Ladies and gentlemen, good day and welcome to Welspun Living Q2 FY 2027 Earnings Conference Call hosted by 360 ONE Capital Market. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Aradhana Jain from 360 ONE Capital Market. Thank you, and over to you, ma'am.
Thank you, Dhairvil. Good evening, everyone. On behalf of 360 ONE Capital Market, I welcome all participants and the management of Welspun Living to the 2Q FY 2027 conference call. Without much ado, I will hand over the call to Ms. Bharti Agarwal, Head Investor Relations, Welspun Living, to introduce the management. Over to you, Bharti.
Thank you, Aradhana, and good evening, everyone. On behalf of Welspun Living Limited, I would like to welcome you all to second quarter FY2027 earnings conference call. On this forum today, we have with us Ms. Dipali Goenka, Managing Director and CEO, Mr. Manish Bansal, Chief Financial Officer, and Mr. Harsh Rungta, Group Head Investor Relations, Welspun Group. We hope you have had the opportunity to review the earnings presentation, which has been filed with the exchanges today and is also available on our website. During the course of today's discussion, we may make references from this presentation. As usual, we will begin with the opening remarks from the management, following which we will open the floor for a Q&A session. Should you have any additional questions after the call, please feel free to reach out to us.
With that, I would now like to hand it over to the call to Ms. Dipali Goenka. Over to you, ma'am.
Thank you, Bharti. Good evening, everyone, and thank you for joining us for Welspun Living's Quarter 2 FY 2027 earnings call. We entered FY 2027 with strong momentum and have carried this into the second quarter. Consolidated revenue grew 16.9% year-on-year to INR 2,870 crores, with EBITDA margins at 12.9%, expanded 600 bps year-on-year. It is particularly encouraging to see the progress beyond the headline numbers, growth across the business, improving operating performance, stronger cash conversion, and importantly, a balance sheet that has moved into net cash. These results reflect impact of the floods at Vapi facility, where operations were disrupted for several weeks during the quarter. The plant has since resumed partial operations, and we are working towards restoring full capacity. I would like to thank our teams for their efforts and commitment in managing this disruption.
Our core home textiles continue to be a key growth driver, with exports growing 18.3% year-on-year. Our customer relationships, product innovation, and ability to respond to evolving retail trends continue to underpin our performance. This growth was also supported by healthy retailers' demand ahead of the holiday season. Our U.S. onshore pillow business grew 2.4 x year-on-year this quarter. With both our Ohio and Nevada facilities operational, we are closer to the customer and more agile in our supply chain. We remain on track to double the business this year, further strengthening our position in the sleep category. Our domestic business grew 28.2% year-on-year on the back of strong B2C performance across general trade, e-commerce, and quick commerce. We see significant potential in the gifting and festive opportunity, leveraging improved visibility and product range.
We will continue to scale this business through stronger brands, wider distribution, and products aligned with evolving consumer preferences. Flooring business continued its recovery, with revenue growing 19.3% year-on-year, with EBITDA margins reaching 10.8%, improving both sequentially and year-on-year. The progress reflects the benefits of the strategic actions taken to sharpening the portfolio and prioritizing profitable growth. Our focus remains on sustaining these gains and building a structurally stronger business. We have also achieved an important financial milestone, with the balance sheet moving into net cash position compared with net debt of INR 775 crores at the end of March 2026. This progress has been supported by a material improvement in our cash conversion cycle and ROCE moving into the low teens. Together, these milestones reflect our focus on profitable growth, capital efficiency, and sustainable value creation.
The global environment remains dynamic, with commodity cost pressures persisting across the value chain, including firm cotton prices, an uptick in man-made fiber costs, higher oil-linked input, and elevated freight rates amid ongoing tensions in the Middle East. We are actively managing these pressures through disciplined procurement, planning, customer pricing discussions, and continued productivity improvements. On the demand side, consumers remain value-conscious, but quality, comfort, and design remain important purchase considerations. At the same time, global retailers are prioritizing dependable supply chains, sourcing diversification, and integrated manufacturing partners that can deliver scale, innovation, and speed to market. This creates an opportunity for Indian manufacturers to compete on capabilities and reliability alongside cost competitiveness. With India's expanding trade access, we believe Welspun is well-positioned to capture a large share of this opportunity.
Our strategy is to translate these structural shifts into profitable growth by strengthening customer partnerships, investing in differentiated products, and building capabilities to improve competitive advantage. We are also strengthening the long-term competitiveness of operations through sustainability initiatives. Anjar is now powered by 100% green electricity, while our STEP-ZERO program is advancing the transition towards more sustainable supply chains. These initiatives support our environmental commitments while strengthening our position with global customers who increasingly value responsible and resilient sourcing. Looking ahead, our priorities are clear: sustain double-digit revenue growth, maintain EBITDA margins in the low teens, improve returns on capital, and generate strong cash flows. We recognize that the global environment remains challenging, but we enter the second half of FY 2027 from a position of greater financial and operational strength. With that, I will hand over to Manish to take you through our financial performance.
