Cello World Limited (CELLO) Earnings Call Transcript & Summary

Ladies and gentlemen, good day and welcome to the Cello World Q2 FY'24 Results Conference Call, hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Aniruddha Joshi from ICICI Securities. Thank you and over to you, sir.

Yes. Thanks, Sagar. On behalf of ICICI Securities, we welcome you all to Q2 FY'24 Results Conference Call of Cello World Limited. We have with us today senior management represented by Mr. Pradeep Rathod, Chairman and Managing Director; Mr. Pankaj Rathod, Joint Managing Director; Mr. Gaurav Rathod, Joint Managing Director; and Mr. Atul Parolia, CFO. Now, I hand over the call to the management for the “Initial Comments on the Quarterly Performance” and then we will open the floor for “question and answer session.” Thanks, and over to you, Pradeep ji.

Thank you. Good morning, everybody. A very warm welcome and thanks all for joining our first earning call post listing. On this call, we are joined by our joint MDs, Pankaj Rathod, and Gaurav Rathod, along with us CFO, Mr. Atul Parolia. The “results and presentation” are uploaded on the stock exchange and the company's website. I hope everybody had the chance to look at it. We are happy to witness a healthy response to our IPO. We want to express our gratitude to all our shareholders for entrusting the confidence in us. We would like to congratulate everyone associated with our company, including employees, customers, business partners and bankers. During the H1 FY'24, our company has achieved a revenue of 961 crores, EBITDA of 244 crores and PAT of 169 crores. EBITDA margin stood at a healthy 25.4%. This performance is backed by volume growth and improvement in product mix. With this brief, I would like to hand over to Pankaj Rathod to take this forward.

Thank you and good morning. Even, I will give a quick synopsis of our journey so far. Cello World was incorporated in 2018; however, the roots of the promoter family in this line of business go back to 1960s. Over the first 6 decades horizon, the promoter family diversified product range and brand portfolio. All the consumer-facing owned by the promoter group have been consolidated under the Cello World Limited prior to the IPO. The wealth of the experience has given us a very deep understanding on the Indian consumer preference and needs. We have curated an extensive product portfolio that caters to a diverse range of consumer requirements and offer a broad range of contemporary products across different ranges, type, material, and price points. Our key brands including Cello, Unomax and the respective logos are registered in the name of Cello Plastic Industrial Works, a member of the promoter group, CPIW, has granted a company an exclusive worldwide sub-licensable licensee to use these brand names. This license is valid for 20 years and auto renewable after this term. Further, this is no royalty of brand payment done by Cello World for users of the brand name. With this, I will hand over to Gaurav Rathod to talk about business and growth strategy.

Thank you, and good morning, everyone. Just to talk about the business, I'll give you a synopsis of the business and the strategies for the growth. Our product portfolio can broadly be categorized in 3 verticals. All our businesses are consumer-facing, but we operate our businesses as 3 key verticals, namely Consumerware, Writing Instruments and Molded Furniture. Second is verticals. We manufacture varied products such as insulated bottles, dinnerware, pens and stationery, storage containers, glassware and other products. We manufacture our products at our 13 state-of-the-art manufacturing facilities, which are located in Daman, Baddi, Haridwar, Kolkata and Chennai. Further, we are adding another location in Rajasthan which will take care of our future expansion across product lines for the next 5 to 6 years. 80% of our revenues come from these manufacturing units. In terms of channel wise revenue distribution, general trade is the backbone of our distribution network and it is well complemented by Modern Trade, Online and Exports. Leveraging our strong brand recall, manufacturing capabilities, vast distribution network over the years, we have grown our revenues and PAT at a healthy CAGR. The resilience of our business model is evident in the growth that we saw even during the pandemic. Going forward, we are committed to scale this brand to new heights. We continue to churn out new and innovative products every year. We have launched various products in the first half of '24. We have given a snapshot of these in our presentation. The company is also setting up a greenfield soda lime glass unit in Rajasthan, which will be operational by March of 2024. This will be one of its kind facility manufacturing various products like tumblers and storage containers to name a few, further enhancing diverse range of products that the company offers. For this plant, we have earmarked CapEx of INR 200 crores. On the Writing Instruments side of the business, our base is currently small and as we cover only 55% of India's geography, so there is ample room for growth. Also, currently our portfolio consists mainly of ball and gel pens. Going forward, we will be adding other related stationery items. In the moulded furniture, vertical there is a lot of unorganized competition. So, our strategy has been to add more value-added products to our product mix. We have already started this project and today, 13% of our business comes from these products. Going forward, we aim to enhance this number even further. Thank you. And I would like to hand it over again to our CMD, Mr. Pradeep Rathod.

Before I give you the synopsis of our financial performance, I would like to highlight that this entity is a culmination of all our Consumerware business of the promoter group. A group restructuring was undertaken through a series of business combinations under control to consolidate the business under our company. However, all the financials or historical, these have been restated and are fully comparable. Due to paucity of time, we have taken an exemption of present Quarter 2 FY '23 numbers. We have already started work in this front and will be able to give all the comparable figures in the future. Talking about our H2 performance, we recorded a top line of INR 489 crores. Gross profit stood at INR 261 crores with a 53.4% gross profit margin on a consolidated basis. EBITDA came in at INR 120 crores with a 24.6% EBITDA margin. During the quarter, PAT was at INR 87 crores with a 17.7% PAT margin. Coming to our H1 FY'24 performance, we have registered a top line of INR 961 crores, of which 66% came from our Consumerware, 17% from our Writing Instruments and the remaining 17% from Molded Furniture and Allied Products. Gross profit stood at INR 509 crores with a 53% margin. Consumerware garnered GP of 53%, Writing Instruments GP margin was at 58.5%, Molded Furniture and Allied Products has the GP of 45%. EBITDA came in at INR 244 crores with a 25.4% margin. EBITDA margin profile across verticals is also very healthy. PAT margin of INR 169 crores with a margin of 17.6%. On the consolidated basis, the company grew at 9% for H1 and H2. Though volume growth stands at 13%, the value growth was lower due to the softening of raw material and energy prices, which are the key raw materials for 2 of our major verticals. And even -- because of the raw material -- plastic raw material going down substantially, there was correction in prices in some of our verticals. Also, number seems lower as the Diwali festival season shifted from October to November and the key sales month became October. The Q3 would be much more healthier than we see in the coming quarters. Though in the first half of '24, the consumer demand was not at the robust level and it was a little muted, but we are seeing a strong demand coming up. Post October, we saw a very good month and I think this second half of the year would be much more robust. Profit margin stood at around 20% growth in the first half. In terms of the balance sheet and the key metrics, I would like Mr. Atul Parolia, CFO, to highlights on this.

