Cello World
is a prominent player in the consumerware market in India with presence in the
consumer houseware, writing instruments and stationery, moulded furniture and
allied products and consumer glassware categories. Although the company was
incorporated only in 2018, its erstwhile promoter late Ghisulal Dhanraj Rathod,
father of two of its promoters, Pradeep Ghisulal Rathod and Pankaj Ghisulal
Rathod, was associated with Cello Plastic Industrial Works (CPIW) and the Cello
brand since 1962. Promoters (through their family) have since diversified its
product range and brand portfolio over the last six decades.
CPIW was a
partnership firm formed in 1958. While in the past CPIW was engaged in the
business of manufacturing and dealing of thermoware household articles and
plastic materials or articles, it is currently not active in these businesses.
CPIW is the exclusive owner of the Cello, Unomax, Kleeno, Puro trademarks and
their respective logos. Since the trademarks for these key brands were owned by
CPIW from prior to the incorporation of company, the trademarks continue to be
held by CPIW. Over the years, Promoters, Pradeep Ghisulal Rathod and Pankaj
Ghisulal Rathod and their father, Mr. Ghisulal Dhanraj Rathod formed various
entities, which carried on business under the brand name of Cello. Cello Plast
(partnership firm) was formed in 1991 to carry on the business of manufacturing
insulatedware followed by opalware at Daman, Daman and Diu. In 1995, another
partnership firm, Cello Plastotech was formed to carry on the business of
manufacturing new ranges of consumerware at Daman, Daman and Diu. In 2005,
Cello Industries (a partnership firm) was formed to carry on the business of
manufacturing new ranges of insulated ware at Haridwar, Uttarakhand. These
separate entities were initially formed under the Cello brand as each of these
entities focussed on distinct businesses within the consumerware sector and
enabled geographic expansion across the country. Pursuant to the group
restructuring process undertaken in the Financial Year 2022 the business of
Cello Plast was acquired by one of its subsidiaries, Cello Industries Private
Limited and the business of Cello Plastotech was acquired by one of its
subsidiaries, Cello Household Products Private Limited. Cello Industries was
converted into a private limited company, viz. Cello Houseware Private Limited,
and is now one of its subsidiaries.
The company
offer its consumer products across three categories - consumer houseware,
writing instruments and stationery, and moulded furniture and allied products.
Its products under the consumer houseware product category are offered and sold
under the Cello brand. The popular sub-brands under the Cello brand include
Kleeno, Puro, Chef, H2O, Modustack, Maxfresh and Duro. Products under the
writing instruments and stationery product category are offered and sold under
the Unomax brand. The popular sub-brands under the Unomax brand include
Ultron2X and Geltron. Products under the moulded furniture and allied products
category are offered and sold under the Cello brand.
The company
own and operate 13 manufacturing facilities across five locations in India, as
of June 30, 2023, including eight facilities in Daman in the Union territory of
Daman and Diu, two facilities in Haridwar, Uttarakhand, one facility in Baddi,
Himachal Pradesh, one facility in Chennai, Tamil Nadu and one facility in
Kolkata, West Bengal. It has an installed annual capacity of 57.77 million
units of consumer houseware products per annum, 15,000 tonnes of opalware and
glassware per annum, 705.00 million units of writing instruments and stationery
products per annum and 12.80 million units of moulded furniture and allied
products, as of June 30, 2023. It is currently establishing a glassware
manufacturing facility in Rajasthan which is expected to have an installed
annual capacity of 20,000 tonne of glassware per annum and house European-made
machinery that enables high productivity and precision in design and finish.
This glassware manufacturing facility in Rajasthan is also expected to house
various machines, including fire polishing machines and servo gob feeder to be
located close to raw material suppliers and provide a dry weather environment
that is suitable for the manufacturing of glassware.
The company
also trades in products such as steel and glassware products, by sourcing these
products from contract manufacturers primarily located in China, and
subsequently selling them to consumers.
