Cello World — Q3 FY25 earnings call

Call held 13 Feb 2025

Management summary

Cello World delivered a steady quarter despite a slowdown in discretionary spending following the festive season. The company maintained strong EBITDA margins of 25% through operational efficiencies and stable input prices. The highlight of the call was the operationalization of the new glassware plant, which is expected to be a key growth driver for FY26, albeit with a temporary 100bps impact on consolidated EBITDA margins during the ramp-up phase.

Highlights

  • Revenue for Q3 FY25 stood at ₹557 crores, representing a 5.7% YoY growth from ₹527 crores.

  • EBITDA margin remained healthy at 25%, with PAT at ₹86 crores (16% margin).

  • Consumer Ware segment, the core business, grew by 8% YoY, contributing 69% of total revenue.

  • Writing Instruments business faced headwinds due to export shipping issues, leading to a scale-back to previous year levels.

  • Glassware facility commenced commercial production on February 1, 2025, with a 50% initial efficiency level.

  • Working capital cycle improved significantly, with trade receivables dropping from 124 days in Q2 to 111 days.

  • Management provided a conservative revenue growth guidance of 12-14% for FY26, factoring in glassware contributions.

  • Capex for FY25 is maintained at ₹275 crores, with FY26 projected at ₹75-100 crores.

Concerns

  • Weak Consumer Demand

Key financials

2 periods

Headline

  • Revenue
    ₹557 Cr
    YoY +5.7%
  • EBITDA
    ₹140 Cr
  • EBITDA Margin
    25%
  • PAT
    ₹86 Cr
  • PAT Margin
    16%

9M

  • Revenue
    ₹1,548 Cr
    YoY +4%

What they filed

Q1 FY27: revenue down 0.4%, net profit down 9.9% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue490 557 589 529 587 +20%554 −1%654 +11%527 −0%
EBITDA119 127 135 109 128 +8%106 −17%129 −4%99 −9%
Net profit87 92 96 81 91 +5%69 −25%90 −6%73 −10%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

SegmentRevenue ContributionGross Profit MarginYoY Growth
Consumer Ware69%50%8%
Writing Instruments14%55%—
Molded Furniture and Light Products17%44%7%

Guidance & targets

Revenue

  • Consolidated Revenue Growth Revenue · FY26 · Medium confidence 12-14%

    Previously 20% → 12-14%

    So if this continues, it's slightly weaker still, we expect about 12% to 14% growth for the next year, given that we also have an addition of revenue from our glassware plant.

    — Gaurav Rathod, Joint Managing Director

Margin

  • EBITDA Margin Margin · FY26 · Medium confidence 24%

    Previously 25% → 24%

    EBITDA margins about -- the maximum impact would be probably about 1 percentage point. That would be the impact... Around 24%, correct, correct.

    — Gaurav Rathod, Joint Managing Director

Capacity

  • Glassware Plant Revenue Capacity · FY26 · High confidence ₹150 crores
    So in the first year, we anticipate close to INR150-odd crores revenue from this plant, not the whole INR250 crores. That is at peak capacity.

    — Gaurav Rathod, Joint Managing Director

Capex

  • Annual Capex Capex · FY26 · High confidence ₹75-100 crores
    And the next year is around INR75 crores to INR100 crores.

    — Atul Parolia, CFO

Other

  • Trade Receivables Days Other · FY26 · Medium confidence 90-95 days

    From 111 days today

    Our target is about to reach about 90 to 95 days in terms of our trade receivables.

    — Gaurav Rathod, Joint Managing Director

Risks & concerns

  • Weak Consumer Demand

    high

    Management noted pressure on demand due to lesser consumption and discretionary spending by the middle class.

    Management acknowledged

  • Export Shipping Issues

    medium

    Container availability and global slowdown delayed orders in the Writing Instruments segment, though a pipeline recovery is visible.

    Both acknowledged

  • Glassware Plant Efficiency

    medium

    Initial efficiency is only at 50%; it takes ~6 months to reach 75-80% levels for a new furnace.

    Management acknowledged

Areas of evasion (1)

  • Slightly vague on the exact split of domestic vs export decline in Writing Instruments beyond saying export was the 'major decline'.

Q&A highlights

3 direct
Glassware Plant Ramp-up and Margin Dilution Direct
EBITDA margins will still not be affected as much as your EBIT margins because your costs are down... EBITDA, there might be dilution by, as you said, about 1 basis point [percentage point].

Investors were concerned about the margin impact of the new ₹250cr capacity plant; management quantified the hit at ~100bps for the first year.

Asked by Percy Panthaki

Gross Margin Contraction Drivers Direct
It's actually a factor of 3 factors... part inflation of raw material... product mix has changed... and of course, there were some discounts that were passed on because due to weak demand conditions.

Explains why margins contracted despite stable input prices, highlighting the competitive intensity and demand pressure in the market.

Asked by Praveen Sahay

Revenue Guidance Revision Direct
When we got listed, the previous years... were about 30%, 30% growth. They were exceptional years... So I think going forward, our guidance would be about -- conservatively, I'm saying... about 12% to 14% growth for the next year.

Management officially reset growth expectations from the high-growth listing period to a more sustainable, conservative level given current macro headwinds.

Asked by Achal Lohade

2 min read 5 chapters

Detailed narrative

Glassware Plant: The New Growth Engine

Cello's new glassware facility commenced commercial production on February 1, 2025. While initial efficiency is at 50%, management expects this to scale to 75-80% within six months. The plant is projected to contribute ₹150 crores in revenue in its first full year (FY26), scaling to a peak capacity of ₹250 crores. Although the ramp-up will cause a temporary ~100bps dilution in consolidated EBITDA margins, the gross margins for glass remain strong and in line with existing premium products.

Segment Performance and Margin Dynamics

Consumer Ware remains the dominant segment, growing 8% YoY with a 50% gross margin. Molded Furniture grew 7% with a 44% gross margin. However, Writing Instruments faced a challenging quarter due to export shipping delays and global slowdown, leading to stagnant domestic performance. Gross margins across segments saw slight contraction due to a mix of marginal raw material inflation, product mix shifts, and tactical discounting to counter weak discretionary demand.

Working Capital Efficiency Gains

A key positive from the call was the improvement in the working capital cycle. Trade receivables improved from 124 days in Q2 FY25 to 111 days in Q3, with a long-term target of 90-95 days. Inventory days also reduced from 98 to 88 days. This improvement was attributed to better channel inventory management and a 'cleansing' of stock during the festive season, positioning the company well for the upcoming peak summer season.

Revised Growth Outlook for FY26

Management has adopted a conservative stance for FY26, guiding for 12-14% revenue growth compared to the 30%+ levels seen during the IPO period. This revision reflects the reality of a subdued macro environment for consumer discretionary goods. However, they remain optimistic that revised income tax policies and potential interest rate cuts could boost the purchasing power of their core middle-class customer base, potentially pushing growth toward the 15-17% range.

Channel Strategy and Quick Commerce

Cello is seeing a shift in distribution, with Quick Commerce emerging as a high-growth propeller. While currently contributing only 1.5% to 2% of e-commerce sales, management expects this to grow to 15-20% of the e-commerce mix in the coming year. The company is focusing on optimizing its product portfolio for these platforms, particularly in the kitchen and home space, which were not traditional categories for quick commerce.

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