With regard to key balance sheet and cash flow related metrics, working capital days as on 30th September 2023 stood at 159 days as compared to 154 days as on 31st March 2023. Cash flow from operations of H1 FY'24 stood at healthy INR 105 crores. OCF-to-EBITDA stood at 43%. Cash and cash equivalent stood at INR 53 crores as on 30th September 2023. CapEx during H1 FY'24 was INR 107 crores. This year, we expect to do a total CapEx of INR 225 crores. We have a track record of very healthy OCF/EBITDA conversion of past 3 financial years and this H1 was no different. In fact, we saw that affects more, but the returns ratios will continue to be healthy. The growth opportunity ahead of us is vast and with such strong cash flow and healthy balance sheet, we are very well placed to capture upcoming opportunities. Please note that in our presentation slide 20, sales figure of Consumer Glassware and Writing Instruments should be read as rupees in millions instead of rupees in crores. With these, we conclude our presentation and open the floor for questions and answers.

[Operator Instructions] The first question is from the line of Percy from IIFL.

My first question is on the Appliances business. The coolers business that you have recently launched, can you give some idea on that. What are your plan here. Do you stand to enter any other type of appliances also and why do you think that you can win in this market, I mean, because there are so many other players in the household appliances market. Apart from the plastic being used, what is the commonality with the rest of your business?

We are only into the niche areas and we are only into kitchen appliances. So, we are trying to take mixers, induction cooker, kettles, cookware which are restricted to the kitchen. And why? Though it is a crowded space, definitely Cello as a brand and what the consumers are [indiscernible] is the same. Even our target audience who purchases these are mostly women and they have been buying Cello products for various years on other casseroles to lunch carriers and everything because she's the decision maker. So, we are getting good response and we will only restrict and we will be in the niche area of this. We do not want to enter completely in the crowded area. So, we are just creating a niche market of a small portfolio, not very large portfolio. It will be a medium portfolio what we want to create.

So sir, regarding this air coolers that you have recently entered, any comments on that?

Air coolers, we have launched much earlier. It was in fact 5 years before Covid, 5 to 6 years back. And the air cooler, we did not get a very good response. Because, I think so, this year we are scaling it up again in Wim Plast because that vertical which is in Wim Plast Limited, one of our subsidiaries now, and we did not have much deep pockets over there to put in full strength. So, this year we are launching it in a full way and that's a very elite product. Because wherever our furniture sells, the cooler sells because mostly in rural areas and there are only 6 states of operating: Rajasthan, Delhi, Punjab, Haryana, some part of Odisha, Andhra and Telangana.

So, there is no plan to get into any other household appliances like [indiscernible] or anything like that?

At present, we are not looking because we have quite a big basket for the next 2 years, all the verticals and all the product lines where we are thinking we have a good scope of growth. Post 2 years, we would definitely think on some lines which are adjacent to our product which can add in our company's portfolio.

Right, sir. My second question is on household appliances. So, can you give some idea on what will be your growth driver here. Because my understanding is that the market growth of course decent, but it will be like a low double-digit kind of growth here. So is it market share gain from unorganized or do you see any other organized players which are weak from which you want to gain market share or is it a distribution expansion story? What is the driver of the growth here?

This is Gaurav here. I think on the appliances front, we have a very small base till now. I think -- so, comparing and taking market share is still a little far away. As mentioned that we are in niche category and we want to operate in that category. So, we look at the appliances and cookware as one complete vertical and we wish to grow this in the niches that we have spoken about. So we play on our strength, which is our plastic capabilities as well. So we have in-house molds that we are able to work with. So that differentiates us from the market a little bit. So I think here again, niche is our mantra, not the mass market.

So, just for my understanding, Gaurav, in the household products, you have the bottles and the casseroles and all that. You already have a pretty sort of well diversified product portfolio and these products have been there in your portfolio since many, many years. So do you think that product portfolio sort of expansion is the sort of route to growth because that doesn't seems to be the case looking at your product portfolio? It is already -- most of the segments that you would want to be there are already there since many, many years?

No, I think we have always grown our segment or vertical because if you look, we entered into glassware as well. So again these are all consumer-facing businesses and Glassware was a recent venture, which was only about 5 years ago. So I think that is how we have been increasing [indiscernible].

Glassware, I understand it's a new venture and there is definitely a ramp up there which is happening. Ex-Glassware, Homeware division, I was asking about that?

Glassware is also a part of Homeware only. So, it is basically one vertical put together because all they go to the same household and the buyers are the same. And also, the retail outlets are very similar. So, I think when we compare as a market, the whole Consumerware needs to be looked at one vertical rather than looking at it separately. There will be of course product lines which will have saturation at point of time, but then we have always expanded horizontally into different verticals or different product lines. So, I think within the Consumerware, it is a very vast product array that we offer and that is why we keep on continually growing horizontally.

The next question is from the line of Ankur Sharma from HDFC Life.

