Sigachi Industries Ltd (SIGACHI) Q4 FY23 Earnings Concall Transcript

Sigachi Industries Ltd (NSE:SIGACHI) Q4 FY23 Earnings Concall dated May. 29, 2023.

Corporate Participants:

Amit Raj Sinha — Managing Director & Chief Executive Officer

O.S. Reddy — Chief Financial Officer

Analysts:

Chaiti B. Gujarati — Valorem Advisors — Analyst

Aditya — Motilal Oswal Financial Services — Analyst

Meet — Newshare — Analyst

Anirban Manna — Investor — Analyst

Munjal Shah — Investor — Analyst

Rupesh Shah — Investor — Analyst

Stuti Shah — Investor — Analyst

Soumitra Joshi — Investor — Analyst

Rajnath Yadav — Choice Equity Broking — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Sigachi Industries Limited Q4 FY ’23 Earnings Conference Call. [Operator Instructions]

I now hand the conference over to Ms. Chaiti B. Gujarati from Valorem Advisors. Thank you and over to you.

Chaiti B. Gujarati — Valorem Advisors — Analyst

Good morning, everyone, and a very warm welcome to you all. [Technical Issues] from Valorem Advisors, we represent the Investor Relations of Sigachi Industries Limited. On behalf of the company, I would like to thank you all for participating in the company’s earnings conference call for the fourth quarter and financial year ended 2023.

Before we begin, I would like to mention a short cautionary statement. Some of the statements made in today’s con-call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties which could cause actual results to differ from those anticipated. Such statements are based on management’s beliefs as well as assumptions made by and information currently available to management. Audiences are cautioned not to place undue reliance on these forward-looking statements in making any investment decision. The purpose of today’s earning conference call is purely to educate and bring awareness about the company’s fundamental business and financial quarter under review.

Now I would like to introduce you to the management participating in today’s earning conference call and give it over to them for their opening remarks. Thank you and over to you for Mr. Amit Raj Sinha, Managing Director and Chief Executive Officer, and Mr. O.S. Reddy, Chief Financial Officer, and Ms. Shreya Mitra, Company Secretary. Mr. Amit Raj Sinha, please, take over.

Amit Raj Sinha — Managing Director & Chief Executive Officer

Thank you, Chaiti. Very good morning, everybody. It’s a pleasure to welcome you to the earnings conference call for the fourth quarter and the financial year ended 2023. In the interest of some of the people who are new to the company, let me first start by giving a brief overview of the company, after which Mr. O.S. Reddy, our CFO, will brief you on the financial performance for the quarter under review.

Sigachi was incorporated in the year ‘1989, and today, we are one of the leading manufacturers of microcrystalline cellulose in the world. Our company manufactures high-quality cellulose-based excipients, which predominantly find usage in the pharmaceutical, supplements, and the food industry. The company has created a niche in manufacturing highly innovative pre-formulated excipients and 60-plus widely used excipients of international quality standards, apart from offering customized solutions. From our state-of-the-art R&D facility, we ensure continuous innovation to efficiently meet evolving customer customer demands. We have two manufacturing facilities in Gujarat and one in Telangana from where we ensure supply chain reliability for our customers in India and across the globe. Our total capacities of all these three facilities more than 13,800 metric tons per annum, which we are further enhancing through our ongoing capex plans to 21,000 metric tons per annum. We at Sigachi have a global sales and distribution network, exporting to more than 50 countries across Asia, Australia, the Americas, Europe, and Middle East.

Now I will request our CFO to give you a brief on the financial performance, after which I’ll give you the operational highlights of the quarter. Over to you, CFO.

O.S. Reddy — Chief Financial Officer

Thank you, Mr. Sinha, and good morning, everyone. Let me first brief you on the fourth quarter financial performance. The operational revenue for the quarter was INR72.4 crores, representing a flat growth on a year-on-year basis. EBITDA reported was INR12.2 crores, a decrease of approximately 16% year-on-year. And the EBITDA margin stood at 16.85%. Net profit-after-tax reported was INR7.3 crores, a decrease of 37% year-on-year, while the PAT margin was 10.08%, a decline of 592 basis points on a year-on-year basis. For the financial year ended 2023, the operational income stood at INR302 crores, representing an increase of around 21% compared to FY ’22. Similarly, operating EBITDA stood at INR58.7 crores, an increase of 10.5% on year-on-year. EBITDA margin was reported at 19.43%. Net profit stood at INR43.6 crores, an increase of 8.7% year-on-year, and PAT margin stood at INR14.43 during FY ’23.

Now, I hand over the call back to our MD to give you the operational highlights.

Amit Raj Sinha — Managing Director & Chief Executive Officer

Thank you, O.S. Reddy. On the operational front, the revenues for the quarter Q4 FY ’23 primarily was driven by the realization growth of nearly 15% on a year-on-year basis. The focus on the high-margin yielding product mix and cost-effective manufacturing processes, effective management of inventory resulted in increase in EBITDA of — and profitability. During the quarter, the company was successful in being able to pass on increased freight and raw material prices for the customer. Company is constantly striving to improve upon its R&D capabilities and cost-effective manufacturing processes, and thereby remain a manufacturer of choice with highest quality standards.

