Welspun Group Home Textiles Leadership. Welspun India Limited (WIL) Investor Presentation February 2015

Transcription

1 Welspun India Limited (WIL) Investor Presentation February

2 Disclaimer Certain statements made in this presentation may not be based on historical information or facts and may be forward looking statements, including those relating to general business plans and strategy of Welspun India Limited ( WIL"), its future outlook and growth prospects, and future developments in its businesses and its competitive and regulatory environment. Actual results may differ materially from these forward-looking statements due to a number of factors, inter alia including future changes or developments in WIL's business, its competitive environment, its ability to implement its strategies and initiatives and respond to technological changes and political, economic, regulatory and social conditions in India. This presentation does not constitute a prospectus, offering circular or offering memorandum or an offer invitation, or a solicitation of any offer, to purchase or sell, any securities of WIL and should not be considered or construed in any manner whatsoever as a recommendation that any person should subscribe for or purchase any of WIL's securities. Neither this presentation nor any other documentation or information (or any part thereof) delivered or supplied under or in relation thereto shall be deemed to constitute an offer of or an invitation by or on behalf of WIL to subscribe for or purchase any of its securities. WIL, as such, makes no representation or warranty, express or implied, as to, and does not accept any responsibility or liability with respect to, the fairness, accuracy, completeness or correctness of any information or opinions contained herein. The information contained in this presentation, unless otherwise specified is only current as of the date of this presentation. WIL assumes no responsibility to publicly amend, modify or revise any forward looking statements contained herein, on the basis of any subsequent development, information or events, or otherwise. Unless otherwise stated in this presentation, the information contained herein is based on management information and estimates. The information contained herein is subject to change without notice and past performance is not indicative of future results. WIL may alter, modify or otherwise change in any manner the content of this presentation, without obligation to notify any person of such revision or changes. This presentation may not be copied and disseminated in any manner. THE INFORMATION PRESENTED HERE IS NOT AN OFFER INVITATION OR SOLICITATION OF ANY OFFER TO PURCHASE OR SELL ANY SHARES OR ANY OTHER SECURITY OF WIL. This presentation is not for publication or distribution, directly or indirectly, in or into the United States, Canada or Japan. These materials are not an offer or solicitation of any offer of securities for purchase or sale in or into the United States, Canada or Japan. 2

3 WIL An Overview Global leader in Home Textiles (Speciality) 1 st among Home Textile Suppliers to US* Rank # 1: Bath Towels; Rank # 2: Bed Sheets & Pillow case; Rank # 4: Rugs 14 of Top 30 global retailers serviced Global Reach and Delivery (more than 50 countries) State-of-the-art manufacturing facilities at Anjar and Vapi (Gujarat) Innovation emphasis: Patents / Pending patents 6 ; Trademarks 7 About 25% of sales comes from innovative products Export focus: About 95% of production exported * Based on ranking by Home Textiles Today 3

4 4 WIL - Financial Overview Consolidated Financial Summary Continuing business* 50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 29,329 Revenue in INR Million 36,473 44,954 39,367 0 FY12 FY13 FY14 9M FY15 *All figures re-grouped and restated to show the continuing textile business Non- Institutional Public, 17.30% Banks, 0.18% Mutual Funds, 4.50% Shareholding Pattern as on Dec 31, 2014 Insurance Cos, 2.48% FII, 2.23% Promoters, 73.31% 12,000 10,000 8,000 6,000 4,000 2, ,960 * On TTM basis EBITDA in INR Million 6,438 Summary Market Statistics 10,253 9,956 FY12 FY13 FY14 9M FY15 As on Feb 3, 2015 Price per share - INR 372 No: of Shares Outstanding (Mn) 100 Market Capitalization (INR mn) 37,354 Enterprise value (INR mn) 63,087 P/E (x)* 7.75 EV/EBITDA (x)* 5.49

5 WIL Revenue Milestones WIL Revenue in Rs. Billion 1993: Towels facility at Vapi Towels & Sheets Facility at Anjar Entry into bath rugs & top of bed : JV for bath robes Pre-2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 Textiles business has been growing at a CAGR of 27% since the start of Anjar Facility. Sustained growth points out the potential of Home Textile market in the world. International operations has been the major part of the revenues. Anjar facility is the largest home textiles facility in Asia. 5

6 Structural Change in Global Textile & Specialty Textile Welspun India Global Leader in Home Textiles Financial Highlights Road Ahead Maintaining leadership 6

