Sanstar IPO Subscription: Sunstar IPO subscribed 418% on the first day, indications of high returns from GMP

Sanstar IPO Day 1 :Investors are liking the IPO of Sunstar Limited, a company that manufactures plant based specialty products. Today, on the very first day of the issue, it has been subscribed about 4.16 times or 416 percent. It is expected to get high subscription on Monday and Tuesday. At the same time, today on the first day of the IPO, there is also a stir in the gray market about it. Strong subscription and high premium in the gray market have increased the expectation of strong listing gains in this IPO. It can be subscribed till 23 July 2024. The size of the IPO is 510 crores, while the company has fixed the price band at Rs 90-95 per share.

Infosys: Many brokerages are bullish on Infosys, most of them have increased the target price for the stock, will you buy it

The IPO was subscribed 4.18 times on the first day

Sunstar’s IPO has been subscribed about 4.18 times or 418 percent on its first day today. 35 percent of the IPO is reserved for retail investors and this portion has been subscribed 4.07 times or 407 percent so far. At the same time, 50 percent of the share is reserved for Qualified Institutional Buyers i.e. QIB and it has been subscribed 5 percent so far. However, the QIB portion is subscribed more on the last day. At the same time, 15 percent of the share is reserved for non-institutional buyers i.e. NII and it has been subscribed 9.85 times or 985 percent so far.

IPO: 5 blockbuster IPOs of the year 2024, got 100 to 270% return in a range of 6 months

GMP : 42% premium

There is already a craze in the grey market regarding Sunstar’s IPO. The company’s unlisted stock is at a premium of Rs 40 in the grey market. This is a 42 percent premium in terms of the upper price band of Rs 95. If this indication is correct, then the stock can be listed at Rs 137 as compared to the IPO price of Rs 95.

How is the valuation

Considering the P/E valuation, according to brokerage house SMC Global, at the upper end of the price band of Rs 95, the stock is priced at a pre-issue P/E of 19.98x on annualised FY24 EPS of Rs 4.75. Post issue, the stock is priced at a P/E of 25.93x on EPS of Rs 3.66. Looking at the P/B ratio at pre-issue Rs 95, the book value P/BVX is Rs 18.97 of 5.26x. Post issue, the book value P/BVX is Rs 35.71 of 2.66x.

Brokerage gives model portfolio for investment, list includes 8 largecap and 6 midcap stocks

Considering the P/E valuation, at the lower end of the price band of Rs 90, the stock is priced at a pre-issue P/E of 18.93x on annualized FY24 EPS of Rs 4.75. Post issue, the stock is priced at a P/E of 24.57x on EPS of Rs 3.66. Looking at the P/B ratio at Rs 90 pre-issue, the book value P/BVX is 4.98x at Rs 18.07. Post issue, the book value P/BVX is 2.52x at Rs 35.71. The brokerage has given a neutral rating on the subscription. However, brokerage house KR Choksey has advised to subscribe for the long term.

what the company does

This Ahmedabad-based company manufactures liquid glucose, dried glucose solids, maltodextrin powder, dextrose monohydrate, indigenous maize starch, refined maize starch, gluten, fiber and protein among other products. The company has two production units in Kutch in Gujarat and Dhule in Maharashtra. As of May 18, 2024, the company’s total production capacity was 3,63,000 tonnes per annum (1,100 tonnes per day).

Asian Paints: The stock of Asian Paints, which enhances the colour of every home, can make the portfolio colorless, what is the reason

There is some risk with the company

The company has had negative cash flows in the past periods and may continue to have negative cash flows in the future. It is highly dependent on its top 10 suppliers for raw materials and work in progress used in its manufacturing process. The cost of raw materials used in its manufacturing process is subject to volatility.

(Disclaimer: Investing or selling stocks is advised by the brokerage house. These are not the personal views of Financial Express. There are risks in the market, so take expert advice before investing.)