Operator: Ladies and gentlemen, good day and welcome to Welspun Living Q2 FY27 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.
Aradhana Jain: Thank you, Darwin. Good evening, everyone. On behalf of 360 ONE Capital Market, I welcome all participants and the management of Welspun Living to the Q2 FY27 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.
Bharti Agarwal: 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.
Bharti Agarwal: With that, I would now like to hand it over to the call to Dipali Goenka. Over to you, ma'am.
Dipali Goenka: Thank you, Bharti. Good evening, everyone, and thank you for joining us for Welspun Living's Q2 FY27 earnings call. We entered FY27 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 our 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.
Dipali Goenka: 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 US onshore pillow business grew 2.4 times 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.
Dipali Goenka: 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.
Dipali Goenka: The global environment remains dynamic, with commodity cost pressures persisting across the value chain, including firm cotton prices, an uptick in manmade 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.
Dipali Goenka: 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 by 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 H2 of FY27 from a position of greater financial and operational strength. With that, I will hand over to Manish to take you through our financial performance.
Manish Bansal: Thank you, Dipali, and good evening, everyone. Q2 FY27 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 FY27 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.
Manish Bansal: This performance reflects our continued focus on operating efficiencies, procurement discipline, product mix, and cost management. In an environment where input cost and consumer demand remain dynamic, our priority is to ensure that growth translate 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 improvement materially from 82 days in March 2026 to 44 days this quarter. This reflect greater discipline in working capital management and more efficient conversion of our operating performance into cash.
Manish Bansal: 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 a 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 FY27, 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 this improvement through better asset utilization, working capital discipline, productivity, and rigorous evaluation of new investment.
Manish Bansal: 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.
Operator: 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.
Ronak Shah: Yeah, 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 are we seeing this particular part from a near to medium-term perspective?
Dipali Goenka: Thank you, Ronak. I just want to say the momentum looks intact for us, and we are looking at a double-digit growth. That is what we are very confident about, and that is what will be the way forward here, Ronak.
Ronak Shah: Any qualitative indication you can highlight in terms of customer feedback, response, or how the order book is building upon?
Dipali Goenka: 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 UK, 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 UK and Europe, and hence our top line also got impacted by INR 100 to 150 crores. Otherwise, we would have had another growth.
Dipali Goenka: The opportunity that we are seeing in the coming quarters will be UK, 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.
Ronak Shah: Understood. Second question is on the cash flow perspective. From the H1, 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 is it just business as usual?
Manish Bansal: 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.
Ronak Shah: 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?
Dipali Goenka: Ronak, what do you think we should do?
Ronak Shah: Understood, ma'am. Well appreciated, ma'am.
Dipali Goenka: So 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. So we will evaluate as we go forward.
Ronak Shah: Understood. That is it from my side, ma'am. Thank you.
Dipali Goenka: Thank you.
Operator: Thank you. Our next question comes from the line of Prerna Jhunjhunwala with DAM Capital. Please go ahead.
Prerna Jhunjhunwala: Thank you for the opportunity, and congratulations on strong set 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 H2 and for the 2 years?
Dipali Goenka: Yeah, Prerna. Thank you. 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 this steady state growth that you are seeing. So the sustainable range will be low double-digit margin, and that's where we will look at, because commodity is something with a PSF and polymer, could be something that might just be there. That's what.
Prerna Jhunjhunwala: Ma'am, in this business, like low polymer costs and crude oil has been elevated, and it remains elevated going forward also. It seems so.
Dipali Goenka: Yeah
Prerna Jhunjhunwala: in these. Then, how do we get the pass-on on these costs?
Dipali Goenka: Yeah
Prerna Jhunjhunwala: 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 the business.
Dipali Goenka: 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 we are maintaining here.
Prerna Jhunjhunwala: Understood. This is also welcome that low double-digit margins, if it is maintained, then it is better than what we were doing earlier. So, that is a welcome change.
Dipali Goenka: Yes.
Prerna Jhunjhunwala: The second question is on home textiles.
Dipali Goenka: Yeah.
Prerna Jhunjhunwala: Given the cotton prices are continuing to remain high, now that the new season would start, we do not know where the prices would be, because 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?
Dipali Goenka: 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 call 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, then it is not sustainable. We are doing it in collaboration with our customers.
