities ensures that the Company can meet ever evolving customer requirements. The O&M part of business continues to grow ahead of the market growth. As part of O&M growth strategy, we continue to focus on Speciality Chemicals, Petrochemicals, Water Treatment, and Pharma Plants. As Sigachi continues to grow, the purpose driving this growth which is to make this place a "Healthier, Happier and Joyful place" continues to grow deeper.

Joint Venture¹⁹

Sigachi Industries has announced the incorporation of a joint venture (JV) with iMass Investments to facilitate global expansion. The joint venture between Sigachi MENA FZCO, a wholly owned subsidiary of Sigachi Industries Limited and iConsult Trading Consultancy LLC, a wholly owned subsidiary of iMass Investments will forge the path for the Company to enter into the food and pharma market of the UAE.

Furthermore, Sigachi MENA FZCO, a wholly owned subsidiary of Sigachi Industries Limited and Saudi National Projects Investment Ltd (SNP), an advisory investment firm, have also formally announced the establishment of Sigachi Arabia²⁰. This strategic partnership will facilitate the rapidly growing Saudi Arabian market entry.

Sigachi Arabia will operate as a holding company, overseeing distinct entities dedicated to managing Sigachis core verticals. The JV also plans to establish a manufacturing facility in Riyadh within a span of three years. While it will initially cater to the local markets needs, the facility will subsequently serve the Gulf Cooperation Council (GCC) countries.

The ownership structure of both JV depicts Sigachi MENA FZCO holding a majority stake of 75% and the other partner holding the remaining 25% stake in the joint venture.

Acquisition²¹

The Board of Sigachi has formally approved the acquisition of 2.88 crore equity shares of face value of H 10 each. This resulted in Sigachi industries acquiring 80% stake in Trimax Bio Sciences Private Ltd for INR 100 crore. There is also future proposal for the subsequent acquisition of the remaining 20% after a period of three years, for a sum of H 25 crore or 8.5 times the EBITDA multiples. Better price and purchasers call option will determine the acquiring method in the upcoming years.

Trimax Bio Sciences Private Ltds API unit has state-of-the-art technology and complies with rigorous international quality standards set by USFDA, EMEA and WHO. It has also received approval from USFDA for advanced and critical intermediates.

Business overview

Microcrystalline Cellulose (MCC)

The Company manufactures MCC in 60 distinct grades ranging from 15 microns to 250 microns. Sigachi caters its products to various industries, including pharmaceutical, food, nutraceutical and cosmetic sectors.

The Company sells its cellulose-based products under the following brands.

Hi Cel^TM AceCel^R CoatCel^R GloCel^R BARETab^R

The products are differentiated using various drying procedures. The Company also manufactures several grades of the product in conjunction with diverse chemicals such as colloidal silicon dioxide, carboxy cellulose sodium and mannitol, etc.

MCC revenue trends (Rs. in Mn)

19https://www.zeebiz.com/companies/news-pharma-major-sigachi-industries-forms-jv-projects-investment-260531 ²⁰https://sigachi.com/R/JV%20Press%20Release.pdf

21https://www.thehindubusinessline.com/companies/sigachi-industries-buys-80-stake-in-trimax-biosciences-for-100-cr/article67180444.ece

The road ahead

With the commissioning of the added capacities, the total cellulose capacity of Sigachi is touching 22K Tons /A. With new capacities, Sigachi is looking at penetrating deeper into current customer base and wider to other markets/regions. Looking forward, Sigachi has strategically aimed to diversify its operations into the realm of human nutrition, primarily focusing on business-to-business (B2B) markets in India and export markets. It also aspires to expand its operations in 60 countries where it already engages in exports of excipients. Sigachis comprehensive product line, encompassing micronutrient premixes and spray-dried ingredients, caters to varied nutritional requirements.

Operations and management

The O&M industry continues to grow well, within India and abroad. Sigachi would continue to focus its efforts on Speciality Chemicals,Petrochemicals,WaterTreatment,andPharmaPlants. The Operations & Maintenance (O&M) industry in manufacturing is experiencing steady growth due to several key factors:

1. Increasing Complexity of Manufacturing Processes:

Modern manufacturing facilities rely on sophisticated equipment and automation systems. Maintaining these complex systems requires specialized skills and expertise, driving demand for O&M services.

2. Rising Focus on Efficiency and Productivity:

Manufacturers are constantly seeking ways to optimize production processes and minimize downtime. O&M providers offer preventative maintenance programs and data-driven insights to ensure smooth operations and maximize output.

3. Growing Emphasis on Asset Lifecycle Management:

Extending the lifespan of production equipment is crucial for cost-effectiveness. O&M services help manufacturers implement proactive maintenance strategies, minimizing the risk of unexpected breakdowns and extending equipment life.

