The initial public offering (IPO) of Sanstar kicks-off for bidding on today, that is, Friday, July 19. The specialty plant-based products company is offering its shares in the fixed price band of Rs 90-95 apiece. Investors can apply for a minimum 150 equity shares and its multiples thereafter, until Tuesday, July 23, when the issue closes for bidding.
Sanstar manufactures specialty plant-based products and ingredient solutions for food, pet food and other industrial applications in India. The company's product portfolio includes liquid glucose, dried glucose solids, maltodextrin powder, dextrose monohydrate, native maize starches, modified maize starches, and by-products such as germ, gluten, fiber and fortified proteins.
The Rs 510.15 crore IPO of Sanstar includes a fresh share sale of 4,18,00,000 equity shares worth Rs 397.10 crore and offer-for-sale (OFS) of 1,19,00,000 equity shares amounting to Rs 113.05 crore from its promoters and promoter group entities.
The net proceeds of the fresh issue shall be utilized towards funding the capital expenditure requirement for the expansion of the Dhule Facility; repayment and/or pre-payment, in part or full, of certain borrowings availed by the company, and; general corporate purposes.
Sanstar raised Rs 153.04 crore from 12 anchor investors as it allocated 1,61,10,000 shares at a price of Rs 95 apiece. The anchor book included names like Societe Generale, BofA Securities Europe SA ODI, Bank of India Mutual Fund, Trust Mutual Fund, SBI General Insurance, Gagandeep Credit Capital, Negen Undiscovered Value, Intuitive Alpha Investment and more.
The Ahmedabad-based company has two manufacturing facilities covering a total area of 10.68 million square feet at Dhule in the state of Maharashtra and Kutch in the state of Gujarat. With an installed capacity of 3,63,000 tons per annum (1,100 tons per day), the company is the fifth largest manufacturer of corn-based specialty products and ingredients in India.
The company, which was founded in 1982, exports its products to companies in 49 countries including Asia, Africa, the Middle East, America, Europe and Oceania. The company also has a pan-India presence where its products are sold in 22 states.
For the year ended on March 31, 2024, Sanstar reported a net profit of Rs 66.77 crore with a revenue of Rs 1,081.68 crore. The company's net profit came in at Rs 41.81 crore with a revenue of Rs 1,209.67 crore for the financial year 2022-23. The total market capitalization of Sanstar stands at Rs 1731.32 crore.
Sanstar has reserved 50 per cent of the issue for the qualified institutional bidders (QIBs), while non-institutional investors will have 15 per cent of the net offer. Remaining 35 per cent of the net offer shall be allocated towards retail investors for the issue.
Pantomath Capital Advisors is the sole book running lead manager of the Sanstar IPO, while Link Intime India is the registrar for the issue. Shares of the company shall be listed on both BSE and NSE, with Friday, July 26 as the tentative date of listing. Here's what a host of brokerage firms said about the IPO of Sanstar Ltd:
Anand Rathi Research Rating: Subscribe for long term Sanstar is India's fifth-largest producer of maize-based specialty products and ingredient solutions. They have grown to an annual capacity of 363,000 tons. The company's P/E ratio is 25.7 times based on its FY24 earnings, with a market capitalization of Rs 1,731.32 crore post issue and a market cap-to-sales ratio of 1.62 times its FY24 earnings, said Anand Rathi Research.
"Sanstar is poised for strong growth due to increasing global demand for plant-based products and strategic capacity expansion at its Dhule facility. The company's emphasis on high-margin, valueadded products and industry-specific new launches will drive margin expansion, further supported by debt reduction," it added with a 'subscribe' for long term rating for the IPO.
SBICap Securities Rating: Subscribe for long-term Sanstar is valued at the FY24 P/E multiple of 25.9 times at post-issue market capital. Its revenue and PAT has grown at a CAGR of 45 per cent and 105 per cent from Rs 504 crore and Rs 16 crore in FY22 to Rs 1,067 crore and Rs 67 crore in FY24, respectively, said SBICap Securities.
"The company is raising funds through a fresh issue to fund its capital expenditure towards the expansion of the Dhule facility which will be commissioned by July 2025. The additional capacity of 1000 TPD will further boost topline during FY26. We recommend subscribing to the issue for a long-term investment horizon," it added.
Swastika Investmart Rating: Subscribe for listing gains Sanstar is a leading Indian manufacturer of maize-based specialty products and ingredient solutions, caters to a diverse range of industries in both domestic and global markets. The company boasts strategically located, state-of-the-art manufacturing facilities with a focus on sustainability, and has established a large and diversified customer base, said Swastika Investmart.
Sanstar's financial performance presents a mixed picture, with recent declines in revenue but growth in profitability. Fluctuations in raw material prices, exposure to global market volatility, intense competition, and a lack of diversification beyond maize-based products pose challenges for future growth. The IPO valuation of 20 times P/E appears fully priced, it said with a 'subscribe' tag.
DRChoksey Finserv Rating: Subscribe Sanstar is also focused on reducing its debt using IPO proceeds, which will lower the interest burden and enhance profitability. The commissioning of captive solar and biogas power plants is expected to reduce power costs significantly, further boosting profit growth, said DRChoksey Finserv.
"Adhering to high standards of quality and sustainability, Sanstar's strategic focus on cost management, operational efficiency in the backdrop of substantial topline growth is expected to drive sustained profitability and market share expansion, making it a formidable player in the industry. We have assigned a 'subscribe' rating for the IPO of Sanstar as it appears lucrative," it said.
Arihant Capital Markets Rating: Subscribe for long-term Sanstar is set for strong growth driven by rising global demand for plant based products and strategic capacity expansion at Dhule facility. The company’s focus on high margin value added products and new launches for specific industries will drive margin expansion complemented by reduction in debt, said Arihant Capital with a 'subscribe for long term' rating for the IPO.
StoxBox Rating: Subscribe Sanstar's financial performance is driven by its established market position in the industry, increasing global footprint, high entry barriers, expanded manufacturing capacities to capture additional market share, and long-lasting customer relationships, which enable it to tap the significant opportunities in existing and future products, said StoxBox with a 'subscribe' rating.
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