Prerna Jhunjhunwala: Understood. So, ma'am, any risk on tariffs that we see in the near term? Because there was one, two months relief that we had got. Any chatter that you are observing from the customers around any increasing cost on tariff terms that can come up, or any kind of risk that you can highlight if you are seeing something that we should be aware of, or we should just monitor?
Dipali Goenka: Yeah, Prerna, I can tell you that 100%, the challenge that was there, it has been mitigated. You see that it has been. The BTA 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.
Prerna Jhunjhunwala: Understood. Ma'am, last question on FTA opportunities now that UK FTA is a few months. How are we seeing the opportunities there, and what kind of breakthroughs should we see going forward?
Dipali Goenka: I think the important thing, first of all, I think this is like, I think, time for India, and I think really excited to see these times. I think in the near future, at least 53 FTAs will open where the textile will get zero tariffs. That is the advantage we will see going forward. With UK, there have been early wins, and we will continue to be in conversation. The important thing that is happening, interestingly, with the customers in UK and also in Europe, people are talking about long-term partnerships. Interactions have started, the factory visits are already on the go, and a 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 feet on the street too.
Dipali Goenka: The target is to double-digit UK revenue growth.
Prerna Jhunjhunwala: Understood, ma'am. Thank you so much, and best wishes for next few quarters.
Dipali Goenka: Thank you. Thank you, Prerna.
Prerna Jhunjhunwala: Thank you.
Operator: Thank you. Our next question comes from the line of Dheeraj Mistry with Jefferies. Please go ahead.
Dheeraj Mistry: Yeah. Hi. Good evening, ma'am. Good evening, everyone. Congrats on good set of number. Continuing with the previous question on UK India FTA trade, I wanted to know from the very, let's say, 5 to 6 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?
Dipali Goenka: First of all, with UK market, I think it's a 5 to 7 billion dollar 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, and 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, and that is something that is the opportunity that we are seeing in UK. The same thing, already the conversations with the EU customers has already begun, and the interest is already there, and we will grow this market in double digit over the coming years. That's where we are going to see a complete impetus.
Dipali Goenka: By the way, Vapi is the factory that caters to these retailers.
Dheeraj Mistry: Is Vapi completely up and running after this flood issue?
Dipali Goenka: 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 terms of what we will be packing, in the terms of units and tonnage for towels for the next quarter.
Dheeraj Mistry: Okay. When you say that UK and Europe, you would be targeting double-digit kind of a revenue growth in this, what should we expect in US? 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 US?
Dipali Goenka: You are absolutely right. US 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 US as well.
Dheeraj Mistry: 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 2 to 3 years period of time? Likewise for advanced textiles also.
Dipali Goenka: 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. As Ohio is now 83% utilized, Nevada is 52%. So, 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 worked 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.
Dheeraj Mistry: Yes, 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?
Dipali Goenka: See, we are looking at around $100 million from both the $80 to $100 million from both the plants and the pillow business. So, we are targeting a kind of a lower teen kind of a margin in this.
Dheeraj Mistry: Low teen margins.
Dipali Goenka: Yeah.
Dheeraj Mistry: Okay. Thank you very much.
Operator: Thank you. Our next question comes from the line of Soham Samanta with Motilal Oswal. Please go ahead.
Soham Samanta: Yeah. Thank you, ma'am, for the opportunity. Ma'am, just wanted to check couple of things. In home textile, if we exclude in 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?
Manish Bansal: Yeah. So, the growth is coming from both side. In fact, bed linen has grown by 2% in term of volume.
Soham Samanta: Okay.
Manish Bansal: But it is both a mix of value and volume, and both are parallel. Bed and bath is equally growing.
Soham Samanta: So, going forward, like for next H2, how do we look going forward? The volume will come back, or the realization will sustain in this 15% to 17% kind of growth we have seen realization, that will continue to sustain in H2 as well?
Manish Bansal: 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 terms of top line and even in terms of EBITDA margin.
Soham Samanta: Okay. Second thing is your advanced textiles. As ma'am has already highlighted that there are 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?
Dipali Goenka: Yeah. In the couple of years, there will be the opportunity there. We have put it 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.
Soham Samanta: Okay. The pillow business, as you mentioned right now, that 80 to 100 million potential, when can we expect FY29?
Dipali Goenka: Yeah. FY29, we will expect that number.
Soham Samanta: Okay. Last thing, the flooring business, you have just mentioned we have taken some price hikes. Is it right?
Dipali Goenka: 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. For the exports, we are taking the price hikes as well.
Soham Samanta: What is the quantum? Is it a mid-single digit?
