Cello World IPO: Firm raises ₹567 crore from anchor investors ahead of issue

The company decided to allocate a total of 86.5 lakh equity shares to 39 funds at ₹648 apiece, which is also the upper end of the price band, according to a BSE circular.

Morgan Stanley Asia (Singapore) Pte Ltd, BNP Paribas Arbitrage, CLSA Global Markets Pte Ltd, Reliance General Insurance Company, Bajaj Allianz General Insurance Company, ICICI Prudential Mutual Fund (MF), Edelweiss MF, Tata MF and HDFC MF are among the anchor investors.

Also Read: Cello World IPO opens on October 30, price band set at ₹617- ₹648 per share

Cello World IPO Details

Cello World IPO is a complete offer for sale (OFS), where promoters and other shareholders will sell shares of ₹5 face value totalling ₹1,900 crore. The offer includes a reservation of up to ₹10 crore for subscription by eligible employees. Cello World IPO lot size is 23 equity shares and in multiples of 23 equity shares thereafter.

Cello World IPO reserved not more than 50 per cent of the shares in the public issue for Qualified Institutional Buyers (QIB), not less than 15 per cent for Non Institutional Investors (NII), and not less than 35 per cent of the offer is reserved for Retail Investors. A discount of ₹61 per equity share is being offered to eligible employees bidding in the employee reserve portion.

The issue will see promoter Pradeep Ghisulal Rathod offload ₹300 crore worth of shares, ₹736 crore by Pankaj Ghisulal Rathod, ₹464 crore by Gaurav Pradeep Rathod, ₹200 crore by Sangeeta Pradeep Rathod, ₹100 crore by both Babita Pankaj Rathod and Ruchi Gaurav Rathod.

The book running lead managers of the Cello World Limited IPO are Kotak Mahindra Capital Company Limited, ICICI Securities Limited, IIFL Securities Ltd, JM Financial Limited, and Motilal Oswal Investment Advisors Limited. The registrar of the issuance is Link Intime India Private Ltd.

Cello World primarily deals in three categories: stationery and writing instruments, moulded furniture, consumer housewares, and associated goods. In 2017, it ventured into the glassware and opal ware business under the ‘Cello’ brand.

Analysts recommend ‘Subscribe’

Domestic brokerage firm Mehta Equities views Cello World IPO as an opportunity to invest in a well-established Indian consumer product company with over 60 years of experience. 

‘’Their strong brand and diverse product portfolio make them a one-stop shop for consumer houseware across all income levels. With a wide-reaching pan-India distribution network, multiple sales channels, and 13 manufacturing facilities spanning five locations, they are well-positioned to rapidly expand production and market reach,” said Mehta Equities.

Cello World has shown robust financial performance, with revenue growth of 29.51 per cent and 32.19 per cent in FY 2022 and 2023, along with healthy profit after tax growth of 32.6 per cent and 29.9 per cent in the same periods.

Looking at the valuation at the upper price band of ₹648 and considering annualized earnings and fully diluted post-IPO paid-up capital, the issue presents a market cap of ₹13,753 crore with a P/E of 41.51x on a consolidated basis. This valuation appears reasonable when considering the expected revenue and profit growth, according to the brokerage.

‘’Although the IPO is entirely OFS, which may be a concern for new investors, the company’s higher EBITDA/PAT margins and superior return on capital employed compared to its peers suggest strong long-term prospects. Therefore, we recommend investors ‘subscribe’ to the Cello World Ltd IPO with a long-term perspective,” said Mehta Equities.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.

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Updated: 27 Oct 2023, 10:35 PM IST