Sanstar IPO: Rs 510 Crore Public Issue Opens July 19 – Price Band & Details

Sanstar IPO

Sanstar IPO: Plant-Based Specialty Producer Opens Public Offering on July 19th

Sanstar Limited, a leading manufacturer of plant-based specialty products and ingredient solutions in India, is set to launch its initial public offering (IPO) on July 19th, 2024.

This public issue presents an opportunity for investors to participate in the growth of a company catering to the rising demand for plant-based alternatives.

Key Details of the Sanstar IPO

• IPO Dates: Open for subscription from July 19th to July 23rd, 2024.
• Issue Size: Aims to raise Rs 510.15 crore (approximately USD 61.7 million).
• Price Band: Shares will be offered within a price range of Rs 90-95 per share.
• Offer Structure: The IPO comprises a fresh issue of 4.18 crore equity shares and an Offer for Sale (OFS) of 1.19 crore shares by existing promoters and shareholders.

Investment Opportunity in the Plant-Based Market

Sanstar’s IPO taps into the burgeoning plant-based food and ingredient market. Consumers are increasingly seeking healthy and sustainable alternatives to animal-derived products.

This trend, coupled with growing awareness of environmental concerns, is fueling the plant-based sector’s rapid expansion. Sanstar’s strong presence in this space positions it to capitalize on this momentum.

Utilization of IPO Proceeds

The company plans to strategically utilize the funds raised through the IPO. Here’s a breakdown of the intended use:

• Facility Expansion: Rs 181.6 crore (approximately USD 22 million) will be allocated towards expanding the company’s Dhule facility, Maharashtra. This expansion will enhance production capacity and cater to the rising demand for its products.
• Debt Repayment: Rs 100 crore (approximately USD 12.1 million) will be used to reduce Sanstar’s existing debt, which stood at Rs 164.23 crore as of May 24th, 2024. Lower debt levels will improve the company’s financial health and creditworthiness.
• General Corporate Purposes: The remaining funds will be employed for various general corporate purposes, potentially including investments in research & development, marketing initiatives, and working capital requirements.

Company Background and Products

Headquartered in Ahmedabad, Gujarat, Sanstar has carved a niche in the Indian plant-based specialty products and ingredient solutions market. It boasts a combined production capacity of 1100 tonnes per day across its two manufacturing facilities in Dhule and Kutch.

Sanstar’s product portfolio caters to diverse applications in the food, animal nutrition, and industrial sectors. Some of their key products include:

• Liquid glucose
• Dried glucose solids
• Maltodextrin powder
• Dextrose monohydrate
• Native maize starch
• Modified maize starch
• Co-products like germ, gluten, fiber, and enriched protein

Financial Performance

Sanstar has demonstrated promising financial growth in recent years. The company reported a significant rise in net profit for the year ended March 2024. Net profit jumped nearly 60% to Rs 66.8 crore, compared to Rs 41.8 crore in the previous fiscal year.

Despite a slight dip in revenue (11.4%) compared to the prior year, Sanstar’s EBITDA witnessed a healthy 35.5% growth to Rs 98.1 crore in FY24. Additionally, the company’s profit margin expanded by 319 basis points to 9.2%.

Allocation and Listing Details

Sanstar has adopted a balanced allocation strategy for its IPO. Here’s how the issue size will be divided:

• Qualified Institutional Buyers (QIBs): 50% of the shares will be reserved for QIBs, primarily institutional investors and banks.
• Retail Investors: 35% of the shares will be allocated to retail investors, providing an opportunity for individual participation in the IPO.
• Non-Institutional Investors (NIIs): The remaining 15% of the shares will be available for subscription by non-institutional investors, including high net-worth individuals.

The anchor book, a portion of the QIB allocation, will open for a single day on July 18th. Successful investors can expect allotment of shares by July 24th, with shares credited to their demat accounts on July 25th.

The company’s listing on both the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) is scheduled for July 26th.

Investment Considerations

Investors considering participation in the Sanstar IPO should conduct thorough research and due diligence.

While Sanstar’s IPO presents an opportunity to invest in a growing market segment, there are factors to consider before making a decision.

Market Competition:

Sanstar faces competition from established players like Gujarat Ambuja Exports, Gulshan Polyols, and Sukhjit Starch & Chemicals.

Understanding their market share, product offerings, and pricing strategies will help assess Sanstar’s competitive advantage.

Raw Material Dependence:

Sanstar’s primary raw material is maize. Fluctuations in maize prices could impact the company’s profitability. Investors should evaluate the company’s strategies for managing raw material costs and potential supply chain disruptions.

Financial Sustainability:

While Sanstar’s recent financials show growth, a deeper analysis is crucial. Reviewing the company’s debt-to-equity ratio, cash flow generation, and future growth projections can provide a more comprehensive picture of its financial health.

Valuation:

Comparing Sanstar’s IPO price band to the valuation of its competitors and industry benchmarks can help determine if the offering is fairly priced. Financial experts and analysts’ opinions on the IPO valuation can also offer valuable insights.

Risks and Uncertainties:

The plant-based food market is still evolving, and consumer preferences could shift. Additionally, regulatory changes or technological advancements could disrupt the industry landscape. Investors should be aware of these potential risks and uncertainties before making an investment decision.

Investment Conclusion

The Sanstar IPO offers an opportunity to participate in the expanding plant-based products market. However, careful consideration of the company’s strengths and weaknesses, competitive environment, and potential risks is essential.

Consulting with a financial advisor and conducting thorough research can help investors make an informed decision about investing in the Sanstar IPO.

Additional Information Sources

For a comprehensive understanding of the Sanstar IPO, investors should consult the following resources:

• Sanstar Limited’s IPO prospectus: This document provides detailed information about the company’s financials, business operations, growth plans, and risk factors.
• Reports by financial analysts and research firms: These reports offer expert opinions on the Sanstar IPO and its potential impact on the company’s future.
• Financial news websites and publications: Staying updated on industry trends and news related to the plant-based food sector can provide valuable context for the Sanstar IPO.

By carefully evaluating all available information and considering their risk tolerance and investment goals, investors can make a well-informed decision about whether or not to participate in the Sanstar IPO.