Cello World IPO: 5 Things to Know

Diwali is an important time for investors as they enter the new Samvat with renewed hopes that in the new year, their investments will do even better.

This time, the festival is special for Dalal Street as over a dozen companies are lined up with their draft papers, looking for the right chance to capitalise on the market liquidity and come out with their IPOs.

More than half a dozen companies are preparing to raise substantial capital of up to Rs 60 billion (bn) through initial public offerings in the weeks around the festival.

Ahead of Diwali, seven companies are in the process of getting ready for their public listings.

One among them is the IPO of Cello World.

Here are the key details of the IPO.

Issue period: 30 October 2023 to 1 November 2023

Type of issue: Book Built Issue

Price band: Rs 617 to Rs 648 per share

Face value: Rs 5 per equity share

Lot size: 23 shares

Application limit: Maximum thirteen lot for retail investors. Retail investors can make an application for a minimum of Rs 14,904 for one lot (23 shares).

Tentative IPO allotment date: 6 November 2023

Tentative listing date: 9 November 2023

#1 About the Company

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

1. Writing instruments and stationery
2. Moulded furniture
3. Consumer housewares and related products.

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

#2 A Look at the Financials

The company's revenue has grown at a CAGR of 19.6% in the last three years, while the net profit of the company grew at a CAGR of 19.9%.

This was due to the increase in sales and decrease in operating expenses over time.

For the financial year 2023, the company reported a 31.1% YoY jump in revenue to Rs 18.1 bn. This is primarily due to increasing income from pan-India sales.

The net profit was reported at Rs 2.9 bn, up 30% from Rs 2.2 bn reported a year back.

Cello World Snapshot (2021-23)

Particulars	31-Mar-21	31-Mar-22	31-Mar-23
Revenues (Rs in bn)	10.6	13.8	18.1
Revenue Growth (%)	-	30.1	31.1
Net Profit (Rs in bn)	1.7	2.2	2.9
Net Worth (Rs in bn)	2.9	4.4	6.7

Data Source: Company's Red Herring Prospectus (RHP)

Going forward, the company's goal is to enhance its income by capitalising on the increasing manufacturing capacity and its market share.

#3 Peer Comparison

As per the company's red herring prospectus, the following companies are industry peers of Cello World.

Peer Comparison

Company	Total Income (2023)(Rs in bn)	EPS (Basic) (in Rs)	Return on Net Worth (%)
Cello World	17.9	13.2	23.2
Borosil	10.3	7.9	11.6
Kokuyo Camlin	7.8	2.4	9.3
La Opala RG	4.5	11.1	15.9
Stove Kraft	12.8	10.9	8.9
TTK Prestige	27.8	18.3	13.1
Linc	4.9	25.2	20.4
Hawkins Cookers	10.1	179.2	34.3

Data Source: Company's Red Herring Prospectus (RHP)

#4 Arguments In Favour of the Business

• The company enjoys a well-established brand name and strong market positions. This has helped the company grow a well-established brand name. 
• It offers a wide-ranging product portfolio across price points to diverse consumer requirements.
• The business has a track record of successfully expanding into new markets and product categories, showcasing its adaptability and growth potential.
• With a strong presence in a pan-India distribution network spanning various channels, the company ensures widespread product accessibility.
• The company excels in manufacturing a diverse array of products while efficiently maintaining optimal inventory levels, reducing costs and ensuring a smooth supply chain.
• The business is led by an accomplished and proficient management team, contributing to its ongoing success and strategic development.

#5 Risk Factors

• Fluctuations in the prices and availability of key raw materials, especially plastic granules and polymer prices, could negatively impact the business.
• The company relies heavily on its distribution networks both in India and overseas. Any disruptions in these networks could have adverse effects on its operations.
• The use of third-party contract manufacturers for some products exposes the company to various risks, potentially impacting its business, financial condition, and operations.
• The company does not own the trademarks for its key brands, including 'Cello', 'Unomax', 'Kleeno', and 'Puro', as well as their logos.
• The inability to renew licensing agreements for these trademarks may adversely affect the business. Additionally, the use of the 'Cello' brand name by a competitor in the writing instruments industry could harm the company's reputation and business.

Conclusion

Cello World plans to launch new products in all of its categories, with a focus on innovative and premium products. The company also plans to expand its presence in new categories, such as home appliances and electronics.

To meet the growing demand, the company plans to expand its manufacturing capacity.

In addition to these plans, Cello World is committed to sustainability and innovation. The company is working on developing sustainable products and packaging solutions.

However, Cello World faces competition from several other consumer products companies, both domestic and international. This competition could put pressure on Cello World's margins and profitability.

Like any investment opportunity, Cello World bears its own set of advantages and disadvantages. Therefore, one should conduct thorough research.

For more information on IPOs, check out the list of upcoming IPO's.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...