The Rs 1,605-crore Welspun India, Asia's largest terry towel producer, has been struggling for a while due to a number of decisions that went haywire. The business seems back on track after a few harsh decisions such as closure of Mexican factories and signing out of foreign licences. Rajesh Mandawewala, managing director of the group, tells Sharleen D'Souza the company has stopped bleeding, with a renewed focus on what they do well. Edited excerpts:
The company had aggressive strategies abroad but these didn’t pay. What changes has it made?
Between 2007 and 2010, we took a number of decisions that became a drag on our performance. We set up two factories in Mexico, made an acquisition in Portugal, licensed American brands and set up small format retail stores in India, which were draining Rs 120-150 crore annually. Except the Christy ’s deal in the UK, everything else was going wrong. By March 2010, we realised things were not going right. In the past two years, we shut the Mexican factories, signed out of the American licences and closed the retail stores in India.
Now, we are focusing on what we do well and it shows in our numbers. We have not cut out anything strategic to our business.
We got into an alternative channel of distribution in India, the shop-in-shop route and have 150 such outlets but don’t have to manage these ourselves. Sales are now coming back and the retail business has done well this quarter.
After this experience, how has the global strategy changed?
We are restructuring our textile business. We have two listed entities, Welspun India and Welspun Global Brands. The combined net profit is Rs 61 crore. The restructuring scheme is now pending with the court. Hopefully, we should get approval in the next month or two. After that, Welspun India will consolidate everything. Global brands will become a subsidiary of Welspun India. There will be only one profit and loss account and balance sheet, representing the entire business. There will be only one listed entity, Welspun India.
Your plans for the home furnishings business?
We had a decent first half, which will be replicated in the second half. We have a strong order book. Our raw material cover is efficient and sufficient.
Our exchange cover is sufficient. We are very excited about India, although in the overall scheme of things, it is only five to six per cent of our revenues but it is growing at 25- 30 per cent yearly. We plan to take our shop-in-shop outlets to 200 by March and we plan on adding 100 such outlets every year.
Are you planning fresh investments?
As a company, we have not invested in the past three years. The entire textile industry was highly leveraged and we were no different.
But something exciting has happened in the past five-six months, Maharashtra has declared a new textile policy. Gujarat has also just announced one. It is a very attractive policy for anybody to invest.
Right now, our debt-equity ratio is 1.7, possibly the best among our peers, and we continue to repay the debt.
With a good cash position in the company and the new textile policy in Gujarat, it is a good time to invest in expansion. We are looking at vertically integrating but the level is not where we desire it to be.
Now we are ready and we will invest in spinning, weaving and power.
In the next five years, we will grow our towel, sheets and rug capacity by 35-40 per cent (yearly) but in a calibrated manner.