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Cello World Limited ( IPO analysis)
Cello World Limited is a prominent player in the consumer ware market in India, specializing in two primary categories: consumer houseware and consumer glassware. Despite its relatively recent incorporation in 2018, the company has a rich legacy, with its roots tracing back to the association of the late Ghisulal Dhanraj Rathod, the father of two of its current promoters, Pradeep Ghisulal Rathod and Pankaj Ghisulal Rathod, with Cello Plastic Industrial Works ("CPIW") and the iconic "Cello" brand dating as far back as 1962.
CELLO WORLD LIMITED | INITIAL PUBLIC OFFERNING
On 21st October, 2023 Cello World Limited officially issued its Prospectus mentioning the important details regarding its recent Initial Public Offering (hereinafter referred as IPO) which will start from Monday, 30 October, 2023 and will close on Wednesday, 01 November, 2023. Before delving deeply into the details of the IPO. Let us briefly look at the Business Operation of ‘Cello World Limited.’
ABOUT BUSINESS OPERATION
Cello World Limited is a prominent player in the consumer ware market in India, specializing in two primary categories: consumer houseware and consumer glassware. Despite its relatively recent incorporation in 2018, the company has a rich legacy, with its roots tracing back to the association of the late Ghisulal Dhanraj Rathod, the father of two of its current promoters, Pradeep Ghisulal Rathod and Pankaj Ghisulal Rathod, with Cello Plastic Industrial Works ("CPIW") and the iconic "Cello" brand dating as far back as 1962.
Cello World Limited has strategically expanded its product portfolio, delving into consumer houseware, writing instruments, stationery, moulded furniture, and allied products, as well as consumer glassware. As of June 30, 2023, the company boasts an impressive product catalog with a staggering 15,891 stock-keeping units ("SKUs") across various product categories. This diverse range of products spans different material types, price points, and caters to a wide array of consumer requirements. In 2017, the company, through its promoters, initiated the glassware and opalware business under the renowned "Cello" brand. In 2019, they further expanded their offerings by introducing the "Unomax" brand, focusing on writing instruments and stationery. With a strong foundation in manufacturing, the company owns or leases and operates 13 manufacturing facilities situated across five locations in India as of June 30, 2023. Additionally, Cello World Limited is in the process of establishing a state-of-the-art glassware manufacturing facility in Rajasthan. This extensive manufacturing capability empowers the company to produce a wide range of products in-house, ensuring quality control and cost efficiency in its operations.
PRODUCTS AND SERVICES
The company provide consumer products in three main categories: consumer houseware, writing instruments and stationery, and moulded furniture and related items.
In the consumer houseware category, it offers products under the well-known "Cello" brand. This brand includes popular sub-brands like "Kleeno," "Puro," "Chef," "H2O," "Modustack," "Maxfresh," and "Duro." These sub-brands cover a wide range of household products, the consumer product range can be seen in the given table.
In the writing instruments and stationery category, the company present their products under the "Unomax" brand. Within the "Unomax" brand, there are sub-brands like "Ultron2X" and "Geltron." The product range covers an array of writing tools, including ballpoint pens, gel pens, roller pens, fountain pens, metal pens, and mechanical pencils. It also offer an assortment of stationery items, such as highlighters, markers, and correction pens.
The Company's products in the "moulded furniture and allied products" category are all sold under the well-known "Cello" brand. These products cover a wide range of items, including chairs, tables, trolleys, stools, cabinets, ladders, moulds, bubble-guards, crates, pallets, dustbins, and storage solutions.
BOARD OF DIRECTOR AND PROMOTERS OF THE COMPANY
In terms of the company's leadership and governance, the management team comprises key figures, with Pradeep Ghisulal Rathod holding the position of Chairman and Managing Director, while Pankaj Ghisulal Rathod and Gaurav Pradeep Rathod serve as Joint Managing Directors.
The board of directors includes various individuals, including Gagandeep Singh Chhina, who is designated as a Nominee Director, and independent directors, namely Piyush Sohanraj Chhajed, Pushap Raj Singhvi, Arun Kumar Singhal, Sunipa Ghosh, and Manali Nitin Kshirsagar.
Furthermore, the company's promoters, who have played a pivotal role in its development, are Pradeep Ghisulal Rathod, Pankaj Ghisulal Rathod, and Gaurav Pradeep Rathod.
