10 Key Risks Investors Should Know Before Subscribing To The ₹510-Crore Issue | Stock Market News

Sanstar, a company based in Ahmedabad, launched its ₹510 crore initial public offering (IPO) on July 19, and it will close on July 23. The price range for the shares is set between ₹90 and ₹95.

The IPO includes a new issuance of 4.18 crore shares and an offer for sale (OFS) of 1.19 crore shares. At the highest price band, the total size of the IPO will be ₹510.15 crore.

The company plans to use ₹181.55 crore from the IPO for the development of its Dhule facility, ₹100 crore to repay debts, and the rest for general corporate purposes.

Sanstar is a major manufacturer of plant-based specialty goods and ingredient solutions in India. Their products, including ingredients, thickening agents, stabilisers, and sweeteners, improve the flavour, texture, nutrition, and usefulness of food.

Sanstar has two manufacturing plants in Dhule, Maharashtra, and Kutch, Gujarat, with a combined capacity of 1,100 tons per day. The company exports its products to 49 countries across Asia, Africa, the Middle East, the Americas, Europe, and Oceania, and has a strong presence in 22 states within India.

Sanstar’s operating revenue grew at a compound annual growth rate (CAGR) of 45.46 percent, reaching ₹1,067.27 crore in FY24, up from ₹504.40 crore in FY22. The profit after tax increased to ₹66.77 crore in FY24 from ₹15.92 crore in FY22.

Here are some key risks listed by the company in its Red Herring Prospectus (RHP):

1. Fluctuating Raw Material Prices: Changes in the cost of raw materials could affect the company’s profitability.
2. Market Competition: Increased competition in the industry could impact the company’s market share and margins.
3. Regulatory Changes: New regulations or changes in existing ones could impact the company’s operations and profitability.
4. Dependence on Key Customers: Losing significant customers could adversely affect revenue.
5. Foreign Exchange Fluctuations: As a large part of revenue comes from exports, currency fluctuations could impact profitability.
6. Operational Risks: Disruptions at manufacturing plants or supply chain issues could affect production and delivery.
7. Economic Conditions: Economic downturns in India or key markets abroad could reduce demand for products.
8. Debt Levels: High debt levels could limit the company’s ability to finance further expansions and affect financial stability.
9. Environmental Regulations: Compliance with environmental laws and regulations could increase operational costs.
10. Product Quality: Any issues with product quality could damage the company’s reputation and result in financial losses.