Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue growth of 17% YoY, reaching INR2,588 crores, driven by strong performance in both global and Indian markets.
- Sustained EBITDA of INR393 crores, clocking 15.2% in Q1, growing at 15% YoY.
- India continues to be the leading supplier of terry towels and bed sheets to the USA, with Welspun Living Ltd (BOM:514162, Financial) solidifying its leadership in US exports.
- Emerging businesses, including domestic consumer business, global brands, advanced textile, and flooring businesses, grew 7% YoY in Q1 FY25.
- The advanced textile business witnessed a 26% growth YoY in Q1 FY25 with a revenue of INR132 crores.
Negative Points
- Challenges in the global economy, particularly in terms of ship liners and container availability, have affected revenue growth.
- Hardening of container rates to 3x of the last financial year and space availability issues have impacted timely shipments.
- Domestic retail sector demand remained muted during Q1 due to lower consumer spending in discretionary categories.
- Net debt increased by INR208 crores due to CapEx spending and increased investment in working capital during Q1.
- The flooring business dispatches in Q1 were impacted to some extent due to Red Sea issues, affecting revenue growth.
Q & A Highlights
Q: Dipali, if you can give some color on the order book demand retail growth in the US markets. How is that second half of '25 shaping out to be? Do we see a sharp recovery in the second half demand? And what sort of revenue growth is possible in FY25, given your current assessment?
A: So I think, for us, the demand remains good as it is right now, as you've seen in quarter one. We see a good visibility because you know that United States gets ready for the holiday season, and that's been the trend. So we definitely see that demand being at a steady state here, Rajvi. And when we talk about our growth, we have given a commitment of around 12% growth, and we remain cautiously optimistic about it, and we will top it up as we go forward, as we have done in the quarter one as well.
Q: My first question is on the growth, 15% year-on-year growth. So ma'am, which segments contributed to this 15% growth? And is it at high because of volume or price growth? Or what is the contribution of volume growth in this?
A: Hi, Biplab. It has primarily been the sales. And it has also been an impact of the exports primarily. As you have seen that the emerging markets have been a little subdued competitively as well. So while we see the exports growing at a rate of 17%, and that's what has actually contributed to it, our emerging businesses actually were a little subdued also, because if you look at flooring, with the kind of 64% at the factory it is running at capacity, we could have done better if the resi issues would have been a little more not that challenging. So it has been a mixed year. When you talk about the margins, I think I would say that the exports have contributed to the margins as well, primarily.
Sanjay Gupta: So the growth has mainly come from volumes, as you had asked. So price, there has not been any major change. So the growth is basically volume growth.
Q: I missed the funding part, sir, how you are funding the distribution of the cash outflow for distribution of dividend and buyback?
A: So this is, yeah, internal resources. So we have earned free cash flows earlier and which is available with the company, and it will be paid out of that.
Q: Sir, since you have debt and it has also grow -- this quarter, I think that has grown a bit. So I'm just wondering, could we not have used the monthly debt repayment or because how the capital structure you want to be?
A: So our capital allocation demand that we pay out to our shareholders as well, some percentage of our profit. And hence, which we have been doing year-on-year, so that we have done. Despite that, as I was telling you in my speech that we have been reducing our net debt from INR2,300-odd crores to INR1,300-odd crores. And this year, despite all these payments, we would be in the same ball park range for financial year '24 net debt. So net debt is not an issue.
Q: With quarter one seeing strong growth and outlook on exports looking positive, shall we maintain the same guidance on top line in that? Or we would like to change our guidance?
A: So as Dipali mentioned, we are cautiously optimistic because we are seeing the Red Sea issues and other economic issues, which is gripping the world. However, as we have maintained, we will top the 12% growth that we have already guided to us and we will meet our bottom line guidance of EBITDA at 15% to 15.5%, as we have guided.
Q: My question is about the -- related to the buyback. I wanted to know if the promoter entity will be participating in this?
A: Yes. As we mentioned in our speech, yes, we will be -- promoter entity will be participating 100%.
Q: I wanted to understand more on flooring, why Red Sea is impacting that segment more than other categories, which are also export-driven?
A: So it's a little different here, Prerna. And you must -- I mean, when we talk about home textiles, it's mainly primarily FOB. Here, you have CIS and you also have the DDP shipments. And hence, the challenges were there and where we actually got challenged to get the containers for the flooring, Prerna.
Q: How would be the volume versus price growth in this segment, in this 1% growth? Because utilization levels have improved. So just wanted to understand whether there is some price correction. Or is it inventory line in the system?
A: Hi, Prerna. So as I mentioned, more or less, this is volume growth. However, there have been some mix change as compared to hard and soft breakup. So hence, that small impact might occur, but mainly it is volume growth and volume, though we have manufactured during the quarter at 64% utilization, we have not been able to ship it because of the issues that we are facing for blank sailing and containers not being available. You will see those impacts in the current quarter when we will ship it. Hence, there is no price erosion.
Q: What kind of growth can we expect in flooring business in this year, given the visibility on demand that we have today?
A: We had given a guidance of about 20% to 25% growth in flooring for this year and which we will achieve.
Dipali Goenka: Prerna, we'll achieve that. And in fact, if you see in the domestic flooring also, it has grown 15% year-on-year. And we definitely are on that trajectory.
Q: Does the demand scenario remains decent? I mean there's no challenge over there?
A: No, not at all.
Q: What are this HD -- in HD, the e-commerce segment has seen a significant degrowth. What would be the reason behind it? And what is not included? I mean I'm just trying to understand HD e-commerce and HD brands, how do you bifurcate also between the two?
A: So I think they're very different. One thing is that when you talk about a global one, it is primarily, we talk about omnichannel. And omnichannel, it is quite -- sometimes gets seasoned. But I think we are on the -- we basically are on track because the retailers
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