INDUSTRY OUTLOOK
Cello World Limited operates in an industry with a favourable outlook due to India's high share of domestic consumption, particularly in private final consumption expenditure (PFCE). This trend has several implications for the company's industry outlook:
1. Resilience to Global Economic Volatility: India's substantial share of domestic consumption in its GDP, as evidenced by the high PFCE, offers a significant advantage. This means that the Indian market is less susceptible to economic volatility in the global economy. For Cello World Limited, this translates into a more stable domestic market for its products, potentially reducing the impact of global economic fluctuations on its business.
2. Sustained Consumer Demand: The high proportion of private consumption in India's GDP suggests that sustainable economic growth directly fuels continued consumer demand for goods and services. As the Indian economy grows, there is a greater likelihood of increased consumer spending, which can benefit companies like Cello World Limited that produce consumer goods.
3. Comparative Advantage: In FY 2022, India's PFCE accounted for approximately 60% of its GDP, a figure that surpasses China, Germany, and is comparable to the US and the UK. This underscores India's emergence as one of the world's top consumer markets. Cello World Limited, operating within this thriving consumer market, is well-positioned to benefit from this high level of domestic consumption.
Cello World Limited operates in an industry that benefits from India's substantial share of domestic consumption, marked by a high PFCE-to-GDP ratio. This economic landscape provides the company with a resilient and growing domestic market, making it well-poised to tap into the rising consumer demand in India.
COMPETITION
Cello World faces fierce competition in its industry, with several notable challenges and competitors:
1. Competitors with Greater Resources: The company contends with rivals that are not only larger but also possess substantially greater resources. These competitors can outspend Cello World in areas such as advertising and marketing, allowing them to promote their products more aggressively and offer substantial discounts.
2. Competitive Advantages of Established Players: Some of the competitors have well-established operating histories, superior brand recognition, and established supply relationships. These competitive advantages can make it more challenging for Cello World to capture market share and maintain a strong presence in the industry.
3. Competition from Local Retailers and Traders: Cello World also faces competition from non-branded local retailers and traders. These entities may have more agility in adapting to changing market and economic conditions, making them flexible competitors.
4. Market Saturation and New Entrants: The stationery market in India has seen the entry of several companies offering attractive and differentiated products at similar or lower price points. This trend compels existing players, including Cello World, to continuously innovate to preserve and expand their market share. Moreover, many companies are diversifying into new stationery categories to increase their market presence.
5. Brand-Building and Market Share: Branded players are concentrating on strengthening their market share in the stationery market through above-the-line (ATL) brand-building strategies. This intensified focus on brand building contributes to the already intense competition in the Indian stationery market.
FINANCIAL ASPECT
When considering an investment in a company, investors invariably scrutinize the Key Financial Indicators to make informed decisions. Among these, Revenue from Operations stands out as a pivotal figure. Notably, in the Financial Year 2022-23, Blue World Limited has generated a remarkable revenue of INR 17,966.95 (in ₹ Millions). And in the FY 2021-22 it had a revenue of INR 13,591.76 (in ₹ Millions). Their profit for the FY 2022-23 stands at INR 9,011.81 (in ₹ Millions). And the profit for the FY 2021-22 stands at 6,806.24 (in ₹ Millions).
For a comprehensive understanding of the financial aspects of Blue Jet Healthcare Limited, the following table provides valuable insights of financial ratios for a comprehensive assessment of the company's financial condition and performance.
|
RATIO NAME |
FY 2022-23 |
FY 2021-22 |
|
CURRENT RATIO |
2.22 |
0.96 |
|
DEBT EQUITY RATIO |
0.62 |
1.70 |
|
RETURN ON EQUITY |
134.43% |
N.A. |
|
RETURN ON CAPITAL EMPLOYED |
44.48% |
40.92% |
|
NET PROFIT |
15.87% |
16.15% |
OBJECTIVE OF THE IPO
The objects of the Offer primarily revolve around the listing of Equity Shares on the Stock Exchanges and facilitating the Offer for Sale of a specific number of Equity Shares by the Selling Shareholders. The key points regarding the objects of the offer are as follows:
1. Listing on Stock Exchanges: The primary objective is to gain the benefits of listing the company's Equity Shares on the Stock Exchanges. This listing will enhance the company's visibility, brand image, and provide a public market for its shares in India. The listing allows investors to buy and trade the company's shares on the exchange.
