Ladies and gentlemen, good day and welcome to Cello World Limited Q4 FY 2026 earnings conference call. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Before we begin, a brief disclaimer. This conference call may contain forward-looking statements about the company which are based on the beliefs, opinions and expectations of the company as on the date of this call. These statements are not the guarantees of future performance and it may involve risks and uncertainties that are difficult to predict. Should you need assistance during this conference call, please signal an operator by pressing star then zero on a touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Manan Goyal. Thank you and over to you, sir.
Thank you. On behalf of ICICI Securities, we welcome you all to Q4 FY 2026 and FY 2026 result conference call of Cello World Limited. Today we have with us senior management represented by Mr. Gaurav Rathod, Joint Managing Director, and Mr. Atul Parolia, CFO. Now I hand over the call to the management for their initial comments on the quarterly and annual performance. Then we will open the floor for Q&A session. Thank you and over to you, sir.
Thank you. Good morning everyone and a very warm welcome to our company's earnings call. Joining me is our CFO, Mr. Atul Parolia and our investor relations advisor, SGA. The results and presentations are available on the stock exchange and on our website. I hope you had a chance to look at it. Financial year 2026 was marked by multiple headwinds and evolving market conditions across industries and segments. The demand environment remained dynamic throughout the year. While the first half witnessed relatively better momentum supported by a healthy festive season, demand did not sustain at that level and moderated in the second half.
In our view, financial year 2026 represented a phase of temporary consolidation during which we focused on strengthening the structural operations of the business and implementing several corrective initiatives which includes rationalization of our product portfolio, realignment of our distribution strategy in line with evolving market dynamics, particularly the growing relevance of e-commerce and quick commerce channels, enhancement of our operational efficiencies aimed at optimizing costs and improving productivity, and commissioning of new manufacturing lines for steel bottle production and select consumer wear categories at our Rajasthan facility. We believe that these initiatives have strengthened the long-term foundation of the business and expect their benefits to progressively reflect in our performance over financial year 2027. Coming to financial year 2026 performance, our revenue grew by 9% with a gross margin of 49.8%. The performance was primarily driven by categories like writing instruments, opalware, glassware and some select consumer wear products.
However, some of our key products witnessed near-term challenges. The hydration segment remained subdued due to stock outs in insulated steel products, while categories such as storage, houseware and cleanware had a moderate growth due to a slow consumer demand during the year. Operating profits remained under pressure owing to higher costs associated with new glassware plant and steel bottle manufacturing unit. As these categories start scaling up, we should see an improvement in our profitability. For financial year 2026, EBITDA stood at INR 526 crore with a margin of 22.7% and a PAT margin for the year stood at 14.3%. Coming to the Q4 performance, we delivered the highest ever quarterly revenue of INR 654 crore, recording a year-on-year growth of 11%. We did not witness any material impact due to the Middle East situation during the quarter.
There was an increase in plastic raw material cost, but we had adequate inventory to mitigate the impact in Q4. Additionally, rising energy costs had some impact on glassware production, which remained manageable during the quarter. On the consumer wear side of things, the revenue stood at INR 434 crore with a year-on-year growth of 7%. During the quarter, we operationalized two additional manufacturing lines for steel bottle production. Another four lines has been commissioned during quarter one of financial year 2026, 2027. However, these capacities were commissioned towards the latter part of the quarter and therefore did not materially contribute to Q4 financial year 2026 revenues. We expect two more lines to commission shortly and a gradual ramp up in overall steel bottle production is anticipated over Q1 and Q2 of financial year 2027.
Utilization levels at the glassware segment still remains at about 60%, primarily impacted due to dumping of imported glass products from China. As a result, the category remains at the breakeven levels and did not contribute meaningfully to the overall profitability for the quarter. We are actively engaging with relevant authorities to seek some protection against this dumping happening mainly from China. For us, glassware remains a long-term strategic growth business rather than a near-term profit maximization opportunity. We continue to remain confident about the long-term potential of this segment and are focused on scaling the business while improving it profitably. During the month of March, we witnessed a sharp increase in demand for electric kitchenware products driven by the LPG gas supply change. This resulted in complete liquidation of inventory of these product lines.