With this, we are now open — we open the floor for further question-and-answer session. Thank you.

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Aditya [Phonetic] with Motilal Oswal Financial Services. Please, go ahead.

Aditya — Motilal Oswal Financial Services — Analyst

Hi, sir. So, wanted to understand that incrementally, when we’re looking at the ROEs and ROCs on a year-on basis, they are going down. So, how should we read this? Hello?

Amit Raj Sinha — Managing Director & Chief Executive Officer

Yeah. Hi, Aditya. So, what I understand is that you have a concern on the drop in the ROC and ROE?

Aditya — Motilal Oswal Financial Services — Analyst

Yeah. So, incrementally, it’s going down and even when we adjust for the capital work in progress, I understand that, that is yet to generate revenue for the company. But when we even adjust for that, it’s coming down even though our realizations year-on-year are going down. So, just wanted to understand from you how to look at that.

Amit Raj Sinha — Managing Director & Chief Executive Officer

That’s right, Aditya. But what I see is that the drop is on account of the additional capex that is being put in into the two facilities where it is in the last stages of the capex cycle, and very soon, we should be seen this being commercialized. So, what I believe is a once the capex cycle gets commercialized, we should start seeing it getting better back to the FY ’21 figure.

Aditya — Motilal Oswal Financial Services — Analyst

Okay. And in FY ’23, if we compare employee benefit expenses, it has close to doubled. So, what are we investing in and where is expenses going towards?

Amit Raj Sinha — Managing Director & Chief Executive Officer

Yeah. Aditya, if you could just, I mean, repeat the question, what has doubled?

Aditya — Motilal Oswal Financial Services — Analyst

Employee benefit expenses, salaries.

Amit Raj Sinha — Managing Director & Chief Executive Officer

Okay. So, you mean the people expenses?

Aditya — Motilal Oswal Financial Services — Analyst

Yeah, correct. So, it has gone from INR21 crores to INR38 crores.

Amit Raj Sinha — Managing Director & Chief Executive Officer

That’s right. So, if you see the various verticals we are operating in, prime among them are the operation and management contracts. And over and above that, we also have the healthcare vertical. So, in the — when and — what we have seen is over the last financial year, our revenues in that particular vertical have nearly doubled — nearly more than doubled. So, along with that, because that’s a contract wherein we supply expertise and the team to run the plants, the overall cost expenditure for that O&M vertical has gone up reasonably high, and that of course, shows on the master balance sheet. Parallelly, in the healthcare vertical, what is seen is that, as you start taking baby steps of penetrating into various markets, you need to have a setup of team members to be able to run and operate at various locales, talukas, districts. And we have been having a reasonable hire. Now in spite of the reasonable hire, these — the healthcare vertical doesn’t translate itself to an immediate as much sale. So, we should see the sale going up in the current financial year and it should definitely be better when compared to the people expenses vis-a-vis the top-line.

Aditya — Motilal Oswal Financial Services — Analyst

Got it. Sir, also wanted to understand this one question before I go back to the question queue. Wanted to understand from you, you have strategy and when do we plan to launch Croscarmellose Sodium, because we had highlighted in the perspective that you’ll start investing getting from FY ’22, ’23. And [Speech Overlap]

Amit Raj Sinha — Managing Director & Chief Executive Officer

So, yeah, if I can understand the question correctly, Aditya, when do we plan to launch? I didn’t get it.

Aditya — Motilal Oswal Financial Services — Analyst

The CCS, our Croscarmellose Sodium excipient.

Amit Raj Sinha — Managing Director & Chief Executive Officer

Yeah. So, Croscarmellose. So, the Croscarmellose — at this moment, the application for the environmental clearance has been accepted by the Ministry of Environment and Forests and it is under scrutiny there. What we believe is in the next four to five months, we should have the approval. And immediately with that, we should be commencing our civil work. And once the civil work commences, we should take an estimate of 15 to 18 months before the commercial production starts showing on the balance sheet.

Aditya — Motilal Oswal Financial Services — Analyst

Got it. Sir, I have more questions and I’ll get back in question queue.

Amit Raj Sinha — Managing Director & Chief Executive Officer

Thank you, Aditya.

Aditya — Motilal Oswal Financial Services — Analyst

Thank you.

Operator

Thank you. [Operator Instructions] Our next question comes from the line of Meet with NewShare [Phonetic] Please, go ahead.

Meet — Newshare — Analyst

Hello, sir. Am I audible?

Amit Raj Sinha — Managing Director & Chief Executive Officer

Yes, Meet, you are very much audible.

Meet — Newshare — Analyst

Sir, can you provide some guidance on — or update on the capex side?

Amit Raj Sinha — Managing Director & Chief Executive Officer

CFO, would we be able to bring out the details?

