A few weeks ago, Sintex-BAPL Limited, the popular plastic water storage tank maker acquired by Welspun Group in 2023, announced mega plans to invest Rs 2,355 crore across four states to set up manufacturing facilities. From a bankrupt company over a year ago, Welspun has quickly turned around the prospects of Sintex. In an interaction with Moneycontrol, BK Goenka, the founder of the diversified group, spoke about its plans for the bankrupt ABG Shipyard which it acquired in 2022, and how recent acquisitions such as specialty plastics company Sintex-BAPL are seeing a sharp turnaround, and the group’s new initiatives in areas such as green hydrogen and warehousing.
Edited excerpts:
Could you highlight the key drivers of business over the past few years ?
Over the past four-five years, our focused actions across various businesses have begun to yield results. We've witnessed a steady improvement not only in numbers but also in the quality of running our businesses. Factors like corporate governance, ESG (environmental, social and governance) ratings, sustainability initiatives, and being recognised as a 'Great Place to Work' have all contributed to this positive trajectory. We're now primed for the next level of growth. In Welspun Living, particularly in the emerging sectors like flooring and advanced textiles, we've encountered initial challenges due to factors like COVID disruptions and shifts in the global supply chain. However, we're seeing these issues settle down, and our focus on domestic alternatives for raw materials is paving the way for substantial growth, especially in the booming housing sector. Additionally, our mainstay home textile business continues to thrive, with a strong emphasis on domestic consumption and brand building.
What is the progress on integrating recent acquisitions like Sintex-BAPL into your business operations?
The integration of Sintex has been promising. In the first year alone, we've achieved significant turnover, and we're on track to double that figure in the current year. Sintex enjoys a strong brand recall, especially in segments like water storage solutions. We're expanding our offerings within Sintex, including a comprehensive range of water tanks, pipes and fittings to capitalise on the growing demand in the building materials sector.
What has been the capital allocation strategy over the past year ?
We've announced significant expansion plans across various businesses, primarily funded through internal accruals. Our strong cash flow position and low debt-to-EBITDA (earnings before interest, taxes, depreciation and amortisation) ratio provide us with ample financial flexibility, eliminating the need for external funding or partnerships.
Have you considered venturing into new segments or pursuing further acquisitions?
At present, our focus is on consolidating our recent acquisitions and existing businesses to maximise their potential. While we remain open to strategic opportunities, our priority is to stabilise and elevate our current operations before considering further expansion or acquisitions.
You said Welspun World is focusing on capacity expansion through internal accruals. Could you elaborate on the implications for the company's growth?
We have indeed been concentrating on expanding our capacity using internal accruals. This strategy allows us to consolidate our existing businesses and take them to the next level before venturing into new segments or acquisitions. Our recent acquisitions, such as Sintex, require stabilisation and consolidation efforts before further expansion. Therefore, while we remain open to opportunities, our current focus is on maximising the potential of our existing operations.
Regarding the recent bid for Rolta India and the ABG Shipyard acquisition, could you provide an update on their progress and any challenges faced?
The acquisition of Rolta has faced challenges, particularly regarding the NCLT (National Company Law Tribunal) order, which has not been favourable to us. As for ABG, we have acquired the business but have put it on hold. Our priority is to consolidate these businesses before considering further action.
What are the key areas of focus and opportunities in Welspun World's warehousing business, particularly in the context of the evolving economic landscape and the growth of e-commerce?
Warehousing remains a promising sector, especially with the growth of e-commerce and the increasing demand for last-mile delivery services. India's warehousing sector is still in its nascent stage compared to other countries, presenting significant growth potential. Our unique position as a warehousing company managed by a private corporate, along with recent fundraising efforts, underscores our commitment to capitalising on this opportunity.
Could you outline the exit strategy for investors who have invested in Welspun World's warehousing business through the alternative investment fund route?
Our exit strategy for investors in the warehousing business involves creating an InvIT (infrastructure investment trust)-like structure once the risk is mitigated, allowing investors to either exit or continue holding their units. This approach provides flexibility and potential returns for investors while ensuring stability and growth for the business.
In terms of new energy initiatives, particularly focusing on hydrogen, what is Welspun World's strategy and outlook for the future?
Our focus on new energy, particularly hydrogen, reflects our commitment to sustainability and innovation. We see hydrogen as a promising avenue for future growth, especially considering its potential in addressing environmental concerns and reducing reliance on traditional energy sources. Our investments and partnerships in this space demonstrate our belief in the long-term viability of hydrogen as a clean energy solution.
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