2. Offer for Sale: The Offer for Sale involves the Selling Shareholders making a portion of their Equity Shares available for sale to the public. This allows the Selling Shareholders to divest their holdings to interested investors, and the proceeds from this sale go to the Selling Shareholders.
3. No Proceeds to the Company: Importantly, the company itself will not receive any proceeds from the Offer. All proceeds from the sale of Equity Shares will be received by the respective Selling Shareholders in proportion to the shares they offer for sale.
4. Offer-Related Expenses: The Offer will incur various expenses, estimated to be a specific amount. These expenses include listing fees, underwriting fees, commissions, legal fees, and various other costs associated with conducting the Offer.
IMPORTANT DATES
|
EVENTS |
DATES |
|
Bid/Issue Opening |
Monday, October 30, 2023 |
|
Bid/Issue Closing |
Wednesday, November 1, 2023 |
|
Finalization of Basis of Allotment with the Designated Stock Exchange |
Monday, November 6, 2023 |
|
Initiation of Allotment / Refunds / Unblocking of Funds from ASBA Account or UPI ID linked bank account |
Tuesday, November 7, 2023 |
|
Credit of Equity Shares to Demat accounts of Allottees |
Wednesday, November 8, 2023 |
|
Commencement of trading of the Equity Shares on the Stock Exchange |
Thursday, November 9, 2023 |
DETAILS OF THE IPO
Cello World Limited is set to launch its Initial Public Offering (IPO), which is a book-built issue aiming to raise Rs 1,900.00 crores. Here's a breakdown of the key details of the Cello World Limited IPO:
Ø QIB (Qualified Institutional Buyers): Not more than 50% of the Net Issue is reserved for QIB investors.
Ø Retail Investors: Not less than 35% of the Net Issue is reserved for retail investors.
Ø NII (HNI) Investors: Not less than 15% of the Net Issue is reserved for Non-Institutional Investors, including High Net Worth Individuals.
RISKS INVOLVED
Cello World Limited faces several significant risks that could potentially impact its business operations, financial condition, and overall performance. These risks are as follows:
1. Raw Material Price Fluctuations and Supply Disruptions: Cello World relies heavily on plastic granules and plastic polymer as its primary raw materials. Fluctuations in the prices of these materials can significantly affect the company's production costs and profitability. Additionally, disruptions in the availability of these raw materials may hinder production, leading to adverse effects on the company's financial health.
2. Supplier Dependence: The company depends entirely on third-party suppliers for its raw materials. As Cello World does not have long-term contracts with these suppliers, it is susceptible to the pricing and supply chain strategies of these external partners. This dependence introduces uncertainty in terms of cost stability and material availability.
3. Distribution Network: Cello World relies on a distribution network, both in India and overseas, to sell and distribute its products. Any disruptions or issues within this network could negatively impact the company's business operations, financial results, and cash flows.
4. Third-Party Contract Manufacturers: Cello World sources certain products, such as steel and glassware items, from third-party contract manufacturers primarily located in China. Relying on external manufacturers exposes the company to various risks, including potential supply chain interruptions and delays in product delivery.
5. Trademark and Brand Risks: The company uses well-known brand names like "Cello," "Unomax," "Kleeno," and "Puro" for its products. However, Cello World does not own the trademarks for these brands, relying on licensing agreements. Failure to renew these agreements could adversely affect the company's business. Moreover, the use of the "Cello" brand name by a competitor may damage the company's reputation.
6. Competition: Cello World faces significant competition, which could lead to a reduction in market share. To remain competitive, the company may need to increase advertising and marketing expenditures or offer discounts, potentially affecting its financial performance.
7. Brand Reputation: The company's brands and reputation are critical assets that attract consumers. Maintaining a strong brand reputation depends on various factors, including product quality, pricing, market presence, and marketing efforts. Any loss of trust in the company's products due to issues like quality control, counterfeit products, or other factors could harm the brand reputation and subject Cello World to additional risks.
8. Contingent Liabilities and Commitments: Cello World has contingent liabilities and commitments that could potentially impact its financial condition. If these contingent liabilities or commitments materialize, they may result in financial liabilities for the company.
Source: Company Website,DHRP
I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Stocx Research Club). I have no business relationship with any company whose stock is mentioned in this article.
I am not a SEBI Registered individual/entity and the above research article is only for educational purpose and is never intended as trading/investment advice.
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