Sigachi Industries Limited (SIGACHI) Earnings Call Transcript & Summary

Welcome to Sigachi Industries Limited Earnings Conference Call to discuss the Q1 FY '25 results. We have on the call Mr. Amit Raj Sinha, Managing Director and Chief Executive Officer; Mr. O. Subbarami Reddy, Chief Financial Officer; and Mr. Vivek Kumar, Company Secretary and Compliance Officer. We must remind you that the discussion on today's call may include certain forward-looking statements and must be, therefore, viewed in conjunction with the risks that the company faces. May I now request Mr. Amit Raj Sinha to take us through the company's business outlook and performance, subsequent to which we will open the floor for Q&A. Thank you, and over to you, sir.

Thank you, Priya. Good afternoon, ladies and gentlemen. Welcome to Sigachi Industries Limited Q1 FY '25 Earnings Conference Call. I hope you have had the opportunity to review our financial results and the investor presentations available on the exchange. I'm pleased to report that Sigachi Industries has started FY '25 on a strong note, delivering strong performance across all business segments. As a leading manufacturer of excipients, Sigachi operates predominantly across three segments: excipients, especially microcrystalline cellulose, Operations and Management, and API. Our operations are supported by five state-of-the-art manufacturing facilities. Our core segment, MCC standouts for its unique binding properties, making it a top choice as a directly compressible binder and offering broad API compatibility. Our MCC manufacturing facilities at Dahej, Jhagadia and Hyderabad have a combined capacity of 21,000 metric tons per annum, efficiently serving domestic and export customers as well. In the O&M segment, we have established partnership with prominent entities like Gujarat Alkalies, Aditya Birla Group, ONGC, Lords Chloro. The growth trajectory of this segment aligns with our strategic objectives. Recently, we have added Adani Solar Power at Mundra to our client rosters. We are confident in our ability to maintain excellence in this segment with significant growth potential ahead. Last year, we acquired Trimax Biosciences, adding the API segment to our product portfolio. Our current production capacity stands at 100 KL, and we plan to expand it to 250 KL with an estimated CapEx of around INR 60 crores. Lastly, we are in the process of setting up our CCS facility at Dahej, which is located 1 kilometer from the original unit. This facility would be dedicated for the production of cross carmellose and complex excipients products. With an estimated CapEx of nearly INR 90 crores, the initial production capacity will be 1,800 metric tons per annum, which will be scalable up to 3,600 MTPA. This facility will significantly enhance our product portfolio in the excipients segment. The customer base for MCC and CCS are complementary with potential overlap for API customers, positioning us to capture the larger portion of our customer spending with these complementary products. Geographically, our expansion has been remarkable with our presence now extending towards 65 countries. In the Middle East, we have formed strategic joint ventures to further our reach. Our wholly owned subsidiary, Sigachi MENA FZCO has established partnership in the UAE and Arabia, and Sigachi Arabia having a collaboration with Saudi National Projects Investment Limited. We anticipate that these partnerships will significantly improve our revenue growth moving forward. We will continue to explore opportunities in our core segments of excipients, API and O&M and of course, Allied Trade. We are committed to continuous improvement, focusing on enhancing our R&D capabilities and implementing cost-effective manufacturing processes. This will enable us to maintain our position as a preferred manufacturer with the highest quality standards. I now invite Mr. O. S. Reddy to give you a brief on the financial performance. Over to you, Mr. Reddy.

Thank you, sir. Good afternoon, ladies and gentlemen. I am pleased to present a comprehensive overview of our company's financial performance for the first quarter of FY 2025. The company delivered a strong financial performance in Q1 FY 2025, marked by robust growth across key metrics. Operating income exhibited a year-on-year revenue increase of 13% to INR 96 crores. EBITDA demonstrated a similar strength, rising by 28.05% year-on-year to INR 21 crores, translating to a margin of 21.94%. Net profit also recorded substantial growth surging by 17.4% year-on-year to INR 12.8 crores with a PAT margin of 13.38%. Building upon the momentum from the previous fiscal year, Q1 FY 2025 was characterized by robust financial performance. Revenue from MCC has experienced a year-on-year growth of 2.79%, increasing from INR 69.88 crores to INR 71.83 crores. In Q1 FY 2025, revenue from Operations and Management grew by 18.54% to INR 10.1 crores from INR 8.52 crores. Revenue from the API segment for quarter 1 financial year 2025 is INR 8.99 crores. As we diligently execute our strategic expansion plans, we are confident in our ability to unlock economies of scale and enhance operational efficiencies. These endeavors are fundamental to achieving a sustainable growth and delivering long-term value to our stakeholders. This concludes my formal presentation. Now we would be delighted to answer any questions you may have. Thank you.

[Operator Instructions] First question is from the line of Dhruv Mukesh Bajaj from Smart Sync Investment Advisory Services.

Congratulations on a decent set of results. My first question was that, sir, our margins on quarterly front has increased drastically despite lower revenues on the Q-on-Q front. So was this due to some moderation on the raw material front or there is some change in product mix?

This is -- yes, thank you. This is product mix and also our U.S. operations performed well, and that contributed overall performance and thereby increased the margins.

Okay, sir. And sir, how has been the pricing scenario in MCC in the past few years and some key capacity addition in the industry except ours, where we increased post the IPO. And what is the current capacity utilization in that particular segment, if you can share that?

Yes. Sure. Thank you. And capacity utilization by 31st March 2024, we were at around almost -- from unit-wise, if you see Dahej around 93.4% and Jhagadia, it was 97.3%, and Hyderabad unit also 93%. Overall, it was around 94%. And in -- during the first quarter, Dahej unit, it is around 56% and Jhagadia, it is 53% and Hyderabad, it is 86%. Overall, it is 66%. This is because the expanded capacities, we have increased the capacities in Jhagadia and Dahej by 7,000 metric tons. around 3,600 metric tons each at Jhagadia and Dahej. This we are at to occupy. This is the first quarter. Going forward, we'll not pay this. By next year, we'll not pay in full FY [indiscernible].

So this capacity will work at optimal capacity by the next year, right?

Yes, yes, correct. And coming to pricing, this pricing is a little -- in this quarter, this is moderate. There is not much growth in pricing because we are concentrating on the volumes to our capacities. And going forward, it will increase.

But it is expected to be stable, right? That's what I'm trying to get.

Yes, stable, stable. But the only thing is there not much increase would be there.

Got it. Got it. And sir, since I'm a bit new to this business, so can you please share the nature of our O&M work and the margin profile in that particular segment?

Mr. CFO, I'll just speak on this. So the nature of the O&M work is such that we carry out operations and management of specific plants in the vicinity or in the premises of the big players, specifically the chemical players. So if you look at the Grasim Industries, we operate their stable bleaching powder plant. So they give us the asset and they give us the utilities with our technical expertise, we run their chemical process plants, and we give them savings in cost. We give them improvements in the yield. And of course, they earn better money when Sigachi operates. This is the way we operate. And especially for certain products where we have been having O&M across a reasonable volume of the total capacity in India, we are able to balance out our expertise across these plants and give them a cost saving to the customers.

Got it. And what is our margin in this type of business, if I can understand.

It's usually between 21% to 23% EBITDA.

Okay. Similar to our overall business, right?

Absolutely.

Got it, sir. And sir, if I can just squeeze in another question. Then can you share what are the expected revenue contribution from Sigachi MENA and Sigachi Arabia in the coming years? And how have they held in this particular quarter?

So Sigachi Arabia and the Sigachi Global, the two joint ventures under Sigachi MENA, our wholly owned subsidiary, we are still doing the setup of the whole total business and building up of our team members there for potential businesses. So at this moment, in the last quarter, we have had no revenues from our joint venture partners there. We did have revenues directly from our core business of excipients, APIs and food and nutrition, but nothing from the joint venture, which have been formed.

Okay. So are you planning some CapEx on that front in the coming 2 to 3 years or something? Or that will be more of like a distribution [Foreign Language] business?

No, no, no. It is not distribution business. With our Sigachi Arabia, our joint venture partner, we have given them if the business in Arabia moves ahead positively, we will commit to a CapEx in Saudi after 3 years.

Okay. After [Foreign Language], again, I'm just trying to gauge that in the next 2 to 3 years, we don't have any new CapEx plan?

No, no, no. None at this moment.

The next question is from the line of Deepesh Sancheti from Manya Finance.

Okay. What is the target revenue contribution of the company is looking from the regulated markets?

For which product are we speaking this, Deepesh?

MCC.

Deepesh, our exports are 2/3 in MCC. And you are talking about MCC or which products you are talking about?

Yes, I'm talking about MCC.

Yes, 2/3 are exports and 1/3 will be domestic.

MCC as well as API.

So, Deepesh, here if I would add -- CFO, you go ahead. You go ahead. If there's anything else, then I'll add in later.

Deepesh, in API, at present, we are selling at domestic only. And we are focusing on regulatory market, but it will take some time, maybe 9 months or so. And we have filed some European license, EDQM, and already a safety is there for intermediate, and then we are looking for the final API also. It takes a little time. Now we are focusing on domestic market for the APIs. MCC anyway, we are already supplying for the exports, regulatory market.

So, Deepesh, I'll just add in. For the MCC, of course, CFO has indicated 2/3. For the APIs, when we have taken over our -- the Trimax Biosciences, the CEP filings for the Trimax was zero. They were primarily into advanced intermediates and were a U.S. FDA-approved facility. So taking that as the base, we have commenced and we have filed in three CEP filings for our products in EDQM, European Union. And for the current financial year, we have a target that we will file in a total of nine CEP filings for our APIs. Once these CEP filings are approved, then, of course, the regulatory sales commences. We believe that in the next 9 months or so, we should start having approvals coming in from the EDQM.

Okay. And how will the increased capacity impact your market share and revenue in the API segment?

So revenue in the API segment in the current financial year, revenue from the regulated markets is going to be miniscule. We might still have some exports in the ROW markets, but revenue from the regulated markets is going to be very small, insignificant actually. So I don't see any impact on the regulatory finals coming in for the APIs in the current financial year.

No, I'm talking about the market share, which is there currently. Currently, how much -- you've increased the capacity in API, right?

No, no, no. We haven't increased the capacity. The capacity in API continues to be at 100 KL reactor capacity. We intend to invest further to add it up to 250 KL, not at this moment.

Not at this moment. And what is the capacity utilization this quarter?

Capacity utilization is around 70%.

70%. So you have that, okay, you can go ahead. Fine. Can you provide me details of your recent O&M contract wins, especially the partnership with Adani Solar Power?

So what exact details would you need, Deepesh?

I mean the details which -- I mean, what is the nature of the operation and maintenance? Because what you said right now about, I think, the other company that you manage some other companies' operation and maintaining.

Grasim Industries.

Grasim, yes. For Grasim. So for Adani Solar, I mean, for solar power, how does that work?

No. I mean, do you want me to explain you the production process or the operation process? What kind part of the earnings call purview?

What is the nature of the contract as in what are we going to do?

It's an operation and management contract, Deepesh. We run their operations for the solar power plants.

For the solar power plant. So does that open avenues to other solar power plants also?

Of course, of course. See, we have built up some competence in the solar power segments. The kind of turnaround we have from the solar energy to their panel boards is better than what other vendors have. We are trying to showcase this to the other solar power manufacturers nationally and internationally to show that if Sigachi comes in an O&M partner, you guys stand to benefit by sense of percentage. And this is what people come in and kind of look at us as an alternative partners for their O&M.

Right. No, I also wanted to ask is, what is the margin situation in this kind of contracts because they are basically service contracts, right?

Yes.

So the margins would be much higher. I mean you mentioned about 20%, 25% you have in margins. I thought that the margin should be much higher in this.

20%, 23% is the most reasonable margin range, which we have experienced. Until the product is very -- is a dangerous process or until there are very high technical capabilities essential, the margins, I don't see them going so much beyond because the O&M or the asset owners also purview of our picture of what is it that the whole process entails. So they are not going to let us go with a margin of 35%, 40%. I don't see that happening anytime.

Okay. Because O&M was actually a very -- I mean, interesting concept. So I just wanted to know what are the industries which we can provide O&M with, apart from solar.

So solar is just a new entry. In fact, I would say we have built a competence over the last 15 months. Sigachi is historically, the strength has always been in chemical process plants. So we are trying to kind of build up on it. And at the same time, at this moment, as we speak, we are working to see how we are adding up competence in our desalination plants because in our subsidiary in the Middle East, we see desalination as a national asset there. And there are annual contracts which are given out to players. So we are trying to build up competency to see that we qualify ourselves and subsequently participate in the tenders.

Right. I mean, I could see from your slide -- in Slide #12, you mentioned that the O&M business has grown from INR 9 crores to almost INR 35 crores. Where do you see going it for the next 2 years? Especially with Adani also coming in and we'll be -- I mean, trying for more companies?

Yes, yes. So we believe that it has got an infinite growth opportunity primarily because Middle East is a complete O&M market. That means everything in the Middle East runs on operation and management. The owners don't run their plants anytime. So -- and that's one of the prime reasons that with our joint venture partners, we believe we should be able to penetrate much faster and much deeper into the O&M of various industries there as we build the competence for it.

Okay. And how much -- just the last question now. Just the last question, if I can squeeze in. What is the ROE which is expected over the next -- in FY '25 as well as FY '26? Because our ROE has somehow dipped over all these years.

Yes, Deepesh, this one -- this year also, it will more or less a little small change would be there. Going forward, it will improve because all the investment we have into the system and then that fruits are to come. This expanded capacities also have just started utilizing. Once we reach to the peak, then this ROCE and ROI will improve.

So all the new investment will generate the same ROE or will be a better ROE?

Better, better ROI. But the occupancy level should increase to get a better ROI. That's what I'm telling.

The next question is from the line of Nihal Shah from Prudent Broking Services.

So like as we don't have any CapEx plan for another couple of years, as we said on the call, so do we expect the debt levels to reduce in this year or the next? Because last year, our debt almost doubled. It increased quite a lot. So are we planning to reduce that in coming times from the cash flow that we generate?

Yes, yes. So definitely, this -- by end of this year, almost debt would be -- a zero level would be there.

Okay. That's great to hear. So how will we be able to do so? Because the cash conversion cycle of our company has been pretty high last year. So how do we plan to bring that down as well?

Now we have constituted to reduce the collection period, debtors collection period. And now anyway, as a strategic plan, we are increasing our raw materials because raw material prices are going up and then we thought of taking that advantage. And anyway, this now except small term loan is there, that's why it is showing. But anyway, we are paying it off in this -- during the year. Then only working capital would be there. Against that, again, some current assets means liquid assets in assets also would be there in terms of margin money or FDs that will nullify this thing. Net adjusted debt would be zero.

And so in the O&M business, so is there the collection period higher than our product, product business of MCC, API and other one?

Not so. There, it is around 45 days.

Okay. And for the MCC business, it is around?

It is around 60. Even nowadays, it is increasing up to 90, 95. There is some problems in some other countries. And there is -- but we are getting at once and then there is some delay. And after solving their problem in the countries, the currency issues and all, they are paying it off. There is no threat or there is no this thing, but some delay we are requesting for of business, we are also expecting our support.

So this year, we can bring it down from around 180 days to how much days do we have any target in our mind?

You mean to say operating cycle. 30 days, it will come down overall. Operating cycle.

30 days.

Yes, 30 days, it will come down. And then slowly, we'll reduce it.

The next question is from the line of Vilina Jain from Perpetuity Ventures LLC.

I wanted to understand what the current debt situation is related to the acquisition of Trimax.

Yes. Acquisition of Trimax, you are asking about debt situation?

Yes.

Yes. In this thing, already we have raised fund preferential share warrant for this. We have raised around INR 100 crores for -- total INR 160 crores for acquisition and expansion. And there are INR 60 crores kept aside for the expansion of the facility, API facility from existing 100 KL to 250 KL. -- another 150 KL will increase. But that also fund and then there is no need to raise any debt.

Understood. Also, if you could explain how the raw materials are different for CCS and MCC?

So, Vilina, I'll tell you both of them are from the same family of cellulose. MCC, the raw material is purified pulp and purified pulp is technically cellulose and the finished product for the purified pulp comes out as microcrystalline cellulose. Now the raw material for the cross carmellose sodium is CMC, carboxymethyl cellulose. And that gets converted into cross carmellose sodium. So basically, they are all very similar in their procurement and the same family of raw materials. We would definitely have synergies in purchase of the raw material for MCC and raw material for CCS.

Got it. Understood. And what is the status of CCS as of this quarter in terms of environmental clearance?

So just 4 days back, we have had another review by the Gujarat Pollution Control Board, EC Committee. And I believe we have cleared all their queries. I don't foresee any further queries coming in. So that should imply that in the next 4 weeks, we are expecting to get the EC clearance documents.

Okay. And lastly, sir, if you could elaborate on your go-to-market strategy for the combined MCC and API product offerings?

So our go-to-market strategy is primarily focused on the regulated markets. Like we spoke earlier, 65% of our production in the excipients is for the export market. Out of 65%, nearly 50% of our markets are the regulated markets, which are U.S., Europe, Australia and the U.K. So considering that 50% of the Sigachi produced are in the regulated market, I would want to synergize this with our APIs going into the same set of customers in these regions once we have the regulatory approvals coming in for our APIs. For the other regions, we will continue to operate via distributors because it's not worth it to have our own individual presence because distributors have the last mile connectivity with the end customers, especially in the Southeast Asian market.

The next question is from the line of Manav Vijay from MV Investments.

So maybe the first question is regarding the JV that we have with Saudi Nation project. So we were expecting to do $180 million sales in this year, FY '25. So are we on course to do the sales, sir, this year?

So, Manav, it was such that when we had our Board meeting in the subsidiary and in the JV, our joint venture partners worked out a comprehensive plan, and it came out with a $180 million sales. And because it was a documented thing, it came to Sigachi MENA, our subsidiary. And from there, it came to the parent company. And because it was a big transaction, we had kind of posted it to the stock exchange. Now when we look at it deeper, we realized that we need to be gradual in this because $180 million, there is market potential available -- but for that, for the kind of bid bond, for the kind of tender valuation, which we have to put in money, it will be tremendous and our -- probably our working capital and our cash flow will not permit us to put in that level of funding upfront. So we are trying to balance out as to what is it that can be tapped into and what is the kind of revenue we can have by having contracts and tenders in place for our subsidiary.

Okay. So sir, let's say, if you have done your reworking, what kind of number can we expect this year?

So it will be very difficult to put in place, Manav, because we are still kind of setting up the bank accounts and putting the people in place. So it will be very premature to give you any number. It was a documented Board meeting outcome, and it had to be shared with the exchange. And rightfully, it was just done so that there is nothing which remains price sensitive only with us.

Okay. So the next question is regarding the money that we had raised to warrants to the pref route. So of that money, we were supposed to do some CapEx in Dahej, some in Jhagadia and also some in Hyderabad for the upgradation as well as, I believe, for the expansion as well. What is the status of these three work, sir?

Yes. Manav, this Dahej and Jhagadia, almost it is in the flag and maybe 95% already we have spent that INR 50 crores was allotted for Dahej and Jhagadia that has almost incurred. And for Hyderabad facility, INR 22.1 crores was allocated -- allotted. And in that around INR 5 crores we have incurred. And there is this API unit, Raichur, we have paid around INR 93 crores, INR 94 crores for the acquisition. And the expansion is yet to take place.

But Mr. Reddy, so the result pilot that you have done today on Page 8, where you put out the proceeds you get from the warrant and the amount incurred till 30th of June, okay? There in both -- in both these projects in Dahej, Jhagadia and Hyderabad, in total, INR 71.5 crores, the total amount spent till June 30 is -- you are saying that 95% has been spent Dahej. So these two things don't match, sir?

Yes. This we have incurred from our internal accruals and some towards from bank debt, Dahej and Jhagadia. This -- if you see this INR 92 crores, INR 93 crores already we have paid from this preferential share warrants. And there is INR 50 crores allotted for Dahej and Jhagadia that has been incurred. Only thing is once we collect the amount, then that will be paid off the loan.

Okay. Okay. So you would raise that money from the warrants...

Technically, we have incurred because we don't want to delay the project and then we have to complete it. That's why we have arranged the funds. Our internal accruals also arranged around more than INR 20 crores, and then we have completed. That's why.

Okay. Sir, in that case, can you explain what will be the outcome of the upgradation or the expansion? Because right now, we have a capacity of 21,000 tonnes.

Yes.

After you spend this INR 72 crores, we move to what, sir?

Yes, that is 21 -- see, after incurring that only, that is 21,000.

After incurring.

That INR 50 crores is for rising that to the INR 21 crores, that INR 50 crores is one part of that. That there is no separate allocation. That is for upgradation of that facility, there are pallets and R&D labs we have put and then coatings and there is this expansion towards the PCB norms and all for this, we have incurred that already we have taken care. That is fund allotted from the preferential share warrants only. So, meanwhile without stopping the project we have completed. In last question, previous in my -- somebody -- in my previous this thing, somebody has asked about the loan debt portion. Debt portion, I said that we'll repay it. We'll get the thing a preferential share warrants amount also, and then we'll repay that. There will not be any long-term debt for FY 2025.

Sure. So sir, my last question is regarding an announcement that I believe you guys have made on LinkedIn, where you have mentioned something to do with the capsule coating, and you mentioned that it will be a revolutionary technology. If you can just tell -- let's say, if you can explain what this technology is, what that you guys trying to do? Something more on that would be really helpful, sir.

So I think, Manav, we will come out with the press release at the appropriate day. We are just building up the excitement in the social media for this launch. We haven't declared it anywhere, but we will come out with a press release going to the stock exchange on the appropriate day.

Okay. And sir, is that day too far in the future?

No, no, no. It is not too far.

Or it is nearby.

No, no. It is close by. That's why the excitement. Otherwise, the social media, the memory is just about 24 hours to 48 hours right now. So it is not very far. It's reasonably close.

Okay. Sir, maybe -- so maybe one last question. So on Page 10 of your PPT, you have given plant-wise volumes that you have done in this quarter. And then on Page 19, you have given a submission of the entire volume down. So these two figures don't match, sir. If you can just maybe let's say after this call or later if you can let's say post the correct same figures, because if we sum up these three numbers given on Page 10, it comes up to roughly 3450 times, whereas I believe that in the PPT on Page 19 you mentioned some 3,500 or so, 3,540 -- 3,504.

Sorry, you are talking about Page 9 and?

Page -- okay. I'll tell you this is -- so this is Page 10 and Page 19.

Okay.

So these two volumes don't match, sir.

Yes. One is the sales...

I think one is adding...

One is production and the other one is sales. One is the production and the other one is sales.

Okay, Okay, sorry my bad.

Yes. Page 19 is sales quantity.

And Page 10 is...

Page 10 is sales.

Okay, my bad. Thank you and all the best.

The next question is from the line of Naman Murarka from NFSL Limited. The current participant is not answering. So we'll take the next question. The next question is from the line of Devanshu, which is an individual investor.

My question is to CEO, sir. Last quarter, I think you mentioned that one of the clients did not give you the order and you held back sales. I just want to understand like first, why is there is quarter-on-quarter decline? Because I was of an expectation that you will get revenue from that client. So if you can just throw some light on that. Did you get the sales from the client that you had mentioned last quarter?

So we, of course, got the sale, Devanshu. And on quarter-on-quarter decline, I'll tell you that historically, we have always had this thing where our Q1 sales are lesser than the preceding quarter sales. I think it is -- if I'm able to recollect, I think it's more than 6, 7 years that we have had this thing that the Q4 sales -- after the Q4 sales in the Q1, there is a sequential drop.

Okay. My second question is again in the line of API. Like I know that domestic market has a lower margin and right? And the company aims to go into regulated market because the margins are pretty good in regulated market. Can you just throw some light what's your plan and what's the status on API? What the licenses look like? Did you get any approval? Or have you filed any approval request, something like that?

Yes. Devanshu, I just spoke around 20 minutes back that we have got -- we have filed three CEPs for our APIs. And for the current financial year, we intend to file a total of nine CEPs. At this moment, we haven't got any approval, but I believe that we will commence getting our CEP approval from EDQM towards the -- maybe in another 9 months. So maybe by the Q4, you should expect approvals to come in, and that is when we'll start our sales cycle for the regulated markets.

I think one last question, I just squeeze that in. One of your competitors, again, Asahi Kasei, who is a Japanese company, they also did an investment in MCC in 2023 worth around INR 763 crores, right? I just want to understand, is there -- because they are expecting a surge in demand and you're also expecting surge in demand. I just want to understand that if everyone does a CapEx, which basically means increase the capacity, like how much of the demand that the global team is looking for because every company in the global world is doing CapEx. Just want to understand the balance between supply and demand.