O.S. Reddy — Chief Financial Officer

Yes. This capex we are incurring where the expansion is going on at our existing brown facilities at Jhagadia and Dahej, the facilities. Once out of this expansion, additional 7,000 metric tons per annum capacity will come into force. [Speech Overlap] will come into operational from October FY 2023 onwards, coming October onwards. It will come almost in the verge of completion. This is the status. Anything you would like to more — know more further?

Meet — Newshare — Analyst

No, thanks. Second question is what is our current realization?

O.S. Reddy — Chief Financial Officer

Please repeat the question.

Meet — Newshare — Analyst

What is our current realization?

O.S. Reddy — Chief Financial Officer

Current realization is around — the average realization is 208.85. We can say it’s 209.

Meet — Newshare — Analyst

Can you repeat the figures? What is it?

O.S. Reddy — Chief Financial Officer

209.

Meet — Newshare — Analyst

209? Okay. And what is the guidance for the revenue growth in FY ’24?

O.S. Reddy — Chief Financial Officer

Yeah. We hope this will continue because in FY ’23, we couldn’t do much more because the expanded capacities didn’t come into operation and these are expected to come into operation from October onwards. Second and third quarter onwards, the revenues will — the total revenues will pick up and the realizations also. And the growth rate will continue.

Meet — Newshare — Analyst

Okay. Sir, my last question is revenue growth in FY ’23 was primarily driven by price growth. So, any guidance for the volume [Speech Overlap] Right. So, any guidance for the volume growth in FY ’24?

O.S. Reddy — Chief Financial Officer

Yes, Meet. This — the expanded prices are coming into force from October onwards. Right now, we don’t have the capacities enough to do more quantities. Almost we have achieved the complete at around 95% of utilization is we are running the capacity. And October onwards, the enhanced capacities also will come into force and additional sales will happen.

Meet — Newshare — Analyst

So, capex utilization for the new capacity will be around — can you guide for a number?

O.S. Reddy — Chief Financial Officer

Yeah. 7,000 is the total quantity, but initially in the first year, maybe around 30% to 35% utilization would be there.

Amit Raj Sinha — Managing Director & Chief Executive Officer

That’s right.

O.S. Reddy — Chief Financial Officer

And over a period of two years, the 100% utilization will be there on expanded capacities also.

Meet — Newshare — Analyst

Okay, sir. Thank you.

Amit Raj Sinha — Managing Director & Chief Executive Officer

Thank you, Meet.

O.S. Reddy — Chief Financial Officer

Thank you.

Operator

Thank you. Our next question comes from Anirban Manna [Phonetic], an investor. Please, go ahead.

Anirban Manna — Investor — Analyst

Yeah. Thanks for the opportunity. Sir, my question would be, what would be the revenue for FY ’24? The first question.

Amit Raj Sinha — Managing Director & Chief Executive Officer

So, Mr. Anil [Phonetic] what we expect ourselves is that we definitely see a top-line growth averaging between 25% to 27%. So, basis whatever is our current top-line, we should be looking at a 25%, 27% growth in the coming FY.

Anirban Manna — Investor — Analyst

Okay. Out of that first two quarters would be minted and we’ll grow up from Quarter 3, right?

Amit Raj Sinha — Managing Director & Chief Executive Officer

That’s right. Absolutely.

Anirban Manna — Investor — Analyst

And my second question would be operating profit margin. What would be the margin in FY ’24?

Amit Raj Sinha — Managing Director & Chief Executive Officer

That’s a very difficult question to answer given the kind of volatility which is observed in the international market. What we see is that we are trying to get back to our EBITDA and margins what have seen in FY ’22. We are confident of getting back to those figures in the near term.

Anirban Manna — Investor — Analyst

Okay. FY ’22? Means 21% — around 21%?

Amit Raj Sinha — Managing Director & Chief Executive Officer

Yes, that’s right.

Anirban Manna — Investor — Analyst

All right. Thanks.

Amit Raj Sinha — Managing Director & Chief Executive Officer

Thanks.

O.S. Reddy — Chief Financial Officer

Thanks, Anirban.

Operator

Thank you. [Operator Instructions] Our next question comes from Munjal Shah [Phonetic] an investor. Please, go ahead.

Munjal Shah — Investor — Analyst

Hello?

Amit Raj Sinha — Managing Director & Chief Executive Officer

Yeah.

Munjal Shah — Investor — Analyst

Yeah. Am I audible?

O.S. Reddy — Chief Financial Officer

Yeah, audible, Mr. Munjal.

Munjal Shah — Investor — Analyst

Yeah. Thank you, management, for the opportunity. Sir, I have couple of questions. Sir, the first question is relating to the gross margin. So, sir, basically quarter-on-quarter as well as year-on-year, we are seeing that the margin has — gross margin has been around 56%. So, considering last eight quarters, I think 56% is the gross margin we have — so it’s a top gross margin which we have achieved. So, any room for improvement in gross margin going ahead? That is the first question.

Secondly, sir, the PAT margin has — the EBITDA margin and PAT margin have like fallen down drastically. So, there is a impact of 4% on the EBITDA margin and close to 6% on the PAT margin. So, any chances of improving the margins going ahead and the rationale behind it? So, these are my questions. And then I’ll squeeze in a few more questions, sir, if I get the opportunity. Thank you.

