Sanstar Limited IPO: Exploring Key Competitive Strengths

Sanstar Limited is all set to launch its initial public offering (IPO) on July 19. The IPO, consisting of a fresh issue and an offer for sale, will close on July 23. As the IPO approaches, it is crucial for you, as an investor, to know the company’s key strengths, based on which the company will determine the offer price.

Sanstar Limited’s business strengths

Given below are the core strengths of Sanstar Limited:

• A premier Indian manufacturer of maize-based speciality products and ingredient solutions with a diverse product portfolio

According to a Frost & Sullivan report, Sanstar Limited is India's fifth largest manufacturer of maize-based speciality products and ingredient solutions. It commenced commercial production from its facilities at Kutch and Dhule in 2006 and 2017, respectively, and has grown its business to the current scale with an installed capacity of 363,000 tons per annum.

It also offers a diversified portfolio of speciality products and ingredient solutions including liquid glucose, dried glucose solids, maltodextrin powder, dextrose monohydrate, native maize starch, modified maize starches, and co-products like germs, gluten, fibre, and enriched protein, amongst others.

• Speciality products and ingredients solutions player catering to diverse industry segments

Sanstar Limited is a specialty products and ingredients solutions company-manufacturing native and modified maize starches, derivatives, and co-products. Its manufacturing facilities, export presence and exposure in over 49 countries, and track record of commercialising and scaling up new products position it advantageously to capture the requirements of diverse end-user industrial sectors.

• Strategically located, sustainability-driven, state-of-the-art manufacturing facilities

The company's Dhule facility in Maharashtra is a strategically located, state-of-the-art, highly automated, sustainability-focused facility with ample scope for expansion. The facility is located on an aggregate land area of 7.90 million square feet (approximately 181 acres), of which 2.46 million square feet (approximately 56 acres) is available for future expansion. It is highly automated and equipped with Supervisory Control and Data Acquisition ('SCADA') and PLC Automation Systems, enabling quicker turnaround time and higher manufacturing rates.

• Global presence in a market with high entry barriers

Sanstar Limited has sold its products to 49 countries across Asia, Africa, the Middle East, Europe, North America, South & Central America, and Oceania regions during the fiscal 2024. It is recognised as a 'Two Star Export House' under the Indian Ministry of Commerce. Given the nature of the application of its products and the processes involved, its products are subject to and measured against high-quality standards and product approval systems and specifications.

The company has developed relationships with its customers over the years, established strategic, state-of-the-art manufacturing facilities, and has proven to be a reputable producer with a track record of providing high-quality products.

• Strong financial growth along with robust performance metrics

Sanstar Limited has a strong balance sheet with growing cash flows. The company has experienced sustained growth in various financial indicators, including revenue, profitability, cash flows, and returns, as well as consistent improvement in its balance sheet position in the last three fiscals, which has seen an increase in its net worth. It has demonstrated consistent growth in terms of revenues and profitability.

Its revenue from operations has increased at a CAGR of 45.46% from ₹ 504.402 crores in fiscal 2022 to ₹ 1067.271 crores in fiscal 2024. The company's profit after tax has grown at a CAGR of 104.79% from ₹ 15.921 crores in fiscal 2022 to ₹ 66. 767 crores in fiscal 2024.

• Large, diversified customer base with long-lasting relationships

The company served over 525 customers during fiscal 2024, of which over 162 were new customers. It has also established long-term relationships, and 96 customers placed repeat orders within each of the previous three fiscals.

Over the years, the company has also diversified its customer base across food, animal nutrition, and other industrial applications, such as pharmaceuticals, paper, textiles, personal care, and adhesives, amongst others.

In conclusion

Read the company’s red herring prospectus (RHP) for further details on its key strengths. The RHP will also provide insights into the company’s financial health and future strategies. Before investing, ensure you factor in your risk tolerance and financial goals.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. It is not produced by the desk of the Kotak Securities Research Team, nor is it a report published by the Kotak Securities Research Team. The information presented is compiled from several secondary sources available on the internet and may change over time. Investors should conduct their own research and consult with financial professionals before making any investment decisions. Read the full disclaimer here.

Investments in the securities market are subject to market risks, read all the related documents carefully before investing. Please read the SEBI-prescribed Combined Risk Disclosure Document prior to investing. Brokerage will not exceed SEBI’s prescribed limit.