Incorporated
on February 26, 1982, the Sanstar Group comprisedtwo entities: Sanstar and
Sanstar Bio Polymers. The group manufactures maize-based specialty products and
ingredients solutions and its co-products such as gluten, germ and bran.
Sanstar and Sanstar Biopolymers were merged on November 23, 2023.
Sanstar’s
products include liquid glucose, dried glucose solids, maltodextrin powder, dextrose
monohydrate, native maize starches, modified maize starches and co-products
like germs, gluten, fiber and enriched protein. These speciality products and
ingredients solutions add taste, texture, nutrients and increased functionality
to (a) foods as ingredients, thickening agents, stabilizers, sweeteners,
emulsifiers and additives (in bakery products, confectionery, pastas, soups,
ketchups, sauces, creams, deserts, amongst others), (b) animal nutrition
products as nutritional ingredients, and (c) other industrial products as
disintegrants, excipients, supplements, coating agents, binders, smoothing and
flattering agents, finishing agents, among others.
The promoters
of Sanstar are GouthamchandSohanlal Chowdhary, Sambhav Gautam Chowdhary &
Shreyans Gautam Chowdhary.
The fifth
largest manufacturer of maize based speciality products and ingredient
solutions in India has an installed capacity of 3,63,000 tonne per annum (tpa)
(1,100 tonnes per day or tpd).The company is recognised as a two-star export house
by the Director General of Foreign Trade, Government of India, while SBL, now
merged with Sanstar following the order of NCLT, Ahmedabad, dated November 23,
2023, was recognised as a three-star export house. Export revenue was Rs
3,94.438 crore, representing 35.53 % of gross revenue from operations, in FY
2024. Products were exported to 49 countries across Asia, Africa, Middle East,
Americas, Europe and Oceania, in FY2024. Additionally, there are footprints
across India, with products being sold in 22 states.
Sanstarhas
two manufacturing facilities spread across a cumulative area of 10.68 million
square feet(245 acres) at Dhule in Maharashtra and Kutch in Gujarat, with a total
installed capacity of 363,000 tpa (1,100 tpd). The Dhule facility is the latest
and largest manufacturing facility, having commenced operations in 2017. It on
an aggregate land area of 7.90 million square feet. Of this, 2.46 million square
feetare available for future expansion. The facility had an aggregate installed
capacity of 247,500 tpaor 750 tpdas on March 31, 2024. There are more than 50,000 tonnes of maize
storage silos and finished goods storage at the Dhule facility. The Kutch
facility was registered with the USFDA in August 2023. The registration is
valid upto December 2024. The manufacturing facility at Kutch, Gujarat, had
commenced operations in 2006. It is on an aggregate land area of 2.77 million square
feet. Of this, 1.84 million square feet are available for future expansion. The
facility had an aggregate installed capacity of 350 tpd as on March 31,
2024. The capacity utilization of the Dhule
facility was 89%, while the Kutch facility’s capacity utilization was 81% in FY2024.
The food
segment formed 58.12%,animal nutrition 10.45%, and other industrial applications
formed 31.43% of total revenue in FY 2024.
The
in-house R&D team comprised 10 personnel as on March 31, 2024. The
employees of the in-house R&D team have an overall collective experience of
atleast 40 years. The R&D facility is spread across 2,200 square feet and
is equipped for research and testing.
The
principal raw material required for manufacturing is maize. Sanstar is
dependent on a few raw material suppliers. They are local farmers located near
manufacturing facilities and suppliers in mandis,the unorganized marketplaces.
In addition to maize, certain other consumables and chemicals are also used
during the manufacturing process.
The Offer and the Objects
The offer
comprises fresh issue of up to 41800000 equity shares, aggregating Rs 397 crore
at the upper price band of Rs 95 and Rs 376 crore at the lower price band of Rs
90, and OFS of up to 11900000 equity shares, aggregating Rs 113 crore at the
upper price band of Rs 95 and Rs 107 crore at the lower price band of Rs 90.
The net
proceeds will be used from the fresh issue to fund capital expenditure of Rs
181.56 crore for expansion of the Dhule facility, repayment and pre-payment, in
part or in full, of borrowings of Rs 100 crore, and the balance towards general
corporate purposes.
The
manufacturing capabilities at the Dhule facility are to be expanded to 1,00 tpdby
installing additional machinery and equipment. The Dhule facility’s capacity is
eventually to be expanded to 1,750 tpd. The cost of the proposed expansion is
estimated to be Rs 201.56 crore. Commercial production from increased
capacities is set to commence from July 2025. Post expansion, the total
installed capacity will be 2100 tpd, from the current 1100 tpd. The aggregated outstanding borrowings amounted
to Rs 164.23 crore end of May 2024.