O.S. Reddy — Chief Financial Officer

Yeah. Thank you, Mr. Munjal, sir. This gross margin, there is likely to be improved going forward because this is a combination of mix of the products. Definitely, we’ll see that is an improvement in this. And EBITDA — coming to EBITDA and PAT margins, there is a decline, because there are other new segments are there, which we have invested lots of amount towards the fixed cost or the revenue expenditure whatever is there, but the fruits are yet to come from those segments, so like OTC, generics, food, nutrition, all these things. And moreover, this — even now coming to PAT, there is an increase of the finance cost also. EBITDA anyway doesn’t have an impact on that. This increase is because we have incurred some amount of capital expenditure from internal accruals and also the integration of working capital limits increase, because of that there is an increase in finance cost and PAT is impacted. And going forward, we hope we’ll maintain FY ’22 figures, we’ll reach soon the figures of FY ’22.

Munjal Shah — Investor — Analyst

Okay. Sir, other question. So, when we are mentioning that apart from MCC, we are getting into different segments like generics, so basically, we said healthcare. And we also have O&M. So, basically, are these segments on the same gross margins or EBITDA margins as our MCC business, or they will be — there’ll be differentiating margin factors?

O.S. Reddy — Chief Financial Officer

They’re a little lower. Even, O&M is good, but the other segments are a little lower when we compare to MCC. But it is a volume game and then that is an additional revenue from MCC. Even the MCC, one more thing, we didn’t have enough capacity to sell more units and [Technical Issues] margins. And that is anyway whatever the additional profit it comes, that is behind the costs. And because of non-availability of capacities, we couldn’t sell in FY ’23. In FY ’24, now October onwards the enhanced capacities comes into force, that also will add to boost the EBITDA and PAT margins.

Munjal Shah — Investor — Analyst

Okay. So, sir, my next question is then we come to the product MCC, so with the new additional capacity is expected to come from October 2023, so, sir, do we have any orders on hand currently and into which segments, because I think we do 75% of business in pharmaceutical segment on an export level? And we were planning to push more into the food and beverages sector. So, any update on that, sir?

Amit Raj Sinha — Managing Director & Chief Executive Officer

So, Mr. Munjal, on this front, we don’t really get upfront orders on hand on a very long-term basis. Our orders are usually six to nine months forward-looking. And at this moment, we have comfortable orders to cater for the next six to — three to six months. Now in terms of percentage, consumption of Microcrystalline Cellulose in the pharma and the nutraceutical industry vis-a-vis food, the consumption in the food is far lower than what it is in the pharmaceutical and and the nutraceutical industry. Considering that the overall dynamics of pharmaceutical is improving, we believe that by its very nature, it should be able to increase on an 8% to 10% annual, the pharma industry. Food should be much less. It should be 5% to 6% on an annual basis. We don’t foresee any issues in capacity utilization ramp-up as we commission our new capex, Mr. Munjal.

Munjal Shah — Investor — Analyst

Okay. Thank you, sir. So, sir, can we assume that like the INR7 crores profit in the Quarter 4 would be bottoming out of the profits going ahead with the quarters expected to come ahead, because we had a huge employee expense which we have which have already booked in. That is close to INR12 crores, INR12.5 crores. So, I assume that whatever team strength we’d need to build for the new businesses which you’re heading in would have been incorporated. And going forward, probably if the operating leverage comes into play. So, can I — can we assume the same?

O.S. Reddy — Chief Financial Officer

[Speech Overlap] Yeah, just with this O&M, operative and management income, that is predominantly on manpower expenses would be there. And last year, FY ’22, our revenue was INR13.2 crores and FY ’23, it was INR26.4 crores, almost it is doubled. And in coming years also, it increases. And when this — by increasing this, then we fixed costs there and employee benefit expenses also will go up. And the other segments also, generics or OTC, these segments also basically the manpower expenses will be higher. There is no other manufacturing facility kind of thing. This is only the area of marketing front. That’s why the employee costs will be more when this revenue increases. This employee benefit expenses [Technical Issues] there is an increase that will be — will commensurate with the annual growth. So, there is a not being any…

Munjal Shah — Investor — Analyst

So, sir, my question was regarding that basically specifically, that — and we have incurred a cost of INR12.5 crores in the Quarter 4, right? So, if we assume that the team which we — which required to building to penetrate the areas for different segments would have been on the books. So, we assume that the costs related to the manpower will probably remain same in the quarters going ahead. If you’re not adding in more team members, that was my — that was the first thing. And secondly, going ahead, I was just checking that if we can assume that the operating leverage, the team which we have already hired will start getting its revenues for the company would come into the picture. So, that was my other question to that. So, these were my two questions for this particular thing.

Amit Raj Sinha — Managing Director & Chief Executive Officer

Mr. Munjal, what we see is, we believe that the team members would start contributing and there would be an overall increase in the top-line. There is no doubt on that. However, we all are there in the system wherein there are annual increments given — considering that there are a team of 1,100 team members in Sigachi, the annual increment also is expected April 1. And the top-line — the jump in top-line would start trickling in towards the end of Q2 when the capex starts getting commercialized. We however believe that — hello?