4. Shifting Landscape of Talent:

The manufacturing workforce is aging, and theres a growing skills gap. O&M providers can bridge this gap by offering skilled personnel for maintenance tasks, allowing manufacturers to focus on core competencies.

5. Evolving Regulatory Landscape:

Environmental and safety regulations are becoming increasingly stringent. O&M providers stay updated on compliance requirements and ensure manufacturing facilities operate within regulations.

6. Adoption of Advanced Technologies:

Industry 4.0 is transforming manufacturing with technologies like IoT and AI. O&M providers are integrating these technologies into maintenance practices, enabling predictive maintenance and remote monitoring.

7. Cost Optimization:

Utilizing external O&M services can be more cost-effective than maintaining an in-house team, especially for specialized tasks. O&M providers offer economies of scale and expertise, leading to cost savings.

8. Focus on Sustainability:

Manufacturers are prioritizing sustainable practices. O&M providers can help optimize energy usage, minimize waste, and implement environmentally responsible maintenance procedures.

9. Growth of Emerging Economies:

Manufacturing is expanding in developing countries, creating a demand for O&M services to support these new production facilities.

10. Rise of Subscription-Based O&M Models:

Subscription-based O&M models are gaining traction, offering predictable costs and ensuring access to the latest expertise for manufacturers. These factors combined create a strong growth trajectory for the O&M industry within the manufacturing sector. Further, accelerated availability of total team at short notice is an added advantage in O&M model.

Research and Development

The Companys focus on continuous innovation has been the primary growth driver for establishing a rich legacy over three decades. A state-of-the-art research and development facility, approved by the Government of India under the Ministry of Science and Technology and the Department of Science and Industrial Research, coupled with the expertise of Formulation scientists, Sigachi has been at the forefront of innovation to adapt to the market dynamics. The Company has steadily established itself as a market leader in the excipient domain.

The Companys in-house research and development laboratory has top-tier amenities that facilitates comprehensive formulation tests and trials. From initial conceptualisation to laboratory experimentation and eventual commercialization, the department also conducts rigorous final formulation application tests to understand the true characteristics of the final drug forms. These measures guarantee the delivery of high-quality products to clientele. Furthermore, its team also extends support to customers through an interactive web portal. The "Ask an Expert" portal enhances accessibility and facilitates seamless engagement.

Leveraging a proven history of excellence in research, development and manufacturing, the recently acquired API unit will seamlessly integrate with Sigachis established portfolio of excipients. This acquisition offers a comprehensive solution that caters to both API and non-API requirements of customers. The Company is committed to enhancing its research and development capabilities and refining cost-effective manufacturing processes. While upholding the highest standards of quality, the Company aims to establish its position as the preferred manufacturer for national and international consumers alike. Sigachi has been granted about 7 patents in the field of cellulose and excipients.

Quality

Sigachi Industries Limited prioritises on delivering value to its consumers. It operates five state-of-the-art facilities with a combined production capacity exceeding 22,000+ Metric Tons Per Annum (MTPA). Additionally, the Company also maintains two dedicated research and development (R&D) hubs focused on adhering to quality assurance standards.

Sigachi has Approved Certificate of Suitability (CEP) for Microcrystalline Cellulose from European Directorate of Quality and Medicine for all its three facilities. Further, more than 20 Drug Master Files, Type 4 are filed with USFDA for our various grades of Excipients.

Financial performance

‘Focus on high margin yielding product mix and cost-effective manufacturing processes, effective management of inventory would result in increase of EBITDA and Profitability in coming quarters.

Sale of products increased to H 3,631.7 Mn from previous corresponding FY 23 of H 2,755.1 Mn. The revenue from exports demonstrated a notable YoY growth of 18.52%, increasing from H 2,022.6 Mn to H 2,397.3 Mn in FY 24 compared to FY 23.

Financial highlights

(Rs. in Mn.)

Particulars	FY 24	FY 23	FY 22	FY 21	FY 20
Revenue from operations	3,989	3,020	2,503	1,928	1,391
Gross Profit	1,727.20	1,391.80	1,118.40	738.40	508.50
EBITDA	766	587	531	388	248
EBITDA margin	19.20	19.43	21.21	20.12	17.83
PAT	572	436	400	303	203
PAT Margin	14.34	14.43	15.98	15.72	14.59
Cash flow from operations	128.91	290.16	58.50	295.51	121.38
ROCE	16	19	22	39	40

Key ratios

Particulars	FY 2023-24	FY 2022-23	% change
Debtors Turnover (no. of days)	137.27	96.88	41.69
Inventory Turnover (no. of days)	58.95	23.30	253
Interest Coverage ratio (in times)	9.82	13.68	(28.21)%
Current Ratio (in times)	1.67	2.38	(29.83)
Debt Equity Ratio (in times)	0.29	0.15	93.33
Operating Profit Margin (in %)	21.51	19.43	10.70
Net Profit Margin (in %)	14.34	14.43	(0.62)
Return on Net Worth (in %)	16.41	17.55	(6.49)

Debtors Turnover

This ratio serves as a quantitative measure of a companys proficiency in collecting receivables or outstanding payments from customers. It illuminates the companys adeptness in managing the credit it extends to customers and the expeditiousness with which short-term debts are retrieved. Computed by dividing the total sales of goods and services by trade receivables, the debtors turnover ratio indicates the efficiency of the companys credit management practices. The observed increase in the debtors turnover ratio can be attributed to a notable surge in sales experienced during the last quarter.

