Cello World, established in 1958, is a renowned global brand known for its diverse range of household and consumer products, from kitchenware to writing instruments. Rooted in innovation and quality for over six decades, the company has consistently set benchmarks in product design and functionality. With a strong presence across numerous countries, Cello World has become synonymous with trust and excellence for millions.
On October 30, 2023, Cello World opened its Initial Public Offering (IPO), marking a significant milestone in its 65-year-long corporate journey. Investors and market enthusiasts are keenly awaiting this offering, predicting it to be one of the most anticipated IPOs of the year. In this post, I am going to share with you a detailed analysis of Cello World IPO and if it is worth investing in.
Cello World Limited in a Nutshell
- Business: Cello World is a prominent consumer product company in India, dealing mainly in writing instruments, stationery, molded furniture, and consumer housewares.
- Experience: Over 60 years in the consumer product industry.
- Manufacturing Units: 13 facilities across 5 locations in India and plans to set up a glassware unit in Rajasthan.
- Strengths: Strong market positioning, diverse product range, history of scaling up businesses, and experienced management.
Cello World IPO Key Details
- Cello World IPO Dates: The subscription is open from October 30 to November 1, 2023.
- Price Band: The shares are priced between Rs 617-648.
- IPO Size: The company aims to raise Rs 1,900 crore through this IPO, which is entirely an offer-for-sale by the Rathod family. Hence, the proceeds will go to the selling shareholders.
- Lot Size: Retail investors can bid for a minimum of 23 shares and in multiples thereafter. Investment ranges from Rs 14,904 to Rs 1,93,752.
- Promoters: The Rathod family, which holds 91.88% stake in the company, are the primary promoters.
- Listing and Grey Market Premium: The shares are set to be listed on BSE and NSE on November 9, 2023. In the grey market, the IPO shares are trading at about a 15% premium.
Cello World IPO Size and Investors
The IPO size of Cello World is Rs 1,900 crore. This maiden public issue comprises solely an offer-for-sale by the Rathod family. There is no fresh issue component in the offer; thus, apart from the issue expenses, all proceeds will go to the selling shareholders, i.e., the promoters. Furthermore, the company has set aside shares worth Rs 10 crore for its employees, who will benefit from a discount of Rs 61 per share to the final issue price. Before the public offering, Cello World raised Rs 567 crore from anchor investors on October 27.
Notable investors include Nomura, HDFC Mutual Fund, Goldman Sachs, HSBC, Morgan Stanley, ICICI Prudential Mutual Fund, Florida Retirement System, Tata Mutual Fund, Aditya Birla Sun Life Trustee, SBI Life Insurance Company, ICICI Prudential Life Insurance, and HDFC Life Insurance Company.
Cello World Financials
Cello World Limited has showcased a strong financial trajectory, highlighted by its consistent growth in recent years. The financial year ending in March 2023 saw commendable growth in both revenue and net profit, with a year-on-year rise of 32.2% to ₹1,796.7 crore and 30.5% to ₹266.1 crore, respectively.
This upward trend has continued into the first quarter of FY24, with net profit surging by 25.2% to ₹77.4 crore and revenue witnessing a growth of 9% to ₹471.8 crore.
Despite this growth, a noticeable dip in EBITDA margin by 110 basis points to 23.4% in FY23 indicated some areas of concern. However, it rebounded in Q1 of FY24, expanding by 290 basis points to 25.3%. On a closer inspection of the company’s ROCE, there has been some volatility, with figures standing at 44.48% in FY23, a slight uptick from 40.92% in FY22 but a decrease from the 58.73% in FY21.
The company’s asset base has been growing consistently, from ₹1,146.51 crore in March 2021 to ₹1,686.05 crore by June 2023. Another significant metric, the IPO Market Cap of Cello World Limited, is valued at a staggering ₹13,752.57 crore, with a P/E ratio of 49.2. With a high Return on Equity (ROE) of 134.43% and a Return on Net Worth (RoNW) of 23.17%, the financial outlook of Cello World Limited remains promising for investors and stakeholders.
Risks: Fluctuations in raw material prices, not owning key brand trademarks, business seasonality, maintaining manufacturing capacity utilization, and significant competition are some of the risk factors.
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