Introduction
Sanstar Limited, a global manufacturer and leading producer of plant-based specialty products and ingredient solutions is launching its Initial Public Offering (IPO) to generate funds for the repayment / pre-payment of certain indebtedness, without impacting regular working capital requirements & general corporate purposes. This note provides a deep dive into the IPO details, company background, financial performance, market analysis, investment potential, and opinions from expert pundits about this opportunity.
1. IPO Details
- Key Dates and Timelines
- IPO Open: Jul 19, 2024
- IPO Closing Date: 07/23/3024
- IBC has And Finalization: July 24, 2024
- Start Date for Refunds July 25, 2024
- List of Shares Credited to Demat Accounts: 25/07/2024
- IPO Listing Date: 26 July, 2024
Price Band and Issue Size
- Price: INR 90-95 per share
- Total Issue Size: 5. 37 crore shares
- Fresh Issue size: 4.18 crore shares
- Offer For Sale (OFS): 1.19 crore shares
- Total IPO Amount: INR 483.3 to 510.15 crore
Allocation and Reservation
- Qualified Institutional Buyers (QIBs): 50%
- Non-Institutional Investors (NIIs): 15%
- Retail Investors: 35%
Minimum Bid (Lot Size)
- Lot Size: 150 shares
- Cost of One Lot: INR 14,250.
2. Company Background
Overview
Situated in Ahmedabad, India, Sanstar Limited produces plant-based specialty products and ingredient solutions for the food, animal nutrition, and industrial sectors. Having been established in 1950, it has experienced remarkable growth serving more than forty-nine countries across Asia, Africa, the Middle East, America, and other continents.
Product Portfolio
Sanstar’s product portfolio includes a variety of goods inclusive of:
- Dried Glucose Solids,
- Liquid Glucose,
- Maltodextrin,
- Dextrose Monohydrate,
- Native and Modified Starches,
- Co-products: fiber, gluten, germs, maize, steep liquor
These products are used as ingredients, thickening agents, stabilizers, sweeteners, and emulsifiers in various culinary applications like baked goods, confections, pasta, soups, ketchup sauces creams, and desserts. Also, Sanstar supplies industrial products that act as disintegrates, excipients, supplements, coating agents, binders, smoothing and flattening agents, and finishing agents.
Manufacturing Facilities
Sanstar has two key manufacturing units:
- Dhule in Maharashtra state of India.
- Kutch in the Gujarat State of India.
Overall these facilities constitute over 10.68 million square feet or 245 acres with a capacity to produce up to 1.1 thousand tons each day. The Kutch Facility is registered with the US Food 0and Drug Administration (USFDA), which demonstrates its compliance with global standards.
3. Financial Performance
Sunstar Limited has witnessed impressive financial growth throughout its historical timeline. The following table shows key financial metrics:
Metric FY 2022 FY 2023 FY 2024
Revenue (INR crore) FY 2022 504.40 FY 2023 1,205.07 FY 2024 1,067.27
Net Income (INR crore) FY 2022 – 15.92 FY 2023 – 41.81 FY 2024 – 66.77
EPS (INR) FY 2022 1.08 FY 2023 2.98 FY 2024 4.75
PE Ratio FY 2022- 18.93-19.98(pre-IPO), FY 2023 – 24 .56-.93
EBIT EBITDA Margin (%)FY 2022 – 7.87 FY 2023 -6.01 FY 2024 – 9.20
ROE (%)FY 2022 – 32.51 FY 2023 – 28.00 FY 2024 – 30.92
Debt/Equity Ratio FY 2022 – 1.00 FY 2023 -0.60 FY 2024 0.50
From FY 2022 to FY 2024, Sanstar revenue expanded at the compound annual growth rate (CAGR) of 45.46% and profit after tax grew with a CAGR of 104.79%. The company’s robust financial performance has been ascribed to its strategic expansion, product diversification, and operational efficiency.
4. Objectives of the IPO
The main objectives for this IPO are as follows:
- Expansion of Dhule Facility: INR 181.56 crore
- Repayment/Prepayment of Certain Borrowings: INR 100 crore
- General Corporate Purposes: Remaining proceeds
This capital will be used to improve Sanstar’s production capabilities, reduce debt burden, and support overall business growth.
5. Market Analysis
Industry Overview
Sunstar operates within the food and industrial products industry broadly which focuses on plant-based specialty products in this case. This is an industry marked by increasing demand for natural and sustainable ingredients driven by consumer preferences towards healthier products that have also less impact on the environment.
Market Opportunities & Threats
Opportunities:
- Growing demand for plant-based ingredients.
- Expansion into new international markets.
- High demand for plant-based products in different industries
- Growth in production processes due to technology.
Threats:
- Market uncertainty and economic crisis.
- Changes in legislation affecting international business.
- Supply chain management can be disturbed.
Competitor Analysis
It operates in a competitive environment as it faces tough competition from its experienced peers.
- Gujarat Ambuja Exports Ltd
- Gulshan Polyols Ltd
- Sukhjit Starch & Chemicals Ltd
6. Investment Potential
SWOT Analysis
Strengths:
- Consistently strong financial growth and profits.
- Proliferated and Creative Offering of Products
- Top share in both domestic and global markets
Weaknesses:
Depended upon the availability of raw materials and price components.
The competitive nature of the industry.
Opportunities:
- Growing into new geographies
- Rising demand for plant-based products in different sectors
- Advances in production processes
Threats:
- Volatility and economic downturns
- Trade war triggered regulatory changes internationally.
- Possible interruption of supply chain management.
Expert Opinions and Analyst Recommendations
According to the experts, there is disagreement among investment analysts concerning Sanstars IPO. Some of them consider the company’s strong financial performance and market positions. On the other hand, others worry about the dangers associated with market volatility and competition risks.
For example, Angel One and SBI Securities are bullish on the IPO of Sanstar citing its impressive metrics while others caution against it by suggesting that thorough research should be done before investing in this product as well as proper alignment with individual investment strategies.
Risks and Considerations for Investors
The following are some of the risks potential investors need to think about:
- Stock Market Volatility: The stock price can change after the IPO because of its inherent volatility.
- Competition in Industry: High competition has implications on market share and profitableness.
- Regulatory Risks: Food safety policies, export regulations, and environmental standards are subject to changes within countries.
- Economic Factors: These may include recessions shrinking demand for company product
Investors are counseled to visit monetary advisors and bear in mind their danger tolerance and funding horizon earlier than subscribing to the IPO
7. Conclusion
Sunstar Limited’s IPO represents a great opportunity for buyers interested in an organization with robust financials and a study marketplace presence inside the plant-primarily based strong point products enterprise. The finances raised will help Sanstars growth and debt discount plans, positioning the organization for future growth.
However, potential buyers have to weigh the possibilities in opposition to the dangers, such as marketplace volatility, opposition, and regulatory challenges. Thorough research and alignment with male or woman funding techniques are vital for making knowledgeable funding choices.