Cello World Ltd

<dhhead>CHAIRMAN AND MANAGING DIRECTOR</dhhead>

I am pleased to present the 6th annual report of Cello World Limited for FY 2024. The past year has been exceptional, marked by our successful Initial Public Offering (IPO) and strong performance across all segments. Your trust and confidence in our business have been instrumental in achieving this milestone, and we are profoundly grateful.

Overview of the macroeconomic environment

Amid uncertainties in the global economic landscape, the Indian economy demonstrated remarkable resilience, emerging as a bright spot in the world. India achieved an impressive growth rate of 8.2% in FY 2024, surpassing the 7% growth recorded in the previous year. This expansion can be attributed to strong domestic demand, robust private investment, and sustained momentum in manufacturing. Moreover, proactive interventions by the Reserve Bank of India (RBI) have ensured that inflation has not spiralled out of control and the economy has stayed on the growth path.

Industry overview

The Indian consumerware market is undergoing significant growth, driven by favourable demographic shifts such as rising disposable incomes, increasing urbanisation, and the trend toward nuclear families. There is a growing demand for functional and organised kitchen spaces, which is further boosted by increased discretionary spending and the expansion of online platforms, along with exclusive and multi-brand outlets in Tier II and III cities. This has enhanced the accessibility and affordability of consumerware products.

A notable trend in the market is the shift from unbranded to branded products, with the branded segment’s market share increasing from 52% in FY 2015 to 61% in FY 2023. Consumers are increasingly drawn to innovative and stylish consumerware, elevating kitchen tools into aspirational lifestyle products. Moreover, consumer loyalty remains strong with well-established brands known for reliability, quality, and trust, maintaining a competitive edge over new market players.

Performance review

For the full year, our revenue grew by 11% to Rs 2,00,026 lakhs, despite sluggish demand within the consumer houseware industry. Profit after tax grew by 25% to

Rs 35,618 lakhs with a margin of 17%. We maintained a healthy operating cash flow of Rs 23,118 lakhs throughout the year. This success is a testament to our widespread market presence, well-established brands, scale of operations, and pan-India distribution network, which help us identify the evolving preferences of our customers and innovate products to cater to those requirements.

Operational highlights

We remain confident in the growth potential of our diverse portfolio, which aligns well with the trend of premiumisation. In FY 2024, we launched over 700 new products, showcasing our commitment to meeting evolving consumer needs. Our new product launches contributed around 15% to our total revenue. Expanding into new product lines synergistic with our existing portfolio presents an opportunity to leverage our expertise and capture a larger market share.

We have also strengthened our presence across all distribution channels. In FY 2024, general trade contributed 77% to our revenue, while export and online sales accounted for 10% and 8%, respectively, with modern retail contributing the remaining 5%. We believe that untapped domestic and international markets offer significant growth potential. Leveraging channel partners and embracing e-commerce and modern trade channels will facilitate our expansion into these geographies.

Capacity expansion was also undertaken across categories during the year. We commissioned the manufacturing facility in Falna, Rajasthan in a phased manner through our subsidiary company, Cello Consumerware Private Limited, on March 16, 2024. The glassware furnace, which is coming up in the same facility, is expected to be operational in mid-Q2 FY 2025 with an annual capacity of 20,000 tonnes. This strategic move aims to reduce our dependence on imported glassware. Additionally, we enhanced our opalware production capacity in Daman by 10,000 tonnes, bringing the total capacity to 25,000 tonnes during FY 2024. We plan to utilise the available land in Falna, Rajasthan, for all our future expansion initiatives.

We aim to regularly evaluate market trends and manufacturing capabilities, strategically increasing the production capacities of thermoware, moulded furniture, and writing instruments. This includes utilising our available land in Falna, Rajasthan, for expansion.

Our sustained investments in branding and marketing have significantly enhanced our brand recall and consumer engagement. We employ a mix of above and below-the-line marketing strategies, leveraging various advertising channels including print, television, and new-age digital platforms. Our advertising spending accounted for 1.35% of our total revenue in FY 2024. Our campaigns, such as "Cello – Companion for Life", "Cello – Rishta Zindagi Bhar Ka", "Hot Chahiye Toh Cello", and "Don’t Just Write, Glide" have been effective, and we aim to launch similar initiatives to boost awareness of our new products.

Building upon our successful diversification into opalware from houseware and insulatedware, and with the commencement of the Glassware facility, we are strategically pursuing inorganic growth to further strengthen our product portfolio. We aim to acquire complementary businesses or brands aligned with our core competencies, aiming to enrich our offerings, expand our customer base, and fortify our competitive edge.

Focus on Environmental, Social and Governance (ESG)

We remain unwavering in our commitment to ESG principles, aiming to generate long-term value for our stakeholders. We operate our business responsibly to minimise our environmental footprint. Significant investments have been made in human capital, focussing on creating an inclusive workplace and nurturing talent. Through our social responsibility initiatives in the areas of education, healthcare, and animal welfare, we strive to bring a holistic impact to our communities and society at large.

Future outlook

We are enthused by the favourable macroeconomic prospects. The expanding aspirational middle class with increased purchasing power makes India a promising market. Growing internet penetration and the rise of e-commerce further enhance the prospects of the sector. Backed by our strategic endeavours, we are well-positioned to take advantage of the abundant opportunities and drive sustainable performance.

Our customer-centricity inspires us to continue innovating our products to meet evolving customer needs. Simultaneously, we are focussed on enhancing our distribution network to reach more consumers and propel our market share.

The availability of land acquired in Falna, Rajasthan presents exciting opportunities for our next phase of expansion, echoing the success in scaling manufacturing facilities seen in Daman. This facility will substantially expand our manufacturing capabilities. The glassware furnace at the same facility is also scheduled to become operational in Q2 FY 2025.

Looking ahead, we are confident of sustaining our robust growth momentum fuelled by contributions from all segments and scaling of our capacities. We expect our EBITDA margins to remain steady as we aspire to surpass industry growth and bolster our market position.

Conclusion

I would like to express my sincere gratitude to our stakeholders, including shareholders, customers, business partners, employees, and the wider community, for their continued trust and support. Their contributions have been integral to our success. I also acknowledge the invaluable guidance of our esteemed Board members. As we progress on our journey, we are confident of accelerating value creation and ushering a stronger future for all stakeholders.