My dear fellow Stakeholders
"Tough times don't last but tough people do" they say. AtWelspun we are no strangers to challenges. However we have always succeeded inconverting these challenges into opportunities and FY 21 was no different. The tough yearhelped us redefine our responsibilities towards our stakeholders as we navigated throughthe global crisis on the strength of our differentiation strategy that once again provedright.
Achieving broad-based growth
FY 21 in the end turned out to be a milestone year for us as we notonly saw broad-based growth but also scored on two fronts - achieved the highest everannual income that crossed the $1 billion mark for the first time and the highest everHome Textile sales volume in a year.
It was equally satisfying to see our sustainability initiatives beingrecognised through a case study on the Ivey publishing website.
As we move forward we are evaluating all our actions through theEnvironmental Social and Governance (ESG) lens. These efforts have been validated by thehigh ESG score accorded to us by one of the leading global rating agencies and bearstestimony to the Board's commitment to accelerate our sustainability journey. We have alsoconstituted the ESG Committee of the Board to proactively address any material issues thatmay impact our ability to deliver sustainable growth and enhance enterprise value.
Capitalising on dominant industry trends
Amidst the pandemic and because of it the global home textile industryis undergoing a structural shift with the homebody economy shaping the digital consumerexperience. At Welspun we continue to pursue our differentiation strategy along with thethrust on digitalisation and e-commerce.
We gained from the increasing preference for quality andperformance-driven hygiene and wellness products given that our brand is synonymous withquality.
Online spending on home goods has also accelerated tremendously and weare well-positioned to meet the demand. To give further impetus to our e-commerce growthstrategy we have embarked on Project Wave (accelerated e-commerce growth) which shouldlead to a topline of over $100 million by FY23.
Capital-light capacity expansion to address growing demand
To cater to the demand our plants at Vapi and Anjar operated at peakcapacity in FY21. With demand continuing to rise we are expanding capacity throughdebottlenecking and rebalancing at both the plants which will lead to increased capacityfor towels bed linen rugs and carpets. We have earmarked capex of around Rs 225 croresover FY21 and FY22 and will see the benefits accrue from as early as Q1 FY22.
Delivering innovative solutions
Even as we expand and grow our business we intend to keep the focus oninnovation which is part of Welspun's DNA. Our innovation-driven approach has helped usto challenge the status quo and set new industry benchmarks - be it through our Nanocoretechnology or our unique trace ability process Wel-Trak that tracks finished productsback to the raw material or our Hygro Cotton technology. We were recognised among themost influential innovators at the Clarivate South and South East Asia Innovation Award2020 where Welspun was the only player from the textile and apparel industry. The awardis a testament to our efforts to develop more relevant and innovative solutions for ourcustomers.
Licensed brands deliver strong performance
In the domestic market we continued to invest in our brandsespecially the value brand for the domestic market 'Welspun'. During the year wewitnessed strong domestic retail performance as consumer confidence recovered with thefall in COVID-19 cases the roll-out of the vaccines and the return of festive demand. Ourstrong performance in our B2C business through licensed brands is evidence of ourdeepening consumer connect across markets particularly in the aspirational categories.The Martha brand is seeing expansion both online and offline. We are also very excitedabout the prospects of the Scott Living brand which we signed up in Q4 FY21. The licensedbrand brings us new opportunity pockets by opening new channels and shelf space withoutcannibalising our existing business. We expect annualised revenue from licensed brands tocross $100 million in the next 2-3 years.
Flooring solutions to be the next growth engine
We believe the flooring business will be a game-changer in India aswell as in the exports market given the kind of convenience and customisation we willprovide to customers as well as to contractors and distributors.
We would be the only brand in the market offering consumers safety andthe convenience of one-day installation (COVID-19 safe installation).
There are several factors that hold out promise.
For example US retailers have been increasingly looking at India asthe sourcing destination to reduce the concentration risk in sourcing. We entered along-term strategic arrangement with one of the largest US distributors for hard flooringduring the year. In FY 21 the export business contributed 50% of our total flooringrevenue. We also see export opportunities for carpet tiles and wall-to-wall carpets in theflooring business.
The domestic flooring business saw tailwinds during the second half ofFY21 as we added business from large marquee brands across both commercial and hospitalitychannels. With a continued focus on network expansion we have added 5 Gateways 40 plazasand 273 portals to our retail footprint. With business gaining strength in the hardflooring segment and soft flooring beginning to gain traction we are confident aboutachieving EBITDA breakeven in Q3 FY22.
Adding to the product mix
During the year the Advanced Textiles Division which manufacturesdisposable towels and wet wipes out of non-woven textiles forayed into disinfectant wipesand surgical masks. The business offers a diverse range of products using three majortechnologies - Spunlace Needle punch and Thermo bond. Each has an in-house downstreamconversion unit to manufacture value-added products. In Spunlace we saw better pricerealisations and improved operating metrics. The new disinfectant wipes line commencedproduction in February 2021 and we expect the expansion of the Spunlace business to beginoperations by September 2021. These would help this category achieve a topline of aroundRs 600 crores by FY23.
Combating the pandemic
This past year has been very challenging in terms of the challengesthat the pandemic threw at us. Our aim is to ensure they feel supported and valued whileensuring the well-being of their families no matter the circumstances.
In times like these it is important to come together and to valuehealth over everything else.
The COVID Care Measures we initiated have been done so keeping in mindthe health requirements of our employees. We set up various facilities such as avaccination drive COVID-care centres and other hospital facilities for our workforce andtheir families. These challenging times also led to the loss of some of our employees. Wehave decided to provide their families 50% of monthly salary for two years as livingallowance and education fees for two kids up to graduation. We have also decided toprovide medical insurance to the family of our employees for a duration of 10 years. Withthe second wave of COVID-19 we continue to stand in solidarity with every member toensure their mental physical and financial well-being as they navigate through thesechallenging times
We would not have achieved what we have without the dedicated serviceof our employees. I express my sincere gratitude to them and to our shareholdersbankers customers and Board of Directors for supporting us throughout our journey. Ibelieve in our capabilities and look forward to sharing more good news about ouraccomplishments with you as we move forward.
B. K. Goenka
Chairman Welspun Group