Promoter
group selling shareholder Gouthamchand Sohanlal Chowdhary’s stake post-issue
will decrease to 8.1% from 10.89% pre-issue shareholding, Rani Gouthamchand
Chowdhary’s to 3.9% from 7.77%, Sambhav Gautam Chowdhary’s to 17.6% from
23.21%, Shreyans Gautam Chowdhary’s to 17.5% from 23.12%, Richa Sambhav
Chowdhary’s to 4.2% from 7.74%, and Samiksha Shreyans Chowdhary’s to 4.2% from
7.83%.
Strengths
One of the
oldest players in the starch industry initially engaged in trading oftapioca
starch and later venturing into manufacturing maize-based starch and its
derivatives. Has nearly 19 years of track record in manufacturing operations.
Leading
position in the industry, technical knowledge to bring specific functionality
and nutrition to end products, more than five decades of presence, state-of-the-art
manufacturing facilities, and a diverse product portfolio and clientele in
domestic and global markets, provide competitive advantage.
The
manufacturing facilities are strategically located in terms of proximity to raw
material sources, i.e., maize harvesting belts, as well as seaports of Mundra,
Kandla, Hazira and Nhava Sheva, for exports of finished products. The Dhule facility
is in the maize production belt of Maharashtra and Madhya Pradesh, accounting
for around 25% of India’s total maize production
The Dhule unit
has been duly certified in accordance with FSSAI, FSSC 22000:2018, Kosher,
HALAL, International Standards for Quality Management Systems as per ISO
9001:2015, and SGS’s Certificate for India’s National Programme for Organic
Production Standards, among others. Similarly, the Kutch unit is registered
with the United States Food and Drug Administration (USFDA) and holds
certifications like FSSAI, HACCP, HALAL, ISO 9001:2015.
The
increasing demand of maize-based speciality products and ingredient solutions
in food and beverages, animal nutrition, pharmaceuticals, adhesives, paper, and
textiles from developing economies like India is likely to increase the
consumption of these ingredients.
There is diverse
clientele. The top 10 customers formed 23% of total revenue in FY2024 as
against 30% in FY2023. These customers are from diverse industries, textiles,
paper, pharmaceutical, food, adhesives, animal nutrition and others, ensuring insulation
from the risk associated with cyclicality in respective industries.
The clientele
included AB Mauri, ITC, Capital Foods, Hindustan Unilever, Godrej Agrovet and
Zydus Wellness in the domesticmarket. There is strong presence in Maharashtra,
Gujarat, and Andhra Pradesh.
The global native
maize starch industry is expected to be valued at US$ 29,631 million in 2023,
with an estimated CAGR of 3.78 % from 2023 -2029. Increasing demand from food and
beverages, textiles, and paper industries clubbed with governments focus to
increase productivity of maize is driving the growth of the native maize starch
market. The use of native maize starch in cosmetics, adhesives and
pharmaceutical industry is fuelling the growth of market. The Indian native
maize starch industry is expected to be valued at US$ 1,897 million in 2023,
with volume of 4.87 million tonnes. The market has recorded CAGR 3.27% since
2019 and is further expected to grow at CAGR 4.56% till 2029
Weaknesses
Maize is
used as a key raw material, accounted for 75-80% of total cost of sales since
three to four years. As maize is an agriculture input, operations are
vulnerable to inherent risks associated with agri-based inputs prices. Raw
material prices are linked to agricultural output, exposing to factors such as
vagaries of monsoon, acreage, crop yield level, and global demand-supply
mismatches.
The price
of primary raw material maize is subject to fluctuation due to global
volatility in supply and demand. Any major price fluctuations can adversely
affect the business.
The maize
processing industry is highly competitive, with a presence of few large players
such as Roquette India Private Limited, Gujarat Ambuja Exports Limited, and The
Sukhjit Starch and Chemicals Limited, and medium-sized players such as Gulshan
Polyols Limited, Bluecraft Agro Private Limited, SAL, Sayaji Industries
Limited, Sahayadri Starch & Industries Private Limited and several other
unorganised players. The commoditised nature of product limits pricing
flexibility and bargaining power with customers. Large players have a significant
presence in value-added products of maize and command a wide product basket.
Significant capacity addition by major players, coming online in one-two years,
may further increase competition in the industry.
Products are
exported to various geographies across the globe. Products may be subject to
import duties or restrictions of the relevant geographies. Additionally, any
adverse fluctuation in foreign exchange rate, unavailability of any fiscal
benefits or the inability to comply with related requirements may have an adverse
effect on business and results of operations.
Cash flow
from operations was negative in FY2023.
Profitability,
business and commercial success are significantly dependent on the performance
of the food industry. Economic cyclicality coupled with reduced demand in the
food industry, in India or globally, could adversely affect the business.
Any
restrictive change in the regulatory provisions governing the use of modified
starches in India, American and European countries may have an adverse impact on
the financial condition.
