Sigachi Industries Credit Rating Downgraded by CARE Ratings

CARE Ratings Limited has revised the credit rating for Sigachi Industries Limited (SIL). The long-term bank facilities rating has been downgraded from CARE A- (RWN) to CARE BBB+ (RWN), and the long-term/short-term bank facilities rating from CARE A- / CARE A2 (RWN) to CARE BBB+ / CARE A3+ (RWN). Additionally, a rating of CARE BBB+ (RWN) has been assigned to Non-Convertible Debentures, and long-term bank facilities have been withdrawn.

The rating revision and continuation of the ‘Rating Watch with Negative Implications’ are primarily attributed to the operational and financial impact of a fire incident at SIL’s Hyderabad facility in June 2025. This incident destroyed the unit, which accounted for approximately 20% of consolidated revenue and reduced installed capacity from 21,700 MTPA to 15,300 MTPA. Production has been shifted to Dahej and Jhagadia units, but utilization has moderated due to safety audits, leading to partial business loss in H1FY26.

In response, SIL is undertaking measures to restore production capacity, including debottlenecking and installing additional machinery, aiming to increase effective installed capacity to around 18,000 MTPA. The management targets a utilization rate of approximately 90% by Q4FY26. The company has disbursed approximately ₹22.14 crore in compensation to victims' families as of November 2025, with discussions ongoing with the state government regarding pending compensation.

Profitability in H1FY26 was impacted by provisions for one-time expenses, including compensation, fixed overheads, and loss on plant and machinery. SIL expects to recover approximately ₹51 crore in insurance claims for plant and machinery loss by the end of December 2025, with staggered receipt expected by Q4FY26 or Q1FY27. To manage liquidity and fund capex, SIL plans to raise ₹125 crore through non-convertible debentures (NCDs) for the Dahej expansion, working capital, and compensation obligations. The company has a broader capex plan of ₹493 crore over 2-3 years for MCC capacity expansion and CCS facility development, to be funded by equity infusion and internal accruals.

Ratings are supported by experienced promoters, a qualified management team, a proven track record, improved financial performance in FY25, and a stable industry outlook. However, key weaknesses include the fire incident, the resulting decline in financial performance in H1FY26, expected moderation in the financial risk profile due to additional debt, significant projected capex, dependence on imported raw materials, and an elongated operating cycle.