News Stocks CARE Ratings Downgrades Sigachi Industries' Credit Rating to BBB on Weak Q3FY26 PerformanceCARE Ratings Downgrades Sigachi Industries' Credit Rating to BBB on Weak Q3FY26 Performance
CARE Ratings has downgraded Sigachi Industries' credit ratings from BBB+ to BBB across facilities worth ₹268.00 crore, citing sharp decline in Q3FY26 profitability with operating margins falling to 5.25% from 24.89% in Q3FY25. The downgrade reflects weaker performance following the fire incident at the Hyderabad facility and delayed insurance claim recoveries of ₹51.00 crore. All ratings remain on Rating Watch with Negative Implications, indicating potential for further downgrades based on ongoing performance and investigation outcomes.
*this image is generated using AI for illustrative purposes only.
CARE Ratings Limited has downgraded the credit ratings of Sigachi Industries across multiple facilities, citing deteriorating financial performance and operational challenges. The rating agency revised the company's ratings from CARE BBB+ to CARE BBB, affecting facilities worth ₹268.00 crore.
Rating Downgrade Details
The comprehensive rating revision affects all major facilities of the pharmaceutical excipient manufacturer:
| Facility Type | Amount (₹ crore) | Previous Rating | Revised Rating | Rating Action |
|---|---|---|---|---|
| Long Term Bank Facilities | 40.00 | CARE BBB+ (RWN) | CARE BBB (RWN) | Downgraded from CARE BBB+ |
| Long Term/Short Term Bank Facilities | 103.00 | CARE BBB+/CARE A3+ (RWN) | CARE BBB/CARE A3 (RWN) | Downgraded from CARE BBB+/CARE A3+ |
| Non-Convertible Debentures | 125.00 | CARE BBB+ (RWN) | CARE BBB (RWN) | Downgraded from CARE BBB+ |
All ratings continue to be on Rating Watch with Negative Implications, indicating the possibility of further downgrades depending on the company's performance trajectory and investigation outcomes.
Sharp Decline in Q3FY26 Performance
The rating revision primarily stems from Sigachi Industries' significantly weakened financial performance during the third quarter of FY26. The company's operating margin declined drastically to 5.25% in Q3FY26, compared to 8.86% in Q2FY26 and 24.89% in Q3FY25.
| Performance Metric | Q3FY26 | Q2FY26 | Q3FY25 |
|---|---|---|---|
| Operating Margin | 5.25% | 8.86% | 24.89% |
| Revenue (9MFY26) | ₹362.84 crore | - | - |
| Operating Margin (9MFY26) | 12.19% | - | 23.72% |
The deterioration was driven by elevated raw material and related costs, higher employee expenses, lower production yields, and increased working capital intensity. These factors resulted in a net loss during the quarter and overall moderation in profitability for the nine-month period.
Impact of Hyderabad Facility Fire
The company's performance has been significantly affected by the fire incident at its Hyderabad facility on June 30, 2025. The incident completely destroyed the 6,400 MTPA capacity plant, representing 30% of total installed capacity and contributing 20% of total operating income. The tragedy resulted in 54 fatalities and injuries to 28 employees.
Sigachi Industries announced compensation of ₹1.00 crore per deceased employee and full medical support for the injured. By November 2025, the company had disbursed ₹22.14 crore, averaging ₹0.41 crore per family. Production was subsequently shifted to Dahej and Jhagadia units, though utilization remained at 85% due to mandatory safety audits.
Insurance Claims and Liquidity Concerns
The company had expected to recover approximately ₹51.00 crore in insurance claims for Plant & Machinery losses by December 2025. However, these claims have not yet been received, creating additional pressure on liquidity. Sigachi Industries now expects insurance recoveries to commence in a staggered manner by the end of Q4FY26 or Q1FY27.
Cash and bank balances declined to ₹21.56 crore as of December 31, 2025, compared to free cash balances of ₹49.00 crore as of September 30, 2025. The reduction is attributable to partial compensation payments and capital expenditure incurred during the period.
Future Expansion Plans and Funding
To bridge the liquidity gap and fund expansion plans, Sigachi Industries has proposed to raise ₹125.00 crore through Non-Convertible Debentures. The company plans to expand MCC capacity by 24,000 MTPA and develop CCS facility, entailing cumulative capital expenditure of approximately ₹493.00 crore over the next 2-3 years.
The expansion is proposed to be funded through ₹300.00 crore of equity infusion and internal accruals. The company has already commenced civil work for a major capacity expansion at its Dahej SEZ facility, proposing to add 12,000 MTPA at an estimated project cost of ₹106.00 crore.
Rating Outlook and Monitoring Factors
CARE Ratings continues to monitor several key factors that could influence future rating actions. Positive factors include steady growth in total operating income with PBILDT margin above 17% and successful project completion without time and cost overruns. Negative factors encompass notable decline in total operating income by over 30% year-on-year, PBILDT margin falling below 15%, and elongation of operating cycle beyond 200 days.
The ratings agency emphasized that any financial performance weakening beyond current expectations, including pressure on liquidity, higher-than-anticipated losses, delays in insurance recoveries, or adverse findings from the ongoing investigation, will remain critical monitoring points.
Source: None/Company/INE0D0K01022/0cf39a48-813a-4dab-9e4e-2703b426b905.pdf
Historical Stock Returns for Sigachi Industries
| 1 Day | 5 Days | 1 Month | 6 Months | 1 Year | 5 Years |
|---|---|---|---|---|---|
| -2.46% | -12.44% | -9.66% | -35.64% | -47.60% | -66.23% |
16