If we had a little more of this, we could have probably done better, but I think we couldn't have anticipated this kind of a demand. Demand for the rest of consumer wear products remained subdued during this quarter. On the writing instruments front, revenues delivered a solid growth of 64% and stood at INR 128 crores. As we anticipated, Cello's stationery brand started contributing to this business from Q4 onwards. Even excluding revenues from Cello brands, the writing instrument delivered a healthy double-digit year-on-year growth, largely driven by a strong pickup in export business as well as revenues from newly launched products, particularly in the premium pens category. Writing Instruments is emerging structurally stronger and more scalable business for Cello, and we remain confident of achieving our target of revenues of INR 500+ crores in financial year 2027.
During the quarter, the molded furniture business recorded a year-on-year decline of 13.5%, largely in line with prevailing industry trends and subdued demand conditions. We have completed the merger of Wim Plast Limited with Cello World. With this integration, the synergies between consumerware and molded furniture can be explored further. During the quarter, we also witnessed a continued increase in revenue contribution from e-commerce and quick commerce channels. These channels now account for nearly 17% of our overall revenues, with profitability broadly in line with other business segments. While general trade continues to remain a critical pillar of our distribution network, strengthening our presence across modern digital channels is equally important to address evolving consumer preferences and enhance our reach in markets where physical distribution remains limited.
Looking ahead, supported by the various initiatives undertaken towards strengthening the business, we expect financial year to be a significantly better year, though challenges do seem looming in the first quarter. I will now hand over to our CFO, Mr. Atul Parolia, for the financial year highlights. Thank you very much.
Thank you, Gaurav, and good morning to everyone. Now I'll be sharing the financial details for the quarter gone by. In Q4 FY 2026, the company reported revenue of INR 653.6 crores, registering a growth of 11% year-on-year compared to the INR 588.8 crores in the Q4 FY 2025. The company reported EBITDA of INR 136.6 crores this quarter, translating into EBITDA margin of 20.9%. Profit after tax for the quarter stood at INR 90.1 crores, while net margin stood at 13.8%. In terms of revenue mix, consumerware contributed 66.4% of the total revenue during the quarter, writing instrument accounting for 19.6%, and molded furniture along with the allied product contributing for the remaining 14%. During the period, generalware contributed 75.4% of the total sales, followed by online sales channel at 9.5%, export at 7.6%, and modern trade at 7.5%.
From a segment-wise margin perspective, writing instrument and consumerware both reported gross profit margin of 47.8%, while molded furniture reported a margin of 39.5%. Now, coming to FY 2026 performance. Revenue for the period stood at INR 2,323.7 crores, registering a year-on-year growth of 8.8%. EBITDA came in at INR 526.4 crores, translating into EBITDA margin of 22.7%. Profit after tax stood at INR 331.5 crores, resulting into a net margin of 14.3%.
For FY 2026, our cash flow from operations stood at INR 255.1 crores. Debt to equity ratio stands at 0.01%. CapEx incurred during the year stood at around INR 219 crores, which mainly include investment towards the setting up of manufacturing line for steel bottle, as well as other select consumerware product, writing instrument, and some portion spent for the maintenance CapEx. Going ahead for financial year FY 2027, we expect to do a CapEx of around INR 100 crores.
Lastly, I would like to inform that composite scheme of arrangement amongst Wim Plast, Cello Consumer Products Private Limited, and the company has become effective from 27th May 2026 with an appointed date of 1st April 2025 as defined under the scheme. Accordingly, our financial comparative has been restated to the effect to the scheme from the beginning of the previous year. This also includes the consequential impact on the earning per share pending issuance pursuant to the scheme. With this, I would like to open the session for question and answers.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Manan Goyal from ICICI Securities. Please go ahead.
Hi, sir. Thank you for the opportunity. My first question is regarding the steel manufacturing capacity. Earlier, the manufacturing capacity was expected to commence on Q4 FY 2026, but now it has been delayed to Q2 of FY 2027. If you can specify, what are the reasons for this delay, and what will be the revenue impact because of this delay? Thank you.
Basically The steel has not been delayed. I have mentioned that it is starting in phases. It has already begun in Q4 of 2026. But the ramp-up is happening. There were two lines that started in the last quarter.
In this quarter there will be another four lines and then another two lines. That's how the phase wise it is going to start. Marginally revenue will start coming from these lines. By July, we should be in complete full scale mode. Right now we are in partial, partially we have scaled up. It's more scaling up. It's not that we haven't started on time. It is already running.
Oh, okay. And sir, what will be the revenue impact in FY 2026 because of the capacity constraint which you have seen in Hydra and in steel?
