Cello World IPO opens today: Here's what brokerages say about the issue

The initial public offering of Cello World kicks off bidding for subscription on Monday, October 30. The company is offering its shares in the range of Rs 617-648 per equity share, with a lot size of 23 shares and its multiples thereafter. The issue can be subscribed till Wednesday, November 1.

The company is looking to raise Rs 1,900 crore via IPO route, which is entirely an offer-for-sale (OFS) of up to 2.93 crore shares and it will not receive any proceeds. Promoters Pradeep Ghisulal Rathod, Pankaj Ghisulal Rathod, Gaurav Pradeep Rathod and other selling shareholders including Sangeeta Pradeep Rathod, Babita Pankaj Rathod, Ruchi Gaurav Rathod will participate in OFS.

Cello World is a well-known consumer product company in India, which mainly deals in three categories- writing instruments and stationery, molded furniture, consumer housewares. The company has an experience of more than six decades in the field of consumer product industry.

Cello World raised Rs 567 crore by allocating 87,49,999 shares to 39 anchor investors at a price of Rs 648 apiece. Anchor book included marquee investors such as Goldman Sachs, Nomura, Morgan Stanley, Florida Retirement System, HSBC, and Eminence Global Fund, CLSA Global, and BNP Paribas Arbitrage along with eight domestic mutual funds.

Cello World has 13 manufacturing units situated in five different locations in India. The company also aims to set up a glass manufacturing unit in Rajasthan with Europe-made machinery to enable efficient productivity and enhanced manufacturing capacity. The company has 15,841 stock-keeping units (SKUs) and a strong sales distribution team, as of March 31, 2023.

Cello World will be giving a discount Rs 61 per share for its eligible employees. Half or 50 per cent of the net off shall be reserved for the qualified institutional bidders, while non-institutional investors will get 15 per cent of the allocations. Remaining 35 per cent of the issue shall be allocated towards the retail investors of the issue.

For the period ended on June 30, 2023, Cello World reports a net profit of Rs 82.83 crore with a revenue of Rs 479.88 crore. The company's net profit came in at Rs 285.06 crore, with a revenue of Rs 1,813.44 crore for the year ended on March 31, 2023.

Kotak Mahindra Capital Company, ICICI Securities, IIFL Securities, JM Financial and Motilal Oswal Investment Advisors are the book-running lead managers to the issue, while Link Intime India has been appointed as the registrar for the issue. Shares of the company will be listed on both BSE and NSE.

Reliance Securities
Rating: Subscribe
Cello World has demonstrated its manufacturing and production capabilities with continuous innovation of products in various categories. It has scaled up the branding attracting new customers, increasing market share in its respective product categories moving up the value chain for every segment, said Reliance Securities.

"It has developed a strong brand identity. We believe CWL would be a prominent player in its respective business verticals with a large addressable market growth of average 16 per cent, strong financials, debt free company offers a growth play in the long term," it added with a 'subscribe' rating for the issue.

Choice Broking
Rating: Subscribe with caution
On the back of diversified product portfolio, wide distribution reach and established brands, the company has maintained a dominant position in the domestic consumer ware market,  Its expansion in the glassware products, would further strengthen its position in the market. There are growth tailwinds for the sector and it is well placed to benefit from it, said Choice Broking.

"Cello World is demanding a TTM P/E multiple of 48.8 times, which is at significant premium to the peer average of 38.6 times. Thus, the issue is overvalued. But due to the highly priced issue, we are assigning a 'subscribe with caution' rating for the issue," it added.

Sushil Finance
Rating: Subscribe
Cello world is a well-established brand name, has a strong market position, a diversified product portfolio, and a track record of scaling up new businesses. These strengths are supported by a pan-India distribution network and strong historical financial results, said Sushil Finance with a subscribe rating, looking at all the factors, risks and opportunities of the investors.

StoxBox
Rating: Subscribe
Cello benefits from a distribution advantage due to its large off-take per retailer. Retailers find it advantageous to stock Cello's products due to the comprehensive range, enabling them to fulfil diverse customer demands through a single brand. This results in higher sales volume per retailer, said StoxBox by BP Equities.

Cello World had the highest ROCE among its peers in FY23, at 44.5 per cent. The issue is valued at a P/E of 44.4 times on the upper price band based on FY23 earnings, which is fairly valued compared to the average industry P/E of 45.5 times. We recommend a 'subscribe' for the benefit of listing gains for the issue, it said.

Mehta Equities
Rating: Subscribe
The issue is asking for a market cap of Rs 13,753 crore with P/E of 41.51 times on consolidated basis, which seems the issue is reasonably priced by looking at the expected revenue and profit growth. Investors should also look at IPO offers which come with a 100 per cent OFS issue which is an area of concern for new investors, said Mehta Equities.

"But due to higher EBITDA/PAT margins and higher ROCE compared to its peers we advocate a good long-term prospect for the company. Hence considering all parameters, we recommend investors to 'subscribe' to the Cello World IPO offer with a long-term perspective," it said.

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