Munjal Shah — Investor — Analyst

Hello. Yes, sir.

Amit Raj Sinha — Managing Director & Chief Executive Officer

Yes. We, however, believe that it should start getting better. Q4, we should be having a better quarter than what we had in the Q4.

Munjal Shah — Investor — Analyst

Okay. So, you — so Q2 would be better than Q4, that is what you’re trying to put forth?

Amit Raj Sinha — Managing Director & Chief Executive Officer

That’s right.

Munjal Shah — Investor — Analyst

Okay, sir. The improvement in the financials from Q2 FY ’23 — FY ’24, sorry, is it correct in my understanding?

Amit Raj Sinha — Managing Director & Chief Executive Officer

So, we also believe as much, sir, there are certain variables which are also not known to us, but we also believe that Q2 should start getting better than what the Q4 was of Q4 FY ’23.

Munjal Shah — Investor — Analyst

Okay. And sir, how are we seeing the response in our newer segments where we are pushing in our products? So, how are we seeing the response in the market currently?

Amit Raj Sinha — Managing Director & Chief Executive Officer

So, at this moment, Mr. Munjal, we’re taking baby steps. We are showing in our presence across the markets, across the segment to the customers. So, at this moment, our prime focus is to drive growth, to drive penetration, so that there is presence across all the retail outlets. And that’s the focus and we’re not really looking at margin generation because the margin generation in the B2C doesn’t come in so quick. So, focus at this moment is on the growth. In the food and nutrition, we have been — I mean, we have gone beyond the small baby steps. We have commenced a reasonable level of exports. We are in discussions with a good number of distribution to some and customers across the globe who will be testing our products, sampling our products. And we believe this particular financial year, we should have far better performance than what we had in FY ’23.

Munjal Shah — Investor — Analyst

Okay. So, basically, okay. So, that is regarding the newer segments. Sir, basically, can we say that we had more of the realization growth for FY ’23? So, that is, you said 15%. So, going ahead, apart from the new capacities coming in, which will — which we are mentioning that we will have utilization of 30% to 35%, so that will be the addition of volume growth which we will have this particular — in this particular year? But do we also assume that there will be further realization growth going ahead?

Amit Raj Sinha — Managing Director & Chief Executive Officer

Yes, Mr. Munjal. That’s right, because our overall objective is to see which way we can offer differentiated products to the customer, not just the routine ones. So, when we offer the differentiated products, the overall level of competition is less, the value-add to the customer is far more, and effectively, our margins are better. So, what you speak is correct.

Munjal Shah — Investor — Analyst

Okay. And sir, in the newer segments, we are specifically focusing on a B2B model or a B2C model?

Amit Raj Sinha — Managing Director & Chief Executive Officer

In the newer segments — sorry, which segments are you talking of?

Munjal Shah — Investor — Analyst

So, when we’re talking about nutraceuticals, healthcare segment…

Amit Raj Sinha — Managing Director & Chief Executive Officer

Okay. So, yeah. So, in the B2C model are primarily in the healthcare and rest all other models for Sigachi stand to be at B2B. The food and nutrition is B2B, the nutraceutical is B2B, the pharma is B2B, everything else is B2B other than the healthcare vertical.

Munjal Shah — Investor — Analyst

Okay. So, three verticals basically into B2B and the healthcare one is in B2C?

Amit Raj Sinha — Managing Director & Chief Executive Officer

That’s right, sir.

Anirban Manna — Investor — Analyst

Okay. And sir, my last question is regarding, sir, I suggested in the last…

Operator

Sorry to interrupt you there.

Munjal Shah — Investor — Analyst

It’s the last question. I’ll get back in the queue. Hello?

Amit Raj Sinha — Managing Director & Chief Executive Officer

Yes, Mr. Munjal, please.

Munjal Shah — Investor — Analyst

Sir, in the last con-call I had made a request and a suggestion as well. So, with due respect, sir, did you — did the management had time to give the thought on the royalty part to convert that from sales to profit from ’25 — 2025 onwards?

Amit Raj Sinha — Managing Director & Chief Executive Officer

Yes, that is — already been in the discussion in the boardroom, sir, and at appropriate time, it will be declared before the royalty commences.

Munjal Shah — Investor — Analyst

Okay. Noted. Thank you, sir. I’ll get back in the queue.

Amit Raj Sinha — Managing Director & Chief Executive Officer

[Speech Overlap] positively indicated and we assure you on that. I mean, there is no two-way about it.

Munjal Shah — Investor — Analyst

Okay. Thank you, sir. Thank you so much for answering my questions patiently. I’ll get back in the queue.

Amit Raj Sinha — Managing Director & Chief Executive Officer

Thank you, Mr. Munjal.

Operator

Thank you. Our next question comes from Aditya with Motilal Oswal Financial Services. Please, go ahead.

