Welspun Living Ltd Q1 FY27 Earnings Call Summary

Revenue

Margin

Demand

Guidance

Tone

Event Participants

Executives

4 Bharti Agarwal (AGM - Investor Relations), Dipali Goenka (Managing Director & CEO), Harsh Rungta (Group Head IR, Welspun World), Manish Bansal (Chief Financial Officer)

Analysts

7 Aradhana Jain (360 ONE Capital Market), Bhavin Chheda (Enam Holdings), Deepali Kumari (Arihant Capital Markets), Prerna Jhunjhunwala (Elara Securities), Ronak Shah (Equirus Securities), Roshan Nair (Antique Stock Broking), Soham Samanta (Motilal Oswal Financial Services)

Financials & KPIs

Metric	Reported	Commentary
Consolidated Revenue	₹2,828 crores	+23.5% YoY, +15.4% QoQ; strongest quarter in seven quarters; Q1 revenue 9% above pre-tariff baseline (Q1 FY25)
EBITDA Margin	12.5%	+140 bps YoY, +170 bps QoQ; third consecutive quarter of margin expansion (from 6.8% trough); driven by volume recovery, operating leverage, business mix improvement, and cost discipline
PAT Margin	5.7%	Improved from 3.8% YoY; PAT nearly doubled year on year
Home Textiles Exports Growth	+28.1% YoY	Strongest quarter in recent years; driven by volume recovery and value mix
Innovation-led Sales	~25% of revenue	Grew 16% this quarter; IP portfolio stands at 50 patents
US Onshore Pillow Business	2.3x growth	Ohio facility at ~81% utilization; Nevada facility commenced operations
Domestic Business Growth	+21.3% YoY	Sustained Q4 trajectory across Welspun and Spaces brands; B2B and B2C both strong double-digit growth
UK & Europe Business	+20%+ growth	Driven by India-UK FTA advantage and established retailer relationships
Global Branded Business	~18% of revenue	+27% YoY growth; Christie delivered 16% growth
Flooring EBITDA Margin	10.4%	Highest in over two years; reflective of operational discipline and structural actions
FY27 Capex Guidance	₹400-500 crores	Includes ₹121 crore debottlenecking/modernization project at Anjar facility
ROCE Target	Low teens	Management targeting improvement during FY27
Green Power	79% of total consumption	Anjar complex commenced 100% green power supply from mid-July 2026

Geographic & Segment Commentary

Home Textiles - Terries (Towels): Strong growth with exports up 28.1% YoY. Management maintains global leadership as world's largest exporter of terry towels, supported by technology, innovation, and three decades of customer trust. Utilization across categories expected to average 80-85% for the year.
Home Textiles - Bed Linen: Utilization lagged in Q1 (around 60%) with 2% volume growth, but management expects full-year utilization across all categories to reach approximately 80-85%. UK FTA is expected to drive incremental order inflow for bed linen.
Flooring: Turnaround efforts yielding results with EBITDA margins at 10.4%, the highest in over two years. Strategic shift toward soft flooring (area rugs), geographic diversification into Australia, New Zealand, Canada, and GCC, and strong India commercial flooring growth. Margins of 10%+ expected to be sustainable.
US Onshore Pillow Business: Grew 2.3x in Q1; Ohio facility at 81% utilization, Nevada facility commenced operations. On track to double revenue to USD $60 million in FY27, strengthening customer proximity and supply chain agility.
Domestic Business (India): Grew 21.3% YoY, sustaining trajectory from Q4. Near break-even profitability with a target of reaching ₹1,000 crores. Benefiting from unorganized-to-organized market shift in home textiles.
UK/Europe: Combined business delivered 20%+ growth. India-UK FTA (effective July 15) puts India on equal tariff footing with Pakistan, which holds over 50% of UK home textile imports. Expect double-digit growth in UK over coming years.

