Sanstar IPO Surges with Overwhelming Subscription: What Investors Should Know
News Mania Desk/Agnibeena Ghosh/22nd July 2024
Sanstar’s initial public offering (IPO) has generated significant excitement, with full subscriptions achieved within hours of its launch on July 19, 2024. The subscription rate for Sanstar’s IPO surged to an impressive 4.16 times, driven predominantly by non-institutional investors (NIIs) and retail investors. According to the Bombay Stock Exchange (BSE), the NII segment alone was oversubscribed by 9.85 times, while the retail portion saw a 4.07 times subscription. The Qualified Institutional Buyers (QIBs) segment, however, was only filled by 5%.
The IPO, which is open for subscription until July 23, has set a price band of ₹90 to ₹95 per share. Each lot comprises 150 equity shares, and subsequent applications are in multiples of this lot size. The allocation of shares is expected to be finalized by July 24, with refunds commencing on July 25. Shares are anticipated to be credited to the successful applicants’ demat accounts on the same day, and the stock is likely to debut on the BSE and NSE on July 26.
Sanstar Ltd, headquartered in Ahmedabad, specializes in producing plant-based ingredients and solutions. The company announced it secured ₹153 crore from anchor investors, including global financial institutions, local mutual funds, insurance companies, non-banking financial companies (NBFCs), and foreign portfolio investors. This diverse investor base underscores Sanstar’s appeal in the market.
The company’s product range includes flavor enhancers, thickeners, stabilizers, and sweeteners, aimed at improving the texture, flavor, and nutritional value of food products. Sanstar’s Dhule plant, set to increase its capacity by 1,000 tons per day, plays a crucial role in its expansion strategy.
In terms of financial performance, Sanstar has demonstrated consistent growth across various metrics over the past three fiscal years, including sales, profitability, cash flow, and returns. The company’s robust market position, expanding global presence, high entry barriers, and increased manufacturing capacities contribute to its optimistic growth outlook. Analysts suggest that despite a higher price-to-earnings (P/E) ratio of 20.0x at the upper price band, the valuation remains fair, prompting a ‘subscribe’ rating from BP Equities Pvt Ltd. Similarly, Arihant Capital Markets Ltd highlights the company’s potential for substantial growth due to rising global demand for plant-based products and strategic capacity expansion.
Sanstar’s IPO involves an offer-for-sale (OFS) of 1.19 crore shares by the promoters, amounting to ₹113.05 crore, and a fresh issue of 4.18 crore shares valued at ₹397.1 crore. The funds raised will be used for expanding the Dhule facility, repaying existing debt, and other corporate purposes. Promoters selling shares include Richa Sambhav, Samiksha Shreyans Chowdhary, and Rani Gouthamchand Chowdhary, among others.
Currently, the grey market premium for Sanstar’s IPO stands at ₹30, suggesting strong demand. This premium indicates that shares might list at around ₹125, which is 31.58% higher than the issue price of ₹95. With positive grey market trends and robust subscription figures, Sanstar’s IPO is positioned for a solid debut, offering investors a promising opportunity.
