Detailed Narrative
Q3 FY26 Performance Overview
Cello World reported a mixed Q3 FY26, with revenues of ₹553.7 crores and an EBITDA margin of 22.1%. The quarter saw demand soften meaningfully in December. Profit after tax stood at ₹63.6 crores, translating to a PAT margin of 11.5%. Additionally, a one-time📎 exceptional impact of ₹7.4 crores was incurred due to gratuity provisioning under new labour codes.
Consumerware Segment Challenges and Steelware Impact
The Consumerware segment, contributing 69.5% of total revenue, recorded a marginal decline in sales. This was primarily driven by significant stockouts in the insulated steel portfolio, which led to an approximate 40% quarter-on-quarter decline in steel revenues. This decline significantly impacted overall consumer revenues and temporarily affected margins due to lower production volumes and suboptimal absorption of fixed costs.
Writing Instruments Segment Growth and Cello Brand Integration
The Writing Instruments segment reported a strong performance with ₹86 crores in revenue, achieving an 11% year-on-year growth. Contributions from the recently acquired Cello brand are expected to significantly boost this segment. Management projects combined revenues for Unomax and Cello brands to exceed ₹500 crores in FY27 and reach approximately ₹1,000 crores over the next two years.
Molded Furniture and Glassware Segment Updates
The molded furniture category experienced a 10.6% decline compared to Q3 FY25, mainly due to weak polymer prices and the absence of certain government orders. Management expects low single-digit growth for this segment. The glassware business is currently operating at around 60% utilization, which is expected to continue for the next two quarters. Profitability for glassware is anticipated to kick in once utilization crosses 75-80%.
Capacity Expansion and Capital Expenditure
A state-of-the-art insulated steel bottle manufacturing plant in Rajasthan has been commissioned, with two production lines operational and the rest to be commissioned in H1 FY27. The company plans a total capex of ₹150 crores for FY26 and FY27 combined, which includes maintenance capex of ₹75-100 crores annually and slight capex in writing instruments. Potential opalware expansion, if undertaken, would involve ₹100-110 crores for a greenfield project.
Strategic Priorities and Channel Mix
Cello World continues to focus on portfolio rationalization using the 80-20 principle and premiumization, aiming to increase the premium product mix from the current 7-8% to 20% over time. The digital channel is gaining significant traction, with its revenues now accounting for 15.7% of the total revenues.
Wim Plast Merger Progress
The merger with Wim Plast is in its final stages, with the last hearing scheduled for February. Regulatory approval is expected within 2-3 months, and the merger is targeted for completion by Q1 FY27, with an appointed date of April 1, 2025.