Cello World brings a strong record in consumerware

ET Intelligence Group: Mumbai-based Cello World is a six-decade-old family business engaged in consumerware, writing instruments and moulded furniture. The IPO is entirely an offer for sale in which the promoter family is diluting nearly 14% of their stake with no money coming into the company.

Business: With the promoter family in business since 1962, Cello World is a prominent player in the consumerware market with products like drinkware, dinnerware, cookware, opalware, glassware, insulatedware, houseware, porcelain, cleaning aids, pens, stationery, moulded furniture and air coolers. This has made Cello a familiar brand in Indian households. The promoters have a track record of scaling new businesses and product categories. Currently, 80% of its revenues are earned from distribution through general trade.

The company has 13 manufacturing facilities in India enabling it to manufacture 80% of its products in-house. It is currently setting up a glassware manufacturing facility in Rajasthan that will help decrease dependence on imports. Its diversified portfolio allows it to withstand demand fluctuations arising from seasonality.

Financials & Growth Prospects: The company's revenues rose at 31% CAGR from ₹1,049 crore in FY21 to ₹1,796 crore in FY23. The net profit also grew at the same clip from ₹165 crore to ₹285 crore. The operating profit margin has rationalised from 27.3% in FY21 during the peak of Covid to 24.3% in FY23. In the last three years, the return on capital employed also declined from 58.7% to 44.5% due to the company's investment in its upcoming glassware facility in Rajasthan.

Going ahead, the company plans to expand its production capacities and distribution network, scale up branding and promotional activities and continue to grow its share of consumer wallet.

Valuations: At an implied market cap of nearly ₹13,750 crore, the IPO values the company at 44 times its estimated annualised earnings for FY24. These seem to be commensurate in view of the company being debt-free and more profitably run compared to its peers across different industries such as TTK Prestige, Borosil, Linc and Kokuyo Camlin.

Besides, the company will generate more economies of scale coming through from its increased capacity expansion in the glassware business. Investors can consider investing in a diversified company that is similar to the American diversified consumer products company Newell Brands.