By Sanstar made a striking entry into the stock market today, with its shares listed at ₹106.40 on the BSE and ₹109 on the NSE, marking around a 15% listing gain for the fortunate allottees. The stock’s initial performance was robust, with shares touching intraday highs of ₹127.68 on the BSE and ₹128.79 on the NSE. Despite this promising start, experts caution that this surge may be more sentimental than substantial.
Stock market analysts have pointed out that Sanstar’s share price has not met market estimates. The company is currently operating at 85% capacity, and while the Capex expansion highlighted during the IPO launch and in the Red Herring Prospectus is expected to be operational by the fourth quarter of the current fiscal year, this might not translate into immediate gains. As Sanstar is operating at its maximum Capex, there is a likelihood that these levels will remain steady or even decline in FY25.
Given these circumstances, experts advise Sanstar share allottees to book profits and exit while the stock is performing well. For those with a long-term view, it might be prudent to wait for a lower re-entry point once the stock stabilizes post-listing. Similarly, investors who missed out on the initial allotment are advised to wait for the stock to settle down, as it is expected to remain sideways to lower throughout FY25.
Amit Goel, Co-Founder & Chief Global Strategist at Pace 360, commented on the fundamentals of Sanstar shares. He noted that Sanstar Limited is engaged in manufacturing specialty plant-based products and ingredient solutions for food, pet food, and other industrial applications in India.
These products include liquid glucose, dried glucose solids, maltodextrin powder, dextrose monohydrate, native maize starches, modified maize starches, and by-products such as germ, gluten, fiber, and fortified proteins. Goel highlighted the inconsistency in the company’s top lines, though the bottom line has shown steady growth during the reported period. He also mentioned that the issue seems to be priced aggressively, considering the FY24 earnings.
Arun Kejriwal, Founder of Kejriwal Research and Investment Services, shared his insights on the share price outlook. He emphasized that the company is operating at its maximum capacity. The Capex expansion guidance provided in the RHP is anticipated to become operational from the fourth quarter of the current fiscal.
This implies that the newly listed company’s operational Capex would either stay at the current level or decline during the current financial year. Consequently, Sanstar’s share price is expected to remain sideways and lower in FY25, as the Capex expansion’s impact will only be reflected in the company’s balance sheet over the next two to three quarters.
Kejriwal also offered an investment strategy for Sanstar shares. He advised long-term investors to book profits during the current rally and wait for the stock to settle post-listing before re-entering at a lower level. Fresh investors are recommended to wait for the newly listed stock to stabilize, given its high current valuations. Kejriwal suggests starting to accumulate Sanstar shares from ₹100, maintaining a buy-on-dip strategy.
Investors are advised to book profits and adopt a wait-and-see approach as the stock stabilizes. With the company operating at near-full capacity and the anticipated Capex expansion not expected to show results until the next fiscal year, the stock’s performance in the short term may not meet high expectations. For those with patience and a long-term view, there may be opportunities to re-enter at more favorable prices in the future.