7 Structural Change: Asian Dominance in Home Textiles Textiles and Clothing US$784 bn China: 36% India : 5% Textiles US$313 bn China: 34% India : 6% Home textiles US$45 bn China: 35% India : 11% Source :- WTO data, Texprocil, Company estimates 7

8 Structural Change: Non-India players facing challenges China Pakistan Bangladesh Big importer of cotton Losing export Competitiveness Wage inflation Rising power costs Stricter environmental compliance Focus shift from textiles to higher value-added industries Focus on domestic consumption Yarn capacity closures Yuan appreciation Cotton Importer Energy issues Geopolitical issues Compliance issues Negligible Cotton Production Environmental compliance issues Workers safety issues 8

9 Structural Change: Tailwinds favoring India Raw material availability Good quality, surplus cotton available 2 nd largest producer of cotton; expected to be largest in MY14-15 Exporter of cotton and yarn Competitive costs Factor costs, particularly power and wages, competitive with other key producers Chinese costs have risen substantially India Advantage Integrated textile presence Significant presence across the value chain from cotton to made-ups Socioeconomic factors Democracy with stable government Better environmental and labour law compliance Supportive Govt. policies Textile Upgradation Fund scheme Holistic enabling environment 9

10 Structural Change: Reflecting in India s market share India is now the second largest exporter of textile products, behind China In textiles (excl clothing), India s share of world exports at ~6% and rising Within that, India s share in Home Textiles much higher at ~11% India s share in Cotton Home Textiles is even higher and better than China in many products India s Global textile exports 6.05% 5.09% 5.20% 5.35% 4.16% 4.32% % 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% Source: WTO 2013 data Textile exports (US$ bn)- LHS Market share - RHS 10

11 Structural Change: Home Textile Market Share US Imports from Various countries Market share Towels (Cotton) India China Pakistan ROW 30% 31% 27% 23% 24% 22% 23% 20% 35% 36% 36% 37% 25% 24% 26% 26% 26% 22% 23% 23% 16% 15% 16% 15% India s share increased by 7 percentage points in 5 years Sheets (Cotton) India China Pakistan ROW 45% 47% 47% 38% 33% 27% 29% 30% 26% 24% 22% 24% 21% 22% 23% 18% 18% 16% 16% 17% 15% 17% 13% 13% India s share increased by 20 percentage points in 5 years Source: Otexa, YTD December Data 11

12 Structural Change: Advantage India in Addressable opportunity Market Size Home textile market at US$45 bn US market Constitutes about one-third of the global market India best placed among competing countries Potential to increase penetration in key categories (TOB, carpets, basic bedding etc.) European market Constitutes about one-third of the global market India competitive in spite of duty disadvantage Proposed India - EU FTA to reduce duties by 5% - 10% Other markets Potential to increase presence in markets like Japan, Korea, Australia FTA with Japan, Korea to boost trade Indian domestic market is a huge potential opportunity 12

13 Structural Change in Global Textile & Specialty Textile Welspun India Global Leader in Home Textiles Financial Highlights Road Ahead Maintaining leadership 13

14 Leadership: WIL - Well Placed to Address Global Opportunities Global scale One stop Solution provider Clients moving towards Vendor Consolidation WIL Home Textiles Leadership Global customer base and brands Presence in multiple categories Significant market share in key geographies Focus on innovation 14

15 Leadership: Focus and Execution Focussed on Home Textiles as a differentiated End-to-end Solutions Provider Widest product range in Home Textiles segment Bath Bedding Flooring Towels Sheets Carpets Bath robes TOB Rugs Basic and Fashion Bedding Uniquely positioned for cross-selling due to Customer reach, Competitive manufacturing and Global delivery model empowering higher wallet share Track record of satisfied customers and repeat business from them; 80% revenue from replenishment business ensuring strong visibility 15

16 Leadership: Categories US Import of Cotton Towels in 2013 US Import of Cotton Sheets in 2013 ROW, 16% Rest of India, 22% Rest of India, 38% Pakistan, 23% Welspun, 14% ROW, 13% Welspun, 9% China, 26% Pakistan, 17% China, 24% Significant market share in Towels and Sheets in the US Rugs and TOB are relatively new products Gaining market share Filled products and carpets are recently launched Expected to gain market share over the next 2-3 years Source : Otexa, Company Estimates 16

