IPO listed on 26 Jul'24
Sanstar Ltd
Minimum Investment
₹ 14,250 / 150 shares
Grey market premium
₹ 37 (39% premium)
Issue price
₹ 95
Listing price
₹ 109
Listing day %
21%
Listing on
Jul 26, 2024
Our Verdict:
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- Sanstar Ltd has witnessed substantial growth in revenue, driven by rising demand in the ready-to-eat food category and broad applications across various industries. The company is now expanding its maize-milling capacity by 1,000 TPD at its Dhule facility. This expansion, set to complete by June 2025, is expected to solidify Sanstar's position as the industry's third-largest player.
- In terms of valuation, the IPO is fairly priced with a Price-to-Earnings (P/E) ratio of 20x based on FY24 earnings. Additionally, the grey market premium also suggests a strong market debut.
- Despite being priced higher than some of its key competitors, Sanstar's impressive growth trajectory, superior return ratios, a healthier post-IPO balance sheet, and strong market potential make this IPO a favourable option for medium-to-long term investors.
About the company
Founded in
26 Feb'82
Managing director
Gouthamchand Chowdhary
- Sanstar Ltd specializes in producing plant-based specialty products and ingredients for the food, animal nutrition, and various industrial sectors. The firm focuses on maize-based specialty products, ingredients solutions, and by-products like Gluten, Germ, and Bran.
- Sanstar's manufacturing operations are located in Gujarat and Maharashtra. With an installed capacity of 363,000 TPA, Sanstar ranks as the fifth largest manufacturer of maize-based specialty products and ingredient solutions in India. The firm exports its products to more than 49 countries worldwide.
STRENGTHS
- Robust Financial Performance: Sanstar has exhibited remarkable financial growth, with a Compound Annual Growth Rate (CAGR) of 45% in operational revenue from FY22 to FY24. In the same period, EBITDA increased by 57%, and net profit soared by 105%.
- Improved Profit Margins: Sanstar’s EBITDA margin expanded from 7.87% in FY22 to 9.20% in FY24. The net profit margin also climbed steadily from 3.15% to 6.17% during these years.
- Solid Return Ratios: Sanstar boasts robust return metrics, with a Return on Equity of 31% and Return on Capital Employed of 25% as of FY24, outperforming its listed competitors.
- Prestigious Clientele: Sanstar serves a roster of marquee clients including AB Mauri, ITC, Capital Foods, HUL, Godrej Agrovet, and Zydus Wellness. Repeat orders from these customers made up 89% of the total turnover in FY24.
RISK FACTORS
- Customer Concentration Risk: Approximately 41% of Sanstar's revenue for FY24 came from its top ten customers, presenting a risk of high dependence on a limited group of clients.
- Plant Commissioning Delays: There is a significant risk associated with delays in plant commissioning, which could negatively impact short-term growth, especially as existing facilities are already operating near their capacity limits.
- Lower Gross Margins: While Sanstar leads the industry in returns and asset turnover ratios, its gross margins remain below those of its competitors, highlighting a need for a strategic shift towards more value-added products.
Financials
All Values are in Cr.
Issue details
Issue type
Mainstream
Issue size
₹ 510.15 crore
Fresh Issue
₹ 397.10 crore
OFS
₹ 113.05 crore
Price range
₹ 90 - 95
Lot size
150 shares
Issue Objective
Sanstar plans to utilise the net proceeds from the fresh issue for the following purposes:
- Financing capital expenditures for expansion of the Dhule facility;
- Repaying or prepaying some of the existing loans; and
- General corporate purposes.
Dates
Bidding open
19 Jul'24
Bidding close
23 Jul'24
Allotment date
24 Jul'24
Refund date
25 Jul'24
Listing
26 Jul'24
IPO Reservations
Qualified institutional buyers
<50%
Non-institutional investors
>15%
Retail individual investors
>35%
Read the Offer Document
© 2025 by Liquide Solutions Private Limited, SEBI Registered Research Analyst (Registration number - INH000009816)
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