Sigachi Industries' Credit Rating Downgraded by CARE Ratings

CARE Ratings Limited has downgraded the credit ratings for Sigachi Industries Limited's bank facilities and non-convertible debentures. The long-term bank facilities rating has been revised from CARE BBB+ (RWN) to CARE BBB (RWN), and the long-term/short-term bank facilities rating from CARE BBB+ / CARE A3+ (RWN) to CARE BBB / CARE A3 (RWN). Similarly, the Non-Convertible Debentures rating has been downgraded from CARE BBB+ (RWN) to CARE BBB (RWN). All ratings continue to remain on 'Rating Watch with Negative Implications'.

The rating revision is attributed to a sharp decline in profitability in Q3FY26 and weaker-than-expected performance in 9MFY26. The company reported a significant drop in operating margins, with Q3FY26 at 5.25% compared to 24.89% in Q3FY25. This deterioration was caused by elevated raw material and employee costs, lower production yields, and increased working capital intensity, leading to a net loss in the quarter.

Management guidance has shown inconsistencies, with actual 9MFY26 performance not aligning with projections. The promoter group's shareholding has also declined due to the invocation of pledged shares and open-market sales, indicating elevated financial leverage at the promoter level. Liquidity has been impacted by reduced cash and bank balances and a delay in expected insurance claim recoveries for plant and machinery losses, which were initially anticipated by December 2025 but are now expected to commence in a staggered manner by the end of Q4FY26 or Q1FY27.

Sigachi Industries is proposing to raise ₹125 crore through Non-Convertible Debentures to bridge delays in insurance recoveries, fund capex plans, and meet compensation obligations. This issuance is expected to increase leverage. The company also has significant future capex plans, including expanding MCC capacity and developing a CCS facility, with a cumulative cost of approximately ₹493 crore over the next 2-3 years, to be funded largely through equity infusion and internal accruals.

The ratings continue to derive strength from the company's experienced management, established track record, favourable plant location, and the stable industry outlook for MCC. However, key weaknesses include the fire accident at the Hyderabad facility in Q1FY26, which caused complete damage and resulted in fatalities, and the ongoing investigation. The company reported a net loss of ₹90.46 crore in 9MFY26 due to provisions for plant and machinery loss, compensation, and inventory loss. The expected recovery of insurance claims has been revised downwards, likely resulting in continued losses in FY26.