Cello World IPO booked 38.9x on Day 3 so far; QIB portion booked 109x

The initial public offering (IPO) of Cello World continued to witness a strong response from the investors during the third and last day of the bidding process as institutional bidders joined the party. The issue was subscribed 38 per cent on day one and ended day two with 1.55 times subscription.

Consumerware player Cello World is offering its shares in the fixed range of Rs 617-648 apiece with a lot size of 23 shares and its multiples thereof. The pan-India firm is looking to raise Rs 1,900 crore via IPO markets, which consists entirely of an offer-for-sale component by its promoters and other selling shareholders of up to 2.93 crore equity shares.

According to the data, the investors made bids for 85,68,03,705 equity shares, or 38.84 times, compared to the 2,20,61,947 equity shares offered for the subscription by 4.10 pm on Wednesday, November 1. The three-day bidding was open on Monday, October 30, and will close today.

The portion reserved for qualified institutional bidders (QIBs) saw a subscription of a whopping 108.57 times, while the allocation for  non-institutional investors (NIIs) was subscribed 24.39 times. The allocation for retail investors and employees was booked 2.94 times and 2.50 times, respectively as of the same time.

Brokerage firms, tracking the issue are mostly positive on it and have suggested to 'subscribe' to it on the back of its pan India presence, strong brand recall, growth potential and sound track record. However, they see the complete OFS nature of the issue and aggressive pricing as the only headwinds for the issue. Shares of the Cello World will be listed on both BSE and NSE.

Cello World is available at a P/E of 48 times, which is expensive compared to its peers.  It 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, said Geojit Financial Services with a 'subscribe' rating for the issue on a long-term basis.

"Cello World is going to list with a market cap of Rs 13,752.6 crore. We assign a 'subscribe' rating  as the company is a well-established brand name with strong market positions and a diversified product portfolio across price points catering to diverse consumer requirements. It is available at a reasonable valuation as compared to its peers," said Marwadi Financial Services.

Cello World raised Rs 567 crore from 39 anchor investors as the company allocated 87,49,999 equity shares at a price of Rs 648 apiece. ICICI Securities, Kotak Mahindra Capital, IIFL Securities, JM Financial and Motilal Oswal Investment Advisors are the lead managers to the issue, while Link Intime India is the registrar for the IPO.

Cello World has observed 30 per cent growth in its topline between FY21-23. The management has 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, said Nirmal Bang Securities.

"Delayed festive season may drive the lower growth during the second quarter but it will catch up with demand in H2FY24. The company’s return ratios of ROE and ROCE stood at 49.6 per cent and 44.9 per cent are outperforming in the industry. We are positive on the company's business growth across three segments with expected healthy volume growth," it said with a 'subscribe' rating.

Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.

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