Rs. 600-cr investment in flooring & carpets
Despite issues related to Egyptian cotton, Welspun India Ltd. (WIL) reported Rs. 1,790-crore revenue for the quarter ended September 30, 2016, marking a 22 per cent rise over the corresponding period in the previous fiscal.
Commenting on the performance, Mr. B.K. Goenka, Chairman, Welspun Group, said: “We have registered a double-digit revenue growth in spite of the recent challenges which have provided important lessons for us. In the long run, we believe these developments will make us stronger. We are taking all necessary steps to transform Welspun India into an institution which is system-driven and will accelerate the journey to achieve global leadership.”
WIL, part of the $2.3 billion Welspun Group, is one of the world’s largest home textile manufacturers. With a distribution network in more than 50 countries and world-class manufacturing facilities in India, it is the largest exporter of home textile products from India. Supplier to 17 of top 30 global retailers, the company has marquee clients like Bed Bath & Beyond, Costco, Kohl’s, Wal-Mart and Macy’s, to name a few.
In the second quarter, the company achieved its highest revenue ever of Rs. 1,790 crores, up by 22 per cent from Rs. 1,469 crores. For the half year, the growth was 18 per cent, from Rs. 2,863 crores to Rs. 3,383 crores.
“Welspun has taken the Egyptian cotton issue very seriously, and we have proactively engaged with all our stakeholders and appointed EY as external consultant to thoroughly examine the supply chain which has become significantly complex over the years, making traceability very difficult,” added Mr. Goenka.
EY suggested several remedial steps covering structural, procedural, people and technological measures on which Welspun has begun to act. As a vertically integrated player, the company is moving towards making all the Egyptian cotton products in-house, i.e., from procuring cotton to the finished product stage.
The slew of steps to be initiated include deployment of a dedicated resource in Egypt for sourcing of Egyptian cotton, increasing third party assurances such as Gold Seal from the Cotton Egypt Association, vendor audit and DNA tests.
Mr. Goenka further pointed out that the processes in the textile industry are not well developed as in some other industries like pharma, and said his company is working on a cutting-edge RFID-based technology to track the manufacturing process and thus reduce human intervention significantly. “We hope to raise the bar for the industry,” he affirmed.
With regard to the innovations driving the company, Welspun has filed 27 global patents, of which nine have already been granted. Its best-selling innovation Hygrocotton has done well and the latest one Nanocore has received Asthma and Allergy Free Certification for bedding products in the US. A third innovation Drylon has achieved good traction with the launch of new varieties.
Apart from revamping its Christy brand to make it youth-friendly, Welspun is also increasing its global footprint with new stores in the US, China, the Middle East and the UK and working on closer association as in the case of Wimbledon and Rugby World Cup.
“We are very optimistic about the Indian market. Our brands such as Spaces – Home and Beyond and Welhome have been well received in the market. I am happy to report that, supported by innovative products, we are growing at a rate of over 20 per cent year on year”, Mr. Goenka said.
Welspun is now sharpening its focus on the hospitality industry which has huge growth potential. The company already tied up with prominent international hotel chains. In tune with the current trend, Welspun will continue to focus its attention on e-commerce.
Capex and new projects
For FY17, the capital expenditure planned is Rs. 8 billion. Out of this, Rs. 4.5 billion of capex has been invested during H1 FY17. By the end of the year, the annual capacity is expected to reach 72,000 MT in towels (from 60,000 MT at end-FY16), 90 million metres in bed linen (from 72 million metres at end-FY16) and 10 million sq. metres in rugs & carpets (from 8 million sq. metres at end-FY16).
Further, as a growth strategy, the Board has approved investment of Rs. 6 billion on a facility for flooring solutions (rugs, carpets, accent rugs and tile carpets) of a capacity 7 million square metres at Anjar, Gujarat. This investment will benefit from synergies arising from the company’s existing product line and customer base. The capex will be done over 18 months, spread over FY18 and FY19 and will be funded by a mix of debt and internal accruals.