Welspun India Ltd. (WIL), part of the $3.5 billion Welspun Group, registered strong gr
owth in revenue and operating profit in the second quarter ended September 30, 2013. Revenue at Rs. 12,191 million vs. Rs. 9,945 million in Q2 FY13 represented 23 per cent growth YoY primarily due to strong volume growth in towels and rugs. The EBITDA margin improved to 22.8 per cent as compared to 17.5 per cent. Finance cost was 22 per cent higher primarily due to the additional debt on account of consolidation of the captive power plant.
During the quarter, the company changed the method of providing depreciation on its plant and machinery from straight-line to the reducing balance method. This has resulted in an additional one-off depreciation of Rs. 4,631 million for the period up to June 30, 2013, which has been provided in the current quarter. The change in methodology has also resulted in an increase of Rs. 41 million for the current quarter, which has contributed to a 15 per cent increase in depreciation in Q2 FY14 compared to the previous quarter.
Profit after tax (adjusted for the one-off depreciation) has doubled to Rs. 1,166 million from the Q2 FY13 level of Rs. 586 million. Net worth, which was impacted by the one-off depreciation taken, stands at Rs. 7,119 million.
As on September 30, 2013, net long-term debt stands at Rs. 12,161 million. The increase in debt QoQ was on account of drawdown of loans for the backward integration capex.
The vertical in
tegration project to increase spinning and weaving capacity is on schedule and is expected to be completed by end of FY14.
Speaking on the company performance, Mr. B.K. Goenka, Chairman, Welspun India Ltd., said: “We continue to deliver strong operating results, as in the last few quarters. To sustain and improve our margins, we have already taken several steps such as increasing share of premium products, raising our level of backward integration and setting up a captive power plant. We will continue to strive to be the preferred home textile supplier for our customers, through our innovation, scale and reach.”
India’s market share in global home textile exports has been continuously increasing over the last few years. The market share gain is expected to continue, supported by factors such as surplus cotton in the country, competitive factor costs and the supportive policy regime.
With economic growth showing signs of improvement, the US market is expected to pick up pace. Europe is also showing signs of revival, with consumer confidence hitting six-year highs in many important markets such as the UK and Germany. With many foreign retailers planning to set up their operations in India, post the opening up of FDI in retail, the domestic market is expected to grow considerably.