Its
manufacturing capabilities allow it to manufacture a diverse range of products
in-house. Its revenue derived from its in-house manufacturing operations
aggregated to 78.65%, 82.63%, 79.37%, 82.08% and 79.67% of total revenue from
operations for FYs 2021, 2022 and 2023 and the three months ended June 30, 2022,
and June 30, 2023, respectively. The remaining products (consisting mainly of
steel and glassware products) are manufactured by third party contract
manufacturers who manufacture these products with its branding pursuant to
arrangements with them. The scale at which it manufactures products, combined
with supply chain management, enables it to derive the benefits of economies of
scale across various aspects of business model. Further, it maintains optimal
inventory levels across its manufacturing facilities by implementing technology
and utilising available market information. It also endeavours to maintain high
quality standards and good manufacturing practices
The company
has a strong pan-India distribution network. As of June 30, 2023, it offered
15,891 SKUs across its product categories.
Its
products are made of different types of materials, such as plastic, steel,
opal, glass, copper and melamine.
The Offer and the Objects
The offer
comprises offer for sale of up to 29320988 equity shares at the upper price
band of Rs 648 and 30794165 equity shares at the lower price band of Rs 617
aggregating Rs 1900 crore. The offer also includes a reservation for a
subscription by eligible employees and a discount of Rs 61 per equity share is
being offered to eligible employees bidding in the employee reservation
portion. The company will not receive any proceeds from the Offer. All the
offer proceeds (net of any offer related expenses to be borne by the selling
shareholders) will be received by the respective selling shareholders, in
proportion to the equity shares offered by them in the offer for sale.
The promoters
of the company are Pradeep Ghisulal Rathod, Chairman and Managing Director, and
Pankaj Ghisulal Rathod and Gaurav Pradeep Rathod, Joint Managing Directors.
Promoter
group selling shareholder Pradeep Ghisulal Rathod post-issue shareholding shall
decrease to 10.7% from 12.9% pre issue shareholding, Gaurav Pradeep Rathod
post-issue shareholding shall decrease to 11.2% from 16.5% pre issue
shareholding, Gaurav Pradeep Rathod post-issue shareholding shall decrease to
22.4% from 25.7% pre issue shareholding, Sangeeta Pradeep Rathod post-issue shareholding shall decrease to
5.9% from 7.4% pre issue shareholding, Babita Pankaj Rathod post-issue shareholding shall decrease to
1.1% from 1.8% pre-issue shareholding and Ruchi Gaurav Rathod post-issue
shareholding shall decrease to 2.9% from 3.7% pre issue shareholding.
Strengths
The company
is a prominent player in the consumerware market in India with products in the
consumer houseware, writing instruments and stationery, and moulded furniture
and allied products categories.
The company’s
strong market position in the consumer products industry segment isdue to vast
experience, continuous product development and consumer understanding.
Brand Cello
was awarded as one of the most trusted brands of India in 2021 by Commerzify.
The six
decades of experience of promoters (through their family) in the consumer
products industry has enabled it to better understand the preferences and needs
of consumers in India, diversify its product portfolio and grow its
multi-channel distribution network. This has enabled it to curate an extensive
product portfolio that caters to a diverse range of consumer requirements and
offers a broad range of contemporary products across different ranges, types of
material and price points.
The company
has a track record of scaling up new businesses and product categories.
The company
has the most diversified product portfolio among its peers, with products in
the glassware, opalware, melamine and porcelain categories.
Pursuant to
the establishment of the glassware manufacturing facility in Rajasthan, it is
expected to become the only domestic consumer products company which has
presence across all material types to have an in-house glassware manufacturing
unit in India
The company
manufacturing capabilities allow it to manufacture a diverse range of products
in-house, which in turn enables it to scale up production quickly to meet
increased demand, reduce time taken to launch new products in the market,
maintain quality control of its products, maintain better control over its
supply chain and mitigate risk of supply chain disruption.
The company
has implemented an enterprise resource planning system, which is a systems
application and product software, to, among others, help it in tracking
consumer demands and maintaining optimum inventory levels for its consumer
houseware and moulded furniture and allied products product categories. It is
also in the process of implementing the same for its writing instruments and
stationery product category. Additionally, it plans inventory levels by
utilising available market information, including existing inventory levels,
delivery timelines and expected order pipelines, and its six decades of
experience in anticipating and forecasting consumer demand in the consumer
products industry. An optimal level of inventory is important to its business
as it allows us to respond to consumer demand effectively.
The company
intend to utilise its innovation capabilities to expand its existing product
portfolio and develop new range of products across product categories. Particularly,
it aims to expand product portfolio in consumer houseware product category, by
focusing on introducing new range of products in the kitchenware, porcelain,
appliances, cookware, glassware, writing instruments, and stationery spaces.
