Moneycontrol
Apr 25, 2016 05:56 PM IST | Source: CNBC-TV18

Aim to be debt-free with $2 bn sales by 2020: Welspun

Welspun is betting on innovation and branded products to drive margins, which Dipali Goenka, CEO & joint-managing director of the company says, will be around 22-24 percent going forward.

Commissioning of a spinning unit this year and vertical integration in all the segments have driven EBITDA margins of Welspun India, said Dipali Goenka, CEO & Joint-MD of the company. 

About 34 precent of the company's revenue stream comes from innovative products and 13 percent from branded products, which have been key contributors, Goenka added.   

The company is betting on innovation and branded products to drive margins, which Goenka says, will be around 22-24 percent going forward.

The company has seen an accelerated growth of 47 percent in the domestic market and also plans to reinvigorate the brand further in India.

Not only the retail sales segment, but also the hospitality channel have also contributed to its double-digit growth, Goenka adds.

The company has planned a capex of Rs 800 crore in FY17, which includes Rs 300 crore carried forward from FY16.

The company is looking to expand its production capacity. The towel capacity will go up to 70,000 tonnes from 60,000 tonnes; sheet capacity to 92 lakh metres from 72 lakh metres, she added.

The net debt has gone down by Rs 500 crore and the comapny aims to be debt-free by 2020, Goenka maintains.

Below is the verbatim transcript of Dipali Goenka’s interview with CNBC-TV18's Priya Sheth.

A: (starts in the middle of an answer..) the margins that have been there have actually been contributed by the vertical integration. As you know we had commissioned a spinning unit this year and in all the categories we are completely vertically integrated and hence that has contributed to our margins.

Apart from that if you look at our portfolio 34 percent of our revenue stream comes in from innovative products,13 percent from branded. Hence that has actually been the key contributors going forward as well.

Q: Are these kind of margins sustainable going forward as you look at FY17 and the kind of business environment panning out?

A: As we go forward we would take position of around 22-24 percent and we definitely are looking at the contribution of innovation and branded products far aggressively.

Q: I also wanted to understand with regards to the US market and the domestic market. You have said that the focus is going to be on growing domestic business as well. Run us through what is the kind of strategy that you are working with?

A: With the domestic market this year we have seen an accelerated growth of around 47 percent and we will continue to do so. We are at the same time reinvigorating our brand in India as well. So, with lot of different strategies and we will share with you as we go forward.

US market is definitely one important market for us and apart from the retail sales that we see we have actually seen a major contribution from the hospitality channel that actually has contributed a double digit growth. We are looking at healthcare as we go forward and omni-channel also will be a key way of growth.

Q: As far as the capital expenditure (capex) is concerned you have said that you are looking at significant capex this year. Run us through the numbers and what this is going to be utilised for?

A: As we see next year we are looking at around Rs 800 crore of capex. Rs 300 crore is something that we are carrying forward from last year. We are looking at actually growing our capacities a little further. We see around from 60,000 tonnes to around 70,000 tonnes of tulls. 72 lakh meters to 90 lakh meters of sheets and around over 10 million square meters of rugs. That is what we are looking at because today if I talk about our capacities we are practically 100 percent utilised.

Q: As far as net debt is concerned what is the kind of easing off you see going ahead because you have been looking at reducing this over the last few quarters?

A: The net debt if I look at it we have actually reduced it considerably by around Rs 500 crore this year and going forward the key focus will be on our working capital and you have seen that the free cash flows (FCF) have been quite good and we have been maintaining that for the past two to three years. Hence, by prudence in the way we manage our cash and our projects would be the key going forward as well.

Q: I also wanted to understand with regards to the e-commerce business you have launched a portal last year. What is the kind of sales expectation you have from e-commerce and how big will this be as far as your overall pie is concerned?

A: When we talk about e-commerce at Welspun we actually talk about it as an omni-channel and that is the way that it complements our offline and online, they work hand in hand for us. Since we have a whole lot of portfolio of innovative products there is not a better medium to communicate under social-digital and it also gives us the first flavour of the products that we get launched. So, it will work hand in hand, it is not going to be a very integral revenue stream but it will contribute to the kind of awareness that we are going to be creating.

Q: You have a vision for 2020 as well. Run us through what is the kind of branded as well as the innovative split that you expect going ahead as far as revenues are concerned, run us through those numbers as well?

A: When we talk about our 2020 we are talking about USD 2 billion revenue. We are talking about nil-debt, we are talking about at least 20 percent of the revenues coming in from domestic channel and 40 percent from innovative products.

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