Aditya — Motilal Oswal Financial Services — Analyst

Hi, sir. Majority of my questions have been answered. But [Indecipherable] question that I had was, sir, what was revenue from API in FY ’23?

Amit Raj Sinha — Managing Director & Chief Executive Officer

Yes, Aditya. Your — whatever revenue from?

Aditya — Motilal Oswal Financial Services — Analyst

API, the pharma business, that we just started.

Amit Raj Sinha — Managing Director & Chief Executive Officer

Okay. The pharma business for API has not yet commenced, sir. We are actively looking out for a potential target to look to see which way it can get integrated. But there is no development on that front as of now.

Aditya — Motilal Oswal Financial Services — Analyst

Okay. And [Speech Overlap]

Amit Raj Sinha — Managing Director & Chief Executive Officer

Right now, we’ll continue to sell inactive ingredients, inactive pharmaceutical ingredients.

Aditya — Motilal Oswal Financial Services — Analyst

Okay. And this is developed in our facility only, right?

Amit Raj Sinha — Managing Director & Chief Executive Officer

That’s right.

Aditya — Motilal Oswal Financial Services — Analyst

All right. Sir, in last couple of con-calls, there were some discussion around Sigachi raising capital through issuing volumes. So, any update on that?

Amit Raj Sinha — Managing Director & Chief Executive Officer

So, actually, Mr. Aditya, it’s a combination of finding a suitable target and then accordingly working to see what is the kind of fund involvement, what is the funding required, and then working to see which way we can balance out the funding for that particular target. So, it’s a work in process at this moment. And as and when we have an update, we will of course issue an advisory.

Aditya — Motilal Oswal Financial Services — Analyst

Okay. Sir, also one small request, going forward, if we can show revenues coming from, because we’ve got different verticals now. We’ve got our B2C healthcare, we’ve got nutraceuticals, we’ve got the main business, MCC, and then O&M. If you can show a split of revenues going forward in a presentation, that will be super-helpful.

Amit Raj Sinha — Managing Director & Chief Executive Officer

That point is taken, Aditya. I would suggest let the verticals take in a couple of baby steps before it becomes meaningful to be shown.

Aditya — Motilal Oswal Financial Services — Analyst

But what I was saying that if only you can, sir — because O&M is growing at a fast pace, so MCC, here only I can say is that it’s coming down from 97%, 95%, 90%, it was 90% as of FY ’23. If we can show how much revenue O&M is contributing, how much that segment is contributing and how much MCC is contributing.

Amit Raj Sinha — Managing Director & Chief Executive Officer

Fair. I think that’s a point well taken. We shall see that we have these breakup of the pharma, the O&M, and others. I think that way, it will — I think we have fair detailing available for the investors, and I think that should be good enough.

Aditya — Motilal Oswal Financial Services — Analyst

Thank you so much.

Amit Raj Sinha — Managing Director & Chief Executive Officer

Thank you, Mr. Aditya. Good talking.

Aditya — Motilal Oswal Financial Services — Analyst

Likewise.

Operator

Thank you. Our next question comes from Meet with Newshare. Please, go ahead.

Meet — Newshare — Analyst

Hi, sir. Am I audible?

Amit Raj Sinha — Managing Director & Chief Executive Officer

Hi. Yes, Mr. Meet, you’re audible.

Meet — Newshare — Analyst

Okay, sir. Sir, we are seeing good [Indecipherable] or EBITDA margin better due to a new segment and also our new capacity is coming, right, in Q2 or Q3. So, we will need some more starting operational costs. So, how we will maintain our EBITDA margin? [Foreign Speech] So, how we will maintain that?

Amit Raj Sinha — Managing Director & Chief Executive Officer

So, Meet, growth is a combination of certain short-term targets and long-term approach. Considering the kind of demographics we have in India, considering the kind of increased life expectancy, income levels we have in India, what we believe is that healthcare is one of the most — is one of the good segments to be in. And for that, we have commenced taking baby steps in the healthcare vertical. And of course, that results in a drop in our overall EBITDA. Now to what level we are able to balance out and increase cost expenditure from the healthcare division from our pharma vertical is a subject matter of debates because sometimes, the capacity utilization is not as we expect or the increased incremental capex is not really coming in. So, the effective EBITDA does get hit. What we believe is that once we have the capex cycle turning commercial, we should see a healthy EBITDA or probably higher than that. And by then, we will also have the healthcare vertical doing reasonably well.

Meet — Newshare — Analyst

Okay, sir. Thank you.

Amit Raj Sinha — Managing Director & Chief Executive Officer

Thank you, Meet.

Operator

Thank you. Our next question comes from the line of Rupesh Shah [Phonetic] an investor. Please, go ahead.

Rupesh Shah — Investor — Analyst

Yeah. Good morning. Thank you [Technical Issues] So, my first question, what is the [Technical Issues]

Amit Raj Sinha — Managing Director & Chief Executive Officer

Rupesh, your line is not amply clear. We are not able to understand the whole statement.