So while you said there was a 9% growth overall in the first half, possible to also share numbers for Q2? How would each of these segments, Glassware, houseware, pens and the moulded furniture, how would each of those have done for Q2? And I understand obviously there would have been a sales shift because of festive?

So our Consumerware in Q2 has been 67% of the revenue, Writing Instruments 17% and Furniture and Allied around 16%.

And then on a YoY basis sir, on a year-on-year basis?

This year because we did not have the Q2 figures consolidated, because the Writing Instruments and Wim Plast came into the company and got consolidated post October in the third quarter. So the numbers are not similar on that line and because of the time constraints which I spoke in my first message itself, will not go back in doing IND AS because all the new figures which I'm giving are [indiscernible] related and we do not follow IND AS at that time. So, that's why it is not 100% comparable and that's why I said it is -- on the level of [ 9% ] growth. Going forward, definitely, we will give quarter-on-quarter because it got listed on 6th and when [Technical Difficulty]. When we go IND AS, we have to go with the auditors and it takes a long time. So, that's why we took an exemption and from next quarter, we will definitely do that.

And if I remember your remarks, Q3 seems to be doing reasonably well given sales shifted to October?

Yes. So, if you see our profit growth, what we have compared within ourselves on a segment is around 20% growth. Going forward October, because it was the main month for our festive season of sales, it shifted September last year to October this year. So, this quarter sales and the last quarter because of the summer season is very, very robust always mostly, historically also. We think it will be much better than what it is. I think so it should be more than 20% growth over in the second half.

Second sir, on this new soda glass factory which is coming up from Q4 in Rajasthan, if you could help us understand how much sales can we generate from here? What kind of products that will come from here? Will margins be similar to the existing Glassware business? Just some more color there on the new plant?

Actually, yes -- so basically this facility that is coming up about is 25,000 tonne capacity and we would have capacities up to INR 230 crores, that would be the revenue that can be expected from this plant. Overall, yes, margins will be in similar lines to our current Glassware unit.

And this would be mostly import substitution of existing imports of such glassware, is that right?

Yes, majority of it will be import substitution. Because there aren't -- this is like one of its kind facility in India. So it would be first of its kind. So mostly import substitution.

Okay. So the market is there. We just need to see the [Technical Difficulty]. And lastly sir, on the pens business, I obviously understand -- we've had a very long history of running pens and doing it very well. If you could just help us understand how do you see this business growing. I know we scaled it up very well in the last 2-3 years, but how's the growth trajectory, what are the new products you're looking to introduce, geographic expansion? Just a few pointers on how you see this segment growing?

I am Pankaj. I will just give you a brief. In fact, we started this Writing Instruments, the new brand Unomax in 2019, '20 and there was Covid just after 2 months after our launch. But even out of that, in the last 3 years, we have scaled this business from -- till last year, we had done about INR 285 crores. So from zero to INR 285 crores in 3 years. This year, the first 6 months have been good months comparatively. And now we are extending our range as we have already said that. We are mainly concentrating on the gel pens and ball pens and of course, there are other products with it. But we are going to now getting into more stationery product also and also increasing our range within the gel pen and the ball pen, which I feel -- even our reach in the market today is much lower because we wanted first to grow. Because we were growing at a very fast pace, so the capacities and everything would have been constrained. So now we have already put up a second plant which has already started last year which has a lot of capacity which will be consumed in this couple of years. We are increasing our distribution network. So we are getting into -- now more into 2 and 3-tier cities also where we were not before. Our retail network is still very small compared to the size of the market which we are growing this month. So I think with itself, the regional -- the overall distribution -- growing the distribution network and the new product, we are very confident that this business for us from this pace to grow at a healthy rate pace for the next 2 to 3 years seems very good.

The next question is from the line of Pallavi Deshpande from Sameeksha Capital.

Just trying to understand the earlier you mentioned about the 20% growth. So that would be for the second-half year-on-year or you're looking at half-on-half?

No. It was this half, second half.

Second half and so first half was approximately 9% and second half 20%?

Right.

And sir, second question. We would be missing the guidance we had of 20% to 25% for the year?

No. As I mentioned, because of softening of the price, our price correction was in the range of around 5% to 6%. So raw material -- our major raw material which is plastic has gone down by 22% from February of '23 till April, May and now further it is softening up. So the price reduction definitely will have to be passed on to an extent. That's why if you see our gross profit margins have increased in all the sectors. So that's why it looks muted. But volume growth if you see we will be achieving around 22% to 24% though the first quarter -- first half, even the consumer sentiments were not that very high.

So sir, going ahead, do you maintain that FY '25 onwards, the same 22%?

We are very sure on our profitability figures and everything what we have given. I think so we will definitely achieve that.

The next question is from the line of Mr. Achal Lohade from JM Financials.

Sir, just a clarification. You said 9% growth YoY for the first half. Is that for the company as a whole or just for the Consumerware business, sir?

For the company as a whole.

And would you be able to give a sense with respect to how much would be for Consumerware and how much would be for the Writing Instruments and the Molded Furniture?

No. Molded Furniture did not grow in value because when the raw material goes down by 22%, I think so they have to pass at least 16% to 17%. So in fact, it is a little minus on the value side though the volume growth is very good over there.

Okay. And what about the Consumerware?

Consumerware grew at around 7% to 8%. Again here, there is a correction of around 5% to 6% and 1 month shift of our Diwali month, being a major in October. So last year September was the peak month. This year it is October. Writing Instruments grew at a healthy 24%, 25% top line.

And Consumerware 7%, 8% is the value growth for the first half?

Volume growth would be around 13% to 14%, and that too again because of the month change to October. Otherwise it would have been in the range of 17% to 18%.

Okay. And like you said, 20% growth YoY for the second half. Have I understood right?

Yes.

This is second half to second half Y-o-Y, right? Not compared to first half?

Right, right. Second half to second half, YoY.