Dipali Goenka: It depends on the programs that we have, and it depends, so I cannot share anything else on that. Yes, we are taking reasonable so that it sustains us.
Soham Samanta: Got it. That is it from my side. Thank you very much.
Dipali Goenka: Thank you.
Operator: Thank you. Our next question comes on the line of Bhavin Chheda with Enam Holdings. Please go ahead.
Bhavin Chheda: Yeah, good evening. Congratulations to the entire management team for the excellent results despite the Vapi disruption in the quarter. Ma'am, few questions. First on the India-US trade deal. If I understand from what the trade deal earlier was, we were looking at 17%, 18% tariff with US 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?
Dipali Goenka: So 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 very, very clearly is that we will be at par with Pakistan, Bangladesh, China, Vietnam, and the neighboring countries. So, definitely that is where we will see how it goes and how it pans out.
Bhavin Chheda: Sure. 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?
Dipali Goenka: 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%.
Bhavin Chheda: Sure.
Manish Bansal: Bhavin, Manish here.
Bhavin Chheda: Yeah. Hi, Manish.
Manish Bansal: Yeah
Bhavin Chheda: Yeah, carry on.
Manish Bansal: 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, that has actually helped us to manage this kind of revenue utilization.
Bhavin Chheda: Sure. Really good job. Third, I just want to come back on the earlier guidance before all those disruptions happened with the US on the tariff front and all that, where we were looking close to INR 15,000 crores of top line in FY28, 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. I would like to come back when now the things are normalized and probably we are looking at 10% duty regime, FTA signed in UK, Europe, currency being at 95. Everything is positive as of now for the Indian textile industry. 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?
Dipali Goenka: 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.
Bhavin Chheda: 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?
Dipali Goenka: No, there is an opportunity here, Bhavin, and I think, actually, for Welspun, we do not 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.
Bhavin Chheda: Sure. Thanks a lot, and best of luck. Yeah.
Dipali Goenka: Thank you.
Operator: Thank you. Our next question comes on the line of Roshan with Antique Stock Broking. Please go ahead.
Roshan Nair: 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 other things? Yeah, that is my question.
Manish Bansal: Yeah. Hi, Roshan. Manish here. There are mix of things. It is not one of the item, and 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, production efficiencies, and some of the price increase also. That is the thing which we have 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.
Roshan Nair: Understood. The next question is, how is the demand evolving across US, UK, and European markets, and what is the current visibility on orders for the near term from next 2 quarter perspective? Maybe you can help with what are your customers thinking about the upcoming festive season? How are they thinking? Maybe those commentaries would be helpful.
Dipali Goenka: Yeah. US has been growing, and it has defied all the norms of even inflation that is coming away. That story remains for these couple of quarters, and so we will see that growth there. In UK 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 is 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 UK orders.
Roshan Nair: Understood that. With the cotton prices and freight cost and
Operator: Sorry to interrupt, Roshan, but your line is not very clear. Request you to please check your line and speak closer to the mic, please.
Roshan Nair: Is it better now?
Operator: Yes. Please go ahead.
Roshan Nair: 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?
Dipali Goenka: 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 help 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 and conversation. For the freight also, let me also tell you, more than 90% of our business is FOB.
Roshan Nair: Understood. 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?
Operator: Sir, sorry to interrupt, but your line is not clear. Your audio is not coming through completely.
Roshan Nair: Yeah, I will repeat the question.
Operator: Yes.
Roshan Nair: 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?
Manish Bansal: Yeah. 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.
Roshan Nair: Understood. That is all from my side. Thank you so much.
Manish Bansal: Thank you.
Operator: Thank you. Ladies and gentlemen, to ask a question, you may please press star and one. Our next question comes from the line of Shradha Agrawal with Asian Markets Securities. Please go ahead.
Shradha Agrawal: 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?
Dipali Goenka: That we do not actually talk about, but it is always owing to the businesses that we have. Primarily, they are the same.
Shradha Agrawal: 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?
Dipali Goenka: 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, and because for us, it is otherwise not sustainable.
Shradha Agrawal: Mm-hmm. What is the sustainable revenue growth number that we can look at for the flooring division?
Dipali Goenka: It will depend on what we are talking about right now. We are looking at a low double-digit kind of a growth. Margin is at low double digit, and the growth is at a steady state.
Shradha Agrawal: Sorry, growth is?
