Rs.11 billion investment, 27 million sqm. capacity
Welspun is shifting the proposed flooring and carpet manufacturing facility from Gujarat to Telangana. The expected investment is Rs. 11 billion with a capacity of 27 million sq. metres per annum. Commercial production is expected to start in the third quarter of FY20.
Welspun had announced foray into manufacture of carpets, area rugs and carpet tiles. The carpet facility ushers in a new chapter of its growth story by adding flooring solutions to its current portfolio of home textile products. Initially the company had planned for an annual capacity of approximately 7 million sq. meters, and this has been increased to 27 million sq. meters per annum. The upcoming facility will house one of the most modern plants in the country.
Mr. B.K. Goenka, Chairman, Welspun Group, said: “Flooring solutions has immense potential as a growing business. We believe that this segment will benefit from the synergies with our existing product line and customer base, thereby creating strong growth opportunity for the domestic as well as international market. The investment represents our ongoing pursuit of expansion and is a testimony of our strength as one of the leading manufacturers globally.”
For the financial year ended March 31, 2018, Welspun clocked sales of Rs. 6,131.8 crores which was 8.8% lower than the previous year on account of lower volumes by 5%, adverse currency impact of 1.6% as well as change in drawback rates of 2.2%.
Speaking about the performance, Mr. Goenka disclosed: “FY18 witnessed destocking by retailers, transition to GST, currency appreciation, consumer preference for online channel, etc. Nevertheless, we look at these changes as opportunities. We are confident that the company will revert to the growth path in FY19, driven by our differentiation strategy based on branding, innovation, sustainability and our patented traceability solution, along with our focus on the domestic market.”
Wel-Trak system
FY18 has been a very important year for Welspun. The company successfully rolled out the Wel-Trak system, a patented, end-to-end traceability process. This revolutionary process ensures that customers and consumers can trace the provenance of the cotton raw materials throughout the supply chain from farm to the retail shelf.
Wel-Trak delivers end-to-end traceability by deploying automated data capture using RFID, customised software for validation and robust IT & ERP systems to enable smooth operations across all stages of production. In fact, the merchandise with the Wel-Trak traceability solutions are now available on shelves in the US stores at multiple retailers.
Welspun continues to calibrate capex according to its cashflows. The capex during FY18 was Rs. 3 billion, majorly towards expanding its towel capacity to 80,000 MTPA. The Board has approved the shifting of the proposed flooring facility from Gujarat to Telangana.
Outlook
The company is seeing an uptick in volume off-take by customers in key markets, with some of the transitory issues fading out. Increasing volumes along with the depreciating rupee and clarity on Government policies should augur well for the company’s margins in FY19.
The company’s growth strategy is based on five pillars. Welspun has filed 30 unique inventions globally. It is making efforts to commercialise some of these promising innovations and emulate the success of ‘Hygrocotton’.
The company has reinvigorated the ‘Christy’ brand in the UK. The brand is also being introduced globally, including the US, China and the Middle East. On the domestic front, the new campaign for the ‘Spaces’ brand has been well-received.
India is one of the most promising markets for Welspun, which is being addressed through brands such as ‘Spaces’. The company is also focusing on markets in Europe, the Middle East, the Far East, Australia, etc., to boost growth.
Welspun has also developed omni-channel capabilities to support retailers as well as its own websites across key geographies. It is also working on being the preferred sourcing partner for private label programs of key e-commerce platforms and has tied up with leading hotel chains and wellness centres to boost its hospitality sales.
Finally, the flooring solutions business will be one of the key growth drivers for Welspun in the coming years. Apart from this, technical textiles, smart textiles and bedding are the other key growth areas.
Welspun has set a target of $2 billion in turnover by 2022. To meet this target the company is focusing on new markets, new channels such as e-commerce and hospitality, and new products such as flooring solutions and advanced textiles. For achieving zero net debt, Welspun is focusing on improving its free cash flows by rationalising capex through ancillarisation and optimising working capital.