Welspun India is among the few textile companies that have weathered traditional challenges faced by the sector and emerged as one of the largest exporters of home textiles. It has recently ventured into the flooring business and has made its mark. Dipali Goenka, Joint Managing Director, Welspun India, spoke on the way forward for the company. Excerpts:
Is the operations cost going up after the outbreak of Covid-19?
Yes, the government had hiked the MSP (minimum support price) for cotton and this had pushed up prices by 3-5% in the last two months, but it is still lower than last year, as demand during Covid-19 had gone down. We see cotton prices breaching Rs 35,000 to Rs 36,000 (a candy of 356 kg). The demand in China and Pakistan is very strong. On the whole, we see cotton prices at about Rs 40,000, which is below last year as well. Coal prices are also going up. We had also spent to protect our employees during Covid-19. Our WelCare facilities in Anjar conducted antibodies testing for 12,000 people. Despite all these, we would maintain EBITDA of about 21%.
Have you been able to pass on this increase in cost to your customers?
Our retail prices are capped. We covered part of the cost increase by optimising our efficiencies. If cost increase sustains over three to six months, we go back to the customer and ask for price revision. If this is just a small seasonal change we leave it as it is. While the private label business is growing steadily, the portfolio business should register a growth of 20%. Growth in the omni channel and e-commerce businesses have been very strong.
How do you expect growth this fiscal?
The Covid-19 pandemic has changed the consumption pattern. Home products are in greater demand than they were earlier. As more people are working from home, we are seeing more demand for hygiene products like towels and wet wipes. Retailers are also stocking more of these products in the western world. We believe this will continue for 6-12 months.
Do you have any receivables from the government as part of the recent incentives announced?
There were some challenges due to delays in payments earlier. Government had not opened the portals for registering claims, but that has been sorted out. In fact, in August and September, we got approvals for a few claims. I don’t think it is a concern any more. The government has announced a new regime on reimbursement of local taxes on exports from April, but we are awaiting details.
Has the backlash on China opened fresh opportunities for India in global markets?
All customers in the export market want to de-risk on the sourcing front. They are looking at India, China and an additional country for sourcing. Being the largest producer of cotton, India is right up there for international buyers. Our flooring business, such as bath rugs, carpets and hard flooring has seen a lot of upside in demand. The hard flooring is a $3-billion business globally. Being a vertically integrated company we see a lot of opportunities for us.
Has the slowdown in hospitality and travel sectors hit Welspun?
Not much. This segment accounts for about 5% of our portfolio. But yes, the hospitality sector is struggling, and it is down by 30%, but we see a few green shoots here. In the US, it was down to 47% but they are reopening. It will take some time for this sector to recover.
Has demand in India recovered?
With digitisation and online transactions growing by leaps and bounds, we are seeing tremendous growth. For us, omni channels will drive sales. Besides modern trade, the traditional MBOs (multi brand outlets) constitute a large part of what we do in India. Tier-II and -III cities are seeing massive growth and that is where the aspiration for our brand is growing. However, we are not considering putting up our own stores.
Why are you keeping away from retail outlets?
We have our experimental outlet ― Spaces ― in Bandra (Mumbai), which will complement our virtual experience as well. Buyers can virtually visit Spaces and can buy products. So, we are not considering brick and mortar shops. We are working closely with our MBOs for branding. With the help of MBOs, we have about 3,000 stores for Spaces and 2,000 for Welspun that are pushing ‘Har Ghar, Har Dukaan Welspun’.
Any plans to bring down your debt?
We want to cut our debt to about Rs 2,400 crore or even lower by the end of this fiscal. We had repaid Rs 582 crore so far this fiscal and reduced debt to Rs 2,380 crore. We had announced expansion plans in our advanced textiles division which would require some additional capex, but we will keep the debt level as per our guidance of Rs 2,400 crore.