Sir, one more question I had. In terms of the margins and obviously, we have been top notch in terms of across segments' margin performance. How do you see it from hereon? Do you see the expanding margins or we'll keep margin probably stable and push harder on the growth? How do we look at margins for each of these 3 verticals?

So, margins would be stable definitely. We are at a very good level of margins. And I do not really want to comment here. We will grow from here. We would like to maintain. If we compromise also in future 1% or 2%. Definitely, that will only go to take the growth that higher.

Right. And in terms of the new categories. So you mentioned about the appliances part, more so kitchen appliances if I heard you right. Would it come at a substantially lower margin given it is far more competitive, lot of existing players being there for decades. So is that what you're hinting at when you say 100 to 200 basis points margin compression only for these new categories. Have I understood right?

See, this is a very small vertical at present. If we do have any margin, it would not affect too much at a consolidated level. So for the growth, it is a very small market. We want to grow that. It is at a healthy margin only we want to grow. We do not -- that's why we said we would want to go into niche area. So because the expenditures on sales and all are much higher in this segment. For the time being, we are seeing a little muted percentage of profit. But going forward, I think so we will take to a very healthy level and we would like to operate on that healthy level margin only.

With respect to the Glassware business, can you help us understand what is the total industry capacity at the moment? And I presume that the utilization has to be 90% or 100% in order to run it -- it has to be run continuously for a couple of years or 3 years. So, do you see a risk of price correction, price reduction given if there is a risk of overcapacity in the short term?

So -- this is Gaurav here. So basically I think in the Glassware side, we operate in two verticals; one is the opalware and the new vertical is the soda lime glasses, which is coming up in Rajasthan. So on the opalware side, I think the number of players are few in the market and not -- there is a very huge deterrent to entry. And all the 3 players that are in the market are good sized, more experienced and mature players. So I don't see any problem on that side. When it comes to the soda lime glass, basically, it's more of import substitution. So we would be the first one in India to put a facility of this kind. So I think -- and it is still at a very small revenue that today, the market is quite substantial when it comes to imports. So we just want a small pie is what we are eying for in that particular market. So I don't see any problems reaching the revenues in a very short period of time. And profitability -- when it comes to the profitability also, we don't see any compromises. There has been expansion of capacities everywhere, even when it comes to opalware. But even after that, the margins seem to be healthy.

Got it. Got it. And you mentioned about 13% mix from the value-added products. So; a, how do you define this value-added product? And; b, this 13%, what is the outlook for the next 3 to 5 years? Could it be 25%, 30%? Or could it be more 18%, 20%?

No. This is on the Molded Furniture side, what we said 13%. That is from our lifestyle products, what we have stated last 2 years back, where the product is more value added. When you see if there is a difference, we will definitely see, which can go into households more than being only for households like small eateries increase and display, where we get a good price when the product is good. And it's a little difficult to manufacture even out of raw material, which is recycled and all, because the strength has to be much better, the looks are different, the colors are different. So this value addition is giving us a better margin. So if you see in Wim Plast also in the last 2 years, we have scaled our profitability up in percentage terms compared to any of the peers in this. We aim to take it to 25% to 30% over the next 2 to 3 years, the mix of the products, where our lifestyle and better product, call it products, would be a mix of sale of around 25% to 30%.

Understood. In terms of the capital expenditure for FY '24, I think, Atul, you mentioned about INR 225 crores. But how do you see FY '25, '26, what kind of annual CapEx would we look at for next 2, 3 years?

So if you see -- except our Glassware, which is a high CapEx vertical, Writing Instruments, Consumerware and Long Glass doesn't have a very high CapEx. So, that we have been expanding over the years. The CapEx or the ratio from CapEx to turnover is around 7x. So, whatever we want to scale over the next three years, it will be -- it will be not -- it will be a very -- for the company of this size, it will be a negligible CapEx, around INR 40 crores to INR 60 crores a year.

So the question that was in my mind next was, how do you deploy the cash flows, given the kind of significant cash flows we're looking at annually. How do you see it in terms of dividend or payout?

See for next 1 or 2 years, we want to use all our money to grow. So, the Glassware plant -- and when we start, it even needs a lot of working capital. Even there, if we are aiming to go at 20% plus CAGR over the next 3 years, our CapEx -- one is the CapEX side, the other is the working capital side. And we would be looking -- if you see historically also, one of our listed companies, Wim Plast, we have been regularly giving dividend at a good level and we have maintained that for last 20 years. So scaling up is too early. We just got out of the issue and definitely we'll have a policy in place for a really good dividend policy.

Just one small clarification, sir, since you raised a topic about working capital. So -- obviously, our receivables are probably one of the highest in the peers. So how do you look at this: a, do you see utilizing the likes of channel financing bill discounting to reduce this or also curtailing the credit to the trade partners?

See, little bit we will cut it. There are some places where we are really giving it high because their association with us and we were little comfortable. Channel financing, yes, we started a little bit, but we do not want to go fully aggressive on that. Because I think so this kind of business and what we see the profitability is because my good products which are slow moving, which are -- which do not move very fast. Always, we maintain that stock. So the turnaround for that product in their warehouse also. The distributors warehouse is a little slow and that's why the payment is late. Otherwise, we do not -- so if I do not want to sell that kind of product and I want to sell only the [indiscernible] products like everybody sells, the margins is very difficult. So that's why I was a little bit -- from last 25 years we have been giving a better credit period into the distribution and that will help the company. So we would not like to really distribute it to a larger extent. Yes, definitely, we'll discipline it to a better level.

The next question is from the line of Yash from Stallion Asset.

All my questions were answered.

The next question is from the line of Keyur from ICICI Prudential Life Insurance Company.

The question is on the growth that you mentioned for the second half, 20% growth, that is what you're guiding for the revenue growth, if I'm not wrong? Right?

Right, right.

So the way in H1, we have seen these margins are higher because of the lower RM prices. So should we assume that the operating profit and PAT growth would be higher than the revenue growth in the second half, would it be fair understanding?

