The initial public offering (IPO) of Mumbai-based consumer-ware company Cello World opens for subscription today (October 30). The three-day bidding process will close on November 1. Ahead of the issue opening, the company has raised ₹567 crore from 39 anchor investors including Goldman Sachs, Nomura, Morgan Stanley, SBI Life, among others.

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Last heard, shares of Cello World are trading at a premium of ₹120 in the grey market. The grey market is an unofficial platform wherein IPO shares can be bought and sold till the listing.

What should investors do?

Analysts mostly have a subscribe rating to the issue considering the company's strong brand identity and market position.

Swastika Investmart: Subscribe for long term

"In terms of valuation, the IPO is priced at a P/E (price-earnings) of 47.47 times, which seems fully priced. Thus, we will suggest a subscribe rating to high-risk investors with a long-term view," said Shivani Nyati of Swastika Investmart.

Nyati said the company offers a diversified product portfolio and has a pan-India presence with a strong distribution network. The financial performance of the company has also been consistent, and it has further plans for expansion as well.

However, the analyst pointed out that there are some concerns as well, like that it does not own trademarks for its key brands. Secondly, it faces significant competition from other players in the industry. Additionally, the issue is a complete offer for sale.

Mehta Equities: Subscribe for long term

Mehta Equities believes that the IPO gives investors an opportunity to invest in a renowned Indian consumer product company with over 60 years of experience. "We think a strong established brand and diverse product portfolio across different product categories enables them to serve as a 'one-stop-shop for all Consumer Houseware across all income levels'."

Considering all parameters, the brokerage recommend investors to subscribe to the Cello World IPO offer with long-term perspective.

Reliance Securities: Subscribe

"We believe the company would be a prominent player in its respective business verticals with a large addressable market growth of an average 16%. The strong financials and debt-free nature of the company offer a growth play in the long term. Therefore, we recommend a Subscribe to the issue," said Reliance Securities.

Choice Broking: Subscribe with Caution

According to Choice Broking, there are growth tailwinds for the sector and Cello World is well placed to benefit from the same. "But due to the highly-priced issue, we are assigning a 'Subscribe with Caution' rating to the issue."

About the offer

Cello World is selling its shares in the range of ₹617-648, and investors can bid for a minimum of 23 equity shares and in multiples thereafter.

The company aims to raise about ₹1900 crore at the upper end of the price band.

The IPO is a complete offer for sale (OFS) worth ₹1,900 crore by promoters and other selling shareholders, with no fresh issue of equity share component.

Under the OFS, promoters Pradeep Ghisulal, Pankaj Ghisulal Gaurav Pradeep and selling shareholders Samgeeta Pradeep, Bibita Pankaj, Ruchi Gaurav Rathod will offload their partial stakes in the firm.

The offer includes a reservation of shares worth up to ₹10 crore for subscription by eligible employees. Also, 50% will be available for allocation on a proportionate basis to qualified institutional buyers, 15% for non-institutional investors and the rest 35% for retail investors.

The net proceeds from the issue will entirely go to the selling shareholders.

For FY23, consolidated revenue from operations rose 32% to Rs 1796.69 crore, compared to Rs 1359.18 crore in the year-ago period. The company's net profit surged 30% from Rs 219.52 crore in FY22 to Rs 285 crore in FY23.

Cello World is 60 year old business that is a prominent player in the consumerware market in India with presence in the consumer houseware, writing instruments and stationery, and moulded furniture and allied products and consumer glassware categories.

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

The equity shares of the company are proposed to be listed on both the BSE and the NSE.

First Published:Oct 30, 2023 11:13 AM IST