The initial public offering (IPO) of Sanstar continued to see a strong response from the investors during the third and final day of the bidding process as institutional investors joined the party along with HNI bidders. The issue was booked over 13.5 times by the end of the second day of the bidding process.
The 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 2,81,59,91,250 equity shares, or 74.91 times, compared to the 3,75,90,000 equity shares offered for the subscription by 3.30 pm on Tuesday, July 23. The three-day bidding for the issue, which kicked-off on Friday, July 19, concludes today.
The allocation for non-institutional investors (NIIs) was subscribed 133.73 times The quota set aside for qualified institutional bidders (QIBs) quota was booked more than 122.57 times as of the time. However, the portion reserved for retail investors saw a subscription of 22.48 times.
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.
Sanstar is a leading manufacturer of maize-based specialty products and ingredient solutions in India, with a diverse product portfolio. It ranks as the fifth-largest manufacturer in this sector. Although recent boiler maintenance impacted sales volume slightly, the company has demonstrated consistent growth in both revenue and profit over the years, said Choice Broking.
"This valuation appears to be relatively discounted compared to the industry average. Looking ahead, the company’s strategic expansion of its plants is expected to boost revenue, while cost management initiatives should enhance profitability. Sanstar is focusing on derivative products, which offer higher margins," it added with a 'subscribe with caution' rating for this IPO.
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 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 has a wide spectrum of potential opportunities to grow its business on account of rapid growth in demand for maize in the world. The company has planned a capacity expansion to meet the growing market demand for maize-based products. Also, it expects gradual improvement in the margins in the future by introducing derivatives, said Nirmal Bang Securities.
In terms of profitability, operating margins have improved 9.2 per cent in FY24. When compared with peers, the company has outperformed both in terms of revenue growth and profitability. Thus, the company's FY24 return ratios are better than average peer performance. The issue is valued at 26 times to FY24 EPS. We recommend 'subscribe' to the issue for the long term," 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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