17 Leadership: Best-in-Class Customer Base Wal Mart Bed Bath & Beyond Macy s J C Penney Target Kohl s K Mart- Sears.. and many more Spaces- Home & Beyond Welhome Ikea Carrefour JYSK El Corte Ingles Vincenzo Zucchi S.p.A and many more ASDA Tesco Marks & Spencer Debenhams House of Frazer Christy.. and many more 17

18 Leadership: Global Reach & Delivery Model 18

19 Leadership: Scale Ranked No. 1 for last 2 years by US Home Textiles Today Magazine in Top 15 Home Supplier Giants to USA Largest Bath Towel Supplier 2 nd Largest Bedding Supplier 4 th Largest Bath Rugs Supplier FY14 Capacity: 45,000 MTPA (60,000 MTPA by FY16) Location: Anjar/Vapi Cap. Utilization: 99% FY14 Capacity: 55 million Mtrs/year (72 mn Mtrs/year by FY16) Location: Anjar Cap. Utilization: 89% FY14 Capacity: 12,000 MTPA (20,000 MTPA by FY16) Location: Vapi Cap. Utilization: 68% 19

20 Leadership: Brands and Innovation Brands and Licenses Innovation and Patents Innovation Innovation is a key differentiator for Welspun. Innovative products account for ~25% of the revenues. Focus on Product, Process and Supply Chain innovation Six patents applied for till date Hygrocotton Yarn patented in UK (pending in USA and India) Five other patents pending approval Exclusive Licensee for towels Other Key Innovations a. Eco Dry Towels b. License for Flex Fit 20

21 Leadership: Enhancing Resilience Geographical Revenue Mapping US Sales ROW Sales 80% 73% 55% % Sales - Top 5 Customers 53% 70% 60% 50% 40% 30% 27% 60% 40% 50% 45% 40% 35% 30% 25% 41% 20% FY10 FY14 20% FY 10 FY14 Further working to develop Lat Am, Asia pacific, Indian markets and exploit the full potential of European markets. 21

22 22 Leadership: Pricing power Welspun has developed strong relationships with clients over the years, which gives it better pricing power Most clients on an index-based pricing Price varies up or down with changes in major input costs This reduces volatility in margins Contact price Sample contract with one of our clients for a particular product Index (Jan 10 = 100)

23 Leadership: Recognitions Star Vendor award for the year 2014 by Macy s. Special award Global Citizen Award for our Corporate Social Values by Macy s CEO award from Sears Holding. Green Believers Award from Frost and Sullivan's at Green Manufacturing Excellence Awards and Summit Best Corporate Social Responsibility Practices award at Global CSR Excellence Leadership award 2014 by World CSR Congress. Sears/K-mart Vendor of the Year. 5 Star Vendor award for the year 2013 by Macy s. Textile Conclave 2013 Brand INDIA Largest Producer Made Ups & Home Textiles. Largest Exporter Made Ups & Home Textiles. Texprocil Award Special Gold Trophy for Highest Global Exports Gold Trophy for Highest Exports of Terry Towels in Made-ups Golden Peacock Eco- Innovation Award Wilkinson Award for Best Product. Tesco Homeshop Gold Supplier Award. Texprocil Awards Special Gold Trophy for Highest Global Exports Gold Trophy for Highest Exports of Terry Towels in Made-ups Gold Trophy for Highest Exports of Made-ups in Merchant Exporter 23

24 Leadership: Social, Environmental and Corporate Values Welspun s social vision is enshrined in the 3E s Education - Quality Education Program with 18 Govt. Schools in Kutch from 15 villages reaching out to 5720 students and 157 teachers. - 4 Balwadis (Pre-primary Education Centers) with 170 children being benefited. Empowerment - 8 Vocational Centers to train women in Cutting & Stitching. 600 women trained in stitching. Avg. earning per women per month INR Environment & Health - Drinking water purification RO plant in Vapi reaching out to approx people. - Welspun has planted 2,29,654 Trees at Anjar. Global CSR Excellence & Leadership award World CSR Congress 2012 and 2013 Outstanding CSR in Textiles Sector Wockhardt Foundation

25 Leadership: Vision Global leadership position Best-in-class, end to - end product and service offering Continuous improvement in systems and processes Develop human capital The most valuable asset Across all business verticals and product categories 25