Sure. For at least these 6 months, I'm very sure.

In the second half, right?

Because of the raw material pricing softening up and a little demand being opened up in the market much better than what it was in H1 and now we have the raw material which is fully down, almost we are at a stage where we are now saturated in going down further and we have raw material which is already booked. So, for the next 6 months, definitely we feel whatever we grow, the margins will be above that in percentage of sales.

Whatever you can share as to how the festive was, Diwali? If you can share the qualitative, quantitative data, [Technical Difficulty]?

Sorry, I couldn't get your question.

So, post the Q2, in Q3, that is October and November, how was the festive season? If you could share or give some idea about how good or bad the festive season was?

Yes, yes. Festive season, October was a very good month definitely and November seems good.

Okay. Sir, in this last question, as you start your Glassware facility in Q4, now that being a higher margin product and since we are doing import substitution. So in manufacturing also, we will save some margin -- save some cost. So should we assume higher gross operating margins in FY '25 versus FY '24?

Sir, once it starts operating in the first year, the entire furnace which can give us a turnover of around INR 275 crores plus will not be achieved because there are a lot of SKUs and by the time we launch the locally produced material into the market, it would be around a quarter later. At EBITDA levels, yes, definitely will be much healthier from this year to next year. But the EBIT level would get over the next 1 or 2 years because of that particular thing. We will be operating on other [indiscernible]. That is definitely there. But because of the Glassware, for the time being, I think that we can get a little muted also next year. The appreciation would be very high next year once we start the furnace.

The next question is from the line of Praveen Sahay from PL Capital, Prabhudas Lilladher.

First question is related to your CapEx that is related to the Glassware capacity expansion. Just a clarification. Total CapEx is of INR 250-odd crores and capacity would be around 25,000 tons?

No. So the total CapEx would be around INR 200 crores. INR 250 crores is the total layout what we have made over there in Rajasthan. So there would be another [indiscernible] of the company also being started later on over there. So the CapEx for Glassware particularly is INR 200 crores.

And the potential revenue is INR 230-odd crores?

INR 275 crores -- INR 250 crores to INR 275 crores, depending upon the product mix.

Okay, okay. And second question related to the capacities only. You have a 79% of your revenue in the first half in-house manufacturing. And if I look at the capacity utilizations for each of your verticals, like Consumer is more than 80%, Writing 68% and Molding is 70%. So, how to read this, like every year you are going for a capacity expansion in each and every vertical and what level of utilization is the maximum you can go in each vertical?

See, first of all, in Writing Instruments, the capacity utilization was 68% to 70%, whereby we are growing very fast. So that gets adjusted. We just have to add some machines because the mold capacities are already there. In some of the molds, we do add new products into that. Even in the Consumerware, it is just by adding machines, we do not have to create a facility. Unlike the glass the way it is, you have to put a furnace which is 25,000 tonnes or 20,000 tonnes. You cannot just get by expansion of 20% more, 10% more. You have to grow, either it is 50,000 tons and then 100,000 tonnes -- 100,000 tonnes and 150,000 tonnes. So this is the way the expansion goes in. The utilization also changes a lot because of the raw material pricing. So we normally, when we were given this -- we were given this for utilization level, it was always based on volume. So volume is not the parameters what we look normally into our business sense, we look as the value. If these are -- my unit should make approximately this is value of material, it should make it in a month. Because we could not give value, the right specification is the value of what we can produce. So every plant we have a value-based plant, and in Glassware, we do on a tonnage basis, how much tonne of material we have made in this month and what is our capacity. Except that, actually, the capacity utilization is only on a base historical thought. It is not exactly -- because the value might change a lot. If I change the raw material from one to another, if we're making from a pack to a [indiscernible], the raw material size is double. And if I make the similar bottle into that, the machine is same. My value will go double, then 2.5 times of what I was selling the bottle which was made out of another material. With very low CapEx on this, this was never a constraint for the company, and it would not be in future also except the Glassware where we have a higher CapEx at the time. At one go, we have to do a higher CapEx to put the plant. In our Writing Instruments, in our Consumerware, other than Glass or in Molded Furniture, the CapEx is not very high. So, the ratios really do not matter a lot.

And also similar to your Molded Furniture business in which 13% is value added contribution, can you give for the other segments as well?

No. Molded furniture per se was lower side. Others, we operate at a very decent margin only if you have seen historically. Even in Writing Instruments, if you compared last year, our EBIT was around 23% which was best in the industry and still we are not at the top peak. So Molded Furniture per se where we really want to go into value added products, because we were ethically and we have a competition, which is unethical because of raw material which is used from recycled material and that competition we cannot chase because it's not apple-to-apple, right? And that's why we want to shift our portfolio to a category where it cannot be produced from any recycled raw material or where the brand definitely comes into picture when the price point is very high for a buyer.

Okay. Sir, next question is how much is the plastic product contribution in your top line ex of Glass or Appliances?

Sir, we have already given, but we have not kept in that way because we have thought it in 3 verticals, on the Consumerware, Stationery and this and we have given the gross margins definitely on the Consumerware business. And it is not worth...

I think, it is -- when we compare plastic, we are actually across materials. So you know, we have product lines, where -- see we have a plastic bottle, we have a steel inside it also. So I think comparing exactly, we are no longer a plastic company. It is very difficult to define the amount of plastic that goes into because there are glass products with plastic lids. I think, a plastic, per se, is very difficult to define anymore.

Okay. Or if you can give how much the appliances contribute to your business?

Appliances today is a very small vertical for us. It's about only about INR 75 crores of the turnover this year will come from that. So it's a very small niche line for us at this point of time.

INR 75 crores in FY '23?

'24.

Okay. So that's the expectation you are saying?

Yes. That is the overall expected what we have achieved almost in the first quarter based on that.