Inventory Turnover

The inventory turnover ratio quantifies the frequency with which a company sells and replenishes its inventory over a designated period. This metric is derived by dividing the revenue generated from the sale of goods by the average inventory held during the same period.

Interest Coverage Ratio

The interest coverage ratio serves as a vital indicator of a companys ability to meet its interest obligations on outstanding debts. This metric is computed by dividing the earnings before interest and tax (EBIT) by the interest expense. The observed decrease in the interest coverage ratio can be attributed to a reduction in gross profits coupled with an increase in interest expenses.

Current Ratio

The Current Ratio, a liquidity metric, evaluates a companys capacity to settle short-term obligations or those maturing within a year. This ratio is derived by dividing the current assets by the current liabilities. The observed decrease in the Current Ratio can be attributed to a rise in borrowings and trade payables.

Debt Equity Ratio

This ratio serves as a tool for assessing a companys financial leverage, providing insight into the extent to which the company finances its operations through debt relative to its internally owned funds. It is computed by dividing a companys net borrowings by its shareholders equity.

Operating Profit Margin

The Operating Profit Margin is a key profitability metric utilized to gauge the percentage of profit generated by a company from its operational activities. It is computed by dividing the Operating Profit (also known as PBDIT - Profit Before Depreciation, Interest, and Tax) by the Revenue f rom Operations.

Net Profit Margin

The net profit margin signifies the proportion of net income or profit generated in relation to total revenue, expressed as a percentage. This metric is computed by dividing the profit after tax for the year by the total revenue for the same period.

Return on Net Worth

The Return on Net Worth/(Equity) serves as a metric to gauge the profitability accruing to equity holders. This measure is computed by dividing the net profit after tax for the fiscal year by the average shareholders equity over the same period. The decline in Return on Net Worth can be attributed to a reduction in net profits, primarily stemming from an increase in expenses related to finance costs and Depreciation and Amortisation Expenses.

Human resources

The Company acknowledges the value of its workforce in driving continued growth and success. Therefore, Sigachi invests in its human resources to ensure that it continues to play a pivotal role in further sustaining the Companys operations. Furthermore, employees are encouraged to pursue innovative and engaging project to facilitate both personal and professional development. The Company aims to foster a workplace environment wherein all employees are uniformly valued and provided due respect.

Internal control and adequacy

The effectiveness of internal controls is necessary to lower the risk of financial loss. It contributes to the correctness, thoroughness and reliability of financial accounting. The internal financial control mechanism of Sigachi is quite effective. The Companys internal financial controls and internal control systems are adequate, functional and appropriate given the nature of its operations and the scope and complexity of its activities. The Audit Committee evaluates the performance and adequacy of the Companys internal control system, especially internal financial control. The Company promises ongoing monitoring of its risk-based supervisory measures. The Company has taken the necessary precautions to maintain proper accounting records, as required by several regulations.

The Company has received several accolades due to their expertise in building world-class products and delivering excellent services to consumers worldwide. Furthermore, Sigachis facilities are EXCiPACT GMP, SGMP, HACCP, EDQM CEP and ISO 9001:2015 certified.

Disclosure of accounting treatment

The Company followed the necessary accounting procedures and made sure they were implemented consistently. No variations from the procedure outlined in the accounting rules announced under Section 133 of the 2013 Companies Act have occurred.

Disclaimer

Certain statements about future prospects in this section may be forward-looking statements, which involve a number of underlying, identified or unidentified risks and uncertainties that could cause actual results to differ materially from those projected. In addition to the aforementioned macro environmental changes, Russian-Ukrain war, Red Sea Crisis might present an unanticipated, unexpected, unknowable and ever-evolving danger, among other things, to the Company and the environment in which it operates. Some of the facts and numbers in the study have been derived from the outcomes of these assumptions, which were based on accessible internal and external information. The estimations on which these assumptions are based are liable to change since the underlying variables are dynamic in nature. Any forward-looking statement provided here only reflects the Companys objectives, beliefs and current expectations and only as of the date on which it was made. It may be revised or updated by the Company at any time without notice in response to new information, unexpected circumstances, or other factors.