Company-Specific & Strategic Commentary

Manufacturing Excellence & Automation: Company systematically simplifying processes, accelerating automation, and deploying AI tools and Industry 4.0 technologies across shop floors. These structural initiatives expected to drive sustainable margin expansion.
India-UK FTA Advantage: Effective July 15, 2026, the FTA positions India equally with Pakistan for UK home textile imports. Company already embedded in UK market through Christie brand and retailer relationships, with significant runway for market share gains.
US Tariff Management: Recent US tariff framework preserved India's competitive position. BTA talks progressing; management optimistic on positive outcome. Tariff costs passed on across customers, consumers, and company collaboratively; already baked into current margin structure.
Sustainability Commitment: Anjar complex now fully powered by green energy; 79% of total power consumption now green. Tariff refunds process progressing in line with regulatory framework.
Capex Program: ₹121 crore debottlenecking/modernization at Anjar facility approved in July; replaces older technology, improves utilization, adds 10-20 tons/month processing capacity. Total FY27 capex of ₹400-500 crores focused on automation, modernization, and debottlenecking.
Vapi Flood Response: Unprecedented flooding at Vapi facility; all personnel evacuated safely within hours. Operations partially resumed within a week; fully insured with claims process underway. Q2 impacted, with restoration expected by Q3-Q4.

Guidance & Outlook

Metric	Guidance / Outlook	Commentary
Revenue Growth (FY27)	Double-digit growth	Management confident of maintaining double-digit top-line growth despite Vapi flood impact; Q1 revenue 9% above pre-tariff baseline
EBITDA Margin (FY27)	Low teens	Management committed to maintaining low-teens margins; structural drivers include volume recovery, operating leverage, business mix, cost discipline
Capacity Utilization (FY27)	80-85% across all categories	Bed linen to improve through Q2-Q4; average expected at 80-85%
US Pillow Business (FY27)	USD $60 million revenue	Doubling revenue from previous year; Ohio at 81% utilization, Nevada ramping
Flooring EBITDA Margin (FY27)	~10%+	Sustainable based on soft flooring mix shift, geographic diversification, cost controls
Capex (FY27)	₹400-500 crores	Automation, modernization, debottlenecking across manufacturing network
ROCE (FY27)	Low teens	Target improvement through cash generation, asset productivity, disciplined capital allocation
Medium-term EBITDA Margin	~15%	Gradual progression from 12.5% current level; mix improvement and operating leverage as key drivers

Risks & Constraints

Risk	Context
Raw Material Inflation	Cotton and crude oil prices rising; management confirms direct pass-through to customers is clear and non-negotiable. Gross margins already affected; Q1 decline attributed to RM inflation. Customers in conversation for price adjustments.
Vapi Flood Disruption	Unprecedented flooding impacted facility; operations partially resumed within a week. Q2 to be impacted; fully insured. Restoration expected by Q3-Q4. Annual double-digit growth guidance maintained.
RoSTEL Export Incentive Expiry	Scheme up for termination by September 2026; management expects positive outcome but not assured. If lapsed, impact would be shared across industry landscape; base case assumes continuation.
US Tariff Uncertainty	Current 10% tariff on India preserved competitive position, but any change in tariff differential vs. competitor countries (Pakistan, Vietnam, China) could impact competitiveness. BTA talks progressing with cautious optimism.
Container Availability & Freight Rates	Market rates increased; company hedged through long-term partnerships with freight carriers ensuring dispatch reliability. No customer dispatch impact expected.
Geographic Concentration	US remains ~~50-55% of business (~~41% non-US currently). Management targeting increased diversification to UK, Europe, Japan, and India over medium term.

Q&A Highlights

Margin Drivers & Sustainability

Question: Is margin expansion structural or circumstantial, and what is scope for further improvement? (Roshan Nair, Antique Stock Broking)
Answer: Three clean drivers: volume recovery/tariff share unbinding converting into operating leverage on largely fixed cost base; improving business mix; structural cost actions over past year (energy cost reduction, automation, throughput improvement). Full-year EBITDA guidance in low teens. (Dipali Goenka)

Capacity Utilization

Question: What utilization rates across segments for the full year, particularly bed linen at 60% in Q1? (Bhavin Chheda, Enam Holdings)
Answer: Full-year utilization at 80% across all categories—towels, sheets, rugs. Bed linen will cross 90% in coming quarters; average 80-85% overall. Q1's lower utilization reflects dispatch lag of 50-60 days. (Dipali Goenka)