Rupesh Shah — Investor — Analyst

Yeah. What’s the status of the O&M agreement [Technical Issues]

Amit Raj Sinha — Managing Director & Chief Executive Officer

O&M agreement with?

Rupesh Shah — Investor — Analyst

[Technical Issues] Dahej facility.

Amit Raj Sinha — Managing Director & Chief Executive Officer

ONGC?

Rupesh Shah — Investor — Analyst

Yeah.

Amit Raj Sinha — Managing Director & Chief Executive Officer

Yes, ONGC is one of our customers and our O&M continues to be operative there, sir.

Rupesh Shah — Investor — Analyst

[Technical Issues]

Amit Raj Sinha — Managing Director & Chief Executive Officer

I’m sorry, you’re not audible.

Rupesh Shah — Investor — Analyst

Yeah. Can you show — throw some light on the realization, domestic and external?

Amit Raj Sinha — Managing Director & Chief Executive Officer

Realization of domestic and exports?

Rupesh Shah — Investor — Analyst

Yes.

Amit Raj Sinha — Managing Director & Chief Executive Officer

CFO, could you just give in the breakup for that?

O.S. Reddy — Chief Financial Officer

Yes, sir. The realization, the total is we can tell the approximate figures. In export, we have done around INR180 crores and — INR202 crores, sorry, INR202 crores in FY ’23, and previous year, it was INR178 crores. And the domestic, INR74 crores in current year when the previous year it was INR58 crores. There is a growth of — in exports, there is a growth of 13.2% and domestic, there is a growth of 25%. But coming to realization, export realization will be obviously high. That is around 20% to 25%, which is higher than the domestic.

Rupesh Shah — Investor — Analyst

Okay, sir. It was very helpful. Thank you, sir.

O.S. Reddy — Chief Financial Officer

Thank you so much.

Amit Raj Sinha — Managing Director & Chief Executive Officer

Thank you, Rupesh.

Operator

Thank you. [Operator Instructions] Our next question comes from Stuti Shah [Phonetic] an investor. Please, go ahead.

Stuti Shah — Investor — Analyst

First of all, good morning and thank you for hosting us. So, my first question is in the line of what are the current utilization levels at all the three plants? And shall this continue and how shall this continue in the coming quarters?

O.S. Reddy — Chief Financial Officer

Yeah. Ms. Stuti, it’s — annual utilization is right now, it is the Dahej plant, it is around 96% and Jhagadia plant, it is 96.65%, and Hyderabad plant is a 93%. Overall, it is 95% is there. And almost, we have — now there are no additional capacities. October onwards, there is [Indecipherable] expansion 7,000 metric tons per annum additional [Indecipherable] capacities will come into this year.

Stuti Shah — Investor — Analyst

Okay. Thank you so much for hosting us, sir.

O.S. Reddy — Chief Financial Officer

Thank you.

Amit Raj Sinha — Managing Director & Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from the line of Soumitra Joshi [Phonetic] an investor. Please, go ahead.

Soumitra Joshi — Investor — Analyst

Good morning. Am I audible?

Amit Raj Sinha — Managing Director & Chief Executive Officer

Yes, Mr. Joshi.

Soumitra Joshi — Investor — Analyst

So, good morning, all, and thank you firstly for this opportunity. Sir, most of my questions have been answered. I just would like to summarize a few things and can you please just correct me if I have gone wrong somewhere? So, one is with respect to revenue for the next year, the projection would be around 25% to 37% increase on the revenue to last year. Second, we are looking at operating margins to be around the 21% — 21%, 22%, which was in March — that is, last to last year. Now coming to this thing, with respect to growth, the growth drivers would be the new, this thing, the capacities which will come into action from Q2 onwards. So, basically, the results would be factored in on the books from Q2, if I’m not wrong. Is this understanding correct, or have I missed out on some points here?

O.S. Reddy — Chief Financial Officer

Yeah. [Indecipherable] onwards, that is October, October, November, December, and third quarter, the additional expanded capacities [Speech Overlap]

Soumitra Joshi — Investor — Analyst

[Speech Overlap] Q2 would be the normalcy and then Q3 would be where this additional revenue kicks in? And [Speech Overlap] so Q3 and Q4 would be such that they would ensure a 25% to 37% revenue growth happens for the entire year? Is that correct?

O.S. Reddy — Chief Financial Officer

That will be more than that, not less than around 27%, 29%. Maybe it will decrease further also, we have chances, because of additional capacities are coming into place.

Soumitra Joshi — Investor — Analyst

Sure, sir. Last year with respect to Q1 and Q2, are we saying that Q4 or this particular result we bottomed out with respect to the margins as well as the growth in revenues and Q1 and Q2 are expected to be better, or they would be on similar lines to Q4?

O.S. Reddy — Chief Financial Officer

We see, FY ’24, Q1, Q2 are better lower and Q3, Q4 are higher side because in FY ’23, first and second quarter, we have got enough capacities are there to sell more quantities. And Q3, Q4, we don’t have enough capacities. That’s why almost we are running at 95%. That is the operating capacity. And that’s why there the revenues and the EBITDA and PAT are little where in Q4. And coming to FY ’24, Q1 and Q2 will be a bit lower when they compare to Q3 and Q4, because Q3 and Q4, the expanded capacities will come into place.