Thank you, Dipali, and good evening, everyone. Q2 FY 2027 reflects continued progress on growth and financial discipline. Consolidated revenue grew 16.9% year-on-year, with double-digit growth in both segments despite impact from the disruption at Vapi. A key milestone this quarter is that we have moved from net debt position to net cash, representing a significant improvement from net debts of INR 775 crores in March 2026. This has been supported by substantial improvement in cash conversion cycle, along with sustained profitability and disciplined capital management. At the same time, we have achieved our FY 2027 goal of bringing ROCE into low teens ahead of schedule. Let me take you through three key aspects of our financial performance: profitability, cash generation, and return on capital. First, profitability. We delivered consolidated EBITDA margin at 12.9%, an expansion of 600 basis points year-on-year and 40 basis points sequentially.
This performance reflects our continued focus on operating efficiencies, procurement discipline, product mix, and cost management. In an environment where input costs and consumer demand remain dynamic, our priority is to ensure that growth translates into substantial profitability. Flooring continued to make progress, with EBITDA margin reaching to 10.8%, improving both sequentially and year-on-year. The improvement reflects the benefit of portfolio transitions and our sharper focus on profitable business. We remain committed to sustaining this progress through operating efficiencies, disciplined growth, and better returns. Second, cash generation and balance sheet strength. Our cash conversion cycle improved materially from 82 days in March 2026 to 44 days this quarter. This reflects greater discipline in working capital management and more efficient conversion of our operating performance into cash.
The improvement in cash conversion, together with our focus on cash generation and capital discipline, has strengthened our balance sheet to a point where we have moved into net cash position. This provides us with a stronger financial foundation and greater flexibility to pursue strategic growth opportunities. Going forward, we will remain focused on sustaining this progress through tighter management of inventory, receivables, and payables, ensuring that cash generation remains integral to our growth strategy. Third, returns on capital. We had set ourselves the goal of improving ROCE to low teens during FY 2027, and we have already reached 12.7%. This is an important milestone reflecting progress not only in business growth and profitability, but also how efficiently we deploy capital and utilize our assets. Our focus now is to sustain and build on improvement through better asset utilization, working capital discipline, productivity, and rigorous evaluation of new investments.
Our capital allocation approach remains focused. We will continue to invest selectively in capabilities, technology, productivity, and operational efficiencies while ensuring that investments are aligned with our strategic priorities and return expectations. To summarize, we have delivered healthy revenue growth, sustained strong margins, improved our cash conversion cycle to 44 days, achieved 12.7% ROCE, and transitioned to a net cash position. Together, these developments reflect a business that is growing, generating cash more effectively, deploying capital more productively, and strengthening its financial resilience. With that, we would be happy to take your questions.
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to please use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Our first question comes from the line of Ronak Shah with Equirus Securities. Please go ahead.
Thanks for the opportunity, and congratulations on the strong profitability recovery. Ma'am, my first question is on the B2B part of the home textile. In the first half, we have seen a growth recovery on a relatively lower base. However, from the fourth quarter, we are overlapping a relatively higher cycle. Structurally, how we are seeing this particular part from a near to medium-term perspective?
Thank you, Ronak. I just want to say the momentum looks intact for us, and we are looking at a double-digit growth, and that's what we are very confident about, and that's what will be the way forward here, Ronak.
Any qualitative indication you can highlight in terms of customer feedback, response, or how the order book is building up on? Okay, sure.
America, we have seen, despite the challenges that we are seeing in the terms of inflationary costs going up, the consumption hasn't dropped at the moment. That demand remains sacrosanct, and we are seeing that demand coming from United States of America. The other countries like U.K., Europe follow suit, and that is because of the opportunities that have happened because of the replacements, because of the FTAs. India is gaining share there, so that is the opportunity that we are seeing. As we go forward, this quarter was a blip little bit for us because of Vapi. Because of the Vapi floods, we had a blip, so we couldn't do too much of dispatch to U.K. and Europe, and hence our top line also got impacted by INR 100 crores-INR 150 crores. Otherwise, we would have had another growth.
But the opportunity that we are seeing in the coming quarters will be U.K., Europe, rest of the world. India is also gaining momentum, and of course, United States is also there. We know that we are just in the holiday season right now, but the next quarter also looks quite promising.
Understood. Second question is on the cash flow perspective. From the first half, very robust cash flow generation. We can see the larger part is funded through the incremental trade payables. Is there any material change into the trade terms or something, or it is just business as usual?
Yeah. Hi, Ronak. Manish here. Yes, it is business as usual, but there may be some movement because of various business conditions. Overall cash conversion cycle, which is looking 44 days, probably this will be more sustainable at 55-60 days kind of thing.
Understood. Lastly, on the CapEx front, considering the higher accelerated growth and the incremental opportunities which we are seeing, are we looking to increase our CapEx program, or are we good to go with the current disclosed stuff?
