IPO-bound Cello World has sufficient cash flows to fund future growth: CMD Pradeep Rathod

Cello World’s cash flow is sufficient and it will not need fresh funding for the next three years, says Pradeep Rathod, CMD, Managing Director of Cello Group of companies, in an exclusive interview with Fortune India. He also talked about the upcoming initial public offering (IPO), which will open for subscription on October 30 and close on November 1. The anchor book will open for a day on October 27. Cello World has fixed a price band in the range of ₹617 to ₹648 per equity share of face value of ₹5.

Cello World, which is into consumer houseware, writing instruments, and moulded furniture, has increased the IPO size to ₹1,900 crore from ₹1,750 proposed in the offer document filed with the SEBI in August this year. The issue is a complete offer for sale (OFS) of shares by the promoters and other selling shareholders, which means the company won't get the money; it would go to the existing owners.

Explaining the rationale behind increasing the IPO size, Rathod said, “There was a lot of demand so we had to scale it up a little bit…we are just selling 13.82% of our stake, not up to 25%.”

Cello World’s CMD also explained why the company opted for OFS and not equity dilution. He said, “We do not need money to grow for the next three years. Our internal accrual is more than sufficient to grow from here…The company has not borrowed over the last 30 years.”

The OFS will see promoter Pradeep Ghisulal Rathod paring shares worth ₹300 crore, ₹736 crore by Pankaj Ghisulal Rathod, ₹464 crore by Gaurav Pradeep Rathod, ₹200 crore by Sangeeta Pradeep Rathod, and ₹100 crore by both Babita Pankaj Rathod and Ruchi Gaurav Rathod.

He further said that Cello World is a B2C company and the brand will get bigger and wider horizon, post listing of shares on stock exchanges. In the future, if the company would look for inorganic growth through acquisition of businesses, “the share price would act as a currency”.

Speaking about the revenue model, Rathod said that the company generates 65% of the revenue from the consumer houseware business, 18% from moulded furniture, and around 16% from writing instruments.

He also stated that the consumer houseware sector will grow widely in India, thanks to the nuclear family system as every family needs new household products if a big family is divided into different houses. “The trend of nuclear families is going up and up because of job opportunities at various different places,” he said.

As per the offer document filed with the SEBI, Cello World has reserved up to 50% of the shares in the public issue for qualified institutional buyers (QIB), up to 15% for non institutional investors (NII), and up to 35% for retail investors. The company has reserved shares worth ₹10 crore for eligible employees, which will be offered at a discount of ₹61 per equity share under the employee reserve portion.

For the fiscal year 2023, Cell’s consolidated revenue grew 32.19% to ₹1,796.69 crore against ₹1,359.18 crore a year ago. Net profit rose 29.86% from ₹219.52 crore in fiscal 2022 to ₹285 crore in fiscal 2023.

The company was founded by late Ghisulal Dhanraj Rathod, formerly the promoter and father of two current promoters, Pradeep Ghisulal Rathod and Pankaj Ghisulal Rathod. He had been associated with Cello Plastic Industrial Works and the "Cello" brand since 1962. Cello competes with Indian companies like Borosil, Kokuyo Camlin, La Opala RG, Stove Kraft, TTK Prestige, Linc, and Hawkins Cookers.