26 Structural Change in Global Textile & Specialty Textile Welspun India Global Leader in Home Textiles Financial Highlights Road Ahead Maintaining leadership 26

27 Financial Highlights: Income statement (Continuing business) Consistent improvement in financial performance Particulars FY12 FY13 FY14* 9M FY15 Sales revenue 29,329 36,473 44,954 39,367 Sales growth % 20% 24% 23% Operating EBITDA 5,566 5,946 9,211 9,296 Operating EBITDA Margin 19.0% 16.3% 20.5% 23.6% EBITDA 5,960 6,438 10,253 9,956 EBITDA Margin 20.3% 17.7% 22.8% 25.3% Depreciation 1,309 1,449 1,903 2,321 Finance cost 1,840 1,977 2,352 2,260 PBT 2,811 3,013 5,997 5,376 PAT 1,986 2,248 4,195 3,784 PAT Margin 6.8% 6.2% 9.3% 9.6% Cash PAT 3,603 4,178 6,237 6,236 (Rs. in million) Note: On account of the change in depreciation policy from straight line method to reducing balance method, the company had taken an additional one time depreciation of Rs. 4,960 million in FY14. FY14 figures are normalized for these effects. * Note: Cash PAT = PBT + Depreciation Current tax (incl MAT, if any) 27

28 Financial Highlights: Balance Sheet (Rs. in mn except Ratios ) Particulars FY12 FY13 FY14 9M FY15 Net Worth 7,428 9,902 11,097 13,357 Short Term Loans 7,313 9,166 11,349 10,585 Long Term Loans 12,309 11,079 18,944 19,399 Gross Debt 19,621 20,244 30,293 29,983 Cash, Cash Eqnts & Inv. 3,041 2,798 3,658 4,250 Net Debt 16,580 17,446 26,635 25,733 Average interest cost of long-term debt at ~7% Net Fixed Assets (incl CWIP) 17,995 18,615 25,609 27,361 Net Current Assets** 6,290 8,221 9,991 7,924 ** Net Current Assets does not include Cash & Cash Equivalents Solvency ratios FY12 FY13 FY14 9M FY15* Fixed assets/long term debt Gross debt/equity Net debt/equity Long term debt/equity Net Long Term Debt / Equity Net debt/op. EBITDA EBIT/Interest * P&L figures annualised Debt increase in FY14 mainly on account of backward integration capex 28

29 Financial Highlights: Improving Operating and Return Ratios Operational ratios FY12 FY13 FY14 9M FY15* Fixed Asset turnover Total Asset turnover Inventory days Debtor days Payable days Cash conversion cycle Return ratios FY12 FY13 FY14 9M FY15* ROE 26.7% 25.9% 40.0% 41.3% ROCE (post-tax) 11.9% 12.2% 16.2% 16.8% Note : ROCE = EBIT x (1-tax rate) / Average Capital Employed; ROE = Net Profit / Average Net worth Total asset turnover = Sales/ (Fixed assets + Gross current assets) * P&L figures annualised Strong improvement in ROE and ROCE over the years 29

30 Rs. in million Welspun Group Home Textiles Leadership Rs. in Million Rs. in Million Rs. in miilion Key Financials - Trends (Continuing business) 50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 Revenues 44,954 36,473 39,367 29,329 FY12 FY13 FY14 9M FY15 EBIDTA (Reported) 12,000 10,000 10,253 9,956 8,000 5,960 6,438 6,000 4,000 2,000 0 FY12 FY13 FY14 9M FY15 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, PAT After Minority 4,195 3,784 2,248 1,986 FY12 FY13 FY14 9M FY15 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Cash PAT 6,237 6,236 4,178 3,603 FY12 FY13 FY14 9M FY15

31 Key Ratio Trends EPS in Rs./Share % 16.00% 11.00% 6.00% 7.67% ROCE (Post Tax) % 11.9% 12.2% 7.15% 16.2% 16.8% - FY 10 FY 11 FY 12 FY 13 FY 14# 9M FY15* 1.00% FY 10 FY 11 FY 12 FY 13 FY 14# 9M FY15* 3.0x 2.8x 2.6x 2.4x 2.2x 2.0x 1.8x 1.6x 1.4x 1.2x 2.8x Net Debt / Equity 2.3x 2.2x 1.8x 2.4x 1.9x 6.0x 5.5x 5.0x 4.5x 4.0x 3.5x 3.0x 2.5x 2.0x 4.8x Net Debt / EBITDA 4.8x 3.0x 2.9x 2.9x 2.1x 1.0x FY 10 FY 11 FY 12 FY 13 FY 14$ 9M FY15* 1.5x FY 10 FY 11 FY 12 FY 13 FY 14 9M FY15* * Annualized ; # Adjusted for one time Depreciation Impact of Rs. 4,960 mn; $ Net worth reduction on account of one-time Depreciation