Ronak, what do you think we should do?
Understood, ma'am. Well appreciated, ma'am.
We will be looking at, to your point, we are exploring, we are evaluating, and we will take this forward because these opportunities never come just once, right? We have to take them and grab them. We will evaluate as we go forward.
Understood. That is it from my side, ma'am. Thank you.
Thank you.
Thank you. Our next question comes from the line of Prerna Jhunjhunwala with DAM Capital. Please go ahead.
Thank you for the opportunity, and congratulations on strong sets of numbers. Ma'am, first question is on the flooring business. This quarter has been a good recovery of around 19% on top-line growth, and margins continue to sustain. Just wanted to understand what should we look forward to in this business, and how should we look at growth and margins for second half and for the two years?
Prerna, thank you for your question. You know that the times right now with the crude and the others, the manmade fiber, the costs have gone up. However, with our flooring business, I think the important thing what we did, we right-sized the portfolio. The customer mix discipline was really taken care of. The cost structure, focusing on the profitable businesses was very important. Along with that, actually focusing on R&D, I think, has been a very important aspect and a driver for flooring. And we are confident that we will maintain the steady state growth that you are seeing. The sustainable range will be low double-digit margin, and that's where we will look at, because commodity is something. With the PSF and polymer could be something that might just be there. That's what.
Ma'am, in this business, like low polymer cost and crude oil has been elevated, and it remains elevated going forward also. It seems so.
Yeah.
Then, how do we get the pass-on on these costs?
Yeah.
Is it very difficult that margins can even contract little more, or we should see mid double-digit growth maybe after a few quarters because eventually it will get passed on? I am just trying to understand the nature of your business.
Sure, Prerna. I must tell you that in India, any business, because these are all based on projects, we are taking businesses with price increases. So, that is something that we have already taken on because we know that is not going to be sustainable to work otherwise, right? Even in the same way and the same spirit is maintained globally as well. So, that is the reason you are seeing what you are seeing in the terms of discipline that you are maintaining here.
Understood. This is also welcome that low double-digit margins, if it is maintained, that is better than what we were doing all year. So, that is a welcome change.
Yes.
Second question is on home textiles.
Yeah.
Given the cotton prices are continuing to remain high, now that the new season would start, and we do not know where the prices would be because what October has seen, an increase in prices against in the past where we would have seen decline in prices. What is your strategy on cotton procurement, and how are you dealing with this change with customers? Are you getting price hikes, and should the margins remain where they are, or there should be some softness that we can see in the near to medium term?
Prerna, one thing, cotton has been growing, the prices are going up, and we are seeing that. I mean, today if I look at it could be INR 68,000. But the important thing is we are in the season right now, and we have around four to five months of inventory covered beyond December. We are going to evaluate and take our own time to see when we take this fall to buy cotton. Secondly, the important aspect is the prices will be shared. If there is a price increase like this, you cannot do business, and it is not sustainable. We are doing it in collaboration with our customers.
Understood. Ma'am, any risk on tariffs that we see in the near term? Or because there was one, two months release that we had got. Any chatter that you are hearing from the customers around any increasing cost on tariff terms that can come up, or any kind of risk that you can highlight if there is you are seeing something that we should be aware of, or we should just monitor?
Yeah, Prerna. I can tell you that that 100%, the challenge that was there, it has been mitigated. You see that it has been And the BTA, the conversations are still going on. If anything that happens, India will be at a level playing field with the other countries. That is what we are very clear about.
Understood. Last question on FTA opportunities now that U.K. FTA-
Yeah.
Is few months. How are we seeing the opportunities there, and what kind of breakthroughs should we see going forward?
I think the important thing, first of all, I think this is like, time for India, and I think very excited to see these times. I think in the near future, at least 53 FTAs will open where the textile will get zero tariff. That's the advantage we will see going forward. With U.K., there have been early wins, and we'll continue to be in conversation. The important thing that is happening, interestingly, with the customers in U.K. and also in Europe, people are talking about long-term partnerships. Interactions have started. The factory visits are already on the go, and lot of product development is happening here. We already are present, by the way, with the marquee retailers here. It is again the next step forward, and we have our office there. We have the seat on the street too.
The target is to double-digit U.K. revenue growth.
Understood, ma'am. Thank you so much, and best wishes for next few quarters. Thank you.
Thank you, Prerna.
Thank you.
Thank you. Our next question comes from the line of Dhiraj Mistry with Jefferies. Please go ahead.
Yeah. Hi. Good evening, ma'am. Good evening, everyone. Congrats on good set of number. Continuing with the previous question on U.K. India FTA trade, I wanted to know from the very, let's say, five to six years perspective, what is the kind of opportunity you can see? What is the kind of market size, and what are the potential market we are targeting in terms of premium portfolio versus mass market portfolio, and what are the strategy going ahead for this?
