Cello World IPO GMP (Grey Market Premium)

Cello World IPO opens on 30th October 2023 and closes for subscription on 01st November 2023. Cello World Ltd stock has a face value of ₹5 per share and the price band for the book built IPO has been set in the range of ₹617 to ₹648. The IPO of Cello World Ltd will be entirely an offer for sale, with no fresh issue component. The offer for sale (OFS) portion of the IPO comprises the sale of 2,93,20,987 shares (293.21 lakh shares approximately), which at the upper price band of ₹648 per share translates into an offer for sale (OFS) size of ₹1,900 crore. The entire offer for sale (OFS) of ₹1,900 crore is being made by the promoter group; spread across 6 promoter shareholders. Since there is no fresh issue component in the IPO, the overall IPO size will comprise only of the OFS. Hence, the total IPO will also entail the sale of 2,93,20,987 shares, which at the upper price band of ₹648 per share translates into total IPO issue size of ₹1,900 crore.

Since it is an offer for sale, there is no fresh funds coming into the company. It will just be a transfer of ownership. Cello World Ltd was promoted by Pradeep Ghisulal Rathod, Pankaj Ghisulal Rathod, and Gaurav Pradeep Rathod. Currently the promoters hold 100.00% of the company, which will get diluted post the IPO to 91.8%. The IPO of Cello World Ltd will be lead managed by Kotak Mahindra Capital, ICICI Securities, IIFL Securities, JM Financial and Motilal Oswal Investment Advisors acting as the Book Running Lead Manages (BRLM). Link Intime India Private Ltd will be the registrar to the IPO.

About Cello World IPO GMP

The grey market price (GMP) trading normally starts about 4-5 days prior to IPO opening and continues till the listing date. In the case of Cello World Ltd, we already have GMP data for the last 2 days, which should give a reasonable picture of the likely listing.

There are 2 factors that impact the GMP. Firstly, the market conditions have a deep impact on the GMP, especially the liquidity conditions in the market. Secondly, the extent of subscription for the IPO has a deep impact on the GMP as it is indicative of investor interest in the stock. GMP can also technically be in negative, which means the stock would list at a discount to the issue price.

There is one small point to remember here. The GMP is not an official price point, just a popular informal price point. However, in most cases, it has been observed to be a good informal gauge of demand and supply for the IPO. Hence it does give a broad idea of how the listing is likely to be and how the post-listing performance of the stock would be.

How has the GMP panned out in last few days?

GMP tends to be a good mirror of the real stock story. More than the actual price, it is the GMP trend over time that gives insights about which direction the wind is blowing. Here is a quick GMP summary for Cello World IPO for data is available.

In the above case, the GMP trend shows that the grey market premium has opened at around ₹95, but has since dropped by ₹160 per share for which GMP data is available. Of course, we have to await for the actual subscription numbers to flow in after the issue opens for subscription on 30th October 2023 and also watch the progress, as that would have a very significant impact on the GMP. In the past, stocks which got oversubscribed in the IPO also saw a very robust positive shift in the grey market pricing. For a start, Cello World Ltd has shown good traction in the grey market.

If you consider the upper end of band price of the IPO of Cello World Ltd at ₹648, then the likely listing price is being signalled at around ₹739 per share as per the GMP indicator on 25th October 2023. This is dynamic and keeps changing. One data point to track will be the subscription update on the stock as that would chart the GMP course.

The GMP of ₹91 on the upper end of the book built IPO price of ₹648 indicates a listing premium of a healthy 14.04% for Cello World Ltd over the IPO issue price. That pre-supposes a listing price of approximately ₹739 per share, when Cello World Ltd lists on 09th November 2023. Of course, these are purely approximations, so you must keep a margin of safety. One needs to observe the trend of GMP closely as that gives the best hints on listing status. Look at the time series trend instead of just the GMP absolute numbers.

How to apply for the Cello World IPO?

Investors can apply for Cello World IPO in minimum lot sizes. The lot size only applies for the IPO and once it is listed then it can be even traded in multiples of 1 shares since it is a mainboard issue. Investors in the IPO can only invest in minimum lot size and in multiples thereof. In the case of Cello World Ltd, the minimum lot size is 23 shares with upper band indicative value of ₹14,904. In short, IPO investors have to apply in lots that are in multiples of 23 shares only. The table below captures the minimum and maximum lots sizes applicable for different categories of investors in the IPO of Cello World Ltd.

It may be noted here that for the B-HNI category and for the QIB (qualified institutional buyer) category, there are no upper limits applicable.

Quota allocation across IPO investor categories

As per the terms of the offer, 50% of the net offer is reserved for the qualified institutional buyers (QIBs), while 35% of the total issue size is reserved for the retail investors. The residual 15% is kept aside for the HNI / NII investors . The stock of Cello World Ltd will be listed on the NSE and on the BSE. The table below captures the gist of the allocation to various categories.

It may be noted here that there is a small allocation for employees and there will be a special employee discount of ₹61 per share for applicants in the IPO.

The issue opens for subscription on 30th October 2023 and closes for subscription on 01st November 2023 (both days inclusive). The basis of allotment will be finalized on 06th November 2023 and the refunds will be initiated on 07th November 2023. In addition, the demat credits are expected to happen on 08th November 2023 and the stock is scheduled to also list on 09th November 2023 on the NSE and the BSE.