Yeah. In steelware, it actually was pretty significant. If you recall in the last quarter itself, it was about 40% and that impact came down a little bit in the last quarter, which was still about 30% from last year, quarter-on-quarter. I think going forward, it was a pretty significant drop because overall for the year also we saw a 25% drop in sales for this category, which we aim to get it back to at least the number that we clocked in financial year 2025. I think that's where we are headed.
Sure, sir. Thank you.
Thank you.
Thank you. Before we take the next question, I would like to remind participants that you may press star and 1 to ask the question. The next question is from the line of Sucrit Patil from Eyesight Fintrade Private Limited. Please go ahead.
Good morning. I have two questions. My first question to Mr. Rathod is, just want to understand the forward guidance on what type of strategic levers are you placing in 2026, 2027 to expand Cello's consumer product portfolio across kitchenware, furniture, and writing instruments while managing risk from raw material price volatility and sustaining brand leadership in domestic and export markets? That's my first question. I'll ask my second question after this.
Basically, we are quite diversified. If you look at our portfolio, anyway, we are across materials also. It's glass, plastic, steel. But the current crisis or the overall situation has affected everything. It's not just a particular raw material that has been affected. Every segment has been affected by this crisis that is going on currently. I think while we try to shield ourselves by diversified portfolio, we always try to launch newer products within our category. Though there is no current thought process on expanding into other categories. As I said, we were able to take advantage of the LPG crisis that happened in March by selling a lot more of our appliances. By being in that category, though it is a smaller category for us, by being in that category, that helped us for that particular time that crisis was there.
I think we are pretty much diversified across all segments, and that is why sometimes the risk is also mitigated from that perspective.
My second question to Mr. Atul is, I want to understand what type of capital allocation and risk management frameworks have been applied in 2026, 2027 to balance dividend payouts with funding for capacity expansion. Any hedge against Forex and polymer price volatility, and any buffers put into place to sustain the liquidity for the demand cycle with seasonal demand? Thank you.
With regard to raw material prices, actually, always as we have said in the past, we increase our selling price in accordance. Whatever the raw material prices, we pass on the burden to the end consumer. As far as raw material prices are concerned, we are confident that whenever the prices comes down, we reduce the prices, and when it goes up, we increase the prices. With regard to your question on CapEx, actually, during this year, I think INR 100 crore is the total CapEx which we have said, mostly will be for the metals CapEx. Hardly around INR 30 crore we have allocated for the steelware we are building.
Thank you, and best wishes.
Thank you.
Thank you. Participants who wish to ask questions may press star and one at this time. The next question is from the line of Krupa Pandya from PN Capital. Please go ahead.
Hello. Good morning, sir. Am I audible?
Yeah. You are audible.
Yeah.
Please go ahead.
Sir, my first question would be, what is the utilization level of our opalware business currently, and what is your strategy on that?
Right. On the opalware side of things, we are about at 85% utilization today. We hardly have about 15% that is left. I think our strategy is to exhaust this capacity over this year. Also, there has been increased competition in this space, so we are treading a little cautiously here. Maybe in some time we would look at expanding our capacity. But at this point of time because of heightened competition and more capacity that has come in the market, we first want to exhaust our current capacities and then move ahead.
Okay, sir. Thank you. The second question will be on from a pricing quality point of view. Are we at par with Chinese glassware products, or we are at premium?
No, I think in terms of quality, we are at par or better than most of the Chinese manufacturers. I think it has been very well accepted in the market, all the products. From that perspective, there is no challenge.
Okay, sir. Thank you, sir. That answers my questions.
Sure.
Thank you. Participants who wish to ask questions may press star and one. The next question is from the line of Vaidik Bafna from Monarch Networth Capital Limited. Please go ahead.
Congratulations, Gaurav, on these numbers. My first question would be on, do you believe that due to this Middle East crisis, we had some impact on our revenues, and now how are things shaping? What do you expect now going forward from here?
I think Q4 did not see that much of impact because the war had just started in March, and there was not much impact on prices also. It started happening in the later half of March. I think, yes, Q1 looks a little challenging. We are treading very cautiously because we have been impacted. I think most companies have been impacted by all sides, whether it is rising raw material prices, labor issues, basically rising production costs, overall demand being also a little subdued. I think, yes, there are a lot of headwinds at this point of time. But we are hoping that it passes and overall because there has been a lot of escalation in prices, about 12%-20% MRP rises that we have taken across all our product lines, which we had to because of these rising costs.
