Cello World shares list at 28% premium over issue price; here is what investors may do

Cello World IPO listing: Consumer products company Cello World's shares made a strong debut on Dalal Street on Monday, November 6. The stock of Mumbai-based Cello World, a manufacturer of consumer-ware products in categories such as glassware, opalware, melamine and porcelain, opened at Rs 831 apiece on BSE, a premium of Rs 183 or 28.2 over the upper end of the issue price range of Rs 617-648 apiece. 

The stock began its journey in the listed space at Rs 829 apiece on NSE, a premium of Rs 181 or 27.9 per cent.  

The stock gave up some of its initial gains after the bumper listing. At 10:07 am, Cello World shares were at Rs 792.5 apiece on BSE and Rs 791.9 apiece on NSE, a premium of around 22 per cent.

The IPO of Cello World, comprising fresh issuance of shares to the tune of Rs 1,900 crore, concluded last week with an overall subscription of 38.9 times the equity on offer.  

EDITOR'S TAKE | Investors may hold Cello World shares with a stop loss at Rs 775 

Zee Business Managing Editor Anil Singhvi, who earlier advised subscribing to the issue for small listing gains and for the long term, suggests investors hold on to their positions with a stop loss at Rs 775.

He expected the Cello World stock to list in the Rs 825-850 range, a premium of up to 31.2 per cent. 

Cello World IPO: Key things to know

The Cello World IPO opened for subscription on October 30 and closed on November 1. Under the public offer, shares were available for bidding in a price band of Rs 617-648 apiece in multiples of 23 shares, translating to Rs 14,191-14,904 per lot. 

Here's how various types of investors responded to the issue: 

While 50 per cent of the issue was reserved for qualified institutional buyers (QIBs), 15 per cent was set aside for non-institutional investors or high net-worth individuals, and the remaining 35 per cent for retail individual investors. 

Many analysts had recommended subscribing to the issue. 

According to Nirmal Bang, which gave a long-term 'subscribe' call on the IPO, the issue was expensive at 48.8 times its earnings per share (EPS) on a trailing 12 months basis, as against an industry average price-to-earnings ratio of 43.5 times.

However, the brokerage remained ositive on the company’s business growth across three segments with expected healthy volume growth and attractive return ratios. "Cello World has observed 30 per cent growth in its top-line between FY21 and FY23. The management has observed healthy growth in its writing instruments and stationary segment in which it enjoys around 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 the opalware segment, it enjoys 28 per cent operating profit, which assumes to be sustainable margins over the next three years as per the management," Nirmal Bang said in a research report, dated October 31. 

"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, 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," it added.

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