And also if you can give some color on the seasonality of each of the products like as you mentioned overall second half is expected to deliver a very high growth compared to the Q1 and also you had highlighted that October is a heavy month which shifted because of festival. So for this each vertical, if you can give some -- like how is the seasonality throughout the year?

So I'll start with the Writing Instruments which is the easiest. Back to school time which is a little higher scaling up and exam time. So January, February, March quarter will be a little higher. April, May, June also -- no, sorry, June, July also -- no, April, May, June is low. Certainly, May, June are very high months. So that quarter is good. Going into our Consumerware business, definitely festive season gives a spike of around 4% to 6%. So in the 12 months if I divide 8.33, I think for Diwali 2 months' period would give us 21% to 22% sales. Other than that, it is not very strong seasonality. In summer, we have a spike because of bottles and water jars because it's a longer season; it's almost 2.5, 3 months. Back to school also falls into the same. We don't have a very high seasonality where the sales come to 5% and then go to 15% in the second month.

Okay, sir. And the question is on the distribution like as you also mentioned and in your presentation, general trade contributes on the higher side 75%, 76%. Way forward, we are going to maintain such kind of numbers or we are expecting Modern Trade, etc., to contribute more?

So as the Modern Trade section is also again now getting established. If you see, there were very few retail companies in India. One of the biggest which we could not sustain and got closed and so now again it is getting up. Earlier modern trade has the problem of pricing always and now they have understood the game also, okay, even we need some brands without pricing. So without pricing, we will not be able to be a good store. So the metrics will definitely change. Our general trade over the next 2, 3 years would be around 70%. Our online sales will go from 9% to 10% of what it is today to around 12%, 13% and similar from 5% of our modern trade will go to 7%, 8%. Our export will be from 8%, 9% to around 10%, 11%. That's what is the market what we are looking at over the next 3 years.

Okay. Just or lastly, sir, one clarification on the license for the 20 years. Can you elaborate further like how much the amount is and like how this structure is actually?

So this is own -- it is -- the brand is registered in one of our partnership companies where the promoters are 100% partners over there. We have licensed this from Cello Plastic Industrial Works to our company for 20 years was the first thing and perpetually, it can be automatic renewal. None of the consumer space, all the -- It is an exclusive license with Cello World Limited and none of the consumer items can be even manufactured by the promoters who own the brand as a separate outside the company. There is no royalty and it is on auto renewal. So you can assume that it is a perpetual license which we have worked for consumer spaces across.

And how much amount paid?

No, we have not paid anything.

Okay. So there is no outgo of money, but we are having for 20 years and that will auto renewal?

The next question is from the line of Jagvir Singh from Shade Capital. Please go ahead.

My first question is related to the Writing Instruments. So we have done amazing work from zero to around INR 300 crores in 4, 5 years when we launch the Unomax. So, how much we are doing from exports and how much is the domestic and how big is the export opportunity for Indian players?

We are now almost 4 years into -- after launching the new brand, Unomax, [indiscernible] 2020. Last year, we had a turnover of INR 285 crores. Out of that 40% was export and 60% was domestic. And I feel even in this year, I think it will be 35% would be export and 65% would be domestic. And going forward, we feel that maybe we will have a 30:70 ratio going forward.

But how big is the export opportunity, is there anything like [indiscernible] for Writing Instrument?

For what? I didn't get it. Hello, I didn't get you over the last -- what you said.

How big is this export opportunity? Is there anything like kind [indiscernible] Writing Instruments?

You mean to say the numbers what we did last year or this year? What is the size of the market?

Yes. How big is the opportunity for Indian players for the exports?

The size of the market is huge because if you see the world market, it's like -- it will be like INR 40,000 crores to INR 50,000 crores market all over the world is Writing Instruments. So we are just a very small part of it. So it's about INR 150 crores export, maybe this year INR 40 crores to INR 50 crores, that's negligible. So, there is a lot of potential of growing in this market.

Okay. But there is a big company in the writing instruments being around INR 1,000 crores of revenues?

Sorry to interrupt Mr. Singh. Is it possible for you to use the handset because there is an echo coming in from your side?

So in the writing instruments, there is a big company doing around INR 1,000 crores of the revenue. Even then, our margins are higher than that player. So what is the main reason? Is it that we have -- because we have more exports or lower advertising costs? Or what is the reason for this?

So we are basically -- we operate in a category which is above 10%. We don't do below 10%. So this is one of the reasons. And also we are also -- our product mix and our pricings are better than the competitors. Because we add more value in products instead of getting into those lower end volume products, yes.

And sir, in the opalware side, largest and the oldest player have a very high EBITDA margin around more than [indiscernible]. So, our opalware business also can do at some point these kind of margins or we have aspiration of these kind of margins in the opalware business?

I think we already do similar margins with our competitors. So, I think we're not far away from that anyways.

Okay. Is there any thought on the merger of this Wim Plast business because now we have 2 listed companies? So any sort of [indiscernible]?

Over the time, we will definitely think and consider that.

Okay. Then last question, sir, we did 2 things in the last 4, 5 years, one is the Writing Instruments. So we have done a zero to around 300 crores and second is the opalware. So we have -- also, here, we also did very good. So, any other product lines where we can do these kind of new categories where we can do this kind of a scale?

See, first of all, a new plant for glassware is coming up. Though it is opal glass and [indiscernible], but it's completely different at end use. So, that has a huge potential. And I think so for the next verticals what we have at present, has huge potentials over, yes, was it like 2 years the glass plant and opal expansion and writing expansion, we would like to concentrate much more on that and become a top level plant. And porcelain is one project which is coming up, which is almost due to be launched in January where we will have more of hot drinks wares and this dinnerware. I think the company has a lot of verticals which we have already started in the last 3 to 5 years and which needs to be scaled up. So we have a lot of these in our basket already to perform and to consolidate that on a higher level and maintain our profitability or grow from here.