Flooring Turnaround Sustainability

Question: Are 10.4% flooring margins sustainable or one-off? (Bhavin Chheda, Enam Holdings; Prerna Jhunjhunwala, Elara Securities)
Answer: Sustainable. Strategic shift toward soft flooring (area rugs), qualitative product focus, geographic diversification (Australia, New Zealand, Canada), and cost controls are driving structural improvement. Management comfortable maintaining ~10% margins going forward. (Dipali Goenka)

Tariff Impact & Competitive Position

Question: Has India's normalized tariff position resulted in tangible sourcing allocation changes from customers? (Aradhana Jain, 360 ONE Capital)
Answer: India is in a strong position with America needing huge capacities; no neighboring country has comparable capacity. Long-term strategic partnerships with retailers protected market share; no share was lost during tariff disruption. Incremental business flowing in as demand looks robust. (Dipali Goenka)

Raw Material Cost Pass-Through

Question: Are customers compensating for input cost inflation? Have new orders come at newer prices? (Prerna Jhunjhunwala, Elara Securities)
Answer: Raw material cost pass-through to customers is very clear and already executed. Company will not bear these costs. Tariff cost absorption was collaborative (customers, consumers, company), but RM inflation is being passed on directly. (Dipali Goenka)

FTAs and UK/Europe Opportunity

Question: Has order inflow started from UK post-FTA, and what about Europe? (Prerna Jhunjhunwala, Elara Securities)
Answer: Conversations began when FTA discussions commenced; approvals happening, confirmations coming in. This will gradually flow into the system. UK already grew 20%+, and a big upside remains given Pakistan's ~50% UK share. Europe is "right around the corner" with existing retailer relationships. (Dipali Goenka)

Vapi Flood Impact

Question: Can you quantify the Q2 impact from the floods? (Roshan Nair, Antique Stock Broking)
Answer: Adequately insured; Q2 will be impacted due to the onslaught. Q3-Q4 restoration expected. Annual double-digit growth guidance maintained. (Dipali Goenka)

Capex Details

Question: What is the capex breakdown and capacity addition from debottlenecking? (Soham Samanta, Motilal Oswal; Prerna Jhunjhunwala, Elara Securities)
Answer: FY27 capex of ₹400-500 crores for automation, modernization, and debottlenecking. ₹121 crore Anjar project adds 10-20 tons/month processing capacity (dyeing/processing chokepoints). Next year's capex guidance too early; will come closer to year-end. (Manish Bansal)

Margin Progression to 15%

Question: What levers bridge the 250bps gap from 12.5% to 15%? (Deepali Kumari, Arihant Capital Markets)
Answer: Gradual process moving toward 15% over next year. Drivers: volume recovery, tariff share unwinding, operating leverage, business mix improvement, cost discipline. Current focus is maintaining low-teens margins. (Dipali Goenka)

Geographic Mix Shift

Question: With non-US revenue at 41%, which regions will drive the shift to 50%? (Deepali Kumari, Arihant Capital Markets)
Answer: US to stay at ~50-55% of business. UK home market is $5-7 billion with Pakistan at ~50% share—this market share is available to gain. Europe conversations already begun with existing retailers. India and other markets (Japan, rest of world) will also contribute. (Dipali Goenka)

Key Takeaway

Welspun Living delivered its strongest quarter in seven quarters with consolidated revenue of ₹2,828 crores (+23.5% YoY), 9% above the pre-tariff baseline of Q1 FY25, while EBITDA margins expanded 140bps YoY to 12.5%—the third consecutive quarter of improvement from the 6.8% trough. PAT nearly doubled with margins reaching 5.7%. Growth was broad-based: home textile exports +28.1% YoY, domestic business +21.3%, UK/Europe +20%+, and the US onshore pillow business growing 2.3x with Ohio at 81% utilization. Management reaffirmed FY27 guidance of double-digit revenue growth and low-teens EBITDA margins, targeting 80-85% utilization across all categories and a low-teens ROCE. The India-UK FTA (effective July 15) represents a significant growth runway given Pakistan's ~50% share of UK home textile imports; management expects double-digit UK growth over coming years. Strategic priorities center on structural cost initiatives (automation, AI, Industry 4.0), a ₹400-500 crore capex program focused on debottlenecking and modernization, and continued geographic diversification beyond the US. Key watch points include raw material inflation pass-through dynamics, the Vapi flood impact on Q2 (fully insured), the RoSTEL export incentive expiry in September, and ongoing US BTA negotiations.