Welspun Living Ltd Q3 FY2026 Concall Summary

Key Takeaways

• Revenue hit hard by tariffs, but margin held: Consolidated revenue fell 9.9% YoY as U.S. tariff headwinds and muted discretionary demand persisted, yet EBITDA margin expanded 80 bps QoQ to 7.7% on cost actions and forex gains.
• The FTA story just materially changed: India concluded trade agreements with the U.S., EU, U.K., Japan and Australia in the quarter, a structural shift management says improves visibility and competitiveness for years, not quarters.
• Christy is the standout growth engine: The owned brand grew 31% YoY, powered by U.K. strength, Middle East entry and a 64% YoY jump in U.K. repeat customers, while licensed brands declined.
• Advanced Textiles became unviable in the U.S.: The segment fell 20.9% YoY because 25+25% tariffs made Welspun completely uncompetitive; management now sees FTAs unlocking double-digit growth and strong margins.
• What to watch next quarter: Whether the U.K. FTA begins converting into orders within the promised two quarters, the pace of margin recovery as tariff pass-through negotiations progress, and any early signs of U.S. demand normalisation.

Tariffs, Trade Deals & the Structural Reset

• The quarter's damage: Consolidated revenue fell 9.9% YoY, core home textile exports declined 8.9% YoY, and Advanced Textiles dropped 20.9% YoY, all driven by the residual impact of 25+25% U.S. tariffs that made Welspun the most uncompetitive supplier versus all other countries.
• The FTA breakthrough: India concluded a U.S. trade agreement removing a Russian oil-linked levy and establishing a reciprocal tariff framework around 18%, plus pre-trade agreements with the EU, an FTA with the U.K., and early agreements with Japan and Australia, all within the quarter.
• India's competitive edge at 18%: With 18% tariffs, management argues India becomes far more competitive than Bangladesh due to stable democracy, adjacent cotton availability, strong infrastructure and an MSME backend, even though Bangladesh will also get a quota-based deal.
• Portfolio rebalancing underway: America has already shifted from 70% to 65% of the portfolio; Europe and rest of world at 40% will gain another 10% share as FTAs open.
• EU is the big prize: The EU imports over \$260 billion of textile and apparel annually; India currently exports only \$7 billion. Welspun is already present across 27 European countries in all categories, working with mass retailers opening roughly 2,000 stores a day.
• Scaling is gradual by design: The textile supply chain is long; retailers closed their financial years in December and started January with reconciliations, so tariff-resolution benefits convert to orders over quarters, not weeks.
• Retailer inventories are lean: After a relatively weaker Black Friday and sales period, retailers reduced inventories by 60% to 70%, with the rest on a roll, positioning for restocking when demand visibility improves.

Dipali Goenka: "This shift is not about an immediate demand rebound over the next quarter or two, rather, it meaningfully improves visibility, competitiveness and confidence for global customers planning their sourcing strategies over the next several years."

Margin Resilience & Cost Actions

• Margin expanded despite the revenue drop: EBITDA margin rose 80 bps QoQ to 7.7%, driven by sustainable cost actions, overhead rationalisation, sourcing optimisation, plant productivity improvements and favourable forex realisation.
• Free cash flow turned sharply positive: Improved to ₹395 crores from ₹112 crores in FY25, reflecting tighter working capital discipline across the business.
• Tariff burden-sharing is opaque: Management described working through strategic partnerships with retailers to share the 25+25% tariff burden but declined to quantify the split or confirm when normal margins return, saying only that conversations continue and the process is gradual.
• Q4 still pressured, recovery from Q1: Margin recovery will be gradual quarter-on-quarter starting Q1, not Q4, as new orders take time to flow through.
• Capex stays disciplined: No additional capacity is planned beyond what was already agreed; current capacity is sufficient for future demand and will be reviewed only after two years. Spinning expansion of 40 tons per day and Terry towel expansion of 3,600 tons per annum are on track and already started.

Dipali Goenka: "When these kind of implications happen, there's a lot of conversations that will happen between the customers because these partnerships are more than over 2 decades. And we are the most competitive."

Brand & Category Performance

• Ohio pillow facility ramping: Revenues already 2x YoY; the business is on track to double this fiscal year, with Nevada expansion preparations underway.
• Soft flooring optimism: Management expressed categorical positivity on the flooring business for the first time, citing massive uptake opportunity with Europe and rest of world, with top line and margins expected to turn around within a year or two.
• Advanced Textiles reset: With FTAs opening up, spunlace, wet wipes and needle punch products become competitive again versus imports from Europe, U.K. and U.S., creating an opportunity for 20% growth with strong double-digit margins.

Dipali Goenka: "I haven't been more positive about this business than ever. I can tell you that really very categorically."

U.S. Cotton & Input Dynamics

• Unit economics set hard limits: For towels, U.S. cotton content cannot go beyond 50%; for sheets, it cannot go beyond 30% to 35%. These are the unit economics ceilings, not policy choices.
• Management declined to disclose the mix: When asked for the percentage of U.S. cotton in the overall cotton mix for the quarter and nine months, management said, "That, I just cannot share that actually."
• Bangladesh comparison matters: Bangladesh does not grow cotton and imports it; under its FTA, it will import more U.S. cotton but face a quota on goods exported using that cotton, with the rest at 19%. A similar deal is being discussed for India.

AI, Productivity & Competitiveness

• AI is being deployed but remains small-scale: Textile manufacturing is labour-intensive; AI is being explored and implemented in a smaller way for efficiency and productivity gains, with management saying it will be a very big element going forward.
• No quantified spend: Investments in AI and Industry 4.0 will happen as part of opex cost; management gave no specific number when asked.
• Competitiveness is non-negotiable: Management was explicit that throughput, costs and everything else will have to get competitive going forward, framing AI and productivity as essential, not optional.

Dipali Goenka: "And we have to get competitive guys. I mean I'm very clear about it. This is something our throughput, our costs, everything will have to get competitive going forward."

Guidance & Commitments

Key Metrics