Cello World, a diversified product company, commenced its Initial Public Offering (IPO) today, October 30, 2023, with a valuation of Rs 1,900 crore ($255 million). The IPO, with a price band of Rs 617-648 ($1 = Rs 83.25) per share, is an all-OFS (Offer for Sale) issue and will close on November 1. Analysts have recommended subscribing due to Cello's wide distribution reach, dominant market position, and diversified product portfolio of nearly 16,000 SKUs.
The proceeds from the IPO will go to selling shareholders or promoters, excluding a fresh issue component. Notably, the company has reserved employee shares worth up to Rs 10 crore at a Rs 61 discount per share.
Despite experiencing a slight decrease in EBITDA margin, Cello's FY23 revenue stood at Rs 1,797 crore. The company also boasts the highest FY23 Return on Capital Employed (RoCE) among peers at 44.5% and is valued at a Price-to-Earnings (P/E) ratio of 44.4x based on FY23 earnings.
Several financial institutions have issued recommendations about the IPO. Reliance Securities suggests subscribing due to Cello's large addressable market growth and robust financials. BP (NYSE:BP) Equities recommends subscribing for listing gains citing the company's cost management and margin preservation through diverse raw material utilization and savings. Sushil Finance also recommends subscribing based on Cello World's strong market position and business scaling track record.
However, Choice Broking advises caution due to Cello's high trailing twelve months (TTM) P/E multiple of 48.8x versus the peer average of 38.6x. Swastika Investmart suggests subscribing only for high-risk investors due to competition intensity and trademark ownership issues.
As of midday today, the issue was subscribed by 11 percent, indicating a strong initial interest from the market. In other news, ESAF Small Finance Bank's IPO is set to open on November 3, seeking to raise Rs 463 crore.
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