Cello World makes strong debut, lists at 28% premium over issue price

Cello World made a strong stock market debut on Monday, with its shares getting listed at Rs 831, a 28 per cent premium over its issue price of Rs 648 per share on the BSE. On the National Stock Exchange (NSE), the stock of the houseware company opened at Rs 829. Post listing, the share price of Cello World hit a high of Rs 837.40 and a low of Rs 790 on the NSE. At 10:01 AM, it was trading at Rs 803.65, 3 per cent lower from its opening level. A combined 7.3 million equity shares have, so far, changed hands on the NSE and BSE.

"Despite the premium valuations, Celo World's 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. After such a strong listing, investors may book profit. However, those who have a long-term investment horizon can keep a stop loss at Rs 750," said Shivani Nyati, Head of Wealth, Swastika Investmart.markets The company's maiden share sale saw over 41.69 times more demand than shares on offer. The institutional investor portion of the issue garnered 122 times subscription, the high-networth individual portion was subscribed 25.65 times, and the retail investor portion was subscribed 3.21 times.

Mumbai-based Cello World has a product portfolio across three key categories -- consumer houseware, writing instruments and stationery, and moulded furniture and related products. In 2017, it ventured into the glassware and opal ware business under the 'Cello' brand. The company has 13 manufacturing facilities in five different locations -- Daman, Haridwar (Uttarakhand); Baddi (Himachal Pradesh); Chennai (Tamil Nadu) and Kolkata (West Bengal) as of March 31, 2023. It is also in the process of setting up a glassware manufacturing facility in Rajasthan. Cello World observed 30 per cent growth in its topline between FY21-23. The management observed healthy growth in its writing instruments and stationary segment in which it enjoys 23 per cent operating margins which is best in the industry.

It aims to increase its pan-India distribution reach in this segment from 1,550 distributors to 2,500. In Opalware segment, it enjoys 28 per cent operating profit which assumes to be sustainable margins over the next 3 years as per the management. "In the current year, delayed festive season may drive the lower growth during the second quarter but it will catch up with demand in H2FY24. Cello World has delivered healthy operating margin of 23.4 per cent when compared with industry peer average performance of 15.6 per cent. Additionally, company’s return ratios of ROE and ROCE stood at 49.6 per cent and 44.9 per cent are outperforming in the industry," analysts at Nirmal Securities had said in their IPO note.

The brokerage is positive on the company's business growth across three segments with expected healthy volume growth and attractive return ratios. Cello World has developed a strong brand identity through effective brand advertisements and marketing campaigns, including “Cello – Companion for Life’’, “Cello – Rishta Zindagi Bhar Ka’’, “Hot Chahiye Toh Cello” and “Don’t Just Write, Glide”. Analysts believe Cello World would be a prominent player in its respective business verticals with a large addressable market growth of average 16 per cent, strong financials, debt free company status, all of which offer a growth play in the long term. "At the upper price band of Rs 648, Cello World is available at a P/E of 48x (FY23), which is expensive compared to its peers. However, factors like consumer awareness towards safety and quality, shorter replacement cycles, a shift towards the aesthetics of products, loyalty to established brands, increasing disposable income, and nuclearization of families are contributing to the growth of the branded consumerware market in India," according to analysts at Geojit Financial Services.

Cell World has advantages such as a well-established brand name, strong market positions, a diversified product portfolio, a skilled and experienced management team, and strong financial performance, the brokerage firm had said in IPO note.