I think it needs time for the market to kind of understand these new prices and be okay with it. I think it is a phase that we will all have to go through. Post that, hopefully we, but we are in a strong, we have a good foundation to take all these shocks or take any impact at this point of time. We are well-positioned. I think when the opportunity comes, we will be there to grab that as well.
Okay. Second question is on the writing instruments front.
Yeah.
Can you quantify that, how much revenue would be from our acquisition, which we did out of the INR 128 crores?
We do not give out these numbers separately. This is basically together. This is more for our confidentiality within the company.
Okay.
At a later stage, I can have it answered on a one-on-one session.
Okay.
But I think overall, what we expect from the writing instrument category is a INR 500+ crore next year kind of revenue, which currently stood at about INR 368 crores for this year.
Yeah.
It will ramp up very quickly. With the new acquisition, of course, it opens up a lot of other spaces for us because Cello being Cello as a brand is very strong in the stationery market, though the revenues don't look like at this point of time. But eventually, the brand equity is still extremely strong, and we are trying to cash on that for the next year.
Okay. Okay, Gaurav, thanks. That is it from my end.
Thank you.
Yeah.
Thank you. Participants who wish to ask questions may press star and one at this time. The next question is from the line of Anu Parekh from Anand Rathi. Please go ahead.
Yes. Hi, sir. My first question is, what will be our guidance for revenue growth and EBITDA margin for FY 2027?
Right. For us, revenue, we are looking at about 10%-12% revenue growth going ahead. There are, of course, having said that, there are current challenges that we are facing currently because of this crisis. That number could change a little bit as the year progresses. Also, in terms of our margins, we are trying to scale up to about 2%-2.5% more EBITDA margins than we currently have. That is by far because of the steelware and the glassware units because glassware still hasn't started giving any margins, though it is breaking even. On the steel side, as we ramp up, we should see better margins. Having said all of this, it all depends on also how things evolve over this quarter and the next quarter because pricing pressures are of course there.
As I said, because demand has been subdued, plus there has been a very high, sharp increase in cost. Partly, most of it is we're trying to pass it on, but we could take short-term shocks, maybe a little bit to maintain demand or make sure that at least we are selling in line with what we were doing last year. I think overall, we still look at about a 10%-12% revenue growth for the year.
Okay. Sir, what was the reason for sharp gross margin compression in consumer wear and writing instruments in Q4? What is the guidance for FY 2027 for both the segments?
Consumer wear, as I said, mainly glassware. The revenues of glassware grew, but it grew without any profits. That was reason number one. Reason number two is the steel wear, which we were buying from China before, and then we had to switch to OEMs, which was more expensive to buy from them, but we couldn't increase our selling prices. Our margin compressed in steel wear as well, up to the tune of about 5%-6%. That was the major impact of consumer wear. Also, in the appliances segment, we started doing very well, and we grew pretty well the last year, but appliances is a slightly lower margin product line. Again, the product mix also kind of brought the margins down a little bit. Plus, there was little selling pressure.
There were some discounts that were being passed last year to maintain demand. I think coming to this year, it should be a lot better. Steel wear, as it ramps up, and glassware, as it starts becoming more profitable, we should see improvement, about 2.5%-3.5% EBITDA margins in the consumer wear category. In the writing instruments category, we had just bought Cello Pens. It was actually a loss-making business prior to this. Now that we have taken it over, it still is not a very profitable business at this point in time because of the product mix. As we are changing the product mix, the profits will be in line with what we used to do in Unomax. That will take a couple of quarters to come back.
But we are very confident that we'll get it back to the numbers as what we achieve in Unomax.
Okay. Sir, what should be the peak revenue from all the stainless steel bottle lines put together? By when are we expecting it to be achieved?
The peak revenue of our current capacity is about INR 300 odd crores, though we continue to do some OEMs. Also, this was a greenfield project. Going forward, we can keep adding lines as and how our revenues increase. I think going forward, increasing revenue will not be a challenge because it only is a couple of months process to set up a new line. I think, peak capacity as of today's capacity is about INR 300 crores.
When can we expect it to be achieved?
This will start being fully achieved from July onwards. From July onwards, you will see full production.
Okay. What kind of reduction in debtor days are we looking at in FY 2027 and over the medium-term period?
