Welspun Living Q2 FY27 Earnings Call: Revenue Up 16.9% Despite Vapi Floods, Net Cash Milestone Achieved (WELSPUNLIV)

Double-Digit Growth Despite Vapi Disruption; Net Cash Milestone

• Revenue Rs.2,870 Cr, +16.9% YoY — consolidated Q2 FY 2026-2027 growth with double-digit expansion in both segments, despite flood disruption at the Vapi facility, where operations were restricted for several weeks.
• EBITDA margin 12.9% — up 600 bps YoY and 40 bps QoQ, driven by operating efficiencies, procurement discipline, product mix and cost management; input costs and consumer demand remain dynamic.
• Vapi floods cost Rs.100-150 Cr of Q2 top line — dispatches to UK and Europe were restricted; management indicated growth would otherwise have continued. Towel volumes (units and tonnage) are expected to normalize in Q3 FY 2026-2027.
• Net cash position achieved — a swing from net debt of Rs.775 Cr at end of March 2026 (FY 2025-2026 close); cash conversion cycle improved from 82 days (March 2026) to 44 days in Q2 FY 2026-2027, with ROCE at 12.7%, hitting the FY27 low-teens goal ahead of schedule.
• Home textiles exports +18.3% YoY — supported by healthy retailer demand ahead of the holiday season; domestic business grew 28.2% YoY on strong B2C across general trade, e-commerce and quick commerce.
• Commodity headwinds persist — firm cotton prices (~68,000 as of the Q2 FY 2026-2027 call), rising man-made fiber and oil-linked input costs, and elevated freight amid Middle East tensions; being managed via procurement discipline, customer pricing discussions and productivity.

US Resilient, Europe FTA-Led, UK Share Capture

• US: 60-70% of US business is replenishment programs (FY 2026-2027); management sees no impact from inflation risk flagged on the call, with consumption "steady state" and US growth guided at mid-to-high single digit (period unspecified).
• Europe/UK growing ~20% (FY 2026-2027) — management is "cautiously optimistic" and expects to maintain that pace over the next two years (through FY 2028-2029), aided by the FTA; Q2 saw a "little blip" in Europe/UK because Vapi services those orders.
• UK home textile market sized at $5-7 bn — management noted Pakistan currently holds ~55% of that market (primarily bed sheets); Welspun sees an opportunity to capture share, starting with bath towels and extending to bedding, sheets and rugs.
• NGFTA (effective 20 Oct 2026, FY 2026-2027) — no opportunity size quantified; Dipali Goenka said retailer conversations "continue to fructify" and Welspun Living is "geared up for a 20% growth in this region" (period unspecified).
• US tariffs: India currently at 10% — management said talks are ongoing and India will be at par with Pakistan, Bangladesh, China and Vietnam under the eventual trade agreement; 100% of the earlier tariff challenge has been mitigated, with BTA conversations ongoing.
• FTA pipeline — management expects at least 53 FTAs to open with zero tariff for textiles in the near future (period unspecified); UK FTA has delivered early wins with customer factory visits and product development underway.
• OTEXA data reading — per management, Welspun's US towel share increased in CY 2026 YTD even as India's share dropped; management acknowledged India's decline against the analyst's cited -17% YTD (CY 2026) figure and offered a follow-up to reconcile data.

Flooring Recovery, Pillows Scaling, Advanced Textiles an FY27 Aberration

• Flooring revenue +19.3% YoY, EBITDA margin 10.8% in Q2 FY 2026-2027, improving sequentially and YoY on portfolio right-sizing and customer-mix discipline; management targets steady-state low double-digit margins (period unspecified), flagging PSF and polymer costs as swing factors. H1 FY 2026-2027 flooring revenue was ~Rs.400 Cr (analyst-cited); management targets Rs.800-1,000 Cr (period unspecified) and explicitly stated "nothing beyond that" — the analyst's Rs.1,500 Cr FY 2027-2028 path was not endorsed.
• US pillow business grew 2.4x YoY in Q2 FY 2026-2027 with Ohio (83% utilized) and Nevada (52%) operational; volumes are doubling in FY 2026-2027 — H1 FY 2026-2027 has already doubled the FY 2025-2026 number. Business is currently around break-even.
• Pillow revenue potential of $80-100 million at lower-teens margin at full capacity across both US plants; management expects the 80-100 million potential to be achieved by FY29.
• Advanced textiles flat YoY in H1 FY 2026-2027 — hit by the commodity surge in a challenging man-made fiber scenario; management termed FY 2026-2027 an aberration, expects recovery in FY 2027-2028, and holds a board-level 20% EBITDA target for the segment with growth that "could reasonably be" double-digit over the next couple of years.
• B2B innovation and domestic B2B each grew upward of 40% in Q2 FY 2026-2027, together roughly one-third of revenue (analyst-cited); CFO flagged "a couple of one-time" promotional orders but said the momentum is part of the sales-mix plan. 70-80% of total business is program-led (current mix, Q2 FY 2026-2027).
• Home textiles ex-advanced textiles grew ~22% YoY in H1 FY 2026-2027 — management clarified growth is a mix of value and volume, with bed linen volume up 2% in H1 FY 2026-2027; analyst Soham Samata (Motilal Oswal) flagged bed volumes down 4% and bath up only 5%.