First of all, with U.K. market, I think it's a $5 billion-$7 billion market that's growing, where Pakistan actually takes on around 55% of that market, primarily in the bedsheets. India, and for us as Welspun, we have an opportunity to grow here and take that market as well. That's what we see as we go forward. Right now, we will see an opportunity in bath towels, but as we go forward, we will see it in the other categories like bedding, sheets, rugs. That is something that is the opportunity that we are seeing in U.K. The same thing, already the conversations with the E.U. customers has already begun, and the interests are already there. We will grow this market in double digit over the coming years. That's where we are going to see a complete impetus.
By the way, Vapi is a factory that caters to these retailers.
Is Vapi completely up and running after this flood issue?
This quarter did see Vapi's disruption as an impact. Vapi already, with our cut and sew, with our processing, that is already on the go. The impact was on spinning and also slightly on weaving, but that we did outsource, and Anjar also contributed to help us and support us in that. Our volumes are coming back, and we will be normal in the terms of what we will be packing, in the terms of units and tonnage for towels for the next quarter.
Got it. When you say that U.K. and Europe, you would be targeting double-digit kind of a revenue growth in this, then what should we expect in U.S.? Whether it would be more of a mid to high single-digit kind of a growth, or we can expect double-digit growth there as well, given that we already have high market share in the U.S.?
You are absolutely right. U.S. will be mid to higher digit, and I think that is what we will be looking at. Every category will have its own role to play here. We also see an opportunity in U.S. as well.
Yeah. Ma'am, last question on emerging businesses, especially on Advanced Textiles and pillow market, if I look at, how is the thing? Let us say pillow has been seeing good significant run-up in terms of revenue and all, but where are we in terms of profitability, and where do we see that pillow business going in next two to three years period of time? Likewise for Advanced Textiles also.
So, with pillows, we are looking at a double-digit growth, and our profitability is, we are around breaking even there. As we go forward, we will be good to go there as well, because these are the early days. Because as Ohio is now 83% utilized, Nevada is 52%. We are absolutely on the go on this, and there is a huge opportunity that we see in America. So, pillows, we are very, very positive on. Advanced Textiles, a little challenging in the scenario, in the terms of our man-made fiber. This has taken a little hit because of the commodity surge in the Advanced Textiles. But we are working on a lot of things, how we work very focused on flooring. In a couple of quarters, you will see the kind of product portfolio differentiation that will come in, and we will share when it comes in.
Yeah, thank you. On pillow, so at maximum capacity utilization, what can be the potential turnover, and what kind of margin you will be making on that turnover?
See, we are looking at around $100 million from both the $80 million- $100 million from both the plants and the pillow business. We are targeting a kind of a lower teen kind of a margin in this.
Low teen margins?
Yeah.
Okay. Thank you very much.
Thank you. Our next question comes from the line of Soham Samanta with Motilal Oswal. Please go ahead.
Yeah. Thank you, ma'am, for the opportunity. Ma'am, just wanted to check couple of things. In home textile, if we excluding the Advanced Textiles, we almost grew 22% in H1 versus H1 last year. But at the same time, if we look the bed and bath volume, there is no volume major growth. Like in bed, we have declined 4%, bath, we have grown only 5%. So majorly, is it my assumption right that majorly the growth come from realization part on half-yearly basis as of now in home textile?
Yeah. So, the growth is coming from both side. In fact, bed linen has grown by 2% in term of volume.
Okay.
But it is both of mix of value and volume, and both are parallel. Bed and bath is equally growing.
So, going forward, like for next half year, how we look going forward? The volume will come back, or the realization will sustain in this 15%-17% kind of growth we have seen realization, that will continue to sustain in H2 as well?
Yeah. We are still tracking the same growth guidance which we have given in the beginning of the year. And we will continue to maintain the same in term of top line and even in term of EBITDA margin.
Okay. Second thing is your Advanced Textiles, as ma'am has already highlighted that there is some challenges in Advanced Textiles, and we can see the number, like in H1 versus H1, there is no growth. So, how do you look for next couple of years? I mean, can we expect a low double-digit kind of growth or high single-digit growth in this Advanced Textiles business?
Yeah. In a couple of years, there will be the opportunity there. We have put in on our board as 20% EBITDA, and that is what we are looking at. Also, the growth that we are looking at could be reasonably at around a double-digit growth, and that is what we are focusing on. I think this year has been an aberration, and as we get into the next year, we will see that coming back as well.
Okay. The pillow business, as you mentioned right now, that 80 million-100 million potential, when can we expect, FY 2029?
Yeah. FY 2029, we will expect that number.
Okay. Last thing, the flooring business, you had just mentioned, we have taken some price hikes. Is it right?
Yes, because of the commodities and the materials. The price hikes, any businesses in India that we take, they are project-based, so we do it on the price actually, which is there. And for the exports, we are taking the price hikes as well.
What is the quantum? Is it a mid-single digit?
It depends on the programs that we have, and it depends, so I cannot share anything else on that. But yes, we are taking reasonable so that it sustains us.
Got it. Yeah, that is it from my side. Thank you very much.
