Sanstar Limited’s Q1 FY26 results show sharp revenue drop, but capacity expansion signals recovery push

Why did Sanstar Limited post a steep revenue and profit decline in Q1 FY26 despite growth plans?

Sanstar Limited (BSE: 544217 | NSE: SANSTAR), one of India’s leading maize-based specialty products and ingredient solutions producers, reported a significant year-on-year decline in its Q1 FY26 results. Revenue from operations fell 44.2% to ₹1,689 million compared to ₹3,027 million in the same period last year. Gross profit dropped nearly 50% to ₹404 million, with gross margin narrowing to 23.9% from 26.5% in Q1 FY25.

The downturn was accompanied by a rare negative EBITDA of ₹17 million, against ₹274 million in the prior year, while profit after tax slipped to a marginal loss of ₹3 million. Sanstar’s earnings per share turned negative at ₹(0.02) versus ₹1.18 in Q1 FY25. On a sequential basis, revenue was down 25.4% from Q4 FY25, underscoring persistent operational and demand challenges.

What factors contributed to Sanstar Limited’s weak quarterly performance and margin compression?

According to the management, the quarter was impacted by two converging headwinds. The company undertook an extended 24-day annual maintenance shutdown across its plants during what was already a seasonally soft demand quarter. With both facilities, representing 1,100 tonnes per day (TPD) of installed capacity, offline, Sanstar had no revenue generation for nearly a month.

Simultaneously, the Indian starch market came under pricing pressure, particularly in native starch, due to increased Chinese exports into Southeast Asia. The influx created excess supply and lower realizations in India, directly affecting Sanstar’s margins. Management noted that while the pressure was significant in Q1, normalization of Chinese export flows is expected in subsequent quarters.

How is Sanstar Limited positioned in terms of expansion and capacity addition at Dhule?

Despite the operational setback, Sanstar is accelerating its expansion at its flagship Dhule facility in Maharashtra. The plant, currently operating at 750 TPD, will be scaled up to 1,750 TPD by December 2025, with an additional derivatives facility scheduled for commissioning in March 2026. Post-expansion, Sanstar’s total installed capacity will rise from 1,100 TPD to 2,100 TPD.

This scale-up will make Dhule the single largest maize processing facility at one location in India and position Sanstar as the country’s second-largest producer of maize-based specialty ingredients. Management expressed confidence that the expanded capacity will enable stronger participation in higher-margin derivatives and downstream starch solutions, particularly in food, pharma, and industrial applications.

What revenue mix shifts are visible across Sanstar Limited’s product categories?

The company continues to derive revenue across three key product lines—native starch, modified starch derivatives, and co-products. For Q1 FY26, the contribution mix showed a rising share from starch derivatives at 25%, up from 21% in Q1 FY25, highlighting Sanstar’s gradual pivot towards higher-value segments. Native starch, while under price pressure, remains core, while animal nutrition and industrial co-products provide stability in cyclical phases.

As part of its roadmap, Sanstar is positioning itself not only as a commodity starch supplier but as a diversified solutions provider catering to food, personal care, pharmaceuticals, and animal nutrition. Management underlined that the commissioning of new derivative capacities in 2026 will accelerate this portfolio shift.

How did the market react to Sanstar Limited’s results, and what is the investor sentiment?

On August 18, 2025, Sanstar’s stock closed at ₹82.30, down 3.99% from the previous close of ₹85.72. The share price is hovering near its 52-week low of ₹80.00, sharply below its September 2024 peak of ₹158.80. At current levels, Sanstar’s market capitalization stands at approximately ₹1,499.9 crore, with a free float value of ₹444.3 crore.

The stock trades at a high adjusted price-to-earnings multiple of 57.94, reflecting either compressed trailing earnings or an expectation of normalized recovery in FY26. Daily volatility of 2.22% and an annualized volatility of over 42% indicate that institutional sentiment remains cautious. Market participants appear to be waiting for visibility on pricing stability in native starch and execution of the Dhule expansion before reassessing exposure.

What do analysts and institutional investors expect for Sanstar Limited in the near term?

Institutional investors and analysts believe the near-term outlook hinges on two factors: stabilization of native starch prices and the timely completion of the Dhule expansion. Should Chinese export pressures ease and domestic maize supplies improve, Sanstar could see margin recovery in H2 FY26. Analysts also noted that the company’s ongoing expansion will allow it to shift further into derivatives, which carry structurally higher margins compared to native starch.

However, given the steep year-on-year contraction in revenue and profitability, most investors are likely to maintain a “hold and watch” stance. Short-term sentiment remains cautious, particularly as the stock is trading near its lower price band, but longer-term investors see potential upside once capacity expansion begins contributing meaningfully from FY27.

Does Sanstar Limited’s expansion strategy position it for sustainable growth in India’s starch industry?

The starch industry in India is undergoing structural shifts, with greater demand for specialty derivatives in food, pharma, and industrial sectors. Sanstar’s ambition to double its capacity and emerge as the second-largest player highlights its intent to capture this growth. The expansion also comes at a time when domestic maize cultivation is expected to rise, and government maize inventory releases could support stable raw material supply.

In this context, Sanstar’s expansion could provide a multi-layered strategic hedge against cyclical downturns in the native starch market. By doubling its installed capacity and scaling up the Dhule plant to 1,750 TPD, the company is not only safeguarding itself from commodity price swings but also creating a more balanced revenue mix with greater emphasis on high-margin starch derivatives. These include specialty solutions such as modified starch, dextrins, and glucose derivatives, which enjoy more stable demand from industries like pharmaceuticals, food processing, confectionery, personal care, and industrial fermentation.

The expanded Dhule facility is also expected to become a key hub for both domestic and international sales. India’s starch derivative market is increasingly integrated with global supply chains, particularly in Southeast Asia, the Middle East, and Europe, where demand for corn-based ingredients is rising. By creating a single-site capacity of 1,750 TPD, Sanstar will gain cost advantages through economies of scale, optimized logistics, and lower per-unit processing costs. This will strengthen its competitiveness against global suppliers, especially in regions where Chinese exports have previously disrupted pricing.

Another crucial advantage lies in customer engagement. Large multinational food and pharma companies prefer suppliers with scale, reliability, and a diversified product portfolio. Sanstar’s Dhule expansion gives it greater negotiating leverage in long-term contracts, as clients can consolidate procurement with a single partner rather than relying on fragmented regional players. This improves pricing power and supports margin resilience, particularly as global buyers increasingly seek Indian suppliers to de-risk supply chains from China.

Moreover, by positioning Dhule as India’s largest single-location maize processing plant, Sanstar can emerge as a preferred partner in public procurement and government-linked nutrition programs, which increasingly demand bulk supply at competitive rates. This diversification into institutional sales, alongside consumer-facing industry contracts, further insulates the company from cyclical downturns in the native starch commodity cycle.