Welspun Living Ltd Q4 FY2026 Concall Summary

Key Takeaways

• FY26 was a deliberate shock-absorption year: Consolidated revenues fell 11.5% YoY as U.S. tariff headwinds and cautious retail buying hit exports, but management chose to protect customer relationships, capacity and talent through the cycle.
• Q4 exit rate signals a turn: Revenues improved 7.7% QoQ and EBITDA margin jumped 313 bps QoQ to 10.8%, driven by better utilization, mix and cost rationalization.
• FY27 guided for double-digit growth and teen EBITDA: Management targets a return to double-digit top-line growth and an EBITDA margin advancing into the teens, supported by U.S. facility ramp-ups and domestic momentum.
• Cash generation swung sharply positive: Free cash flow hit INR956 crores, up 8.5x YoY, as tighter working capital management freed INR776 crores and the cash conversion cycle improved to 82 days.
• What to watch next quarter: Whether the double-digit growth trajectory materializes in H1, the pace of the Nevada pillow facility ramp toward the \$60 million target, and any clarity on tariff refund sharing with customers.

The Tariff Overhang & Recovery Path

• FY26 was defined by tariff volatility: The U.S. tariff rate swung from 10% to 25% to 50% before settling at 10%, with a BTA conversation now underway at 15% or 18%; this uncertainty, not customer losses, drove the 12% YoY decline in global B2B.
• Tariff refund clarity is absent: Over 80% of the business is FOB, meaning refund conversations sit with customers; management deflected quantification, saying "we let you know when the clarity gets better."
• Cost-sharing is the operating assumption: Management expects a 50-50 split with customers on tariffs, and conversations are already underway; the same partnership approach applies to input cost pass-through on cotton, yarn and crude.
• Input costs are rising across the board: Cotton up 10%, man-made fibers up over 20%, crude up 40%, dyes and chemicals up 20%, and polymers up 20%; rupee depreciation to INR96 provides no net delta gain after these escalations.
• Non-U.S. diversification is a structural hedge: Non-U.S. markets contributed 41% of the top line across Europe, UK, India and ROW, reducing exposure to U.S. inflation and tariff risk.

Goenka: "it moved from 50% to 10%. And now the BTA is having, whether it will be 15% or 18%, that conversation is happening. But always, it is a conversation with the customers as a partnerships. So it's going to be definitely a 50-50, and that's the conversation we've already been having with our customers on."

U.S. Manufacturing Ramp-Up

• Ohio pillow facility doubled revenue: Utilization at 60%, revenue grew to USD 27.5 million from \$15 million in FY25; further ramp-up continues.
• Nevada facility commissioned on March 31: Partially commenced commercial production of 0.45 crore pieces; strengthens local U.S. manufacturing presence in the sleep solution category.
• Combined pillow revenue target of \$60 million in FY27: Management expects Nevada to double the current \$27 million run-rate, though the utilization ramp timeline and plant-level split were not disclosed.
• Natural fiber filling to be added in Nevada: The facility will expand beyond man-made filling, broadening the product capability for the U.S. market.

Domestic Business: The Bright Spot

• Q4 domestic revenue grew 29.2% YoY with EBITDA reaching breakeven; full-year revenue of INR657 crores, up 9% YoY, driven by Welspun and Spaces brands.
• Brand-level momentum is strong: Spaces grew 19% and Welspun grew 44% in Q4, supported by general trade, modern trade, regional trade, commercial and hospitality chains, and religious tourism growing at 20%.
• Domestic brands target INR1,000 crores: Welhome and Christy, the premium UK brand, are positioned for double-digit growth; overall domestic business expected to grow 26-30%.
• Domestic Flooring grew 18% YoY for the full year, supported by housing, hospitality and institutional demand, with engagement from architects and interior designers; 30% growth anticipated next year.

Segment-Level Dynamics

• Advanced Textiles is pivoting to value-added products: Moving from commoditized to Hometech, Medtech, Protech and Indoortech; secured wins in sustainable diapers, fem care, specialty wipes, protective apparel and jacket insulation; IP portfolio now at 50 patents.
• Soft flooring margin potential is 20%+: Commercial segment traction in the U.S., co-branded carpet tiles, and diversification into Australia and New Zealand support the outlook; hard flooring is being grown prudently to protect margins.
• FTAs are a material unlock for Flooring and Advanced Textiles: Australia, New Zealand, Middle East and Europe markets will open up; the UK FTA is expected by June end and the Europe FTA in January.

Margin & Cost Structure

• FY26 EBITDA margin diluted to 9.1% from 13.6% last year, primarily due to lower volume and tariff-related realization impact.
• Q4 margin recovery to 10.8% was driven by better utilization, improved product mix, cost rationalization and favorable forex realization; this exit rate supports the FY27 teen EBITDA target.
• FY27 capex guided at INR400-500 crores: Largely towards modernization, automation and debottlenecking; utilization expected above 86% across towels, sheets and bath rugs.
• Cost actions delivered measurable working capital improvement: Tighter controls reduced debtors and inventory by INR345 crores, improved net working capital by INR776 crores, and drove the cash conversion cycle to 82 days.
• Management declined to give segment-level margin guidance for the 52% global B2B business, only reiterating the overall "double-digit growth and teen EBITDA" framework.
• No commitment on return to 14-15% EBITDA margin: When asked, management only reiterated "teen EBITDA," leaving the upper end of the recovery path unspecified.

Goenka: "double-digit growth in the top line, it also kind of a teen kind of EBITDA margin. I think that's what will sum up everything."

Balance Sheet & Capital Allocation

• Free cash flow swung to INR956 crores, up 8.5x YoY, driven by the INR776 crore working capital release and improved cash conversion.
• Board approved a buyback of equity shares at INR175 per share for an aggregate amount not exceeding INR252 crores; a 10% dividend per equity share was also recommended for FY26.
• Net debt zero targeted next year: Management aims to eliminate net debt barring additional capex or special requirements.
• ROCE expected to improve to more than 15% with an asset-light approach; no multi-year ROCE roadmap was provided.
• M&A remains open-ended: Management characterized opportunities as "open ended" with no specific timeline.

Guidance & Commitments

Key Metrics