Thank you.
Thank you. Our next question comes from the line of Bhavin Chheda with Enam Holdings. Please go ahead.
Yeah, good evening. Congratulations to the entire management team for the excellent results despite the Vapi disruption in the quarter. Few questions. First on the India-U.S. trade deal, if I understand from what the trade deal earlier was, we were looking at 17%-18% tariff with U.S. versus Section 301, where the tariffs now are at 10%. Can you update any latest developments of what you are hearing the tariff rates would be whenever this trade agreement gets into picture?
Honestly, for us also, it is for us to see what happens here. At the moment, we are at 10%, and the conversations are happening. The thing that we know here is very, very clearly is that we will be at par with Pakistan, Bangladesh, China, and Vietnam, and the neighboring countries. Definitely that is where we will see how it goes and how it pans out.
Sure. Then my second question is on the capacity utilization. If I see the bath linen, you did 83% despite Vapi contribution probably not being much in the quarter, which means if I adjust for the Vapi, did you operate bath linen almost near 100% in the quarter?
Actually, we are running 100% on the quarter for bath. I mean, literally, and as we go forward also, we will be utilizing our capacity, and we are around 90%.
Sure.
Bhavin, Manish here.
Yeah. Hi, Manish. Yeah.
Yeah. Okay.
Yeah, carry on.
My only point was, what DVG was saying, Vapi is at lower capacity, but because of Anjar and other ancillary units, and also some of the investment we have done in last years, WHSL, which has also kicked in, so that has actually helped us to manage this kind of revenue utilization.
Sure. Really good job. Third is, I just want to come back on the earlier guidance before all those disruptions happen with the U.S. on the tariff front and all that, where we were looking close to INR 15,000 crores of top line in FY 2028, which may probably have got pushed to one or two quarters back based on the capacities we have already in place, and the utilization is also increasing. So, I would like to come back when now the things are normalized, and probably we are looking at 10% duty regime, FTA signed in U.K., Europe, currency being at 95. Everything is positive as of now for the Indian textile industry. So, we should be more confident of reaching that INR 15,000 top line number based on the current capacities as per the earlier plans, right?
We will be. Actually, the number is intact for sure, but the opportunity here is immense. We are definitely exploring some opportunity of investment here.
Yeah, ma'am. That was my next question, because I was considering INR 15,000 crore top line is in the bag. So, what we do after that?
No, there is an opportunity here, Bhavin. I think, actually, for Welspun, we don't want to let these opportunities just go by, because we are leaders in towels, and we will maintain that globally, and we will maintain that complete leadership across the globe.
Sure. Thanks a lot, and best of luck. Yeah.
Thank you.
Thank you. Our next question comes from the line of Roshan with Antique Stock Broking. Please go ahead.
Yeah, thanks for the opportunity and congratulations on good set of numbers. I just wanted to understand your EBITDA margin has expanded approximately 12% in this quarter. How much of this improvement reflect the structural factors like operating efficiencies and premiumization versus the temporary factors like elevated raw material cost, freight, and then other things? Yeah, that's my question.
Yeah. Hi, Roshan, Manish here. There are mix of things. It's not one of the item. In fact, there is some cost also been added, like some of the commodity or chemicals prices has gone up. But there are lot of things happen, cost optimization, cost efficiency, production efficiencies, and some of the price increase also. That is the thing which we've been talking now, that we will continue to monitor this, and as we go further, we see all agreed kind of situation where we can maintain our numbers.
Understood. The next question is, how is the demand evolving across U.S., U.K., and European markets, and what is the current visibility on orders for the, maybe the near term, from next two quarter perspective? Maybe you can help with what are your customers thinking about the upcoming festive season? How are the things moving? Those commentaries would be helpful.
Yeah. U.S. has been growing, and it has defied all the norms of even inflation that is coming our way. So, that story remains for these couple of quarters. We will see that growth there. In U.K. and Europe also, we are going to see a steady growth, and that growth will be owing to the FTA opportunity and the replacement. Definitely, that's going to be something that we will see even in the coming quarters. We had that little blip this quarter because mainly Vapi does service our European orders and U.K. orders.
Understood that. With the cotton prices and freight cost and-
Sorry to interrupt, Roshan, but your line is not very clear. Request you to-
Yeah.
Please check your line and speak closer to the mic, please.
Is it better now?
Yes. Please go ahead.
Yeah. With the cotton cost and freight cost trending higher, what is the timeline that is expected between you passing on the cost to the customers? Typically, what is the timeline that happens?
We continue to talk through all the conversations for prices when they are needed, and this is all done through collaboration. Freight also, actually, with our long-term contracts that we have with our partners, they held us in good stead. Yes, as we go forward and with the prices impact that we are seeing, we will definitely go back to customers for price conversations. For the freight also, let me also tell you, more than 90% of our business is FOB.
Understood. A final question from my side. With the company being net cash, with the strengthened balance sheet, how does the management intend to allocate the future cash flows? Any steps in that?
