Cello World IPO Review – Should you Invest or Avoid?

Cello World IPO would open for subscription on October 30, 2023. Cello World is a famous Indian consumer product company. Company has generated strong revenue and margin growth. Should you invest in Cello World IPO? In this article, we would provide Cello World Limited IPO Review, IPO Details, Risk Factors, Positive Aspects which can help investors who might think to invest or not.

Cello World IPO Dates and Key Details

IPO Opening Date 30-Oct-23
IPO Closing Date 01-Nov-23
IPO Listing Date 09-Nov-23
Issue Type Book Built Issue IPO
Face Value Rs 5 per equity share
IPO Price band Rs 617 to Rs 648 per equity share
Lot Size 23 Shares
Listing at BSE and NSE
Total Issue Size Rs. 1900 Crores
Employee Discount Rs.61 Per Share

About Cello World Limited

Company is one of the famous consumer product company in India with 60 years of experience in this field that mainly deals in 3 categories such as

i) writing instruments and stationery,

ii) molded furniture,

iii) consumer housewares and related products.

Cello World has 13 manufacturing units in India. Company also aims to set up a glass manufacturing unit in Rajasthan with European made machinery to enable efficient productivity and enhanced manufacturing capacity.

  • As of March 31, 2023, the company has 15,841 stock-keeping units (“SKU”) across all product ranges.
  • As of March 31, 2023, the company’s national sales distribution team comprises of 683 members.

Cello World Limited – Core Strengths

  • Well-established brand name and strong market positions
  • Diversified product portfolio across price points catering to diverse consumer requirements
  • Track record of scaling up new businesses and product categories
  • Pan-India distribution network with a presence across multiple channels
  • Ability to manufacture a diverse range of products and maintain optimal inventory levels
  • Skilled and experienced management team
  • Strong historical financial results

Cello World Limited – Financial Insights

Financial Year ending / Period ending (Amt in Crores)
Period Ended 31-Mar-21 31-Mar-22 31-Mar-23 30-Jun-23
Assets 1,146.51 1,333.66 1,551.69 1,686.05
Revenue 1,059.58 1,375.11 1,813.44 479.88
Profit After Tax 165.55 219.52 285.06 82.83
Net Worth 289.59 444.04 665.73 1,226.56
Reserves and Surplus 98.66 87.26 238.75 784.91
Total Borrowing 334.07 462.91 335.11 328.64

Objects of the IPO

The IPO IPO size is Rs 1,900 Crores which is entire OFS (Offer for Sale). Under OFS, the money would go to selling shareholders and company would not get anything.

Positive Factors in Cello World IPO

  • Cello world has established brand name and strong market positions with a diversified product portfolio across price points catering to diverse consumer requirements.
  • It has a track record of scaling up new businesses and product categories
  • Company has Pan-India distribution network with a presence across multiple channels
  • Company with strong historical financial results

Negative or Risk Factors in this IPO

  • IPO issue has only OFS. Under OFS, the money would go to selling shareholders and company would not get benefitted
  • Fluctuations in raw material prices, especially plastic granules and plastic polymer prices, and disruptions in their availability may have an adverse effect on company business
  • They are dependent on its distribution network in India and overseas to sell and distribute its products and any disruption in such distribution network could have an adverse effect on the business.
  • Company reliance on third-party contract manufacturers for some of its products subjects us to risks, which, if realized, could adversely affect its business, results of operations, financial condition and cash flows.

Company do not own the trademark for its key brands, including “Cello”, “Unomax”, “Kleeno”, “Puro” and their respective logos. If we are unable to renew the relevant agreements that grant them the license to use these trademarks and logos, its business may be adversely affected. Further, the “Cello” brand name is also used by one of its competitors for its writing instruments business. Any adverse impact on the “Cello” brand name due to the actions of such competitor, which utilizes the brand name, may adversely affect its reputation and business.

#6 – Investors should read both internal and external risk factors indicated in the RHP.

Cello World IPO Price Valuation

  • Its IPO price band is Rs 617 to 648 per share
  • If we consider last year FY23 EPS of Rs 13.17, P/E ratio works out to be 49x
  • If we consider last 3 years weighted EPS of Rs 11.36, P/E ratio works out to be 57x
  • The listed peers like Kokuyo Camlin trading at P/E 58x (Highest) and Linc Limited is trading at P/E of 33x (Lowest) and industry average P/E is 45x. Hence, the IPO Price band at P/E of 49x to 57x is fully priced.

Cello World IPO GMP (Grey Market Premium)

While one cannot predict the accuracy of the GMP, currently its GMP is between Rs 110 to Rs 120. GMP is nothing but the premium at which these shares are trading in offline market.

Cello World IPO Time Table

IPO Opens on 30-Oct-23
IPO Closes on 01-Nov-23
Basis of Allotment 06-Nov-23
Initiation of Refunds 07-Nov-23
Credit of Shares to Demat 08-Nov-23
Listing Date 09-Nov-23
Cut-off time for UPI mandate confirmation 1-Nov-23 – 5 pm

Cello World IPO Review – Should you buy or not?

After reading the pros and cons, you might be wondering whether you should subscribe to this IPO or not.

This IPO has several positive aspects, such as a well-established brand name, strong market positions, 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.

However, there are some risks and negatives to consider. The primary concern is that the IPO is an Offer for Sale (OFS), meaning the funds raised will go to selling shareholders rather than the company. Additionally, the company is exposed to fluctuations in raw material prices, dependency on distribution networks, and reliance on third-party contract manufacturers. There’s also a trademark-related risk.

In light of these factors, the decision to invest in Cello World IPO should be carefully considered. If you are comfortable with the fact that the IPO is an OFS and you believe in the company’s ability to manage the associated risks, it might be a good investment opportunity.

High risk investors can invest in this IPO.

Investors can also go through all internal and external risk factors and more details about the company at Cello World IPO RHP.

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