32 Structural Change in Global Textile & Specialty Textile Welspun India Global Leader in Home Textiles Financial Highlights Road Ahead Maintaining leadership 32

33 Road Ahead: Maintaining Leadership Revenue growth Revenue Growth Underpenetrated Markets Underpenetrated Channels Underpenetrated Product Categories India E-Commerce Bath Robes Europe Hospitality Carpets Asia Pacific Branded Sales Filled Products Latin America 33

34 Road Ahead: Maintaining Leadership Quality & Scale Capacities FY14 FY15 FY16 Yarn (MT) 38,500 50,000 60,000 Towels (MT) 45,000 50,000 60,000 Sheets ( 000 metres) 55,000 60,000 72,000 Rugs incl Carpets(MT) 12,000 15,000 20,000 Total capex plan of Rs. 25bn Phase-1 Capex of Rs. 13 bn, completed Focused on backward integration and debottlenecking To mitigate quality and availability issues of key intermediates Phase- 2 Potential maximum Capex of Rs. 12bn over FY15 and FY16 To be focussed on plant modernisation, automation and calibrated finished product capacity expansion Capacity growth to be achieved without headcount increase 34

35 Summary: Key Investment Considerations Highly Experienced Management Team Focussed on Value Creation Clear Leader in Large and Addressable Market with Favourable Growth Dynamics Broad, High Quality Product Portfolio with Well- Recognised Brands Strong Operational Cashflows with Deleveraging and Dividends as Key Focus Welspun India Entrenched Customer Relationships across Geographies Best-in-class Manufacturing Infrastructure and Distribution Network One Stop Solution Provider from Product Development to Supply Chain Management 35

36 36 Annexures

37 India Only Textile Exporter with Cotton surplus Cotton Balance Sheet MY Projections (In mn Bales LB) COUNTRY OPENING STOCK OUTPUT IMPORT CONSUMPTION EXPORTS ENDING STOCK WORLD INDIA CHINA U.S PAKISTAN BANGLADESH Source :- USDA. Status as of January 2015 India produces 25% of world s cotton It consumes about 78% of its production; rest is available for export China holds ~58% of world s cotton stock. India will overtake China as the largest producer of cotton this year, according to USDA projections. 37

38 India India Turkey Turkey China China Egypt Indonesia Indonesia Pakistan Pakistan Bangladesh Bangladesh India China Pakistan Turkey Indonesia Bangladesh Egypt Benchmarking Input Costs Wages, Power Cost, Manufacturing Cost Competitiveness Wages (Base India =100) 120 Power Costs (Base India =100) Manufacturing Costs (Base India =100) India s Position:- Wages are Half of China s. Power costs at par with China, Pak, Turkey. Competitive in manufacturing costs. Source :- GHERZI 38

39 39 Innovative Product Range Bed Technologies Bath Technologies Sleep Solutions Rugs Flexifit (exclusive licensee) Eversmooth Cotton Touch Smart Bedskirt Perfect Sheet Hygro Comfort Bleach safe Hygro cotton Quick Dry Bleach safe Eucalyptus Silk Bamboo Aerospun Spot Stop Earth Pillow Sneeze eezzz Hygrofil My Favorite Pillow Bleach safe Eucalyptus Drylon Hygro Quick Dry Aerofil Hygro cotton

40 Branded Sales Trend India Branded Sales (Rs Million) Christy Branded Sales (Rs Million) ,565 1,411 1,547 1,741 2,334 2,686 FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 (E) FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 (E) Branded Sales ( Rs. in Mn) FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 (E) Spaces Welhome India Branded Sales Christy 1,565 1,411 1,547 1,741 2,334 2,686 TOTAL 2,095 2,111 1,837 2,101 2,804 3,386 Strong growth expected in branded sales, especially in India

41 41 Thank You For further details, please contact: Akhil Jindal Director Group Finance and Strategy Harish Venkateswaran General Manager - Group Finance and Strategy harish_venkateswaran@welspun.com Company Website: