Sigachi Industries Limited (SIGACHI) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Sigachi Industries Limited Q2 H1 '25 Earnings Call hosted by Go India Advisors. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Riddhi Shah from Go India Advisors. Thank you, and over to you.

Thank you, Iqra. Good afternoon, everyone, and welcome to Sigachi Industries Limited Earnings conference call to discuss Q2 and H1 FY '26 results. We have on the call Mr. Amit Raj Sinha, Managing Director and Chief Executive Officer; Mr. O.S. 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 risk that the company faces. May I now request Amit Raj Sinha to take us through the company's business outlook and performance, subsequently to which we will open the floor for Q&A. Thank you, and over to you, sir.

Thank you, Riddhi. Good afternoon, ladies and gentlemen, and welcome to the Q2 and H1 FY '26 Earnings Conference Call of Sigachi Industries Limited. The financial results and investor presentations have been uploaded on the stock exchanges. I hope everyone had an opportunity to review them. I would also like to take this opportunity to wish everyone a very happy and prosperous Diwali. I'll begin by sharing an update on the ongoing evaluation and restoration effort of our Pashamylaram facility in Hyderabad. The government-led investigation is still underway. However, preliminary findings from our internal reviews supported by independent safety experts indicate that the incident was caused by a localized dust explosion in the dry section of the facility. The restoration work at Hyderabad unit is progressing in a phased manner [Technical Difficulty] production has been relocated to our Dahej and Jhagadia facilities to ensure uninterrupted supply to our customers. The future course for the Pashamylaram facility will be finalized once the detailed findings of the investigation are received. Based on current assessments, the facility is expected to remain [Technical Difficulty]

Ladies and gentlemen, the management line has been disconnected. Please hold while we get them reconnected. Ladies and gentlemen, thank you for being on hold. The management has been reconnected. Thank you, and over to you.

Thank you. Based on current estimates, the facility is expected to remain under temporary shutdown for around 180 days with an estimated revenue impact of approximately INR 60 crores. As part of our comprehensive support measures, Sigachi has rolled out interim compensation and ex-gratia financial assistance for the families of the colleagues we lost as well as those in June. We have taken full responsibility for hospitalization, critical care and all medical expenses. Beyond this immediate response, we have strengthened our safety systems across the organization to prevent such occurrences. Comprehensive safety reaudits have also been completed at our Dahej and Jhagadia units. We are taking this opportunity to not only review our systems, but to embed a deeper culture of safety and accountability across all levels of the organization. Sigachi remains fully committed to upholding the highest standards of safety and compliance, ensuring that the well-being of our people always comes first. From an operational standpoint, I'm pleased to share that our facilities continue to operate smoothly, ensuring business continuity. The prompt relocation of production to Dahej and Jhagadia helped us maintain supply consistency for our customers without disruption. This agility demonstrates the strength of our manufacturing network and the operational resilience we have built over the years. Meanwhile, our capacity expansion and the growth initiatives are progressing well. We have fast tracked at 12,000 metric tonnes per annum capacity expansion of MCC at the Dahej SEZ facility, where the civil work has already started. Once completed, this will enhance our total MCC capacity to 30,000 metric tonnes per annum. We expect this unit to be commissioned by Q3 FY '27. This expansion will enhance our ability to serve growing global demand and strengthening our position as one of the leading global MCC manufacturers. On the CCS front, the project continues to move forward steadily, and we are on schedule to commission the plant by Q3 FY '27. This facility represents an important step in our strategy to broaden our excipient portfolio and capture opportunities in the high-value segment. We also continue to focus on strengthening margins through portfolio optimization and operational efficiency. Our emphasis remains on high-value, high-demand products while gradually reducing focus on low-volume SKUs. This disciplined approach ensures better resource utilization, lowers complexity and supports sustainable growth. We are simultaneously expanding our export footprint in MCC and introducing new value-added products that will contribute meaningfully to profitability over the medium term. On the API side, we achieved a significant milestone with our new API R&D center in Hyderabad now fully operational. The facility consolidates API development and analytical capabilities all under one roof. This substantially improving our speed to market and enabling tighter integration between R&D and manufacturing. It will also serve as a critical enabler as we expand our presence in the regulated markets. This marks an important step in our journey towards becoming a fully integrated pharmaceutical company. The center will also help accelerate product development, improve compliance readiness and create long-term value through innovation-driven growth. We are also advancing our efforts to enter high-value regulated markets. To this end, we are actively pursuing approvals from the European Directorate of Quality and Medicine with nearly 9 certificate of suitability filings currently underway. These developments will help us strengthen our position in the regulated geographies and expand our API portfolio with a sharper focus on quality and compliance. Through these initiatives, Sigachi continues to reinforce its core strength, scaling up its high-value business, expanding into regulated markets and laying a strong foundation for sustainable long-term growth. Despite the temporary disruption at one of our facilities, our operations remain stable. Our projects are advancing as planned and our long-term direction remains intact. Looking ahead, we expect to deliver consistent and sustainable growth over the next 2 to 3 years, driven by our excipient, APIs and O&M service. Our strategic road map is clear. We aim to expand capacity, strengthen our product mix and enhance profitability through operational excellence and disciplined execution. These efforts combined with our ongoing investments in research, compliance and infrastructure will ensure that our growth remains both steady and value accretive. The first half of FY '26 has been a period of testing and learning for us. It has reaffirmed our resilience of our organization and the dedication of our people. We responded quickly to the challenges, prioritizing the well-being of our teams, stabilizing operations and ensured business continuity. At the same time, we made steady progress on our strategic priorities, maintaining focus on execution and, of course, long-term value creation. We are deeply grateful to our employees, partners and shareholders for their continued trust and support during this time. Their confidence in Sigachi continues to motivate us to perform better every day. As we move forward, our focus remains unwavering on safety, operational excellence and sustainable growth. With the collective strength of our teams and a clear strategic vision, Sigachi is well positioned to emerge stronger, more agile and more resilient in the years ahead. With that, I would now like to invite our Chief Financial Officer, Mr. O.S. Reddy, to take you through the financials and the operational highlights for Q2 and H1 FY '26. Thank you.

Thank you, sir, and good evening, everyone. During Q2 FY '26, Sigachi reported total operating income of INR 110.5 crores. EBITDA for the quarter stood at INR 7.5 crores, reflecting a margin of 6.78%. Net profit came in at INR 10.5 crores [Technical Difficulty] with a PAT margin of 9.59%. The MCC segment contributed INR 66.4 crores, while the O&M and API segments recorded revenues of INR 13.17 crores and INR 18.41 crores, respectively. This concludes my updates. We may now open the floor for question and answers. Thank you.

[Operator Instructions] The first question is from the line of Rehan Saiyyed from Trinetra Asset Manager.

So my first question is on the capacity utilization side. So I want to ask, can you share the current capacity utilization plant-wise for MCC and what utilization while you are expecting by FY '27, considering the plant additions and all?

Yes, CFO you may continue.

Thank you, Rehan Saiyyed. At Dahej, this total around for the first quarter, it is INR 4,200 on half year basis. Full year, it is -- the production, the volume is utilized 3,473 metric tonnes. It is 82.69% at Dahej. And Jhagadia, it is 6,900 on a full year basis. In the half year, it is 3,450 is available and the production volume is 2,806 and 81.33% is utilized. And Hyderabad, in this quarter is not there. And total 7,650 for the first half year is available, out of which 6,279 units produced and the utilization as a percentage, it is 82.08%. Around overall 82% is there. Going forward, we'll utilize almost nearly 90% capacity. And after the new facility come into operational, the new one of 12,000 metric tonnes, then overall capacity will increase to 30,000 metric tonnes. In FY '27, maybe half year FY '27 at the end of the -- maybe a little 50% of new capacities will be or even...

Okay. So just wanted to clarify, you have said that right now you are running on 90% capacity on full year basis in FY '26, right?

Yes. Full year, we'll utilize by end of the year because first quarter after resumption of the Hyderabad unit, we are moving from Hyderabad unit. Slowly, we are moving from Hyderabad unit, whatever the additional we have shifted to Dahej and Jhagadia. And third and fourth quarter, we'll utilize in full, we'll transfer the capacities. And at the end of the year, we may utilize around more than 90%.

Okay. Fair enough. And my second and last question is around the China competition like regarding -- so sir have you seen any pricing aggression from Chinese MCCP suppliers in domestic or export market recently? And have we had to take any pricing in FY '26 to protect our volumes?

No, not at all.

Okay. So just could you please more clarify on the MCC Chinese suppliers, like how the margins are moving around and how they are competitive in nature for us. Just I am not understanding. Like I'm asking, could you please give me some broad understanding regarding Chinese engine suppliers, how they are affecting how they are competitive in nature with our company in export market?

So in the regulated markets, Chinese MCC players don't stand a chance. Yes, they have not stood chance and regulated market is much more stringent, and we have not seen them competing against us on any particular customer base or targeted markets.

So is there any competitive edge that you are playing here or like they are not in the same game?

So of course, there are certain competitive edges, but Chinese have not really been in competition with Sigachi in the regulated markets.

The next question is from the line of Ritesh from Lucky Investments.

Yes. I just wanted to check on the finished good realizations, both MCC and CCS. So if you could tell us how they have behaved in this quarter, how they were in the quarter preceding this quarter and how they were on a Y-o-Y basis? And if there are any material movements on the realization? And then I will ask you a question on raw material, which I will take up next.

Yes. Yes, Ritesh. This one Q1 of FY '25, the average realization of MCC is INR 212 per kg and this year INR 216 per kg.

Q1 of the current year or you said Q1 of the last year?

Q1 of last year FY '24. Last year... This year is INR 216. There is an increase from INR 212 to INR 216.

So this is Q2 '26.

Yes. Q2 in the sense first half year...first half year.

Half year. So you are giving half year to half year.

Yes. Yes. Half year to half year. And Q1 to Q2 also, there is an increase in the prices realization -- price realization. Second...

Please go ahead, sorry.

Around INR 214 is there in the first quarter and second quarter, it is increased. And on average, it has come now INR 216.

Okay. Can you give the same for CCS, if possible?

CCS anyway, that is -- right now, it has not come into commercial production. CCS is not there only small quantities. But as of now, it is not there in our product. It will come in the next year October, November of FY '26.

Did the realizations remain what they were or there were any major fluctuations?

There also increase. There is an increase in realizations increased around it is 600 plus is there. And a small percentage, there is an increase in CCS also.

Okay. There was a sharp reduction in the pulp price. So what we heard was about a couple of hundred dollar reduction. So is this correct? And why is it that we are not seeing it in your GP numbers?

Yes. In some -- there are different grades of pulp there. In certain grades, there are $50 per tonne, there is a reduction. But still, it did have impact on the selling price. Selling price despite of the decrease, it has increased because the demand also is there for the MCC and enough supply is not there of MCC in the market. That is may be one of the reasons.

No. So the pulp prices have reduced by $50 to $100, right?

But it depends upon the pulp different grades, but certain grades, they are maintaining the same. There is no reduction in prices.

At the aggregate level, was there a material reduction in the pulp price?

No, no, not material. Maybe very small minute level.

Okay. So basically in a nutshell, the pulp prices are flat to down and the MCC prices are up by 2-odd percent.

Yes, correct.

Okay. Okay. Any reason for these disconnects so from the supply side, if any changes?

Supply over production is there, then they'll compromise to some extent the price, and it is.

No. But what we are hearing is a lot of people have added a lot of capacity, yet realizations are up. So what is it that we need to understand on the MCC?

Enough supply is not there in the MCC. Still there is a short supply.

Short supply.

Yes. Short supply.

And Ritesh I would just like to add in here. See, there are capacities being added, doesn't necessarily translate to competitiveness in the market because they can't compete with a 3 decades old established player, which are approved in so many products of our customers. So capacity addition necessarily doesn't translate to price reduction to maintain margin or market share.

Yes. Yes. They cannot experiment a new supplier product because the product what they use, if they suppose if they mix the API product, the API product cost is always on higher side. Average, if you take, it may be around INR 10,000 per kg. But here, maybe INR 200 or some INR 250 or INR 300 would be there. This -- if they mix it to that INR 10,000 product, then that product quality will go for a task. That's why they don't -- they see the continuity of the supply and also the vintage and the quality and the customer satisfaction. There are many parameters are there. They don't change the supplier that easily unless there is a proven track record like Sigachi.

The next question is from the line of Lakshminarayanan K. G. from Tunga Investments.

Sir, a few questions. Now what is our repeat business in general?

Almost 80% to 90% is their repeat business.

So I look at last year, our exports have been around in the range of 55% to 60%. Now because I just want to understand, given there has been an accident some time back, how the customers have reacted to the whole thing? And have they shifted suppliers? And what is the -- I mean, how do we intend to get back the displaced opportunity?

Yes, Mr. Lakshminarayanan, I would address this. See, there is no denying the fact that there has been a shortfall in the production because one of our units is down. And our customers' business continues to be running continuously. So they are in need of products. We have tried to balance out and prioritize some of our critical customers who don't have a second line of supplier, but there are some customers who we have kind of told them that we will take a couple of months before we can come back with added capacities. So we have had some mutual comfort, mutual understanding, and we have indicated that we will take a couple of quarters before we come back. Until then, they will be looking at alternate suppliers.

Got it. And is there a thing that supplies are actually earmarked for Hyderabad and that cannot be moved. So in pharma, it so happens that certain products are earmarked from a particular supplier side, and they don't really change it and for changing, it requires a lot of regulatory approvals. So how much of our business cannot be removed from Hyderabad for compliance reasons?

So it is not really compliance because what we have done or what our regulatory guys have done is that they have ensured that all the facilities where the same grade of product is established is approved at our vendors' end. So we have -- there's something called as a bulk dried grade and then there is a premium sprayed dried grade. That has to be there. In Hyderabad, we had both the bulk dried and the spray dried. So wherever else there was bulk dried, we had the alternate unit approved at the customer's end. Wherever else there was spray dried, the spray dried unit was approved at the customer's end. So I don't believe that the regulatory approval at customers' end would have been hampering us in terms of changeover to our other units in Gujarat.

Sir, in MCC, can you just give me the mix of different industries to actually...?

So I would say a major chunk, nearly 75% to 80% of the mix primarily goes to the pharma and the nutraceutical industry. A small percentage goes to the cosmetic industry. I mean the balance of it is divided between the cosmetic, the food and the chemical industry.

Got it. Is it possible for us to get into areas like polymer excipients where companies like Evonik is there? Is that something which we can actually get into?

Very much, very much. I don't deny that. The Sigachi coating portfolio, which has kind of started off a couple of months back, a couple of quarters back is something wherein we are getting into the polymers part of the excipients. The coatings is all to do with the polymers, and this is what we have got into, and we continue to expand as our market grows.

And any...

Sorry to interrupt, sorry to interrupt Lakshminarayanan.

Can you just finish this question, ma'am, is a continuation. I just want to understand what is the revenue coming from this polymer excipient business? And what is the target, sir? My last question.

So the revenue at this moment is miniscule because our products are only being sampled out and approved in the new formulations. Wherever the tablet coating as a need is there, our samples are going out and approved. As and when the formulation comes into commercial production, the sales will happen, and that is when it will translate as sales to us also. And at this moment, it will be inappropriate to give out a figure because wherever the samples are getting approved, once the formulation starts commercial production and it catches market, we will be able to ramp up capacities.

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

Yes. Am I audible?

Yes. You are audible.

Okay. Could you share any updates on the insurance claim related to the Hyderabad incident? By when do we expect to receive the compensation?

Yes, yes, Deepesh. This already we have filed all the -- we have filed the application and then all the process is going on. And maybe we are expecting in this quarter, Q3, the insurance profits against the loss of the fixed assets that is around INR 51.48 crores is there. And the -- we also have the loss of profit, business interruption policy that it will take a little time. That is there for a period of 12 months, and that will be there maybe in the next fourth quarter or at the end of the year, we are expecting.

Apparently, we also give significant compensations to the workers who lost their lives and got injured. Is that -- is there a policy for that also where we can claim that? Or is it from the company's account only?

Yes. To a certain extent, we have climbed wherever the PF, ESI, the employee accidental policy. But the rest of the thing, to a certain extent, company is bearing. And also, we are seeking the support of the government also.

Okay. And when do we expect the Hyderabad facility to resume operations?

It is as of now, the safety protocol and all the sites even here also and the regulatory approvals after seeking the regulatory approvals, then we'll go ahead. Maybe we'll get clarity by end of this quarter.

By the end of this quarter. Okay. Now I just wanted to understand how much of the lost production from the Hyderabad unit has been compensated through the Jhagadia and Dahej units. If you can just mention about the volumes and the value in this quarter?

Yes. Volumes, the total capacity of the Hyderabad unit is 6,400 metric tonnes. This, we are -- last year, we have increased the capacity of 7,200 in both Dahej and Jhagadia facilities. And to some extent, anyway, every year, there is an increase in the demand also. But to some extent, we are shifting this Hyderabad production loss to the Dahej and Jhagadia. And in the Q3, Q4, we'll push more and then the utilization of Dahej and Jhagadia will be on full scale. And also, that is the reason earlier itself, we have planned to increase the capacities for the MCC by setting up of a new facility. But now we have expedited that process and then it is going only for the increase -- for the additional 12,000 metric tonnes capacity. But as of now, the Hyderabad capacity we are pushing to Dahej and Jhagadia.

If you can just quantify that how much of this was -- how much of the loss production was compensated in this quarter?

Yes, yes. The entire 6,400, whatever we used to have around 6,000 metric tonnes on operational level. And the entire the production will shift to Dahej and Jhagadia, Q3 and Q4. But this quarter, Q2, we couldn't push because there are internal safety audits and then this external consultants help also we took and the expert to avoid any kind of the unfortunate events or any kind of even small things also. That's why we just -- we couldn't push in this quarter fully. But third quarter and fourth quarter, we'll utilize it in full. That is already done this audit and then all safety measures we took it very, at minute level.

The next question is from the line of Arnav Sakhuja from AMBIT.

So my first question was basically with regards to the exceptional item that we saw this quarter. So we saw around INR 4.7 crores of exceptional items. So just wanted to know, is this something related to any insurance claim we've got from the fire incident? Or is it something completely unrelated?

Yes. Thank you. This in the Q1, we have mentioned the total -- the stock loss we have expected. But later on, we realized that is an excess provision, which was reversed. INR 4.53 crores. Out of last first quarter, we have provided total INR 121 crores. And there is a stock loss of INR 7.66 crores that was included, but this INR 4.53 crores, whatever is there, that one is not there. That's why we have reversed it. That is an exceptional item. We have reversed to the exceptional item only.

So does that mean that the entire remaining amount, so INR 121 crores, minus INR 4.7 crores, that will be the total amount borne by the company because of the fire incident?

Yes, it is correct.

Okay. And a part of this, we expect to get back from insurance, right?

Yes. Yes. This is now expected to get in from the insurance, the balance amount.Yes.

Right. And if I look at the year-on-year performance, so the gross margin, correct me if I'm wrong, has fallen by around 170 bps. So what is the reason for that? Is it again something related to shifting operations because of the fire incident or any other reason?

Yes. Yes. This is the reason shifting of material, there is an involvement of transportation we did, the transportation has increased. And because of this only, there is no other reason. But Q3 and Q4, it will get stabilized.

Okay. And do we have any estimate as to what share of that exceptional items, the cost that we are bearing for the fire incident we'll be able to get back from insurance? Is there any estimate?

Yes, there is around -- around INR 50-plus crores, around INR 51 crores, we'll get it from the insurance towards the fixed asset loss. And also the business interruption policy is the loss of profit that is there, that would be around INR 16.5 crores. Around INR 65 crores, INR 66 crores is expected from the insurance. Stock loss of around INR 7.66 crores we have claimed and now INR 4.65 crores we have reversed the balance around INR 3-plus, INR 33-odd crores we get it from the insurance, INR 66 crores around nearly INR 70 crores, INR 69.5 crores or around INR 70 crores we are expecting.

Okay. So basically is there around INR 40 crores totally effect?

Yes. Even that also we are not foreseeing, but we are seeking the help of the government not to -- maybe that is under discussions anyway.

The next question is from the line of Dhruv Mimani from Niveza Investments.

So I want to know what is the actual amount of claim filed with the insurance company?

The amount filed is INR 51.48 crores towards fixed asset loss and the stock loss, we claimed INR 7.66 crores, but whereas INR 4.65 crores, it will not come. Anyway, we have reversed. And then this is loss of profit around -- that is calculated at that point of time that is estimated around INR 16.5 crores, around INR 70 crores all put together.

And sir, what -- when the 12,000 MTPA facility in Dahej is operational, what would be the peak revenue that the company would achieve from that facility?

Yes. From that facility, the peak revenue is around INR 250 crores.

Okay. And what would be the margin bifurcation between [Technical Difficulty] MCC?

Can you please repeat margin proposition?

When we export MCC and when we domestically supply MCC?

Yes. Yes. Minimum, 20% minimum would be there for 20%.

The difference in EBITDA margin or PAT margin?

This is anyway realization margins, I'm talking about.

Okay. In terms of EBITDA?

EBITDA also the same, almost percentage-wise, it is the same would be there, EBITDA percentage-wise, total realizations, the same level only, it would be there.

Okay. When do we expect [Technical Difficulty] Hyderabad?

Can you please repeat?

When do you expect to receive [indiscernible] from the government?

That anyway we'll get clarity in the third quarter that the regulatory approvals also we have to receive.

The next question is from the line of Himanshu Bisani from PinpointX Capital.

Sir, first question, the percentage of other businesses that includes the AI and the O&M business has percentage-wise gone up. So how much of that was from the gross level? And how much was that from a decrease in the MCC revenue?

Yes. If you see the contribution, revenue contribution, MCC has come down now from when you see the previous Q2 versus this year Q2, 81% to it has come down to 60%. And operational O&M business, it has increased from 8% to 12%. And API business, it has increased from 7% to 17% and other products, food and nutrition or the other products are 4% to 11%. This is mainly because the MCC has come down and the other operations, it is increased. Otherwise, if the MCC also is increased more or less in the same level, maybe O&M would be there around 10% and API would be there or even less than 10% as of now. But slowly, API business will increase. And other allied trade is also just maybe in the 5%, 6% level, it would have been there.

Okay. And sir, what is our margin difference between our MCC business and O&M business?

Yes, almost in O&M around 20%, 22%, the margin is there and MCC also except this during the year of this unexceptional or after this incident, it has come down. Otherwise, it is almost the same thing, same level.

Sir, a couple of questions on the CCS side, sir, what is the sales mix that you would -- we are planning to look at between domestic and export market?

Domestic and export market, we give priority to the export only. Obviously, the realization is also on the higher side for the exports. And we see the price realization and the supply as our this thing wherever the -- at present from Hyderabad unit, just we wanted to support to our customers. Wherever there is a second choice is there, alternate vendors are there, they will procure for time being and otherwise, we'll supply. We also wanted to support to the customers. And also at the same time, we want to increase the realization. We will just balance it out and unless once till such time the production stabilizes.

So a similar outlook, similar to an MCC would be the export mix for the CCS plant as well, right?

Yes. Yes, correct.

Okay. And sir, finally, on the margins, like how superior are the margins because I think realizations are almost 3.5x of what for CCS compared to MCC. So what would be the margin difference in that on EBITDA level?

Yes. Margins are higher in CCC around 30%, up to 30%, even better than MCC.

The next question is from the line of Devang from DD Enterprise.

My two questions are there. One recent announcement was there regarding the IPO utilization fund of INR 1,000 crores?

Yes. Can I explain? This IPO utilization is INR 1,000 crores is not there. That is anyway on -- as per this thing, shareholders' approval is there for any borrowing limits. That under 181C, we have to take the approval of the shareholders. On the higher side, we are taking it for INR 1,000 crores. But each and every time any changes are there, that will be -- a decision should be taken in the Board meeting and also if required shareholder approval and then there is reasonable explanations and announcements will be given to the NSE, BSE.

Okay. And yes...sir continue.

This is not IPO. This is a just, this one broader levels of the approvals for the -- any debt in future.

Okay. Sir, the other question is the fire incident took place, if I'm not wrong, in the last quarter, right?

Yes, 30th June last day of the first quarter.

Yes. And then why -- what's the reason the promoter holding has came down by 4%. Like, it shows like that to the street that why promoter holding should go down when this just has been happening in the company, the promoter should stand with that, right?

There is no relation at all. Only thing is there was [indiscernible] which it was announced and the [indiscernible] providers, there was a renewal and then we thought of -- instead of renewing anyway, we thought of paying it. Otherwise, there is no relation also. There is no correlation for this.

No, no, I'm not getting it. It's a loan against security, was that, right? What you are telling me?

Loan against shares.

Loans against share?

At the time of this thing, when we have issued preferential shares, preferential warrants and at that time, the promoters also participated equally. And that time, they borrowed funds and then infused into the company only. And later on at the time of renewal, either we have 2 options, either we have to secure, we have to put in more shares because the share price also has come down. And then we have to repay it. Instead of that, we have repaid some amount. The reason it has come down. Otherwise, nothing is utilized or nothing is taken away from any other.

Any other future plan to reduce the stake?

Yes. As of now, no plans are there.

No, if you are going to borrow INR 1,000 crores, that would be the debentures.

Yes, that may be a bank debt. That may be -- even it's not INR 1,000 crores debt or that is a broader level it has taken, but all the companies, they'll take -- for the future requirement also, they'll take the approval of shareholders at once. That is the reason it was.

No, no, no. I'm understanding that if you are going to issue the equity shares or if you are not going to issue the equity shares, like it's a bank debt or what's the plan, like plan? I want to understand the...

Sorry to interrupt Devang, if you have a follow-up question, please rejoin the queue.

No, it's not a follow-up question. It's the same question. Let them clear out that question.

Devang, this one equity and this INR 1,000 crores, there is no correlation. This is only for debt. If you want to raise the bank debt, there should be -- limit should be available. And even NCD also limit should be available. That is completely related to debt only, not equity.

[Operator Instructions] The next question is from the line of Karthik, an individual investor.

During these tough times, the management has given a better number. I'd like to congratulate for all the efforts you are putting in. I have two questions. One is on the promoter shareholding has been pledged and it is getting revoked and a lot of shares are coming into the market. I understand promoters also have their personal life, it is their shares, they can do it, but it kind of paints in a wrong way to outside. So is there more shares getting liquidated because of this pledging and revoking? Is there anything in the plan or how you can handle this because it is giving us as an individual investor.

Thank you, Karthik. As of now, there are no plans for further downgrading further selling or further reducing but only this thing -- there was a -- as I told in the previous question, it is -- there was renewal already 1 year over and then at the time of renewal, either we have to pledge more shares or we have to repay that some shares were sold and then repaid. Otherwise, nothing is there.

My second question is since like outcome of incident, we should learn the best practices and we should apply to our other 2 plants -- other 4 manufacturing plants. So how much capital we are looking to improve the existing sites to improve the process and improve the machinery or safety scenarios. So how much capital we are going to spend for the remaining manufacturing plant?

Capital, in terms of capital, it is not -- it is very minor -- minute amounts only. Only thing is the precautionary measures and then what is the reason, what is the root cause and we called the vendors, the suppliers of the equipment and there are internal audits of the safety audits and with external teams also and safety protocols, safety trainings, earlier also, we were doing, but still we are rigorously doing these kind of things only, taking precautionary measures, but there is no direct involvement in the CapEx. But wherever it is required or the professionals if they suggest, and we don't mind tinkering. But safety is our prime motto.

The next question is from the line of Ritesh Bhagwati from Alpha Plus Capital.

Well, I just want an update on our working capital days and the trajectory for the full year.

Thank you, Ritesh. The working capital days, as of now, the DSO days are around more than 100 days, it's there. But now we have started measures for reducing first quarter to this quarter also, there is a reduction. And also the payables are around 30 days, it's there. And the stock is around raw materials already some excess stock is there because for the Hyderabad unit, we have already placed the orders and the material is coming. And then now we have -- immediately after the incident, we have asked them to stop, but still some material it has come. Maybe around 100 days, if you take the receivables and then stock is 60 days and minus 30 days around 130 days -- 120 to 130 days is the working capital cycle.

Okay. And my last question is on the pledge that we hold as on date. So like how do we see its trend going ahead? Like do we plan to depledge it? And if that's the case, how and what could be the scenarios that would help us achieve that?

Yes. Thank you, Ritesh. As of now, we don't have any plans specific. But if required, based upon the requirement, if suppose if there is any capital infusion and then participation, then definitely it will go up. But as of now, there is no pledge will not go up. But at the same time, in the long run, wanted to increase the stake. The promoters, they will participate in further issues and then slowly that will be the promoters holding. Pledge percentage, either we'll maintain or it may reduce. It depends upon the requirement of the company. And then obviously, promoters intend to increase their stake.

The next question is from the line of Rahil S. from Sapphire Capital.

Can you hear me?

Yes. Yes.

First quick question. We are running at 18,000 metric tonnes per annum capacity as we speak, right? Which you expect to be utilizing 90% by the year end?

Yes, absolutely.

Okay. Thank you for the clarification. And secondly, any revenue or margin guidance for FY '26 and FY '27 once we have the new capacity running of the addition of 12,000 at Dahej. So any sort of outlook guidance?

Yes. Thank you, Rahil. Anyway, this anyway there is future this thing. But okay, of course, we will -- in the last quarter also we hope we'll achieving not less than INR 575 crores. But there is a possibility to increase further also by end of March. And also the 12,000 metric tonnes additional capacity, it will generate on its full capacity around INR 250 crores. But FY '27, a part of the revenue is expected to come from that additional expansion. Normal growth also would be there, but FY '27 onwards this year, maybe some small disturbances would be there. Of course, it will be better in Q3 and Q4. But going forward, it will be -- it will turn around and then it will do the regular growth CAGR.

The next question is from the line of Shashank Agarwal from Cisco.

Sir, just two questions. Sir, what are your plans on the Orvakal facility? And sir, what is the global demand for MCC and CCS?

The Orvakal facility that just in API, just anyway, we have not announced, but we have different plans are there, we'll come up with an announcement for that either API or MCC or we have -- internally, we have worked out, but after getting it concrete decision if we take, then after the approval of the Board, we'll announce it, Shashank.

This will be after all the expansions that you have planned or...

Simultaneously also we can plan, but we have worked out on different different projects, different different this thing with the extensive works we have done and then we have clarity, but we have not taken any decision, but the decision has to be taken by the Board and then later on, we'll announce it. But at this point of time...

However, Shashank, I would say that over the next 30 days, we are expecting the environmental clearance to be issued by the government for that Orvakal facility.

Okay, sir. And sir, for the API segment, sir the 4 CEPs that have been filed, when are you expecting the approval?

Sir, I mean, the queries are going back and forth. It will be difficult to quantify a time line, but I believe that we should be in a position to have it cleared within the next 2 or 3 quarters.

So the revenue guidance that you had given for the year, that still stands for API segment?

Very much.

Still Stands there.

And the second question, regarding the global demand for MCC and CCS?

So MCC, the global demand is expected to touch $1.4 billion by 2034.

Okay. Sir, can you give it in quantity terms?

So there are not many documented reports on quantities. Most of the capacities of the leaders are in quantities, but when it comes to the demand, it is always in billion dollars. It's not really quantified as metric tonnes. And whereas CCS by 2035 is expected to touch about $800 million or $900 million.

The next question is from the line of Dinesh Kulkarni from Finsight.

Am I audible?

Yes, yes.

Sir, can you just tell me like what is the kind of capital expenditure for this year and next financial year we expect? I'm assuming part of the -- for the facility, which has been damaged, including that?

Yes. The CapEx for the entire this year and next year, we are expecting anyway, we can -- already whatever we have planned, I can tell, but whatever we have announced, I cannot disclose here. But for the MCC 12,000 metric tonnes, it would be around INR 100 crores, the CapEx is there, out of which the revenue generation would be INR 250 crores. And CCS, we need to spend maybe around INR 60 crores rationally and then there is already available around INR 33 crores. That is total around this year, but we may not incur the entire amount by end of this year. But these are the CapEx plans already we have finalized and then we are going ahead. The implementation also is going.

Okay. Sounds good. So my question is related to the incident which we had in one of the facilities. Is it impacting our clearances or expansion projects across other plants or like -- I mean, because this is all related with the government regulations, right, and authorities?

No, no, no. There is no effect at all. But the other states are also very eagerly inviting us and they are asking us to set up the plants in the other states and even within the state also.

The next question is from the line of Ather Syed from Smart Sync Services. Ather, there is a disturbance in your -- can you please look into this?

Yes. So I have only one question related to this sir, what is the amount we are expecting in insurance claim and when do we expect this claim...

Ather, sorry to interrupt. There is a lot of disturbance in you background. Please rejoin the queue.

Insurance amount expected is around INR 70 crores, including loss or profit. And we get the clarity, we are expecting some amount, at least amount in Q3.

The next question is from the line of an Siddhant Maheshwari, an Individual Investor.

Sir, my question will be slightly repeat on the previous question. Sir, whether this INR 121 crores of extraordinary fund that includes only the fire-related compensation or the loss of machinery related amount and my question is that will the company be able to recover the fire-related compensation amount offer from the insurance company or the claims are only for the loss of machinery and building?

Siddhant. Thank you. This total INR 121 crores includes fixed assets around INR 51.48 crores and there is a stock of loss INR 7.66 crores and the compensation and medical expenses are INR 59.35 crores. And there is a GST reversal INR 2.52 crores. All put together, it is INR 121 crores and now the compensation, it is expected -- the claim it is expected is around INR 70 crores is there, including the loss or profit and stock loss also. And the medical expenses compensation, to some extent, it is covered under a separate insurance, group insurance and ESI and PF EDLI. And but the compensation also, we are taking the support of the government and that is not yet finalized. If the reduction is there, that will be reversed. Once that is confirmed, we'll reverse the compensation also. And on receipt of the claim, we will reverse this. That will be treated as...

Do you expect any further fire related compensation in subsequent quarters or we are already done?

All these losses already we have provided. There will not be any separate provision on this. And we are expecting some adhoc amount in Q3 from the insurance.

The next question is from the line of Shivaji Mehta, an Individual Investor.

Sir, there was some news article regarding the insurance report when it was tabled in the Chief Secretary's Office. There was some news item that our facilities could be blacklisted and the state government may not provide future incentives for Sigachi. Just wanted your inputs regarding this?

Actually, we don't have -- thanks, Shivaji. We don't have any information on this, but there is -- I don't think anything. So far, we didn't have any information and it's.

Got it. No, this could be just rumors there. Sir, my next question was regarding this insurance claim of INR 51 crores. So that's dependent on the insurance report being positive and in favor of what we are claiming. So what is the probability as per you that we will get a positive report from the insurance companies?

Yes. Yes. We are expecting positive report only. We don't have any second thoughts on that. We don't have any other.

Got it. And sir, also on the CCS facility, what kind of margins are we targeting at the EBITDA level once the facilities ramp up fully?

Around 30%. The CCS margins are higher side than MCC with around 30% we are expecting.

The next question is from the line of Ankur Savaria, an Individual Investor.

Regarding raising debt of INR 1,000 crores in near future, explain why the company would ask the shareholders to agree on such a huge number of sum when our market cap is only about INR 1,500 crores, and it is double the entire sales for 1 year, sir. So what expenditure do you see in near future that you want a permission for INR 1,000 crores of debt?

Yes. As of now, it is not mean that we'll take the total debt. As and when it is required, we'll take the bank loans after Board of Directors approval. But as of now, there is -- it doesn't mean that INR 1,000 crores debt will be taken or whenever there is an opportunity, now we are expanding and any CapEx is required, either we can go equity or debt. If we go for equity, there is no requirement. Even if there is a short-term arrangement, if it has to be made, then we'll take and then again, that can be replaced with further equity infusion. But it's not the case that we will company will raise INR 1,000 crores debt.

Yes. But when you are asking for such a huge sum, there might be some expected...

Ankur, one more thing. Even the company size also is increasing. If you want to take the working capital limits or at any point of time, we suppose -- right now, we have INR 200 crores of limits are there. But of course, the utilization would be around INR 130 crores or so. But once it increases to INR 300 crores, INR 400 crores, then we cannot pass and take the approvals. Normally, this is the practice of the company is to take the approvals. And then as and when there is a requirement and based upon the opportunities, debt will be taken. And then later on, it will be offset by the internal accruals or equity infusion or a further cheaper debt. If suppose if we take a debt of INR 300 crores and again, there is a further debt or NCD something we are raising, then all the existing INR 300 crores and another INR 300 crores or INR 400 crores also is required to replace it. For the time being, the total debt limit is required up to INR 700 crores, INR 800 crores. And then after taking the new debt and paying off the first debt initial debt, then it will come down automatically. But there should not be any overlapping. And then because of nonavailability of the limits, we should not miss the opportunity. That is the reason companies take the higher limit. It doesn't mean that the company will take a debt of INR 1,000 crores.

So are you again planning to go through the preferential share route that you did earlier?

Yes. As of now, we cannot disclose anything, but there are different, different plans are there. But once the Board approves, then which is better good to the company, then we can disclose it, Ankur.

Yes. Last time, sir, the preferential share route that you took, you raised about the preferential share amount was very big, and it was only seen as an opportunistic from the promoters that they did not have the money, they took part in the preferential share and later they had to sell their shares. So it was very opportunistic that you at a price of INR 26, you took the preferential share, sold the share at INR 40 and have reduced your promoter holding. So what is to the market and to the shareholders, it is not a good sign for what the promoters are doing?

See, Ankur, always, the promoters, they see their vision is different. They wanted to do good to the company. And see, at the time of requirement, the promoters, they came forward and then at that time, see, that is anybody is investing or infusing it into the company, it is some sort of risk is involved and they came forward and then invested into the company. And there is nothing wrong as per the -- as per the applicable provisions only, it was invested, and we are keep on.

The thing is -- see, I agree that everything is as per the rules. But you will see that the entire chapter of your preferential shares, some of the people did not put in their money in time, their money was forfeited. The promoter had to sell their shares on the last day for which they could deposit the money. After that, they had to pledge the shares. So if in case you have the route of going and getting debt from the bank, don't you think that the management also has to show their faces to the shareholders and it should be in a good light that we see them we will not see them as an opportunistic promoters who would like to do that again and again to the shareholders. I don't think that shows good on the promoters.

Yes, Ankur, that is the decision. The opportunity is to be seen and that is the decision of the investor. As an investor, they have invested into the company. There is no other motto. And depending upon the market opportunities and the requirement of the cash flows into the company, they took the decision, but nothing wrong in that.

The next question is from the line of Suresh Kumar, T, an Individual Investor.

Sir, in your fixed asset, value of the building is more than the plant and machineries, why is it so?

Yes. Building, there is a separate new building is there. Obviously, sometimes there is more than plant and machinery. Even plant and machineries can be infused later. But once the production is started in the running facility, we cannot do the civil works. That is the process being followed by any other the CapEx -- capital intensity industries. They incur the civil cost, whatever they have to incur. And because during the operations, civil works, getting civil works done, it's a challenge. That's why do the complete civil work. And later on, we can keep on increasing -- infusing the equipment and to increase the capacity segmentation.

One small thing, sir. For the last 2 years, our building value has been increased by INR 150 crores. Actually, what we have done, sir, in that amount?

Yes. The buildings only we have constructed and wherever some alterations are required or even restrengthening done in some cases. And this is completely for the civil works we have invested, Suresh.

Is it the corporate office or plant like...

At the plant level only. Of course, yes, that is at the plant level only, all the 3 plants. Majorly for Dahej and Jhagadia and also...

This was the last question for today. I now hand the conference over to management for closing comments. Thank you, and over to you.

Thank you. As we close today's call, our focus remains on strengthening the operations, advancing our expansion projects and moving forward on our journey towards becoming a fully integrated pharma company. With focus on disciplined execution, we are confident of creating sustained value for all the stakeholders. Thank you for joining us, and we look forward to interact with you again next quarter. Thank you.

Thank you. On behalf of Sigachi Industries Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.