Huge spinning & weaving capacity expansion underway
Welspun India Ltd. (WIL), part of the Welspun Group, is one of the top three home textile manufacturers in the world and the largest home textile company in Asia. With a distribution network in 32 countries and manufacturing facilities in India, it is the largest exporter of home textile products from the country. Supplier to 14 of the top 30 global retailers, the company has marquee clients like Wal-Mart, J C Penney and Macy’s, to name a few.
Mr. B.K. Goenka, Chairman and Managing Director, Welspun India Ltd., says: “Welspun has created history not only in terms of business but also in terms of various accolades. Our textile business has made us proud when it was ranked as the No.1 Home Textile Company in the US. This is a remarkable achievement as the US is one of the biggest and most competitive markets. The recognition is a testimony to our dedication and innovation which has contributed to the company’s unprecedented growth”.
He observes: “Over the last several years, we have achieved global manufacturing scale with integrated facilities and a diversified product portfolio making us a one stop shop for Home Textiles. The extensive product mix has enabled us to reach out to a larger consumer base. The technological superiority along with full-fledged Design Studio has enabled WIL to deliver world class quality products with a wide range to meet rising consumer needs. Further, our efforts to bring the textile business under a single umbrella have already started showing results. Our vision to become a fully integrated player will further improve performance and enable us to consolidate our position as one of the top home textile suppliers globally”.
Welspun has decided to augment its spinning and weaving facilities in order to improve its vertical integration. The project to increase spinning and weaving capacity is on schedule and is expected to be completed by the end of FY14. The project entails the installation of 170,000 spindles and 140 looms which will take the backward integration to 75 per cent. The estimated project cost of Rs. 7-8 bn will be 72 per cent debt funded. The debt will receive 5-7 per cent interest rebate from the Gujarat State Government and 4-5 per cent from the Central Government (under TUFS), resulting in an effective interest rate of 2-3 per cent. Apart from ensuring quality and availability of key intermediate products such as yarn and fabric, the backward integration will also contribute to improve the profitability of WIL significantly.
Post this capex, the company’s captive supply of yarn and greige fabric is expected to reach 75 per cent from the current levels of 30-35 per cent, thus reducing its dependence on external suppliers. Apart from ensuring quality and availability of key intermediate products, the backward integration will also contribute to improve the profitability of WIL significantly.
Mr. Rajesh R. Mandawewala, Managing Director, Welspun India Ltd., says: “Our reorganisation efforts have yielded results as demonstrated by our strong financial performance. Our focus for the coming year will be on improving profitability; the efforts underway towards backward integration is a step in that direction. We will continue our focus on innovation, strengthening customer relationships and improving supply chain efficiency which will consolidate our position as the top home textile company in the world. The numerous awards and global recognitions won during the year provide further encouragement to pursue innovation as our key differentiator”.
The Indian textile and apparel market size (domestic + exports) is currently at around $95 billion and is projected to reach $223 billion by 2021, implying a CAGR of 10 per cent. The textile industry is in a consolidation phase on account of buyer’s concentration on a few suppliers with larger market shares and growth potential. Other factors like China’s new cotton and yarn policy, energy uncertainties in Pakistan and workers’ safety issue in Bangladesh will put India at an advantage against these major competitors.
In addition to the competitive advantages on the production side, India is also benefiting from the increased access to various markets on the demand side. The proposed India-EU Free Trade Agreement (FTA) is in the final stages of discussion. This will open up the European market for Indian manufacturers.
India has also signed FTAs with South Korea and Japan, which would provide better access to these markets. The Indian domestic market is also growing rapidly and is expected to become a large consumer over the next few years. Retail penetration in the Indian market is increasing with organized retailing expected to increase from five per cent in 2005 to 24 per cent by 2020. FDI in retail is further expected to boost textile consumption.
WIL clocked a turnover of Rs. 3,647.3 crores in 2012-13 compared to Rs. 3,219.4 crores in the previous year, an increase of 13 per cent. The company’s cash PAT was up 139 per cent from Rs. 175 crores to Rs. 417.8 crores during 2012-13.
Mr. Goenka further observes: “We aim to improve our revenues to become the leader in home textile manufacturing in the world in the next couple ofyears. This growth will be majorly driven by increased sales from innovative product categories. The focus of our innovation covers the entire value chain from fibers to finished product. Currently, nearly 30% of our revenues have been contributed by innovative products in Bath, Bed and Rugs”.
