Cello World board approves fundraising through QIP, plans to issue 86.5 lakh shares; stock jumps 4%

Cello World, a prominent consumer player, initiated a share placement for qualified institutional buyers on May 29, as per a recent stock exchange filing. The company plans to raise capital by issuing 8.654 million equity shares, each with a face value of ₹5. At 12.45 pm IST, shares of the moulded furniture maker were quoting ₹879 on the BSE, higher by 4.1% compared to the previous session's close.

Cello World is set to raise funds via issuing 86.54 lakh equity shares with the face value of ₹5 per share. 

The board of directors approved, "raising of funds by way of issuance of equity shares and / or other securities convertible into equity shares, fully convertible debentures, partly convertible debentures, nonconvertible debentures with or without warrants and/ or convertible preference shares or any security convertible into equity shares through permissible modes." The firm will seek the approval of shareholders at an extraordinary general meeting.

In an exchange filing dated May 25, Cello World announced its intention to raise funds, though the exact amount has not been disclosed. This fundraising initiative aims to assist Cello's promoters in meeting SEBI's requirement to reduce promoter shareholding to a maximum of 75%, down from the current 78.06%.

Over the past year, Cello World's stock has appreciated by approximately 10% in the market. In contrast, the Nifty 50 index has seen a more substantial increase of about 22% during the same period.

For the quarter ending in March (Q4FY24), Cello World reported revenue of ₹512.5 crore. Over the entire fiscal year FY24, the company's revenue rose to ₹2,000.3 crore, reflecting an 11.3% year-over-year increase. During the fourth quarter, the consumer goods segment generated ₹327 crore, the writing instrument segment contributed ₹87.6 crore, and the molded furniture segment reported ₹97.9 crore in revenue.

In FY24, Cello World's revenue saw growth across its business segments: consumerware increased by 12.2%, writing instruments by 16.9%, and molded furniture by 3.5%. On a quarter-over-quarter basis, the consumer goods segment experienced a volume rise of 7-8%, writing instruments saw an 11% increase, and molded furniture recorded an 18% increase.

Moving forward, the management anticipates a significant increase in rural demand due to an improved monsoon prediction for CY24.

Driven by a 15–17% increase in volume, management anticipates a corresponding 15–17% rise in income. With a faster ramp-up of glassware capacity and improved pricing conditions, revenue growth could potentially reach 20%. For FY25, EBITDA margins are expected to remain stable between 24–26%. Houseware sales are projected to grow by 15%, while revenue from consumer glassware is estimated to be around ₹460–475 crore.

In its report, brokerage firm Motilal Oswal stated that it maintains its EPS estimates for FY25 and FY26 and retains a 'BUY' rating on Cello World stock, with a target price of ₹1,090. The brokerage firm projects a potential upside of 25%. "Operating in diverse industries, Cello World benefits from an expanding TAM, driven by various sector-specific tailwinds, including favourable demographics, increased discretionary spending, greater product penetration, import substitution, innovation, evolving gifting trends, and brand loyalty. We estimate Cello World to grow faster than the industry,” it added.

The company has revealed its intention to generate capital through a fundraising campaign to settle its debts, which include loans from promoters. Moreover, the raised funds will be allocated to boosting glassware production and exploring inorganic growth opportunities within its existing markets.