Sigachi’s Credit Rating Placed on Negative Watch

Speedy Summary

• Sigachi Industries’ banking facilities rating has been revised by Care Ratings to ‘Rating Watch with negative implications’ (RWN) following a fire incident at its Hyderabad factory on June 30.
• Long-term bank facility rating changed from Care A- Stable to Care A- RWN; long/short-term bank facility ratings changed to Care A-/Care A2 (RWN).
• The fire caused notable destruction of the manufacturing unit, casualties, and injuries among workers. The Hyderabad unit contributed approximately 20% of the company’s revenue.
• Sigachi plans to offset losses by ramping up production capacities in Gujarat units with potential expansion by 3,300 MTPA and minimal capital investment if successful.
• profitability and cash flows might potentially be affected due to compensation for deceased employees, fixed overheads for the damaged unit, and other one-time expenses.
• ₹1 crore ex gratia compensation announced for families of deceased workers along with medical rehabilitation support for injured workers funded partly through insurance claims, staggered payouts, and available liquidity.
• As of March 31, Sigachi reported free cash reserves of ₹40 crore along with unutilized working capital limits worth ₹30 crore.Insurance covers structural damage and also inventory and production loss for three months post-event.

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