The company
intend to grow its manufacturing capabilities so that it can quickly and
effectively respond to increases in market demand for its products to continue
to grow business. It is in the process of setting up a glassware manufacturing
facility in Rajasthan, which is expected to have an installed annual capacity
of 20,000 tonnes of glassware per annum. Further, it has also recently expanded
its opalware capacity in its manufacturing facility in Daman to increase
installed annual capacity to 25,000 tonnes of opalware per annum from 15,000
tonnes of opalware per annum, as of August 6, 2023.
Weaknesses
The company
face significant competition.Some are larger and have substantially greater
resources than the company, including the ability to spend more on advertising
and marketing and offer substantial discounts. It also faces competition from
non-branded local retailers and traders that may have more flexibility in
responding to changing business and economic conditions than the company.
Fluctuations
in raw material prices, especially plastic granules and plastic polymer prices,
and disruptions in their availability may have an adverse effect on business,
results of operations, financial condition, and cash flows.
The company
do not own the trademark for its key brands, including Cello, Unomax, Kleeno,
Puro and their respective logos. Such trademarks are registered in the name of
Cello Plastic Industrial Works (CPIW), a member of its promoter group and a
partnership firm owned and controlled by promoters, Pradeep Ghisulal Rathod and
Pankaj Ghisulal Rathod. Further, the Cello brand name is used by one of its
competitors, BIC Clichy, for its writing instruments and stationery business.
In 2009, Bic Clichy, to acquire the writing instruments business of the then
Cello entities, which were promoted by the company promoters, among others,
entered into shareholders agreements with these Cello entities. In 2017, BIC
Clichy instituted litigation proceedings against Promoters, amongst others,
before the Bombay High Court alleging violation of certain non-compete
arrangements contained in a shareholders’ agreement dated January 21, 2009. The
matter is pending before the High Court of Bombay. In the event of an adverse
order, Promoters, amongst others, could potentially be liable to pay
compensation. Any adverse impact on the Cello brand name due to the actions of
BIC Clichy, which utilizes the brand name, and any subsequent adverse order
relating to the litigation proceedings instituted by BIC Clichy may also
adversely impact reputation and business.
The company
is required to obtain and maintain certain statutory and regulatory permits and
approvals under central, state, and local government rules in India, generally
for carrying out business and for manufacturing plants. If it fails to obtain
such approvals, licenses, registrations, and permissions, in a timely manner or
at all, its business, results of operations, financial condition and cash flows
may be adversely affected.
Non-compliance
with and changes in, safety, environmental and labour laws, and other
applicable regulations, may adversely affect operations. Further, an increase
in labour costs may adversely affect business, results of operations, financial
condition, and cash flows.
The company
operate in highly unorganised product categories, and due to the popularity and
recognition of brands, its brands and designs may be copied by other companies.
If it is unable to adequately protect intellectual property rights, it may lose
these rights, and its brand image, competitive position and business may be
adversely affected.
The
business may be adversely impacted by sale of counterfeit products and
passing-off which may reduce sales and harm brands, adversely affecting results
of operations, financial condition, and cash flows.
Valuation
For FY2023,
consolidated sales were up by 32% to Rs 1796.7 crore. OPM fell110 bps to 23.4%
which led to 26% increase in operating profit to Rs 420.54 crore. This increase
was mainly on account of an overall increase in demand and sales of products
across three product categories. Other income increased 5% to Rs 16.74 crore
while interest cost fell 38% to Rs 1.76 crore and depreciation increased 6% to
Rs 50.33 crore. PBT increased 29% to Rs 385.19crore. Tax expenses were 26% higher
at Rs 100.13 crore. Net profit increased 30% to Rs 266.14 crore.
For
Q1FY2024, consolidated sales were up by 9% to Rs 417.78 crore. OPM rose 290 bps
to 25.3% which led to 23% increase in operating profit to Rs 119.2 crore. This
increase was mainly on account of an overall increase in demand and sales of
products across consumer houseware and writing instruments and stationery
products product categories, partially offset by a decrease in sales in moulded
furniture and allied products product categories. Other income increased 103%
to Rs 8.1 crore while interest cost rose 54% to Rs 57lakh and depreciation
increased 1% to Rs 11.82 crore. PBT increased 30% to Rs 114.92 crore. Tax
expenses were 42% higher at Rs 32.08 crore. Net profit increased 25% to Rs 77.44
crore.
