Shares of Cello World made an impressive debut on Dalal Street on Monday, November 6, as the stationery manufacturer was listed at ₹829 on the National Stock Exchange (NSE), a premium of 27.93% over its issue price of ₹648 apiece. The stock was listed at a premium of 28.24% at ₹831 on BSE.

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A day before listing, the Cello World stock was commanding a premium of ₹160 per share in the grey market, signaling a strong landing on Dalal Street with a listing pop of 25%.

"Despite the premium valuation, the IPO received a positive response from investors. This is likely due to the company's strong brand recognition, diversified product portfolio, and pan-India presence," said Shivani Nyati, Head of Wealth at Swastika Investmart.

Should you book profit or hold the stock?

Nyati recommended investors to book profit after such a strong listing. However, the analyst noted that those who have a long-term investment horizon can keep a stop loss at ₹750.

Despite a 100% offer for sale (OFS) issue, Cello World witnessed a strong subscription demand and the offer valuation gives investors the comfort to invest and hold for long term, said Prashanth Tapse of Mehta Equities.

"The listing was above our estimate due to strong fundamentals of the company and high growth industry dynamics," he noted.

Considering the change in the market momentum post the US Fed meeting, Tapse said the premium listing is justified as the brand is well-positioned in the market. "We strongly believe that the Cello World IPO gives allotted investors a long term opportunity, hence recommending all allotted investors to 'HOLD FOR LONG TERM' while those who failed to get allotments can accumulate on the listing day for holding it for healthy long term returns."

Parth Shah of StoxBox expected the Cello World stock to open at a premium of around 25% due to sustained revenue and profit growth, which rose at a CAGR (compound annual growth rate) of 30.8% and 31.2%, respectively, during the FY21-23 and a strong return on capital employed (ROCE) of 44.5% in FY23.

Shah advised investors who have received allotment to book profits on the opening day and consider buying after seeing its financial performance in the medium term.

'Looking at 20%+ growth going ahead'

Speaking to CNBC-TV18, Pradeep Rathod of Cello World said the company is looking at 20%+ growth going ahead. “Numbers would depend upon the raw material pricing because from last three quarters we are seeing the raw material, our major raw material, slipped by around 30%. So, there is some price corrections, the volume growth is very high. Thus, the gross margin also in the first two quarters have also gone up. So, the fair estimates would be upwards of 20%."

With the company's profitability, Rathod said that it will be easy to maintain growth and capex for the next three to five years without getting in for any loan.

Subscription status

The issue was subscribed overall 38.9 times, led by institutional investors. The quota for qualified institutional buyers was booked 108.57 times, the high networth individuals' category was subscribed 24.42 times, and the retail investors' portion was booked 3.06 times.

The Cello World issue, which was open for bidding from October 30 to November 1, was sold in the price band of ₹617-648 per share.

The issue was entirely an OFS of up to 2.93 crore equity shares, aggregating to ₹1,900 crore.

Hence, the final issue proceeds, excluding IPO expenses, will be received by the promoters.

Cello World is a pan-India consumer product company, which mainly deals in three categories namely writing instruments and stationery, molded furniture and consumer housewares. Cello boasts of over six decades of experience in the consumerware market in India.

Kotak Mahindra Capital Company, ICICI Securities, IIFL Securities, JM Financial and Motilal Oswal Investment Advisors acted as the book-running lead managers to the issue, while KFin Technologies was the registrar.

First Published:Nov 6, 2023 10:12 AM IST