I think we've always tried to work on this side of things, though the market has not always helped. But we are wishing to have about 10-15 days lesser than what we are at today, which we are confident that we'll be able to achieve over this financial year. That is a sweet spot for us. That has been our historical debtor days as well. We are quite okay with that because that kind of helps us in multiple ways when it comes to margins or being more present and more accessible in the market. I think for us, that's the sweet spot.
And sir, one last question. Our return ratio profile is getting depressed because of the excess cash in books. How are we planning to utilize the surplus cash?
Currently, we've always also looked at inorganic ways to grow. One example was Cello Pens. We are always open to newer acquisition possibilities if they are available at a good value. I think that is why we are preserving some cash in the company, though it might be temporarily kind of affecting our return ratios.
Okay. Thank you, sir.
Thank you. The next question is from the line of Umang Mehta from Kotak Securities. Please go ahead.
Hi. Thanks for the opportunity. My first question was on your guidance of 10%-12%, given that you have taken MRP hikes of 12%-20% and steel wear is looking to scale up to FY 2025 levels, which are around INR 300 crore. I am assuming glassware also will scale up, right? The plant is at 60% utilization right now. Isn't the top-line guidance a bit conservative? I understand on margin front, it might be difficult to call at this point. I just wanted to check on top-line growth.
I think top-line, with the current situation, the volume growth might be lower for this month. The value growth, you are absolutely right that in value terms, we will get growth. But in terms of volumes, it could be subdued for this year. As we look forward, things could improve. I hope they do. But currently, they do not look very good because of this entire prices and the subdued demand. I think factoring that in, that is my guidance for this year. If it improves, fantastic. That is what we are looking at. Secondly, also currently the prices have been elevated, but as we go throughout the year, there could be some correction in raw material prices and crude oil prices also, which again, we will have to pass on. This might not be a full year phenomena.
It could be a five-month, six-month kind of a phenomena with higher prices and then more refreshed prices. I cannot anticipate that today. That is why, just taking a complete value increase of say, 12%-20% might not be for the full year.
Understood. Makes sense. The second question was on writing instruments. You mentioned that the mix was a driver behind the gross margin contraction. Is it that the salience of INR 10 in Cello branded sales is much higher than what it is in Unomax? If that mix remains how it is, then how would the gross margins improve in FY 2027? Any thoughts would be really helpful.
I think with Cello Pen, that's not the concern. The concern is the cost. Basically, because today, pretty much we have started back. We were left with a very bad P&L to begin with. But basically, there are higher costs that we are trying to cut down, and that is what has impacted GP margins and our net margins in the Cello category. That doesn't mean that the salience of the INR 10 will stay. Cello Pen has been selling INR 15, INR 20 pens also. I think that's not the challenge. The challenge will be as we grow this business and as we achieve volume over the years, the margins will improve in this category.
Understood, sir. Thank you so much, and all the best.
Right. Thank you.
Thank you. The next question is from the line of Bhavin Rupani from Investec. Please go ahead.
Yeah, hi. Thank you so much for the opportunity, sir. I actually joined in late, so pardon me if I repeat the question. First question is related to opalware and glassware utilization. What was our utilization in Q4, and what are we running at operating it right now?
Opalware, we are at 85%. Glassware, we are still at about 50%. We operate at the same range that we were in the last quarter as well.
Okay. Second question on opalware. How are we looking at market growth? Also, if you can speak more on competition and incremental CapEx plans that we have over here.
I think, for us, we have limited capacities now left, and our target is to basically just exhaust that currently. There has been new competition, which is coming about six odd months back. We are seeing how that shapes up as well. In the future, of course, we will look at expansion post everything settles and there is no crazy price wars. Then we can take a call of expansion.
Do we have any place at our existing facility to expand or brownfield expansion, or will we need a greenfield expansion altogether?
We need a greenfield. After this, we will not have space at our current location. We will have space, of course, at our new hub in Rajasthan. That is where we look at expanding.
Okay. Just extending this question further. Given there is intense competition going on in this opalware category, also margins are higher in this category, right? In case of increase in competition going ahead, what would be our preference? Will we be focusing more on margins? Will we be focusing more on volume growth or market share? What is our thought process over here?
I think a little bit of both. The good part is that we have very limited capacities left, so we are not in a hurry to sell out today. That does not put a lot of pressure on us when it comes to sales volumes. Of course, we still have to be cautious and not let loose market share, which we will of course, try and maintain.
Fair enough, sir. Sir, next is on glassware. What steps do we need to take to make it more profitable from here on? I understand we need more utilizations, but is it that we need more SKUs or we have to tweak our pricing in the market? How should one understand this category?