Dipali Goenka: The growth is actually a steady state that we are seeing right now, and low double-digit margin.
Shradha Agrawal: Okay. The other question is, you have done very well, but if I look at OTEXA data,
Dipali Goenka: Yeah
Shradha Agrawal: it looks like China and Pakistan seem to have done better than India in this calendar year so far. Any market share changes that you are seeing in the US home textile market?
Dipali Goenka: But I think 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 India would have dropped, but I think Welspun has increased in towels. And sheets, I think has been a steady state there.
Shradha Agrawal: Because the data I am looking at, ma'am, that shows that India has declined 17% YTD.
Dipali Goenka: India has declined, but
Shradha Agrawal: Okay.
Dipali Goenka: Yeah, if you have the data, you can actually reach out to our teams to discuss, if you want.
Shradha Agrawal: Sure. Okay, ma'am. Thank you.
Dipali Goenka: Thank you.
Operator: Thank you. Our next question comes from the line of Aradhana Jain with 360 ONE Capital Market. Please go ahead.
Aradhana Jain: Hi. Just wanted to check on a couple of things. One, 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 US and EU markets. So, from a little bit of a medium-term perspective, what are you expecting because of that inflationary situation in US or EU? 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 2 quarters could already have our order books filled.
Aradhana Jain: But from the next year, H1 or H2 perspective, if you could help us understand that, what are we expecting? Also, from EU perspective, how much is the share today? What would be the share of non-US geography for us today, and where do we see that over the next, say, two-year period? That is my first question.
Dipali Goenka: I think let me just come to your first question and discuss this. Your question about America and the inflation is absolutely on the because actually, obviously, that is what we all think and anticipate. For US, we actually do most of the businesses, 60% to 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 do not 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 will be growth. There will be growth because of owing to the FTA. So, that is the opportunity that we see in Europe as well.
Aradhana Jain: Understood. How much would the non-US share be today, and how much should we expect that over the next two-year period?
Dipali Goenka: We are growing at a state of 20% in Europe and UK, and we will maintain that.
Aradhana Jain: 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 250 bps, and that was because of the pressure of the 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.
Manish Bansal: 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, 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.
Aradhana Jain: 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?
Manish Bansal: Yeah. It will actually improve and depends on the entire customer mix, but it will-
Dipali Goenka: It is a product mix. It is a game of a product mix, actually, Aradhana. It depends on what kind of programs we are shipping out. It will depend. However, we are looking at a good steady state EBITDA margin.
Manish Bansal: Yeah.
Aradhana Jain: Understood. The last thing I wanted to understand is on CapEx. You did say that around INR 400 to 500 crores is the annual CapEx that we plan to do. Of that, around INR 150 is what we have done in the H1. If you could just help us understand where exactly would the rest of the INR 350-odd crores be utilized towards, and for the next year also, can we expect similar sort of CapEx, and where would that be also deployed?
Dipali Goenka: 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.
Aradhana Jain: Understood. That is all from my side. Thank you and all the best.
Dipali Goenka: Thank you. Thank you so much.
Operator: Thank you. Our next question comes from the line of Shirish Pardeshi with Motilal Oswal. Please go ahead.
Shirish Pardeshi: 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, H1 we have done around INR 400 crore. Can we look at this business INR 1,000 crore and next year about INR 1,500 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.
Dipali Goenka: We are actually looking at around INR 800 to 1,000 crore in the near-term future, but nothing more than that. 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 product. This is the focus here, and we will continue to do that.
Shirish Pardeshi: 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. 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.
Dipali Goenka: That is what I am saying. In the long term, in the midterm to long term, we are looking at around INR 800 to 1,000 crores, 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 are lots of opportunities in the domestic business as well.
Shirish Pardeshi: 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? You did mention that this business will grow double digit. 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, 4,500 crore.
Manish Bansal: Yeah. Shirish, you pointed right. There are a couple of one-time orders has gone, been as a drop in some promotional one. 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.
Shirish Pardeshi: 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 in consistency? Or if it is 50/50, then we can say that some lumpy order might come in future also.
Manish Bansal: Yeah, you are absolutely right. It is 70%, 80% of our total business, so that is right.
Shirish Pardeshi: Okay. 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 H2 or maybe next 1 year? Because it is about 47% of the business in this quarter.
Manish Bansal: Yeah. 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. Some of the products has moved into innovation, then next quarter it will go back to the normal one.
