Welspun Living Ltd Q1 FY2026 Concall Summary

Key Takeaways

• Tariff overhang crushed exports: Consolidated revenue fell 11.6% YoY as US retailers froze orders and corrected inventory ahead of reciprocal tariffs, hitting towels especially hard.
• Margins compressed on operating deleverage: EBITDA margin dropped 409 bps YoY, driven almost entirely by lower volumes; cost optimization is underway but cannot offset the top-line hole.
• Domestic businesses provided the only bright spot: Consumer business grew ~10% YoY and domestic flooring surged 26% YoY, supported by improving sentiment and a 6-year low in CPI inflation.
• A US pillow plant bet signals confidence in local-for-local: The board approved a \$13 mn Nevada facility (1.08 cr pillows/year), targeting Q4 operations, even as the Ohio plant runs at just 47% utilization.
• What to watch next quarter: Whether the promised Q2 seasonal improvement materializes, any sign that US retailers are done destocking, and the pace of non-US diversification.

The Tariff Shock: What Happened in Exports

• US retailers hit pause: Reciprocal tariff uncertainty caused retailers and suppliers to adopt a cautious stance, correcting inventory levels and postponing promotions; US retail sales fell for the second straight month in May.
• Towels took the biggest hit: Management described a "mega drop" in towel volumes, while sheets and results also declined; Jacquard and fashion towels are expected to ramp up next quarter.
• Branded portfolio showed relative resilience: The branded segment grew single-digit despite the B2B decline, supported by programs like Creative CO/Lab and Christy; retailers exhibited "visible soft action" due to tariff overhang, though end-customer demand has not fallen to the same extent.
• Non-US exports grew: Revenue from outside the US grew YoY, with the non-US share now at 40%; the company is actively pursuing expansion in the UK, EU, GCC, ANZ and Japan.
• Advanced Textile also hit: Revenues fell 11.6% YoY, impacted by the broader slowdown in US customer offtake and tariff-related headwinds; management views this as a temporary blip.

Dipali Goenka: "While near-term volatility is inevitable, we see this period as one that will separate the resilience from the rest."

Domestic: The Counterweight

• Consumer business grew ~10% YoY: Improving consumer sentiment, steady rural demand and improving urban demand were supported by above-normal monsoon expectations and CPI inflation at a nearly 6-year low of 3.2% in April 2025.
• Domestic flooring surged 26% YoY: Growth was driven by hospitality, institutions and residential opportunities as India's housing market expands; the segment is inching towards EBITDA breakeven.
• Overall flooring still down 15% YoY: The tariff overhang led to order holds and subdued demand globally, overwhelming the domestic strength.
• India-UK FTA removes a 12% tariff barrier: The landmark agreement eliminates tariffs on home textiles, strengthening the opportunity for owned and licensed brands to deepen penetration and expand distribution.
• India-EU interim FTA progress: Management described the decision around finalization as a step in the positive direction for India.

The US Pillow Bet: Nevada Plant Approved

• Board approved a \$13 mn (₹112 cr) investment: The Nevada facility will produce pillows and top-of-bed products with annual capacity of 1.08 cr pillows in two-shift operations; it is expected to be operational in Q4 this fiscal year.
• Pillow business expected to nearly double this year: From a base of US\$15 mn in the previous year, with the Nevada plant contributing over US\$60 mn at full capacity utilization.
• Ohio plant still ramping: Capacity utilization reached 47% this quarter; the new Nevada facility will take 6 to 8 months to reach optimum utilization after startup, with the second year showing optimum optimization.
• Exit utilization target: By the end of this year, the pillow facility is expected to exit at 70% of capacity; effective capacity will increase with a second shift and automation de-clogging.

Margins & Balance Sheet

• 409 bps YoY EBITDA margin compression: Driven primarily by operating deleverage from lower volumes; the company has intensified cost optimization initiatives across businesses without compromising serviceability and quality.
• Net debt reduced: Down ₹202 cr from last quarter and ₹161 cr from the same quarter last year; the cash conversion cycle improved, reflecting better working capital management.
• Net debt target maintained: ₹1,300 cr to ₹1,400 cr for FY26, with management aiming to top guidance; the zero net debt target by FY28 still holds.
• Renewable energy progress: An 18 MW solar plant at Vapi and a 4 MW plant at Hyderabad were commissioned this quarter; the company is targeting 47 MW of round-the-clock green power by year-end, on its journey to 100% renewable energy and 100% sustainable cotton by 2030.

Diversification & the Non-US Pivot

• Non-US revenue share at 40% and rising: Management confirmed the non-US business grew YoY and stated the share will continue to increase; active pursuit underway in the UK, EU, GCC, ANZ and Japan.
• UK conversations described as positive: EU conversations are happening with positive retailer feedback; Japan is seen as a great opportunity; Australia is done, and New Zealand is "right around the corner by the end of the year."
• Management declined to provide geographic revenue splits: When asked for the US/UK/EU breakdown and the B2B revenue split between US and non-US customers, management gave directional answers but did not disclose the requested data.
• Wet wipes capacity utilization at just 24%: The underutilization is due to US tariff anticipation causing customers to hold off, not weak demand, pricing, distribution or seasonality; opportunities exist in makeup wipes, baby wipes, medical wipes and dry wipes.

Dipali Goenka: "India is in a good position, apart from all the other competitors that India has and the peers that India has, right? So whatever will happen, India will be at a better position there."

Guidance & Commitments

Key Metrics