For TTM
period ended June 2023, the consolidated net profit was Rs 281.74 crore on a
sales of Rs 1835.87 crore. The TTM EPS was Rs 13.3 and the PE on upper price
band of offer price works out to 49 times.
As of 11October
2023, its listed peers such as Borosil Limited trades at TTM P/E of 50.4, Kokuyo
Camlin Limited trades at TTM P/E of 41.1, La Opala RG Limited trades at TTM P/E
of 35.4, Stove Kraft Limited trades at TTM P/E of 47.4, TTK Prestige Limited
trades at TTM P/E of 43.5, Linc Limited trades at TTM P/E of 28.8 and andHawkins
Cookers Limitedtrades at TTM P/E of 39.6.
For FY2023,
CelloEbitda margin and ROE stood at 24.3% and 23.2% respectively, compared to 13%
and 8.5% for Borosil Limited, 7.6% and 6.2% for Kokuyo Camlin Limited,42.9% and
16.2% for La Opala RG Limited, 13.4% and 29.7% for Stove Kraft Limited, 14.6%
and 13.9% for TTK Prestige Limited, 13.2% and 23.4% for Linc Limited and 13.9%
and 38.7% for Hawkins Cookers Limited.
Cello World:Issue Highlights
|
Fresh issue (in number of shares)
|
|
Offer for sale (in Rs crore)
|
1900
|
Offer for sale (in number of shares)
|
|
- in Upper price band
|
29320988
|
- in Lower price band
|
30794165
|
Price Band (Rs)
|
617-648
|
Pre issued capital (Rs crore)
|
106.12
|
Post issue capital (Rs crore)
|
106.1
|
Pre issue promoter shareholding (%)
|
91.88
|
Post issue Promoter shareholding
|
78.07
|
Bid Size (in No. of shares)
|
23
|
Issue open date
|
30-10-2023
|
Issue closed date
|
01-11-2023
|
Listing
|
BSE, NSE
|
Rating
|
49/100
|
Cello World: Consolidated Financials
|
Particulars
|
2103 (12)
|
2203 (12)
|
2303 (12)
|
2206 (03)
|
2306 (03)
|
Total Income
|
1049.46
|
1359.18
|
1796.70
|
432.61
|
471.78
|
OPM
|
26.4
|
24.5
|
23.4
|
22.4
|
25.3
|
Operating Profits
|
276.74
|
333.57
|
420.54
|
96.75
|
119.20
|
Other Income
|
10.13
|
15.93
|
16.74
|
3.99
|
8.10
|
PBIDT
|
286.87
|
349.50
|
437.28
|
100.74
|
127.30
|
Interest
|
2.28
|
2.85
|
1.76
|
0.37
|
0.57
|
PBDT
|
284.59
|
346.65
|
435.52
|
100.38
|
126.74
|
Depreciation
|
48.90
|
47.55
|
50.33
|
11.71
|
11.82
|
PBT
|
235.69
|
299.10
|
385.20
|
88.67
|
114.92
|
Share of Profit/loss of JV
|
0.00
|
0.00
|
0.00
|
-0.02
|
-0.01
|
PBT Before EO
|
235.69
|
299.10
|
385.19
|
88.65
|
114.91
|
EO
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
PBT after EO
|
235.69
|
299.10
|
385.19
|
88.65
|
114.91
|
Provision for Tax
|
70.15
|
79.58
|
100.13
|
22.62
|
32.08
|
Profit after Tax
|
165.55
|
219.52
|
285.06
|
66.03
|
82.83
|
PPA
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
Net profit after PPA
|
165.55
|
219.52
|
285.06
|
66.03
|
82.83
|
MI
|
14.35
|
15.52
|
18.92
|
4.15
|
5.39
|
Net profit after MI
|
151.20
|
204.00
|
266.14
|
61.88
|
77.44
|
EPS (Rs)*
|
7.1
|
9.6
|
12.6
|
#
|
#
|
*EPS annualized on post issue equity capital of Rs 106.1 crore of face
value of Rs 5 .each
|
# Not annualised due to seasonality of business
|
Figures in Rs crore
|
Source: Capitaline Corporate Database
|
|