Welspun Living Ltd

Q3 FY23 Earnings Call Analysis

Management growth scorecard

Fundraise

N/A

Capex

Yes

Revenue

Category 3

Margin

Category 3

Order

Yes

2 of 4 growth signals are positive.

Fundraise plans

→No explicit mention of any current or planned new fundraising through debt or equity in the Q2 FY'24 earnings call transcript.
→Net debt as of Q2 FY’24 stands at ₹1,573 Crores, with an objective to reduce to below ₹1,000 Crores by FY’24 end.
→Cost of debt is currently around 6.5%.
→Management is focused on prudent capital allocation, especially regarding future capex decisions related to growth and capacity expansion.
→Any future capex, possibly involving debottlenecking or new investments, will be assessed based on IRR and ROCE considerations.
→No announcement regarding equity fundraising or fresh debt issuance was made during the call.

Yes

→Q2 FY'24 capex was ₹168 Crores, mainly for setting up a 30 MW solar power plant at Anjar facility.
→Board approved investment of ₹56.4 Crores in a special purpose vehicle (SPV) to supply 47 MW renewable energy round-the-clock for Anjar operations, aiming for 80% renewable energy by 2026.
→The SPV will set up a 150 MW solar plus wind plant; Welspun will hold 27% equity.
→Exploring debottlenecking of existing capacity, especially in bath linen, to meet demand growth.
→Considering incremental capex for flooring and home textile capacity expansion once utilization exceeds 95%, subject to prudence on IRR and ROCE.
→Focus on optimizing ancillary network near factories for growth.
→No specific timelines disclosed yet for new large capex; strategic decisions will depend on market conditions and ROCE metrics.

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Category 3

→The company targets topline growth of 10-12% for FY’24 despite global economic volatility and geopolitical concerns.
→Domestic consumer segment expects good growth in coming months as consumer sentiment improves, especially during the festive season.
→Flooring business is growing steadily with increased order flows in US, UK, Middle East, and Africa; capacity utilization is rising.
→Emerging businesses like domestic consumer, global brands, advanced textiles, and flooring grew 28% YoY in Q2.
→Capacity utilization remains high (80-90%) for key products; debottlenecking and ancillary network optimization are being explored to support growth.
→New and increased orders from marquee retailers indicate confidence and sustained demand.
→The company is cautiously optimistic but committed to maintaining growth and profitability guidance.
→Global brands and private label businesses are expanding in new geographies and channels, supporting future growth.

Category 3

→Welspun Living Limited targets topline growth of 10-12% for FY’24, maintaining cautious optimism amidst global economic uncertainties.
→EBITDA growth guidance is around 15% for FY’24, reflecting operational efficiencies and cost rationalization.
→Home textile segment is expected to maintain gross margins of about 17-18%, with exports margins around 17-18% despite elevated cotton prices.
→Emerging businesses (flooring, domestic consumer) currently offer lower margins but are expected to improve as they scale.
→Flooring business capacity utilization is growing steadily (63% in Q2) with potential for debottlenecking and possible incremental capex if utilization exceeds 95%.
→Profit after tax for Q2 was ₹197 Crores (up 22x YoY), H1 PAT ₹358 Crores (up 12x YoY), showing strong earnings growth momentum.
→EPS for H1 FY24 stood at ₹3.70 vs ₹0.31 last year, reflecting strong profitability gains.

Yes

→New and increased order flows from marquee retailers indicate strong trust and confidence in Welspun Living (Page 15).
→The company has a robust order portfolio supporting their revenue growth commitment for FY’24 (Page 11).
→Flooring business orders are not one-off; a consistent run rate of orders is expected due to China+1 strategy and diversified customer base (Page 6).
→Multiple customers contribute to US flooring orders, with a granular mix rather than dependence on a few big players (Page 9).
→For home textiles, 70-75% of business is replenishment-based, providing stability and visibility to the order book (Page 11).
→UK FDA approval expected to boost order inflows within 6 months, expanding exports (Page 7).

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