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
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
© 2024 by Liquide Solutions Private Limited, SEBI Registered Research Analyst (Registration number - INH000009816)
This document has been issued by Liquide Solutions Private Limited for information purposes only. It does not have regard to specific investment objectives, financial situation and the particular needs of any specific person who may receive this document. Investors should seek personal and independent advice regarding the appropriateness of investing in any of the funds, securities, other investment or investment strategies that may have been discussed or referred herein and should understand that the views regarding future prospects may or may not be realized. In no event shall Liquide Life Private Limited and / or its affiliates or any of their directors, trustees, officers and employees be liable for any direct, indirect, special, incidental or consequential damages arising out of the use of information / opinion herein.