I think this is a very utilization-focused category. A lot of dumping from China has not helped us overall in the last 1.5 years. I think overall, it has a very bright future because we are the first ones to do this in India. In terms of SKUs, we have a very good mix. Of course, we keep introducing newer products and some products become like zero. We have a few today, and we will create a few more as well. I think as we increase utilization, everything will just generate into profit. The profitability potential of this plant is very, very huge. Just that it is a little painful to start with. That is how glass plants are. It is a 10-year furnace. We have not even completed two years. It has just been a year.
I think, we have a lot of good things to look forward to. It is just that it is taking a little time for the utilization levels to go up. I think with the rising dollar, that should help us a little bit.
Okay. Sir, what would be our peak revenue and peak EBITDA margins from this category once we reach optimal utilization?
I think we are looking at about INR 300 crores of peak revenue from glassware and our peak would be about 28%-30% EBITDA margins.
Okay. Fair enough. I have more questions, if we can go ahead or if that is okay.
Yeah, sure.
Yep. Sir, on stationery, so we entered into an agreement for Cello brand of writing instrument in Q3. Just trying to understand, as per the agreement, what was the last date when earlier owner of Cello brand was allowed to sell or manufacture the product? Did they stop selling or manufacturing the product right from the date we entered the agreement, or was there any sort of deadline that beyond this date, they won't be able to manufacture?
This deal happened in November of 2025, and I think by December we had full control.
Okay.
By December, that is what I am trying to say.
Fair enough. Okay. Last question on working capital. We had mentioned about reducing our receivables going ahead. Can you please specify what steps are we taking incrementally to reduce it? At what level are we comfortable?
Sure. I think some of our receivable days are looking a little bad because of a couple of institutional government orders, government tenders that we had taken. This is a typical cycle with the government order. It was anticipated already. That is why it looks a little stretched. Second, in terms of what measures is that, we are trying to make sure that the channel inventory checks are done better. We are also trying to help our distributors liquidate stock if there is anything that some of them carry or excess inventory, if they are carrying. Also rationalization of products. I think the lesser products they carry, the lesser inventory they have to carry overall. All three put together, I think will help us. It is slowly helping us. It is a little slow process. It does not happen overnight.
Our target is about 15 odd days less, and less than 100 days is what we are targeting. I think that is our sweet spot. That is where we have always been okay with, because historically also that has been our number, which has gone up in the last 1.5 years.
All right. Sir, when you say we are trying to help distributors help liquidate, does it mean that we will be providing them incremental incentive schemes or any support?
Yeah. One is, of course, trying to push it more aggressively in the market. Secondly, if there is any very difficult material that is not moving at all, then we help them with a little bit of a discount. That is very limited. The amount is extremely small.
All right, sir. Those are my questions. Thank you so much.
Thanks.
Thank you. The next question is from the line of Sushant Kumar from Motilal Oswal. Please go ahead.
Sunank here, not Sushant. My question is, for the inventory, how is the inventory in the channel currently?
I think channel inventory currently should be better already because you had a very high price rise. So a lot of the older inventory started getting sold off faster. I think today it looks better than I think March as well.
I think this quarter should be much better in terms of the channel inventory I am talking.
Okay. On anticipation of, say, in the recent month, the price has increased, so channel has bought more inventory currently or now they are buying cautiously?
Channel has been cautious. As I mentioned that right now because of this whole situation and the price rises are pretty steep. The channel is buying it cautiously, as and when needed, they are buying inventory. Of course, and that is why I said it is a little subdued at this point of time. But as we are seeing that amount is picking up every day. That means that the channel inventory is also getting lower and lower.
Okay. Thank you so much.
Thanks.
Thank you. The next question is from the line of Lakshminarayanan from Tunga Investments. Please go ahead.
Yeah. Thank you. I just want to understand your stationery business. With all the restructuring going on, what kind of revenue contribution you actually would aim with us at the year-end? Second, on the stationery business, I want to understand the seasonality of the business. Third, what is the mix of this INR 10 price point in your stationery, and how do you intend to expand the range in terms of new products as well as exports in stationery?