Sir, sorry to interrupt, but your line is not clear. Your audio is not coming through completely.
Yeah, I will repeat the question.
Yes.
With the company being net cash positive from September onwards, and with the balance sheet kind of strengthened now, how does the management intend to allocate the future cash flows going forward?
Yeah. As of now, our current CapEx allocation is same as we continue to mention, which is roughly around INR 400 crore-INR 500 crore per annum, which is steady state situation. But as we are talking and seeing some of the growth in different countries, we are exploring our opportunities, and over the period, we will come back.
Understood. That is all from my side. Thank you so much.
Thank you.
Thank you. Ladies and gentlemen, to ask a question, you may please press star and 1. Our next question comes from the line of Shradha Agrawal with Asian Markets Securities. Please go ahead.
Yeah. Hi, ma'am. Congratulations on a great quarter. Two questions. Can you give me the split of domestic and export sale in our flooring business?
That we do not actually talk about, but it is always owing to the businesses that we have. Primarily, they are the same.
Is it skewing more towards domestic sale or more towards exports in the flooring division, given that we have seen sharp improvement in profitability in the last two quarters?
They both are actually. It depends on the kind of orders and how it is. For the domestic businesses, they are basically project-led, and the global ones are program-led. Both are actually. It just depends how those orders come in. If you are talking about the margins and the others, let me tell you that we have gone back to our customers for the prices. Because for us, it is otherwise not sustainable.
Mm-hmm. What is the sustainable revenue growth number that we can look at for the flooring division?
So, it will depend on what we are talking about right now. See, we are looking at a low double-digit kind of a growth. I mean, no, margin is at low double digit, and the growth is at a steady state.
Sorry, growth is?
The growth is actually, you know, a steady state that we are seeing right now, and low double-digit margin.
Okay. The other question is, you have done very well, but if I look at OTEXA data, it looks like China and Pakistan seem to have done better than India in this calendar year so far. So, any market share changes that you are seeing in the U.S. home textile market?
But I think you are The OTEXA data, I think if you look at it, I think for towels, we have seen the share of India, and specifically for Welspun, increase compared to Maybe the share for the India would have dropped, but I think Welspun has increased in towels. And sheets, I think, has been a steady state there.
Because the data I'm looking at, ma'am, that shows that India has declined 17% YTD.
India has declined, but grown.
Okay.
Yeah, if you have the data, you can actually reach out to our teams to discuss, if you want.
Sure. Okay, ma'am. Thank you.
Thank you.
Thank you. Our next question comes from the line of Aradhana Jain with 360 ONE Capital Market. Please go ahead.
Hi. Just wanted to check on a couple of things, continuing with where the previous participant left. With respect to OTEXA data, or in general, what we are hearing is that because of the West Asia war not having cooled off till now, there is a bit of an inflationary situation that is building up in both U.S. and E.U. markets. From a little bit of a medium-term perspective, what are you expecting because of that inflationary situation in U.S. or E.U.? Would that in any way impact our order book? How are the tenures with the contracts that we have with our clients? Is there any change there? Is it still a little shorter term, or is it now going back to a little more longer-term contractual arrangement with them? I believe that the next two quarters could already have our order books filled.
But from the next year, first half or second half perspective, if you could help us understand that, what are we expecting? Also, from E.U. perspective, how much is the share today? Like, what would be the share of non-U.S. geography for us today, and where do we see that over the next, say, two-year period? That's my first question.
I think let me just come to your first question and discuss this. So, your question about America and the inflation is absolutely, you know, on the. Because actually, obviously, that's what we all think and anticipate. For U.S., we actually do most of the businesses, 60%- 70% of our business are replenishment businesses that are going on for some time. That actually gives us an opportunity to actually. This is an ongoing business that is going on, so we don't see any impact out there. See, now inflation happens or what happens, but we have seen the consumption being steady state. So, we are okay there. Europe, I can say we can be cautiously optimistic, though there'll be growth. There'll be growth because of owing to the FTA. So, that's the opportunity that we see in Europe as well.
Understood. How much would the non-U.S. share be today, and how much should we expect that over the next two-year period?
We are growing at a state of 20% in Europe and U.K., and we'll maintain that.
Okay, understood. The second thing I wanted to understand is a little more on the gross margin side. Last quarter, if I see, our gross margins had compressed by close to around 250 bps, and that was because of the pressure of raw material prices. What led to the pressure coming down this quarter, because of which our margins improved? Had there been also a reasoning to the branded business doing so well that led to the margins improving? Was it a lot to do with the superior product mix that led to the margins improvement? How much can we expect the margins for the next couple of quarters? If the raw material continues to be at elevated levels?
Yeah. Hi, this is Manish here. It is a combination of customer program mix and sales price along with the raw material. As you know that, we are holding inventory for six to nine months normally, and we continue to maintain, and our average price always support us. That is what we will continue to maintain, and that will continue to have this kind of situation.