The next question is from the line of Karan Bhatelia from Asian Market Securities.

How is the capacity ramp up going with respect to our expanded capacities on the opalware as of now?

So, opalware we have already expanded our capacity. So it was done recently in August of 2024. So it's now in full capacity mode.

Right. So we are seeing the benefits already on volumes and on profitability side or we need to see the benefits?

So we have seen already, but I think it will be even -- it will be better in the next coming H2.

Right. And also, with respect to our Rajasthan facility, we'll be having 20,000 metric tonnes. So do we have sufficient land parcel if we have to further expand that if the demand for glassware increases all of a sudden. So do we have enough land parcel at Rajasthan for glassware and for opalware at Daman?

Yes, we have a pretty big land parcel. So, all our expansion, whether it be glassware, plasticware, anything, for the next 5 to 6 years, we have enough land parcel to grow all our verticals.

Right. And you did mention of a 20% kind of value growth on second half, but any color on how with respect to first half and second-half growth, like the second-half growth on the basis of first half. What's the outlook over there? Because we don't have second-half numbers of last year?

So if you see the first half of this year, we have done around INR 950 crores. Full year last year was INR 1,796 crores. I think so it would be clear from the historical and what we have achieved over here how would the second half look if we are assuming to grow at 20%.

The next question is from the line of Deepesh Sancheti from Manya Finance.

Congratulations on the IPO and the strong listing. Just one question about going ahead what will be the growth drivers? Will the expansion coming from glassware in Rajasthan will be the only growth driver or there will be an enhanced capacity utilization as well as CapEx in Consumerware, Writing Instruments and Molded Furniture?

Definitely, we want to scale up in all. As we already mentioned, Writing Instruments is a small vertical which we started 3.5 years back and that has a lot of expansion and we have already created new capacities within Writing Instruments. Our Consumerware, Glassware and Opalware plus the other products which are the main line of the company, Insulated Wares and all. We would definitely grow at a healthy pace in that also. Glassware could be a major driver. Writing Instruments also can be a major driver to that, but our other consumer products also could grow at a very healthy pace. When we are assuming 20%, it won't be much different on this side.

So, going ahead in FY '25, we will be growing at a faster rate because of the Glassware also coming into the sales?

Yes, definitely. It will help further grow out the numbers.

And just one question about now Cello World, we are getting a price to earnings at around [ 60 ] whereas our subsidiary Wim Plast is getting a price to earnings at [ 15 ]. Now, the merger will actually enhance the value for the company as well as the shareholders. Has the management thought about the prospect because this will also help reduce your shareholding to below 75%.

So definitely we will look. Earlier also, I answered this questions. We will at the right time definitely would like to do that. But it would be unfair to comment or I don't think so I exactly I can give you the details on this call particularly, sir. Once we have the approval of the shareholders and all, then we will definitely look into that.

The next question is from the line of Manav Vijay from Deep Financial Consultants Private Limited.

My first question is regarding the Writing Instruments division that you have. Could you please mention what is the capacity that you have and what is the utilization that you are doing right now over there?

Yes. So, last year, we did around INR 285 crores in Writing Instruments. We have a capacity which we put in the last year with the second plant is about -- it turns out -- it's almost like INR 550 crores volume we can do. So I think that will be good enough for the next couple of years, yes. So we've already [indiscernible]. So capacity is not a problem, even as we grow at a healthy pace.

Okay. So on the current plant capacity that you have, you can do around INR 550 crores of sales and there is no further CapEx?

Yes, yes. We have to just add some more machines, that's all. The land and everything -- building and all the other products all are in line. Just some more new machines will be added as and when the growth is like every year.

Okay. Sir, second question is regarding this segment only. So, in response to one of the earlier questions where the difference between the gross margin and the EBITDA margin was asked by one of the earlier participants. It was mentioned that we do not operate under actually Rs.10 price front and the reason why we have the average margin is actually slightly better. So, for us, what is the average selling price that we realize at the company level?

Our minimum MRP of the product is INR 10 and it goes to say a metal pen which are almost INR 200. Also, the difference is that we always choose the product even in a category to be commanding a better price because of our quality and because of our product demand. So even on the -- it's not just the MRP, but also our net realization to the competitor is higher. We operate in a more innovative way in terms of the distribution, which gives a better margin. Second is also like we don't operate into a lot of categories like, say, there can be a very example, there can be a sketch pen which can be sold at INR 12 for 12 pens, but we are selling a coloring pen at INR 150 for the same product. So, it's all depend on the product what we sell. So we are going with a more profitable business than just putting numbers. After that also, we have a strong market to grow in this category. So like in the last 3 years, you can understand that we have scaled up this business from zero to say INR 285 crores and we this quarter -- 6 months also, we have grown very healthy. So I don't see that we can -- we want to grow at a more value added product rather than being on just a mass market, where we don't feel any value.

Sir, is it possible to share the average selling price that you realized at the company level?

Yes, it's almost like every INR 6.5 to INR 7 per piece net realization, because maximum is INR 10 and then above. So it will be like somewhere at about INR 6 or something -- INR 6.50.

Okay, sir. My second question is regarding the Opalware [indiscernible] expansion that you have done. After the expansion, what is the total capacity, and on that capacity, what is the sales maximum possible that you can do?

I think we expanded our capacity by about 10,000 tonnes and the maximum total sale that is possible now is in the range of INR 400 crores to INR 425 crores is what we expect from this plant.

Okay. And at this kind of sales, what are the gross margins and the EBITDA margins that are possible?

So we've already given the segment wise. So the EBITDA margin would be in the range of around 27% to 28%.

And the gross margins of around 53%, 54%?

So the gross margin particularly in Opalware is different. So, we have given at a consumer level or a consolidated level of 53%.

Maybe just one concern that I have regarding your Consumerware division. So over there, you have Opalware, you have Appliances and you have other kitchen instruments but not there as of now?

