Sanstar IPO - Investment Rationale, Issue Details, Financials, Strengths, Risks And More: DRChoksey

DRChoksey Research Report

Sanstar Ltd. will launch its initial public offering tomorrow and the offer will close for subscription on July 23.

The leading Indian manufacturer of plant-based specialty products and ingredient solutions for food, animal nutrition, and industrial applications has fixed the price band in the range of Rs 90 to Rs 95 Apiece. The minimum order lot size for bidding is 150 shares.

The Rs 510.15 crore IPO comprises of fresh issue of 4.18 crore shares and an offer-for-sale component consisting of 1.19 crore shares.

Outlook and Valuation

Sanstar is poised for significant growth, leveraging its aggressive capacity expansion, robust export strategies, and diversification into higher-margin derivative segments.

With an additional 1,000 tons per day capacity at its Dhule Facility expected to commence by Fiscal 2026, the company aims to meet the increasing global demand for its maize starch, liquid glucose, dextrose monohydrate, and dextrose anhydrous products. Sanstar’s revenue from operations has grown at a CAGR of 45% from Rs 5,044.02 million in FY22 to Rs 10,672.71 million in FY24, driven by both domestic and international market expansion, with exports now reaching 49 countries.

The company is also focused on reducing its debt using IPO proceeds, which will lower the interest burden and enhance profitability. The commissioning of captive solar and biogas power plants is expected to reduce power costs significantly, further boosting profit growth.

Adhering to high standards of quality and sustainability, Sanstar's strategic focus on cost management, operational efficiency in the backdrop of substantial topline growth is expected to drive sustained profitability and market share expansion, making it a formidable player in the industry.

We have assigned a 'Subscribe' rating for the IPO of Sanstar Ltd as the price/earning ratio of 25.9 times on FY24 EPS appears lucrative in light of its strong growth potential.

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