So, we expect the 45% sort of a gross margin to be a steady state level for us, even if the costs remain at these elevated levels from raw material perspective?
Yeah, it will actually improve and depends on the entire customer mix, but it is-
It is a product mix. It is a game of a product mix, actually, Aradhana. It depends on what kind of programs are we shipping out. It will depend. However, we are looking at a good steady state EBITDA margin.
Yeah.
Understood. The last thing I wanted to understand is on CapEx. You did say that around INR 400 crore to INR 500 crore is the annual CapEx that we plan to do. Of that, around INR 150 crore is what we have done in the first half. If you could just help us understand where exactly would the rest of the INR 350 crore be utilized towards? For the next year also, can we expect similar sort of CapEx, and where would that be also deployed?
Right now, we can talk about the current, and I can tell you that this is all being used to debottleneck in our operations, so that can increase our production. That is where this investment, the rest that is going in the rest of the year. That is what we are focusing on. The next year, we will be discussing a lot of things, so we will come back to you on that as well.
Understood. That is all from my side. Thank you and all the best.
Thank you. Thank you so much.
Thank you. Our next question comes from the line of Shirish Pardeshi with Motilal Oswal. Please go ahead.
Hi, team. Congratulations for good set and good set of numbers, and thank you for the opportunity. Just quick question. Last many years, we have been trying to fix flooring business, and now at least there are early signs that this business is seeing some better momentum. Just wanted to check, first half we have done around INR 400 crore. Can we look at this business INR 1,000 crore and next year about INR 1,500-odd crore? I mean, you know what you have done in the business. I am just trying to say that, is there any steady state of revenue momentum we can build up in this business? Because we have lot of learning in this business.
We are actually looking at around INR 800 crore- INR 1,000 crore in the near-term future, but nothing more than that. And the focus here is to grow our domestic businesses, grow and have a steady state margin and profitability, and make our healthy mix in the terms of our products. This is the focus here, and we will continue to do that.
No, I am not asking the margin guidance, but directionally, whatever changes you have brought to this business, the growth is there and the margin uptick is also there. I am saying, because this business has been volatile for us for many quarters now. But again, this number to get a clear sense how the business will contribute to the overall scheme of things. I am just asking the direction.
That is what I am saying. In the long term, in the midterm to long term, we are looking at around INR 800 crore- INR 1,000 crore, and that is what we will continue to have with a steady state healthy profitability as well. This is the focus here, and we are looking at our India market to grow. That is where we are seeing, because there is lot of opportunities in the domestic business as well.
Okay. The second question I have, when you look at the revenue mix number, one-third of our business, which contributes B2B innovation business and domestic B2B business, both businesses grown upward of 40%. Is there any seasonality or one-time ordering backlog which has got cleared? Or, you did mention that this business will grow double digit, but I am just seeing that the quantum, is there a new customer addition or have you won any new programs? Then you can then build saying that this business can grow to maybe about close to about INR 4,000 crore-INR 4,500 crore.
Yeah. Shirish, you pointed right. There are a couple of one-time orders has gone, been as a drop in some promotional one. But overall, it is part of the sales mix plan, so this will continue. There is always a seasonality sometime on one or two orders, but otherwise, it will continue. If not this, something else will work next quarter. This will continue. The momentum will continue.
Okay, Manish, that is good explanation, but what I am trying to check with you, global B2B business, what percentage of business is programmed rate? Is it significantly higher at 70%, 80% so that we can build consistency? Or if it is 50/50, then we can say that some lumpy order might come in future also.
Yeah. You are absolutely right. It is 70%, 80% of our total business, so that is right.
Okay. And more curious that B2B others, I mean, this business has been under pressure for some time. What are the corrections or what are the changes we can expect in second half or maybe next one year? Because it is about 47% of the business in this quarter.
Yeah. So, this will continue to do well. This was just a change of mix in term of sales, but it should be same into next. Yeah. So, some of the products has moved into innovation, then next quarter it will go back to the normal one.
It will be a mix of brand, innovation, and private label business as well.
Is it something to do with supply from Vapi and Anjar, or it is pure U.S.?
It is nothing to do with Vapi, but it is overall business mix.
Okay. The last thing-
Critical is to ensure the right sales mix, and that is what we are trying, and which is actually helping us to rationalize our cost and profitability.
Okay. And the last thing, on the U.S. overall momentum, we have spoken a lot. In terms of refurbishing or reinventing the entire whole business mix, at what point of time we will see the full-scale operation in the U.S.?
No, it is already working in the full scale only. We have replenishment businesses which are growing, which are continuing to go in steady state. There is nothing that is happening which is going to change here. Except the conversation was on the BTA, that will continue, and we will see how it pans out, which will also be on the level playing field.
Okay. Is it safe to assume that U.S. is running at 70%-80% utilization?
Oh, you are talking of pillow business?
Yes.
Oh.
Oh, so that is around, yeah, that is running at 67%-70% kind of thing. And this is continue to grow. Currently, we are running that doubling this year. So far, we have doubled last year's number.