Soumitra Joshi — Investor — Analyst

No. Sir, my question was with respect to this Q4, Q4 of this year, will Q1 and Q2 be on improvement lines or they would be very similar to the current Q4?

Amit Raj Sinha — Managing Director & Chief Executive Officer

So, Mr. Joshi, because the expanded capacities would not really come into play, we believe it will be more or less muted growth.

Soumitra Joshi — Investor — Analyst

Okay. So, they will be on similar lines to Q4, the current results? So, Quarter 1 and Quarter 2 would be on similar lines, correct?

Amit Raj Sinha — Managing Director & Chief Executive Officer

Yes.

Soumitra Joshi — Investor — Analyst

Okay. Thank you so much.

Amit Raj Sinha — Managing Director & Chief Executive Officer

Thank you, Mr. Joshi.

O.S. Reddy — Chief Financial Officer

Thank you, Mr. Joshi.

Operator

Thank you. [Operator Instructions] Our next question comes from the line of Rajnath Yadav with Choice Equity Broking. Please, go ahead.

Rajnath Yadav — Choice Equity Broking — Analyst

Good morning, everyone. Thanks for the opportunity. My question is related to the fundraising program. Normally, it means, a target — I believe, our fundraising has been stalled because the target company has not been finalized. Am I correct?

Amit Raj Sinha — Managing Director & Chief Executive Officer

So, Mr. Rajnath Yadav, we are continuously looking and until and unless all year of activities of the target company look positive, it is still a work in progress. I would say it is still a work in progress. And as and when we have something from them, we will declare to the exchange.

Rajnath Yadav — Choice Equity Broking — Analyst

No, why I’m asking is that normally, a company finds a target company and then go for private placement to raise funds. But in this case, it is — means, first we have identified the investors from where the funds will be coming and then we are searching for a target company. So, just wanted to understand what is the reason of first mentioning, I mean, some prominent names as a investor, and then still we are searching for a target company?

Amit Raj Sinha — Managing Director & Chief Executive Officer

So, it’s actually a parallel process, Mr. Yadav, that we continue to look out to see which is the most appropriate target company which aligns to our overall objective. And parallelly, once the target company is kind of confirmed, we start looking out to see where — which is a way — which is the best way to kind of fund that particular target company acquisition.

Rajnath Yadav — Choice Equity Broking — Analyst

Sir, here we have finalized the funding and?

Amit Raj Sinha — Managing Director & Chief Executive Officer

No, we have not finalized the funding, sir. We have not finalized the funding. It is still a work in process. We haven’t still finalized the funding, sir.

Rajnath Yadav — Choice Equity Broking — Analyst

So, is this because some of the investors there — means, some concerns on their part to put money? Anything related to that? Or, it’s a normal?

Amit Raj Sinha — Managing Director & Chief Executive Officer

No, it has nothing to do with any concerns, sir. As of now, our — the acquisition part, we are still open, we are still looking, and the funding part, we are still looking at various options which balances out the overall cost of the acquisition. So, it is still a work in process, sir.

Rajnath Yadav — Choice Equity Broking — Analyst

And sir, in a domestic market, to whom — among the top five or top 10 manufacturers, pharma manufacturers, to whom we are supplying our excipients?

Amit Raj Sinha — Managing Director & Chief Executive Officer

So, in the case of our customers, GSK, AstraZeneca, Sanofi, Sava, Pfizer’s, Krka, Dr. Reddy’s, Sun Pharma, Granules, Cipla, Lippon, Takeda, Micro Labs, Alkem, TNG, Himalaya, there are just about every big player in the domestic pharma company is our customer, sir.

Rajnath Yadav — Choice Equity Broking — Analyst

So, to what extent we are able to meet their excipient requirement? Are we able to meet their 100% requirement or a specific grade of excipient we are able to meet?

Amit Raj Sinha — Managing Director & Chief Executive Officer

So, it’s different for different customers. But definitely, no company gives out all their excipient requirements to only one supplier for assuring a better supply chain. I mean, that is a separate subject. But there is no company who take all their excipients from only one supplier, sir. Some places, we have nearly 70% to 80% of their supplies coming into Sigachi. And some places, it is 25%, 30%. It’s a range.

Rajnath Yadav — Choice Equity Broking — Analyst

Okay, sir. Thank you.

Amit Raj Sinha — Managing Director & Chief Executive Officer

Thank you, Mr. Rajnath Yadav.

Operator

Thank you. As there are no further questions, I would now like to hand the conference over to the management for closing comments.

Amit Raj Sinha — Managing Director & Chief Executive Officer

Thank you, all, for participating in this earnings con-call. I hope we were able to answer your questions satisfactorily and at the same time offer insights into our business. If you have any further questions or would like to know more about the company, please do reach out to our Investment Relations Manager at Valorem Advisors.

Thank you. Stay safe and stay healthy.

Operator

[Operator Closing Remarks]