I think for us, as I mentioned earlier, our target for the next financial year, 2027, is about INR 500+ crore revenue potential for the entire segment. The INR 10 segment, we have already expanded our range into the INR 12 and the INR 15 and the INR 20 price points. So we are not heavily dependent on the INR 10 segment. Exports-wise, exports, of course, have been helpful in the sense that they've given better margins, and that will continue to happen over the course of the next year as well. That should also help offset some of the steep price increases. Other than that, I think what we are also focusing on is expanding some of the other categories like markers and sketch pens and crayons and I think some of the other stationery items.
I think as we expand into these things, the revenue potential from them will keep coming in. With the brand Cello, I think we are more confident of scaling this up a little faster than we were in Unomax.
How seasonal is the business for us?
Seasonal. Your back to school is your biggest quarter, basically, which is the first quarter, and the last quarter does better. So your January, March till June end is very good, and then it takes a slight dip. So the next two quarters are a little less. It is almost like a 1.5x happens in the last quarter and the first quarter, and then the other. The rest of the year is slightly lesser.
Since the RM prices are increasing or have already increased, how are you looking at it? Because this industry is slightly more price driven or price point driven. How are you looking at it in terms of ROCE and sustainable margins and working capitals?
Right. I think in terms of raw material increase, we have been able to pass it on to the customer. Also what happens during these times is a lot of unorganized players kind of are unable to produce because their price also goes up, and they are unable to pass on most of those price increases. So that kind of helps us somewhere. That is why branded players have a better say during these times. I think that is what has happened. Most of the price increases we have been able to pass on in most of our categories.
Okay. Thank you.
Thanks. Thank you.
Thank you. Before we take the next question, we would like to remind participants that you may press star and one to ask a question. The next question is from the line of Rajakumar Vaidyanathan from RK Invest. Please go ahead.
Good morning. Can you hear me?
Yeah, I can.
Yeah. Thanks a lot for the opportunity. Just two questions. The first one is, you kind of mentioned that the Q1 will be soft. Is it more due to seasonality or same, or it is also due to the, what are the headwinds that we currently face?
Can you please repeat?
In your outlook, you said that the current Q1 will be soft. Is it more due to the seasonality factor or the combination of seasonality and the headwinds that you kindly put?
No, it's not seasonality. It's mostly the current crisis that we're going through.
Okay. What makes you feel that the things will look up after Q2 only?
I do not really know if things will look up. I hope things will be better. I do not know what the political leaders of the world will do. I am hoping that, because I believe that we have hit the peak in terms of raw material prices and other costs. I believe that it should go down from here rather than go up.
Okay.
That is my assumption.
Yeah, got it. You used to make 25% margins about a couple of years back. What needs to happen for those margins for Cello to see again?
Two factors which have majorly been the cause of the decline is because of the glassware, because we have scaled up revenues, but there is no profit currently there. And steelware, because we lost about 5%-6% margin due to unavailability and also due to higher trading prices that we were buying from other OEM manufacturers in India. As we scale up both these production facilities, about 2.5% of margins will return from them. Plus, as we scale up Cello Pens in the stationery category, another percentage point will be added from there. I believe this is what needs to happen to get back to those 26% kind of numbers.
Okay. So it's no longer an aspiration number. It's something that is kind of achievable, is that right?
It is definitely achievable, of course. And if the demand environment also stays good, then I don't see any reason why it's not achievable.
Okay. Got it. And last question is, you have got a lot of cash in the balance sheet. Given that you have a lot of capacity already built up, any plans for this cash?
I think a lot of this cash we are preserving also because we also look at inorganic opportunities, like what we did with Cello Pens. We are always looking out for such opportunities, and we want to. Though currently it shows our ROCEs or other return ratios as a little low. But I think in the long term, it is good for us to hold this cash for any such opportunities that are coming up. I think we look at it from that perspective.
Okay. Sorry to labor on this. Since you said you already have enough capacity, with inorganic opportunities, you will be looking at lines completely different from what you are currently doing? Is that what you are saying?
It will be adjacent segments. It will be something that has synergies with our current businesses. Or there is, say, distribution synergy or there is a manufacturing synergy. We are always looking at that kind of an opportunity.
Okay. And no plans to use this cash for doing any buyback given your depressed share prices.
Buyback, nothing. No buyback at this point of time, no.
Okay. Got it. Thank you so much. All the best.
Thank you.
Thank you. Ladies and gentlemen, that was the last question of the day, and I would now like to hand the conference over to the management for closing comments.
Everyone, thank you so much for joining in for today's call. I hope things get better in the world, and we'll have good quarters in the future. Thank you so much.
Thank you. On behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.