Okay. All right. I have few more. I will talk to you, Manish, offline. Thank you and all the best.
Sure. Thank you.
Thank you. Our next question comes on the line of Rohit Ohri with Progressive Shares. Please go ahead.
Hi, Dipali and team. Two questions. The first one on Welspun and AI. Do you think that this can help improve the manufacturing economics going forward?
Yeah, of course, it is going to. Leveraging AI will definitely, and that's going to be the way forward, along with automation technologies.
Currently, what percentage of manufacturing capacity is being covered by Welspun and AI?
So, we are continuing to evolve this. When you talk about AI, there are different forms. There is agentic AI, vision AI, as you spoke about. Their requirements are different. Vision AI is required for quality and the others. They will continue to look at areas where we need, and we will need it across all our operations, so we will continue to evolve that. This is, we recognize that it is going to be very critical to keep us competitive and make us future-ready as well.
Any discussion or any sort of number that you can share with the improvement in production output per employee that you anticipate going forward?
That will happen as we go forward, and we will come back to you because that is going to be the norm. There are a couple of things, the throughput, the material movement, and the employee productivity is the very key thing as we go forward, because in the era of inflation and the manpower costs that are going up, we will have to continue to make efficiency and the efficacy on that.
Directionally, over the next three to four years, can we conservatively think that 14%-15% on the top line with 14%-15% EBITDA margin and 15% ROCE, that can be achieved?
We have promised, we have given our numbers, and I think we are going to maintain that, a double-digit growth, and in the next two years, a growth 15% EBITDA. We want to maintain that. Yes. The ROCE over 14%-15%.
Dipali, [Gandhi] recently agreed NZFTA, which came into effect on the 20th of this October. What sort of opportunities do you expect from this geography in terms of rupees billion, and have you been able to sign any new logos recently?
These are constant processes, and we are in conversation with a lot of retailers, and they continue to fructify, they continue to A lot of development happen, lots of visits happen. We will see how it evolves, and we are actually geared up for a 20% growth in this region.
Okay. Thank you for answering my question. Thanks a lot.
Thank you. Thank you so much.
Thank you. Our next question is a follow-up from Prerna Jhunjhunwala with DAM Capital. Please go ahead.
Thank you for the opportunity once again. Wanted to check on other expenses. They have not been this high in this quarter. In fact, on a Q1 basis, it is a decline. Is there any kind of tax, import tariff refund, or any kind of cost rationalization that you would like to highlight in this? That would be helpful.
Yeah. Hi, Prerna. This has been a constant work which we have been working, and this is where we are able to perform and show you the numbers. We have been talking this many, many times. Yes, there is a cost optimization activities is going on, and including bringing productivity.
Okay. This also suggests that there is no major escalation on container cost increase that has been happening and stuff. Should we assume that this kind of number should continue going forward also?
Container cost and all, we have been managing and monitoring very closely currently. Because our long-term contract has supported us and given us edge into this area. As we progress and how this market goes, we will continue to monitor and keep you posted.
Understood. Just confirming, there is no tariff refund that we would have got? Because few companies in last one quarter have mentioned, not in textiles, but in other sectors have mentioned that they have received some tariff refunds. We are not receiving any refund, is what I just wanted to confirm.
Prerna, we have received some refunds, but none of them is part of our balance, P&L as of now.
Where would that go? If we keep getting some refunds, where it will be visible?
They are part of some of the. We are under reconciliation with customers, and it is with customs, so probably will start reflecting sometime in next quarter onwards.
Understood. Thank you so much, sir. Second question, one more thing. Ma'am, you have been highlighting that U.S. will also grow at 20% going forward. Leaving the base
No, no. U.S. will not grow at 20%. U.S. will grow mid to upper single digit.
Achha, okay. That's my reference.
Yeah, yeah. U.S. is huge, yeah.
Okay. Thanks.
Thank you. Thank you, Prerna.
Thank you. We have no further questions, ladies and gentlemen. I would now like to hand the conference over to the management for closing comments.
Yeah, thank you. Thank you, everyone, for joining us today and for your continued engagement. Quarter two reflects our continued progress on growth, profitability, and financial strength. With an improved cash conversion cycle, better ROCE, and a net cash position, we have significantly strengthened our financial foundation. While the external environment remains dynamic and restoration of our Vapi operations remains a near-term execution priority, we believe that the underlying strength of our business and the actions we have taken position us well for the next phase of growth. India's increasing competitiveness in global sourcing, evolving trade relationships, and the growing importance of reliable supply chains provide meaningful opportunities for the industry. We intend to build on our strength in scale, innovation, customer partnerships, and operational efficiency to capture these opportunities and create sustainable long-term value for our stakeholders.
Thank you once again for your continued trust and confidence in Welspun Living. We look forward to speaking with you again next quarter. Should you have any further queries, please feel free to connect with the investor relations team. Thank you.
Thank you. On behalf of 360 ONE Capital Market, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.