Cello World IPO: Early Diwali for investors! Stock lists at 28% premium

It's a pre-Diwali bonanza for investors who subscribed Cello World shares. In a blockbuster debut, the shares of Cello World kicked off trading at ₹831 per share on the BSE, a premium of 28.2% over the issue price of ₹648 apiece. On the NSE, the stock opened 27.9% higher at ₹829 per share over the IPO price.

Post listing, Cello World shares gained as much as 28.8% to ₹834.70 on the BSE, while it hit a high of ₹837.40 on the NSE. The market capitalisation increased to ₹16,872 crore at the time of reporting.

The stellar debut of Cello World shares was in sync with broader markets, with BSE Sensed and Nifty50 opening higher, tracking firm cues from global peers. The BSE benchmark Sensex and Nifty were up 0.6% at the time of reporting.

“Despite the premium valuation, the 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,” says Shivani Nyati, Head of Wealth, Swastika Investmart.

“After such a strong listing, investors may book profit; however, those who have a long-term investment horizon can keep a stop loss at ₹750,” she adds.

The strong listing of Cello World shares was broadly in line with Street estimation as the IPO received an overwhelming response from all categories of investors, particularly qualified institutional investors. The ₹1,900-crore IPO, completely an offer for sale by promoters, was subscribed 38.90 times as it received bids for 85.83 shares against the total of 2.21 crore shares on offer. 

The portion reserved for qualified institutional buyers (QIBs) was subscribed 108.6 times, while the quota for retail investors and non-institutions investors (NIIs) booked 3.06 times and 24.42 times, respectively. The employee portion, which was offered at a discount of ₹61 an equity share, was subscribed 2.60 times. 

As per the offer document filed with the SEBI, Cello World had reserved up to 50% of the shares in the public issue for QIBs, up to 15% for NIIs, and up to 35% for retail investors. The company had also reserved shares worth ₹10 crore for eligible employees.

Cello World, which is into consumer houseware, writing instruments, and moulded furniture, had increased the IPO size to ₹1,900 crore from ₹1,750 proposed in the offer document filed with the SEBI in August this year. 

Explaining the rationale behind increasing the IPO size, Pradeep Rathod, CMD, Managing Director of Cello Group of companies, told Fortune India that the decision was taken in the backdrop of strong demand. “There was a lot of demand so we had to scale it up a little bit…we are just selling 13.82% of our stake, not up to 25%,” he said.

He also explained why the company opted for OFS and not equity dilution. He said, “We do not need money to grow for the next three years. Our internal accrual is more than sufficient to grow from here…The company has not borrowed over the last 30 years.”

The OFS saw promoter Pradeep Ghisulal Rathod paring shares worth ₹300 crore, ₹736 crore by Pankaj Ghisulal Rathod, ₹464 crore by Gaurav Pradeep Rathod, ₹200 crore by Sangeeta Pradeep Rathod, and ₹100 crore by both Babita Pankaj Rathod and Ruchi Gaurav Rathod.

For the fiscal year 2023, Cell’s consolidated revenue grew 32.19% to ₹1,796.69 crore against ₹1,359.18 crore a year ago. Net profit rose 29.86% from ₹219.52 crore in fiscal 2022 to ₹285 crore in fiscal 2023. The company generates 65% of the revenue from the consumer houseware business, 18% from moulded furniture, and around 16% from writing instruments.

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