Yes, Devanshu, that's a very, very relevant question you have here. See, there are market research studies which indicate that MCC market is expected to grow, especially in the Southeast Asian region, it's expected to grow between 7% to 9% up to 2035. Now 7% to 9% is still a miniscule number considering the volume of CapEx, which is happening. Now if you look at Asahi specifically, Asahi is the market leader, probably 90% of the Japanese market is with Asahi. And Asahi sells MCC at nearly $10 or $11 a kg. Whereas the other international players, we have it around 2.5 to 3.5 to certain grades, which even sell at $6, $7, but definitely not the $10 one. So I believe there is market growing. There is no doubt about that because MCC is a very versatile product in the pharma, food industry. However, I still believe that everybody has their niche, Asahi catering to certain segments only in the Japanese market. I mean, Asahi, those certain players import the Asahi product here, but the volumes are just miniscule. And likewise, any of the other players importing -- getting exported into Japan, the volumes are miniscule because the Japanese guys just don't accept our way of working and the quality standards, what they expect. I mean they want. So likewise, our products are primarily going into the regulated markets, wherever there are patents going off patent, I mean, the formulations going off patent and of course, to the unregulated or the ROW markets where the volumes are far, far, far more.

Got it. Understood. I think this is clear because you guys goes into regulated and Japanese companies like Asahi and more into...

Devanshu, we can't be focusing on all the segments. We have to have one focus. And of course, for that, it is regulated. The APIs just complement our product portfolio, the CCS complements our product portfolio. Everything else becomes secondary. So domestic market is a secondary thing. It's not really the focus. When we don't have as much, we look at selling it in the domestic and the ROW markets.

Understood. I got it. The reason I ask is because I read various articles and that's why everyone is doing CapEx. So everyone is expecting demand, everyone is rising supply. So I just want to have that balance to understand where Sigachi plays uniquely. So thanks for that clarification really. And I'm excited to also listen to the LinkedIn update. So eagerly looking for that update as well.

Absolutely.

The next question is from the line of Naman Murarka Mora from NFSL Limited.

Okay. So first of all, congrats on the great results. I would just start off with the question, the CapEx, which we are expecting, which we are doing right now, from when are we going to start looking at its impact on the results on the top line because the top line now on quarter-on-quarter is, of course, growing, but not at a phenomenal pace. So from when are we actually going to see the impact of the increase in capacity and start using the extended capacity?

We should see that in the coming quarter, Naman.

Okay. So in the coming quarters from quarter 2 of FY '25, the capacity would be utilized?

Yes, yes, absolutely.

And at what CAGR we're expecting the top line to grow from last year?

So from last year, I mean, I would say that I have always claimed that we have had a growth of 25% CAGR always. We work to see that how is it that we can continue to maintain this or better this.

Okay. So the minimum growth expected is 25%, but it can go much further than that using the capacity.

Yes.

That is great. And if we talk about the bottom line, if we have started repaying back the loans and there is no further CapEx plan further, so the results -- so are we going to see the impact on bottom line margins getting better from the next quarter?

CFO, what is your feedback?

Yes, Naman, for time being, we will maintain, the sustainability is there. And then going forward, it will increase. So immediately, there is no increase. Bottom line margins we will maintain. It will be maintained.

Right, right. Okay. And the next question is regarding MCC, sir. So we are -- I have seen the product mix of MCC is competitively going down in terms of full revenue share of the company. So is that an alarming sign because when the core product of the core revenue source from the company is from MCC and it's going down in terms of other products? What are your views on that?

So, Naman, here, I would say that I think you should be happy that MCC in its absolute value is going up and that company is diversifying and have steady revenue streams from other activities, which are gradually also becoming core.

The next question is from the line of Abhishek Gupta, which is an individual investor.

I have a few questions regarding -- first is regarding the operations and management contracts that we back. So what are the average duration of these contracts like the Grasim, Solar -- Adani Solar and Adani Enterprise that you display on this presentation. So what's the duration of these contracts?

Most of it for 5 years period.

5-year period. And the revenue remains same throughout the tenure for majority of the contracts?

