Margins will remain under slight pressure for at least two quarters: Dipali Goenka, Joint MD & CEO, Welspun India

Dipali Goenka, Joint MD & CEO, Welspun India Limited, talks about the performance of the company in Q2FY22, global recovery, consumer spending, supply chain disruptions, flooring business, debt, CapEx, government initiatives for the textile industry, and inorganic growth opportunity among others during an exclusive interview with Swati Khandelwal, Zee Business. Edited Excerpts:

Q: Congratulations on posting the highest revenue and strong broad-based performance in September quarter. What is your take on the results?

A: Results are better than the pre-COVID levels and there is a 33% growth from the pre-COVID era and a growth of 8% from the COVID times. Definitely, it is better but the commodities are putting pressure on the margins and we are quite aware that commodities are putting almost everything under pressure. But otherwise, overall, sales are looking buoyant even for the next quarters and the demand because the economy stays strong and that is, definitely taking the wallet share of around 7% from the consumer, maybe it is in Europe or the UK or the USA. At the same time, I would like to say that our Welspun brand has a dream of Har Ghar Welspun' and with the Nielsen report, we are the highest distributed brand in the country and we are around 5,200 stores. So, we are very very happy about that.

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Q: You have talked about global recovery and said you have seen a growth of 33% from the pre-COVID era and you have also talked about the US and the UK markets. Tell us about the kind of consumer spending visible there. What is growth outlook from these markets?

A: First of all, if you will talk about consumer spending then during the COVID the consumer spend reached a mark of 13% on home category, earlier it used to be 5%, and as normalisation is happening, it is moving to around 7%. So, there is that focus. The second issue is for India because India is an important cotton-growing country, cotton exporting country and also the kind of sourcing strategy of India is turning important for us and India is getting importance in it. So, definitely, that is very big for all of us. So in the US, the UK, Europe and the rest of the world, definitely, India is coming to the prime. I would also like to add that in the US, every fourth towel is made by Welspun and every seventh sheet is made by Welspun and the number for all of us in the country is looking better.

Q: How have you managed the global supply chain disruptions? Also, have you done any price hikes or planned any hikes further for domestic or global businesses to ensure that the margins are not impacted?

A: Price increase is imminent. We saw supply chain disruptions first in freight and logistics and everyone has to witness this hiccup, i.e. where it used to take 60 days to reach the US, it has now started taking 90 days. We have our warehouses there, so, bring closer to the customer, we felt minor hiccups but the cost pressure is on everyone. Going forward, if we have a look at the commodity, which is changing almost every day maybe it is the price of coal or cotton or freight issues. I think, everywhere, the commodity is definitely playing hide & seek and putting pressure on margins. So, I feel that the margins will be under slight pressure for at least two quarters, although we are going to the customers for the price increase and they are also supporting us but it also has a limit.

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Q: The flooring business grew 107% YoY and contributed 6.5% to the top line in Q2FY22. How sustainable is this growth? Also segment wise, which segment is performing at its best and which one needs attention?

A: First of all, flooring is our upcoming new business and you know it well the COVID came immediately after this flooring business was introduced. But looking at where we are today, it seems that other markets are opening up, we are getting a lot of upside from the US and we are getting new customers in the UK, Europe and the Middle East. So, we have a focus of Rs 200 crore in four years and it will be met. Earlier, we established a Greenfield project of the same for India first but looking at the whole investment that we did, the first focus as India was still struggling to open up from COVID was on export but going forward there will be a 50:50 contribution from the world and India, as we go forward and we are feeling quite bullish about flooring as well. To this, I would also like to add that our emerging businesses maybe it is flooring, advanced textiles (AT) or brands, have contributed 22% to our top line and that has been a big one and we will see it continue to grow. As you have said that I talk broad-based, but definitely, we are also focusing on brands and AT along with flooring and we are quite bullish about it.  

Q: What is the status of your current expansions at Vapi and Anjar? What is your current capacity and do you plan any CAPEX going ahead?

A: Currently, we are running at 95% capacity at both Vapi and Anjar. In addition, the Brownfield project that we announced a couple of quarters back is on track. Towel capacity at Vapi will increase by 60% from the second quarter and sheets will increase from the third and the fourth quarter in Anjar. We have also talked about 80% capacity of rugs will also be in operation in the fourth quarter of FY22. Last time, I said that the Ajnar capacity will be increased by 46 metric tonnes then it will become operational from quarter four FY23. Although we are seeing an impact due to the commodities, I think, India is going to be a resourcing destination and we feel very very bullish about the opportunity as the government is supporting it and India is in a very strong position to become an outsourcing country for everybody across the globe.

Q: What role would it play in the government's endeavours for 'Made in India' for the world among others because the government is already announcing several PLI schemes, mega parks clusters for textile among others? Also, are you applying in any of the PLI scheme/s? 

A: PLI schemes are being talked about and Welspun is also thinking about it. So, a lot of conversations are happening and will come back to you about it. But yes, Made in India is going strong and as I said that for Welspun itself every fourth towel in the United States is made by Welspun and every seventh sheet is made by Welspun. It is an honour and pride to be Made in India and I think that it is going to be a very strong footing for the country as well. I would be happy to share that Christy Towels were ranked at the top by Ideal Home, UK, and the top four towels out of 10 towels were made by Welspun and that is also a matter of pride for us.

Q: Net debt of core business has reduced by 46.4% in the last three years. What are your estimates for FY22 ending with regards to the same? Also, going forward, how will you meet the working capital requirements?

A: I think, our net debt for FY22 will remain equal to FY21 and our growth will be around 14%. So, we are very conservative in the way we look at what we manage. There is prudence in terms of debt. The volumes and the kind of business, we are looking at, definitely, will be able to support the funding also. I would say that the net debt will remain equal to FY21 and we see our growth to be quite robust.

Q: You have talked about the organic growth opportunities but plenty of inorganic growth opportunities are also available in the market. Is Welspun looking at something very closely and do you have something on your radar?

A: Inorganic growth opportunities are available and they will be available always in this market. At Welspun, we definitely will look at that. So from both the sides downstream to upstream, there are opportunities and to integrate the supply chain is one endeavour and to add-on value to our brand portfolio will be another endeavour. So, there are opportunities that we will explore and will continue to explore as well.