Dipali Goenka: It will be a mix of brand, innovation
Manish Bansal: Yeah
Dipali Goenka: and private label as well.
Shirish Pardeshi: Is it something to do with supply from Vapi and Anjar, or it is beyond US?
Manish Bansal: It is nothing to do with Vapi, but it is overall business mix.
Shirish Pardeshi: Okay.
Manish Bansal: Critical is to ensure the right sales mix, that is what we are trying, which is actually helping us to rationalize our cost and profitability.
Shirish Pardeshi: Okay. The last thing, on the US overall momentum, we have spoken a lot. In terms of refurbishing or reinventing the entire old business mix, at what point of time we will see the full-scale operation in the US?
Dipali Goenka: No, it is already working in the full scale only. We have replenishment businesses which are growing, which are continuing to go in steady states. So, there is nothing that is happening which is going to change here. Except the conversation was on the BTA, that will continue, we will see how it pans out, which will also be on the level playing field.
Shirish Pardeshi: Okay. Is it safe to assume that US is running at 70%, 80% utilization?
Manish Bansal: Oh, you are talking of pillow business?
Shirish Pardeshi: Yes.
Dipali Goenka: Oh.
Manish Bansal: Oh. That is around, yeah, that is running at 67%, 70% kind of thing. This is continue to grow. Currently, we are running that doubling this year. So far, we have doubled last year's number.
Shirish Pardeshi: Okay. All right. I have few more. I will talk to you, Manish, offline. Thank you and all the best.
Manish Bansal: Sure. Thank you.
Operator: Thank you. Our next question comes from the line of Rohit Ohri with Progressive Shares. Please go ahead.
Rohit Ohri: Hi, Dipali and team. Two questions. The first one on WelVisionAi. Do you think that this can help improve the manufacturing economics going forward?
Dipali Goenka: Yeah, of course, it is going to. Leveraging AI will definitely, and that's going to be the way forward, along with automation technologies.
Rohit Ohri: Currently, what percentage of manufacturing capacity is being covered by WelVisionAi?
Dipali Goenka: 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.
Rohit Ohri: Any discussion or any sort of number that you can share with the improvement in production output per employee that you anticipate going forward?
Dipali Goenka: 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.
Rohit Ohri: So, directionally, over the next three to four years, can we conservatively think that 14% to 15% on the top line with 14%, 15% EBITDA margin and 15% ROCE, that can be achieved?
Dipali Goenka: 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, and we are going to maintain that. Yes. And the ROCE over around 14% to 15%.
Rohit Ohri: Dipali, Gandhi recently agreed NZ FTA, which came into effect on 20 October. What sort of opportunities do you expect from this geography in terms of INR billion, and have you been able to sign any new logos recently?
Dipali Goenka: 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. So, we will see how it evolves, and we are actually geared up for a 20% growth in this region.
Rohit Ohri: Okay. Thank you for answering my question. Thanks a lot.
Dipali Goenka: Thank you. Thank you so much.
Operator: Thank you. Our next question is a follow-up from Prerna Jhunjhunwala with DAM Capital. Please go ahead.
Prerna Jhunjhunwala: 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.
Manish Bansal: 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 going on, including bringing productivity.
Prerna Jhunjhunwala: 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?
Manish Bansal: Container cost and all, we have been managing and monitoring very closely currently, and because of our long-term contact 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.
Prerna Jhunjhunwala: 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.
Manish Bansal: Prerna, we have received some refunds, but none of them is part of our P&L as of now.
Prerna Jhunjhunwala: Where would that go? If we keep getting some refunds, where this will be visible?
Manish Bansal: 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.
Prerna Jhunjhunwala: Understood. Thank you so much, sir. Second question, one more thing. Ma'am, you have been highlighting that US will also grow at 20% going forward. Leaving the base
Dipali Goenka: No, no. US will not grow at 20%. US will grow mid to upper single digit.
Prerna Jhunjhunwala: Okay. That is what I just wanted to know.
Dipali Goenka: Yeah. US is huge, yeah.
Prerna Jhunjhunwala: Okay. Thanks.
Dipali Goenka: Thank you. Thanks, Prerna.
Operator: 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.
Dipali Goenka: Yeah. Thank you. Thank you, everyone, for joining us today and for your continued engagement. Q2 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 is global sourcing, evolving trade relationships, and the growing importance of reliable supply chains provides meaningful opportunities for our industry. We intend to build on our strength and 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.
Dipali Goenka: 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.
Operator: 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.
