Cello World’s Rs 1,900 crore IPO to open on October 30
The recent announcement regarding Cello World’s decision to launch its initial public offering (IPO) marks a significant step for the consumer-ware company. With an IPO value of Rs 1,900 crore, the company is poised to make a substantial offering to the public, indicating a strategic move to raise significant capital through the equity market. This decision underscores the company’s ambition to fuel its growth trajectory and capitalize on market opportunities that could facilitate its expansion and development in the consumer-ware industry.
Scheduled to open for subscription on October 30, the IPO presents an opportunity for investors to become stakeholders in Cello World, enabling them to participate in the company’s growth story and potentially benefit from its future successes. By opening its shares to the public, Cello World is not only aiming to raise capital but also aiming to increase its visibility and strengthen its position in the market, thus enhancing its brand value and market recognition.
It’s worth noting that the IPO is structured as an offer-for-sale, indicating that the existing shareholders, including the promoters, are the ones offering their shares to the public. Consequently, the proceeds from the IPO will directly benefit the Rathod family, who are the principal shareholders in Cello World. This strategic move could provide the Rathod family with a significant liquidity event, enabling them to unlock the value of their investments in the company and potentially reinvest the proceeds in other ventures or expansion plans.
As the IPO process unfolds, market participants and potential investors will closely monitor the subscription rates and investor sentiment, as they often serve as indicators of the market’s confidence in the company’s growth prospects and potential future performance. A successful IPO could provide Cello World with the necessary financial impetus to fuel its expansion plans, invest in research and development, and explore new market opportunities, thereby solidifying its position as a key player in the consumer-ware industry.
Cello World’s decision to disclose the price band for its upcoming IPO on October 25, after the Dussehra holiday, is a strategic move aimed at capturing the attention of potential investors and stakeholders. This timing indicates the company’s intention to leverage market dynamics and investor sentiment following the festive season, a period often characterized by increased market activity and investor participation.
The announcement that the anchor book will open on October 27 suggests the company’s proactive approach to securing interest and commitments from institutional investors and high-net-worth individuals ahead of the public offering. This pre-IPO placement to anchor investors typically helps in generating momentum and building confidence in the offering among potential retail investors and the broader market.
Cello World’s allocation strategy for the IPO, with 50 percent of the issue size reserved for qualified institutional buyers, 15 percent for high-net-worth individuals, and the remaining 35 percent for retail investors, signifies the company’s focus on ensuring a diverse and inclusive participation of various investor segments. This allocation strategy is often aimed at achieving a balanced and robust subscription profile, fostering broad-based interest and participation in the IPO, and enhancing the overall market reception and success of the offering.
As the IPO process unfolds, market participants and analysts will closely monitor the price band announcement and subsequent investor response to gauge market sentiment and demand for Cello World’s shares. The company’s commitment to providing equitable access to different investor categories reflects its emphasis on fostering a fair and transparent IPO process, ensuring widespread participation, and potentially enhancing the long-term investor confidence and support in the company’s growth trajectory.
Cello World’s diverse business operations encompass multiple consumer segments, including consumer houseware, writing instruments and stationery, moulded furniture and allied products, as well as consumer glassware. With an extensive product portfolio of 15,891 stock-keeping units (SKUs) across these categories as of June 2023, the company has demonstrated its commitment to catering to a wide range of consumer preferences and demands.
The company’s robust manufacturing capabilities are evidenced by its 13 manufacturing facilities located across five different locations. This extensive manufacturing infrastructure highlights the company’s emphasis on ensuring efficient production and timely delivery of its products to meet consumer demands. Additionally, the ongoing establishment of a new glassware manufacturing facility in Rajasthan underscores Cello World’s dedication to expanding its production capacity and enhancing its product offerings in the consumer glassware segment, thus positioning itself for further growth and market expansion.
Notably, approximately 80 percent of the company’s revenue is derived from its in-house manufacturing operations, indicating its strong vertical integration and control over the production process, which may contribute to cost efficiencies and quality control. The company’s strategic reliance on third-party contract manufacturers, particularly for steel and glassware products, for the remaining 20 percent of its revenue, suggests a balanced approach to optimizing its manufacturing capabilities and ensuring a comprehensive product range for its consumers.
Cello World’s diversified product offerings, extensive manufacturing infrastructure, and strategic sourcing arrangements with third-party manufacturers collectively reflect the company’s commitment to maintaining a strong market presence across various consumer segments. As it continues to expand its manufacturing capabilities and product portfolio, the company is well-positioned to capitalize on emerging market opportunities and further solidify its position as a key player in the consumer goods industry.
Cello World’s recent financial performance demonstrates a healthy growth trajectory, characterized by significant increases in net profit and revenue in FY 23. Despite this positive trend, there has been a noticeable decline in the EBITDA margin, which warrants attention and strategic analysis to identify potential factors contributing to this trend.
The company’s robust performance in FY 23 is exemplified by a substantial 30.5 percent year-on-year increase in net profit, amounting to Rs 266.1 crore, and a commendable 32.2 percent surge in revenue, reaching Rs 1,796.7 crore. While the earnings before interest, tax, depreciation, and amortization (EBITDA) witnessed a healthy 26 percent rise from the previous year, reaching Rs 420.54 crore, the EBITDA margin saw a 110 basis points decline, resting at 23.4 percent.
Despite the EBITDA margin decline, the company’s strong financial performance in the first quarter of FY 24 is indicative of its sustained growth momentum. With a noteworthy 25.2 percent year-on-year growth in net profit, totaling Rs 77.4 crore, and a 9 percent increase in revenue, amounting to Rs 471.8 crore, Cello World continues to exhibit positive growth trends. Notably, the EBITDA witnessed a robust 23 percent increase, reaching Rs 119.2 crore, accompanied by a significant margin expansion of 290 basis points at 25.3 percent compared to the previous year.
To sustain its growth trajectory and address the decline in EBITDA margin observed in FY 23, Cello World may consider implementing strategic measures aimed at optimizing operational efficiencies, cost management, and revenue diversification. By focusing on enhancing operational effectiveness and exploring avenues for margin improvement, the company can position itself for sustained profitability and continued success in the highly competitive consumer goods industry.
Cello World’s timeline for finalizing the allotment of shares and subsequent listing on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) represents significant progress in the company’s IPO process. The set dates, including the completion of share allotment by November 6 and the crediting of shares in the demat accounts of eligible investors by November 8, reflect the company’s commitment to ensuring a streamlined and efficient IPO procedure for its stakeholders.
The scheduled listing of Cello World’s stock on both the BSE and the NSE on November 9 is expected to generate considerable market interest and activity, as investors and market participants eagerly await the company’s debut on these prominent stock exchanges. This milestone signifies a crucial step in the company’s journey towards enhancing its market visibility and expanding its investor base.
The involvement of reputable merchant bankers, including Kotak Mahindra Capital Company, ICICI Securities, IIFL Securities, JM Financial, and Motilal Oswal Investment Advisors, further underscores the confidence and support that leading financial institutions have in Cello World’s business prospects and growth trajectory. Their role in the IPO process highlights their expertise in managing and facilitating successful public offerings, which is instrumental in ensuring a smooth and efficient transition to the public markets for the company.
Additionally, the appointment of Link Intime India as the registrar for the IPO indicates the company’s commitment to maintaining a robust and transparent share registry system, facilitating seamless communication and interaction with its shareholders and investors.
Overall, these strategic arrangements and scheduled milestones collectively position Cello World for a successful debut in the stock market, laying a solid foundation for the company’s future growth and value creation for its investors and stakeholders.