Vacuum glass, yes.

Glass is there.

No, no. Vacuum glass, steel vacuum glass, normal vacuum glass, lunch carriers, bucket, storage containers, there are many verticals. End use I think more than anything you can have. So, there are lot of products in that. I hope you wanted this. Was it on the same line what you asked?

So what I am asking you is that in your current Consumerware segment, you have Opalware and you have Appliances and you have -- so what you do not have is glass.

Okay. Glass to an extent of import is already built in the Opalware business. Because we started importing a little bit glass to have the feel of the market before we were putting the plant. What are the products and that's what we started importing just to have the feel what are the products we should manufacture when we start this plant because mold -- plant is one and then what types of products, every product has to have a different mold and the design and all. So we have to make the molds. We wanted to have the feel. So we started importing to a small market what we did over the last 2 years and then we'll convert that into our production locally.

Okay. And last question is regarding sir, in glassware, you mentioned that you're putting up this capacity and this capacity can do around INR 275 crores of sales. What do you think is possible in how much timeline you can reach to this desired sales number?

So basically these numbers -- it's a continuous plant and I think we have sorted in that aspect. So, at maximum in 1 to 2 -- 2 years -- 2 to 2.5 years, we should achieve that number.

Gaurav, I think -- since this will be a continuous process, so you will run the plant at actually full capacity and you will continue to build the inventory till the time you will have the desired market, would that be right assumption to make?

Yes, that's correct.

At this full capacity, what kind of margins are possible?

We're looking at similar margins as we have in Opalware.

The next question is from the line of Pallavi Deshpande from Sameeksha Capital.

I just wanted to understand 2 things. What would be the glass revenues in first half for us within Consumerware, INR 633 crores there? And second would be what would be Milton's capacity on the glass side?

Milton is not manufacturing any soda lime glass. It is 100% is on import base. So I don't know what are the figures accordingly.

And these lunch boxes, they use the soda lime glass, right?

Who?

The lunch boxes, they use the soda lime glass. Is that right?

No soda lime is a vertical. Soda lime is basically, you can say [indiscernible]. So normally this is drinkware, containers and everything what comes out of it at the end product. Soda lime is a material name.

Right. Got it. And so what would be our revenues in the first half?

So it is there in the Consumerware completely. Because from a little competitive edge, we are only giving at the gross margin levels, because we see all our businesses are consumer based business as we have earlier strategized in that way. Some of the figures definitely I can discuss with you on this but we do not want to report into segment reporting. It gives a lot of insight of the company to the competitors.

The next question is from the line of CA Arun Maroti from Subh Labh Research. Please go ahead.

My question is with regard to the borrowing which we show in the balance sheet that we have good amount of win from the related party. So some color on that going forward will be very helpful?

So related party was all the -- when we consolidated all our companies into Cello World, the promoters sold their partnership companies into Cello World and so the money required by the company, I think so which I've explained again, it is a loan which is created by the transfer of asset which will be paid back to the promoters in the next 3 to 5 years as the cash flow of the company happens.

Okay. On the Opalware capacity side, if you can share the current capacity utilization, sir, that?

We've just expanded our capacity in August of 2023, and we currently are at 60% capacity utilization.

And what is the expected timeline for the utilization of the 100%?

About 1 to 1.5 years, we should be completely utilizing the entire capacity.

Okay sir. That's great sir. And on the marketing spend side, as we have the brand ambassador, Mr. Amit ji. So what is the duration of this contract and what are our standard marketing spend percentage of revenue going ahead?

So, Amitabh Bachchan contract is like we renew every couple of years because he has this thing that he renews the agreement every year. Our normal -- all the production and all the advertising, [indiscernible] is all being made and whenever we require, we will use him again. But our contract is like automatic renewal every year.

And what is the sustainable -- sorry the percentage of marketing spend of the revenue?

2%. With this kind of volume 2%, 2.5% would be a good size of budget.

[indiscernible] will remain same?

Yes.

Okay. And on the online sales, if you can share the number, what percent of sales we are getting from the e-commerce?

So currently we are doing 8% of our revenue from our online business, which we are trying to scale it up to about 10% to 12%.

The last question is from the line of Karan Bhatelia from Asian Market Securities.

Sir, you did mention of getting more aggressive on the Stationeryware side of the business. So if our realization on pens is INR 6, INR 6.5, what could be the average realization for Stationeryware and how it can change the blended margin profile going ahead?

Stationery will be little like, it depends on what kind of stationery. So [indiscernible] like stationery as a market, the price points are a little higher. So maybe the average realizations. But they feel -- compared to our business, we still feel that our Writing Instruments will be 70% of our business in future and 30% would be stationery. So even if the stationery product prices are higher, maybe in terms of the changes in terms of per product realization will improve every year because we are also adding more value products. So we are adding above INR 10, like INR 20, INR 30, INR 50. With all these ranges maybe the price point will move up in future. So maybe -- that's the whole idea of getting into higher end product. Major volume will come from the mass product, around INR 10 product, but definitely we are moving towards higher price point.

Right. And with respect to margins, are they substantially better compared to the Writing Division or it is almost at par?

So we are almost at par, yes.

No, sir, going ahead, I'm saying...

Yes. So we are already at a very healthy margin, maybe we'll continue this thing.

And with respect to domestic export, it will be again 70:30 or the stationery will be more on the domestic side?

30% will be export and 70% will be domestic for the next 2-3 years, this is what we are looking at, yes.

As there are no further questions, I would now like to hand the conference over to the management for closing comments.

Thank you, everyone for joining today's call. I hope that we were able to answer your questions satisfactorily. If you have any further queries, please contact SGA, our investor relations advisor. Thank you and thank you to all.

On behalf of ICICI Securities, that concludes today's conference. Thank you for joining us and you may now disconnect your lines.