The initial public offering (IPO) of Sanstar continued to attract a strong response from the investors during the second day of the bidding process thanks to strong buying interest from wealthy individuals and retail bidders. The issue was booked over 4.6 times on the first day of the bidding.
Ahmedabad-based Sanstar is selling its shares in the price band of Rs 90-95 apiece. Investors can apply for a minimum of 150 shares and its multiples thereafter. It is looking to raise Rs 510.15 crore via IPO, which includes a fresh share sale of Rs 397.10 crore and an offer-for-sale (OFS) of 1,19,00,000 equity shares.
According to the data, the investors made bids for 37,27,35,450 equity shares, or 9.92 times, compared to the 3,75,90,000 equity shares offered for the subscription by 2.20 pm on Monday, July 22. The three-day bidding for the issue will conclude on Tuesday, July 23.
The allocation for non-institutional investors (NIIs) was subscribed 23.25 times, while the portion reserved for retail investors saw a subscription of 9.78 times. However, the quota set aside for qualified institutional bidders (QIBs) quota was merely 15 per cent as of the time.
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 grey market premium of Sanstar has taken a big hit amid the rising volatility in the broader markets. Last heard, the company was commanding a premium of Rs 30 in the unofficial market, suggesting a listing pop of about 30-32 per cent for the investors. However, the premium in the grey market stood around Rs 35-37 on the first day of the bidding.
Brokerage firms are mostly positive on the issue suggesting investors to subscribe to it for a long term. They are positive on the company's rising market share, strong financials, experienced management and increased capacity in the coming months. However, increasing competition, dependence on some products and government's control on the price are key risks for it.
Ahead of its IPO, 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. Sanstar reported a net profit of Rs 66.77 crore with a revenue of Rs 1,081.68 crore for the year ended on March 31, 2024. 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.
Sanstar has grown its revenue, Ebitda and PAT at a CAGR of 45 per cent, 57 per cent and 105 per cent, respectively on back of better scale, new product launches and market share gains. The company is the fastest growing starch manufacturer and has its facilities located in the strategic maize harvesting belts of Dhule, Maharashtra and Kutch, Gujarat, said Indsec Research.
"The capacity addition at Dhule facility from 1000 TPD to 2100 TPD should aid volume growth. While the starch business is expected to grow at a healthy pace, we believe, the growth of specialty products coupled with maize based ethanol production in the medium term should act as a catalyst of growth. Given the underlying growth factors," it added with a 'subscribe' tag.
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.
Sanstar, which has a current production capacity of 1100 tons per day, has a market share of 5.9 per cent. The market share is expected to increase to 14 per cent with the company’s strategic decision to increase its production capacity to 2100 tons per day which will help in driving its revenue and PAT growth in the future, said the IPO note by SMIFS.
"The company’s customers have increased from 215 in FY22 to 525 in FY24 which is expected to expand further due to the company’s foray into manufacturing of Ethanol and increasing contribution of derivative products and scale up of organic ingredients segment. We recommend a subscribe to the issue as a long term investment," it said.
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.
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