Maize
starch is seldom replicable. However, researchers and innovators are trying to
replace it with starches from other crops such as rice, tapioca, and arrowroot.
In the event any or all products of the company are to be replaced by
substitute products of same or low cost, the business, financials,
profitability and demand for products may be affected.
A number of
approvals, NOCs, licences, registrations and permits are required in the
ordinary course of business and any failure to obtain, maintain or renew them
may have adverse effect on business, financial condition, and results of
operations.
Valuation
Consolidated
sales were down by 11% to Rs 1067.27 crore in FY 2024, led by a decline in raw
material prices of maize. Consequently,lower sales realization of maize starch resulted
in decrease in sales volume of primary product starch by 7.20% in FY2024 over
FY2023. The OPM rose 320 bps to 9%, leading to 35% increase in OP to Rs 98.14
crore on the back of better realization in the processed food segment alongwith
reduction in power and fuel cost after the completion of the solar plant and
biofuel plant, and low coal prices. Other income rose 213% to Rs 14.41 crore,
while interest cost increased 10% to Rs 10.74 crore and depreciation went up2%
to Rs 12.09 crore. PBT jumped62% to Rs 89.72 crore. Tax expenses were 69%
higher at Rs 22.96 crore. Net profit spurted60% to Rs 66.77 crore.
The FY2024
EPS on post-issue equity works out to Rs 3.7. At the upper price band of Rs 95,
P/E works out to be 25.9.
Sanstar
will be repaying 61% of its debt from the issue proceeds. This will bring down
its interest costs substantially and boost profit. The FY2024 EPS works out to
Rs 4.0 if 61% of its interest cost is removed, keeping all other items,
including the tax rate same. The re-worked P/E, at the upper price band,
moderates to 24.
As of 16July
2024, listed peers such as Gujarat Ambuja Exports traded at TTM P/E of 18.2, Gulshan
Polyolsat70.4,and Sukhjit Starch and Chemicalsat15.1.
For FY2024,
Sanstar’s Ebitda margin and ROE stood at 9.2% and 28% ascompared to 9% and 13.6%
forGujarat Ambuja Exports,4.2% and 6% for Gulshan Polyols, and 9.3% and 13.6% for
Sukhjit Starch and Chemicals, respectively.
Sanstar
Limited:Issue Highlights
|
Fresh
issue (in number of shares)
|
41800000
|
Offer for
sale (in number of shares)
|
11900000
|
For Fresh
Issue Offer size (in Rs crore )
|
|
- in Upper price band
|
397
|
- in Lower price band
|
376
|
Price Band
(Rs)
|
90-95
|
Offer for
sale (in Rs crore)
|
|
- in Upper price band
|
113
|
- in Lower price band
|
107
|
Pre issued
capital (Rs crore)
|
28.09
|
Post issue
capital (Rs crore)
|
36.45
|
Pre issue
promoter shareholding (%)
|
99.79
|
Post issue
Promoter shareholding
|
70.37
|
Bid Size (in
No. of shares)
|
150
|
Issue open
date
|
19-07-2024
|
Issue
closed date
|
23-07-2024
|
Listing
|
BSE,NSE
|
Rating
|
43/100
|
Sanstar
Lmited: Consolidated Financials
|
Particulars
|
2203 (12)
|
2303 (12)
|
2403 (12)
|
Total
Income
|
504.40
|
1205.07
|
1067.27
|
OPM
|
7.9
|
6.0
|
9.2
|
Operating
Profits
|
39.72
|
72.45
|
98.14
|
Other
Income
|
0.37
|
4.60
|
14.41
|
PBIDT
|
40.09
|
77.05
|
112.55
|
Interest
|
9.09
|
9.81
|
10.74
|
PBDT
|
31.00
|
67.24
|
101.82
|
Depreciation
|
9.02
|
11.85
|
12.09
|
PBT
|
21.98
|
55.39
|
89.72
|
Share of
Profit/loss of JV
|
0.00
|
0.00
|
0.00
|
PBT Before
EO
|
21.98
|
55.39
|
89.72
|
EO
|
0.00
|
0.00
|
0.00
|
PBT after
EO
|
21.98
|
55.39
|
89.72
|
Provision
for Tax
|
6.06
|
13.58
|
22.96
|
Profit
after Tax
|
15.92
|
41.81
|
66.77
|
PPA
|
0.00
|
0.00
|
0.00
|
Net profit
after PPA
|
15.92
|
41.81
|
66.77
|
MI
|
0.00
|
0.00
|
0.00
|
Net profit
after MI
|
15.92
|
41.81
|
66.77
|
EPS (Rs)*
|
0.9
|
2.3
|
3.7
|
*EPS
annualized on post issue equity capital of Rs 36.45 crore of face value of Rs
2 .each
|
# Not
annualised due to seasonality of business
|
Figures in
Rs crore
|
Source:
Capitaline Corporate Database
|
|