Gross Margin Rebound After Q1 Compression; Cotton Strategy Patient

• Gross margin compressed ~250 bps in Q1 FY 2026-2027 on raw material price pressure; the Q2 FY 2026-2027 improvement reflected customer program mix, sales price and raw material, with the company's 6-9 months of inventory (per CFO Manish Bansal) supporting average realized price.
• Margins "will actually improve" — CFO response to the analyst's ~45% steady-state gross margin framing for Q3-Q4 FY 2026-2027, dependent on customer mix; MD & CEO added management is "looking at a good steady state EBITDA margin" (unquantified).
• Cotton at ~68,000 with 4-5 months cover beyond December 2026 — the company will take its own time before fresh buying decisions in the new season; any cotton-driven price increases will be implemented in collaboration with customers.
• Other expenses declined QoQ in Q2 FY 2026-2027 — CFO attributed this to ongoing cost-optimization and productivity initiatives rather than a one-off; container costs are being managed via long-term contracts, and more than 90% of business is on FOB terms.
• Cash conversion cycle at 44 days, expected to normalize to 55-60 days (period unspecified) — CFO called H1 FY 2026-2027 cash generation funded largely by incremental trade payables "business as usual."
• Tariff refunds received but not in P&L as of Q2 FY 2026-2027 — amounts are under reconciliation with customers and customs and will probably start reflecting in financials sometime in Q3 FY 2026-2027.

FY28 Rs.15,000 Cr Intact; Multi-Year Framework Reaffirmed

• FY28 top line guidance of close to Rs.15,000 crore reaffirmed — management said "the number is intact," with Dipali Goenka adding Welspun will maintain complete leadership in towels globally and is exploring additional investment opportunities.
• Multi-year framework reaffirmed — responding to whether 14-15% top-line growth, 14-15% EBITDA margin and 15% ROC are conservatively achievable over the next 3-4 years (through FY 2029-2030/FY 2030-2031), Dipali Goenka reaffirmed the guidance the company has "promised": double-digit revenue growth and 15% EBITDA over the next 2 years (FY 2027-2028 to FY 2028-2029), adding "we will see around 14-15%" (period unspecified).
• FY 2026-2027 guidance tracking — management said it is tracking the same top-line and EBITDA margin guidance given at the beginning of FY 2026-2027, in response to whether the 15-17% realization growth seen in H1 FY 2026-2027 will sustain in H2 FY 2026-2027.
• FY 2026-2027 capex of Rs.400-500 Cr — ~Rs.150 Cr deployed in H1 FY 2026-2027; the balance ~Rs.350 Cr in H2 FY 2026-2027 goes to debottlenecking and capacity increase. Steady-state capex allocation remains roughly Rs.400-500 Cr per annum (period unspecified); FY 2027-2028 capex plans were deferred ("we'll come back to you on that").
• AI and automation "going to be the way forward" for manufacturing economics per Dipali Goenka — adoption of Welvision AI is still evolving (agentic AI, vision AI for quality) and will be needed "across all our operations"; no productivity-gain figure was shared — management committed to revert later.

Vapi Restoration, Commodity Costs, Dynamic External Environment

• Vapi restoration is the near-term execution priority — the plant has resumed partial operations and is working towards full capacity; spinning was impacted more than weaving, with production outsourced and Anjar providing support. Bath linen ran at 83% utilization in Q2 FY 2026-2027 despite limited Vapi contribution; management expects utilization around 90% going forward (period unspecified).
• External environment remains dynamic — management believes the underlying strength of the business and actions taken position it well for the next phase of growth (no timeline specified).
• Industry context (not a company commitment) — management cited India's increasing competitiveness in global sourcing, evolving trade relationships, and the growing importance of reliable supply chains as providing meaningful opportunities for the industry; global retailers are prioritizing dependable supply chains and sourcing diversification.
• Sustainability progress — Anjar is now powered by 100% green electricity, and the Step Zero program is advancing the transition towards more sustainable supply chains.
• Q3 FY 2026-2027 described as "quite promising" — with the holiday season underway and opportunities building in UK, Europe, rest of the world, India and the US; on the "BT" matter, management said it will continue and "we'll see how it pans out," on a level playing field.