Sanstar Limited IPO: Public Issue To Open On July 19; GMP Soars; Check Allotment & Listing Dates

Sanstar, a producer of plant-based specialty goods and ingredient solutions, is gearing up for its Initial Public Offering (IPO), scheduled to open for subscription on Friday, July 19. This awaited IPO has set a price band of Rs 90 to Rs 95 per equity share, each having a face value of Rs 2. The Rs 510-crore issue is set to close on Tuesday, July 23. For those considering an investment, here's a detailed look at what this IPO entails and why it might be worth your attention.

Bidding Details

Investors can place bids in multiples of 150 equity shares, with a minimum requirement of 150 shares. The allocation to anchor investors is scheduled to take place on Thursday, July 18, a day before the public offering opens.

IPO Structure

The IPO comprises a fresh issue of 4.18 crore shares and an offer for sale (OFS) of 1.19 crore shares by the existing shareholders. At the upper end of the pricing range, the total size of the IPO is estimated at Rs 510.15 crore.

Utilization of Funds

Sanstar plans to utilize the proceeds from the fresh issue in the following manner:
Debt Repayment: Rs 100 crore will be used to pay off existing debt.
Expansion of Dhule Plant: Rs 181.55 crore will be allocated for the capital investment needed to expand the company's Dhule manufacturing facility.
General Corporate Purposes: The remaining funds will be used for general corporate objectives.

Pantomath Capital Advisors is the sole book-running lead manager for the Sanstar IPO.

Promoters and Shareholding

Sanstar's promoters are Gouthamchand Sohanlal Chowdhary, Sambhav Gautam Chowdhary, and Shreyans Gautam Chowdhary. Together, they hold 80,366,100 equity shares, representing 57.22% of the issued, subscribed, and paid-up equity share capital of the company.

Industry Peers

Sanstar's listed peers include Gujarat Ambuja Exports Ltd (P/E of 18.65), Gulshan Polyols Ltd (P/E of 73.31), and Sukhjit Starch and Chemicals Ltd (P/E of 15.01). Comparing the Price-to-Earnings (P/E) ratios of these peers provides an insight into the valuation landscape of the industry.

Business Overview

Sanstar is renowned for being one of India's leading producers of plant-based specialty goods and ingredient solutions used in industrial, animal nutrition, and food applications. According to Frost & Sullivan, Sanstar is the fifth-largest producer of maize-based specialty goods and ingredient solutions in India, with an impressive installed capacity of 3,63,000 tons annually (1,100 tons per day).

Manufacturing Facilities

Sanstar operates two state-of-the-art manufacturing facilities:
Dhule, Maharashtra: The newest and most advanced automated facility, developed by an in-house team of 24 engineers with a strong focus on sustainability.
Kutch, Gujarat: Complementing the Dhule facility, this plant enhances the company's production capabilities.
Together, these facilities span an area of 10.68 million square feet (around 245 acres) and are strategically located to leverage both seaports and raw material sources.

Financial Performance

Sanstar has demonstrated robust financial growth over the past few years. The company's revenue from operations surged from Rs 504.40 crore in fiscal 2022 to Rs 1,067.27 crore in fiscal 2024, marking a compound annual growth rate (CAGR) of 45.46%. Additionally, the profit after tax skyrocketed from Rs 15.92 crore in fiscal 2022 to Rs 66.77 crore in fiscal 2024, reflecting a CAGR of 104.79%.

Products and Market Position

Sanstar produces a wide range of products, including liquid glucose, dried glucose solids, dextrose monohydrate, maltodextrin powder, native and modified maize starches, and various co-products like enhanced protein, fibre, gluten, and germs. These products serve multiple purposes:

Food Industry: As ingredients, thickeners, stabilizers, sweeteners, emulsifiers, and additives in bakery goods, confections, pastas, soups, sauces, creams, desserts, and more.
Animal Nutrition: Nutritional ingredients for animal feed.
Industrial Applications: As disintegrants, excipients, supplements, coating agents, binders, smoothing and flattering agents, and finishing agents.

Industry Outlook

India's share of global maize production has seen a slight increase, rising from 2.6% in FY2020 to 3.3% in FY2023, though it is expected to slightly decline to 2.9% in FY2024. However, with the right government policies and infrastructure improvements, India's maize production could potentially increase from the current 37.5 million tons to 50 million tons over the next five years.

For anchor investors, the allotted equity shares will be locked in as follows:
50%: Locked in for 90 days from the date of allotment.
Remaining 50%: Locked in for 30 days from the date of allotment.

Sanstar's IPO presents an investment opportunity, backed by strong financial growth, a diverse product portfolio, and a focus on sustainability and expansion. As the IPO opens on July 19, investors should consider the company's robust market position, future growth prospects, and the potential returns from this investment.