No. For most of the contracts, revenue is a mix of the production and the -- I mean, the more amount they sell, the more they produce. And the more they produce, the more revenue we get...

Okay. So it's correlated to the production.

Absolutely.

Okay. And the next question I have is regarding what the previous investor told that regarding the revenue mix, the MCC has around 3/4 of our revenue mix. So down the line 5 years or 3 to 5 years, where do you see the MCC revenue should be and the operations and management, considering the API has a limited growth?

So I see, Abhishek, APIs are going to take over the moment we have our regulatory approvals in place, our focus will be that we completely market it in the regulated market and boom up APIs as much as possible. And by then, the 250 KL capacity also would be on track. So I believe that at least 35% to 40% of our revenue should be coming in from the API. Operations and Management should add into around 20%, 25% and the balance should be from the excipients, not just MCC because we will also have cross carmellose sodium. So it will be a combination of excipients and that should -- the balance should add up from the excipients. And Food & Nutrition should be maybe a little less than 5%.

Got it. So approximately 50% will be the core MCC and rest will split across.

In the APIs and the O&M.

Correct. Just last one, like for the MCC, we have -- do we work on the order book structure like we cater to produce and do we maintain an order book something? And out of the quarterly product sales, what is the revenue mix for the repeat orders and the new orders? Because in the last presentation, you were referring to that increasing -- gaining the market share. So what's the mix for the repeat orders and the new customers?

So repeat orders are typically 80% of our volumes and value. 20% is the new business development, which comes in. Sometimes it goes to 85%. Sometimes it is even touched 90%. But we have historically seen that 80% is the repeat order, 20% is the new customer or the new grade. Sometimes if our MCC was being taken to make paracetamol and suddenly they have started making brufen, I would -- we would also call that as a new order.

It's repeat.

Yes. No, no, it's not a repeat because if brufen volumes are going to shoot up, that will give me additional business from the same customer. It was not for the same finished product. So paracetamol volumes going up was part of the same repeat order. But if suddenly our approval has come in from brufen and for brufen, the MCC requirement has shot up, then I would technically call it as a new product and a new order, maybe from the same customer, but a new order.

Got it. And what's the status of the order book that we have for MCC or any other?

We have a healthy 6 months order book in place.

The next question is from the line of Rama Gopal, which is an individual investor.

This is regarding O&M contract with Adani Solar. Sir, what is our USP that such a big company give O&M contract to ours?

So, I mean, if you were to bring out a statement -- single statement of USP, I might not be able to tell you anything. But I'm sure you will believe that if Adani gives us the contract for O&M, there is certain USP in Sigachi that Sigachi wins the contract from Adani. So I think...

So I'm proud of it, sir. That's why I'm asking.

No, no, no. Of course, it is just that I might not have a single statement to speak on the USP. I mean there is a presentation behind it that Adani sees and Adani questions us and there is a technical debate and then there is a commercial bid. And then finally, Sigachi wins the contract. But there is a USP behind it, and there is a method in the madness of all that happens in getting such big massive contracts.

No, no, no. What I'm seeing is in the future, many people are looking at us to want to get a big player in pipeline. That's why we are very much excited about this.

No, no, no, sir. I would say that this is absolutely right because of the focus on ESG, because of focus on sustainability, because of focus on renewable energy coming in, this industry is, of course, moving. And it's moving in because these big players are putting in all the facilities in-house. So it is going to kind of expand and this expertise of what we gain in with Adani is going to kind of multiply manifold with other industries in India and possibly even in the Middle East because this is what our joint venture partners are doing in the Middle East for getting contracts. As a shareholder, we are hoping for that.

Yes, yes. As a shareholder, we are hoping for that.

Wonderful.

In the interest of time, this was our last question for today's conference call. I would now like to hand the conference over to Mr. Amit Raj Sinha, MD and CEO of Sigachi Industries Limited, for closing comments. Over to you, sir.

Thank you all for participating in this earnings con call. I hope we were able to answer your questions satisfactorily, and at the same time, offer insights into our business. If you have any further questions or would like to know more about the company, please do reach out to our Investor Relations Manager at Go India Advisors. Thank you, and have a wonderful day.

Thank you, everyone. On behalf of Go India Advisors, that concludes this conference.