IPO: Cello World

Cello World, Indian consumer houseware company, has launched its IPO (initial public offering). Here's a breakdown of the company's strengths, weaknesses, and growth prospects to help investors make an informed decision. In a nutshell Quality : The company has consistently maintained 20 per cent and above operating margin in recent years. Its ROE and ROCE seem inflated due to a negative and lower equity base. Growth : Its topline and PAT has grown at 30.8 and 32.7 per cent per annum, respectively between FY21-23. Valuation : The stock will be priced at a P/E and P/B of 48.8 and 15.3 times, respectively, as compared to its peer's median and average of 45.4 and 5.2 times, respectively. Overview : The company is poised to benefit from the overall shift from unorganised to organised segment in the consumerware market. Other than that, surge in popularity of modular kitchens and demand for aesthetic consumerware products are going to benefit the company. About Cello World Cello World is a leading company in the consumerware market in India, with presence in three product categories: consumer houseware (66 per cent of FY23 revenue), writing instruments and stationery (16 per cent), and moulded furniture and allied products (18 per cent). The company is the sole manufacturer, distributor, and marketer of Cello products in India. It has 13 manufacturing facilities across five locations in India. Strengths of Cello World Well-recognised brand name and strong market position: The company's brand "Cello" is one of the most prominent brands in the consumerware and stationery market in India. Diversified product portfolio across price points: The company caters to diverse consumer requirements and offers 15,891 SKUs across different product categories which enables them to serve as a "one-stop-shop" for consumers purchasing their products. Pan-India distribution network with a presence across multiple channels: Cello World has 717 distributors and approximately 58,716 retailers for consumerware, approximately 1,509 distributors and 60,826 retailers for stationary, and 1,067 distributors and 6,840 retailers for moulded furniture and allied products. Weaknesses of Cello World The company operates in a highly competitive industry against well established brands. It competes with some big names such as Borosil, Pigeon, Camlin, La Opala, and more. The company suffers from a need for high working capital . Its trade receivables have been high as a result of which its working capital cycle stands at over 200 days on average. This has forced the company to rely on short-term borrowings. The company does not own the trademarks of its key brands "Cello", "Unomax", "Kleeno", and "Puro" and just licences them. If the contract is not renewed, it could have a dent on its financials. IPO details Total IPO size (Rs cr) 1900 Offer for sale (Rs cr) 1900 Fresh issue (Rs cr) 0 Price band (Rs) 617-648 Subscription dates October 30, 2023 - November 1, 2023 Purpose of issue Offer for sale Post-IPO M-cap (Rs cr) 13753 Net worth (Rs cr) 897 Promoter holding (%) 80.97 Price/earnings ratio (P/E) 48.8 Price/book