“In the year 2012-13, more than 90% of our revenues have come from exports. While the US remains our biggest market, we have increased presence in newer markets. This has helped us in diversifying the geographical risks, so that we are not adversely affected by any one market where we operate. Once the proposed India-EU FTA comes into effect, we will be able to capture some of the newer high-end markets in Europe. Apart from this, we are gaining traction in new markets like Canada, South Africa, Japan, Korea and Australia”, Mr. Goenka discloses.
In the domestic market, WIL has been able to capitalise on the Shop-in-Shop concept in large retail chains with its brand “Spaces”. This model entails no capex and has minimal risk. The company is also trying to boost its domestic presence through other channels like wholesale distributors, institutional clients and e-commerce.
Another significant development was the commissioning of the 80 MW captive power plant at Anjar. With this, the company will be able to get 24 hours uninterrupted power supply at competitive rates, thus increasing its productivity and profitability.
The product range
WIL is one of the largest terry towel manufacturers in the world and the largest supplier of towels in the US. The range offered covers beach towels, kitchen towels, baby hood towels, hand towels, face towels and bath sheets. These are made out of 100 per cent cotton or blended yarns, which has significant hygroscopic property for quick water absorption.
The company is one of the largest producers of premium bath rugs and is one of the largest suppliers to the US market. These bath rugs are generally made of cotton, nylon or micro fiber and can be latex-backed, depending on consumer preferences. The rugs come in various sizes, shapes and designs. Welspun uses its multi-level cut loop machine to create multiple fiber lengths within a rug.
WIL has ability to make piece dyed, yarn dyed, jacquard and velour bath robes in different designs, shades and weights with embellishments, embroidery and prints as per customer requirements. It manufactures robes in different styles such as “kimono”, “hood”, “zipper”, “shawl” and “wraps”. Since the fabric for bath robes is similar to that of towels, the company is able to leverage the product development and innovation undertaken in the production of terry towels.
Bed linen items
In bed solutions, WIL manufactures bed sheets in different sizes, according to bed sizes and mattress depth. It is one of the largest suppliers of bed sheets in the US. They are made from cotton or various blends, such as polyester cotton, cotton bamboo, cotton silk and cotton eucalyptus.
WIL’s basic bedding products include mattress pads, blown and garneted pillows and basic comforters, while decorative bedding products include comforters, duvets, coverlets, bed skirts, shams, decorative pillows and bolsters. Most of these products are made of polyester fiber fill wadding, although the fill can be varied according to the customer requirements.
The global home textiles market is estimated at around $70 billion, of which cotton made-ups account for 50 per cent of $35 billion. The US and the Europe are the biggest consumers, while India, China and Pakistan are the biggest exporters.
India’s share in the global home textiles trade is around seven per cent and $3 billion specifically in cotton made-ups. Around two-thirds of India’s exports are to the US and the EU, according to the Confederation of Indian Textile Industry (CITI).
Non-woven business
Further, seeing the tremendous potential in the Advanced Textiles market, the company forayed into this segment starting with the non-woven category. It has put up a new plant which has started production in October 2012. In a short span of time it got itself certified with J&J, Covadian, Rocklin and Reckitt Benckiser.
Some of the specialised products that WIL is currently manufacturing in Advanced Textiles are top end baby care wipes, hygiene wipes, filtration cloth and automotive nonwovens. The company is well placed with high end global scale capacity, skilled workforce, product knowledge expertise and co-ordinated marketing approach to capitalise on the technical textile growth. It is thus well placed to strengthen its position as a global player.
Literally, it has been raining awards for Welspun’s textile business! Altogether, the company has won nine awards for its performance and sustainability. Some of them are the Golden Peacock Award for Eco-Innovation, the Most Preferred Furnishing Brand – MAGPPIE, Gold Supplier Award – TESCO, Five Star Award – Macy’s, and Vendor of the Year Award – Sears/K-Mart, amongst others.
“With our sheer determination and ‘Dare to Commit’ motto, we have been able to build an enviable list of clientele like Bed Bath & Beyond, Macy’s, Wal Mart, J C Penney, Target and IKEA, to name a few. We offer our customers the advantages of economies of scale, thus enabling them to offer consistent quality at competitive prices at their stores. With our expertise, global manufacturing, diversified products and an international presence, we are well poised to carry on this sustainable performance. In the current scenario, the global textile market is on an uptrend with opportunities in developing economies. Closer home, the Indian market is growing in importance as a result of the increasing demand for textile products in the country. There is also a favorable shift in manufacturing conditions from China to India mainly because of surplus cotton, cheap labour & demographics, and lastly favourable Government policies in India”, adds Mr. Goenka.