| Strong parentage; tangible support from the parent to WAMIL
Welspun India Limited (WIL) is a leading company of the Welspun group, promoted by Mr. B.K. Goenka and Mr. R.R. Mandawewala. WIL is the largest home textiles company in Asia and among the top 5 home textile manufacturers in the world. WIL is the largest exporter of home textile products in India and derives more than 80 percent of its revenue from exports. The company supplies top global retailers from its manufacturing facilities at Anjar and Vapi, both in Gujarat, India. WIL's portfolio comprises a wide range of home textile products such as terry towels (cotton and blended yarn), bed linen (basic bedding and decorative bedding), and bath rugs (cotton, nylon, or microfiber). While enumerating the support extended by WIL to WAMIL, Acuité takes cognizance of WIL's resourceful promoters (WAMIL along with Welspun Group), extensive experience of the management, WIL's leading position in the home textiles segment with global reach, established relationships with leading global retailers, a well-diversified product portfolio, a strong brand image, integrated operations, and a healthy financial risk profile, albeit constrained by exposure to inherent industry risks such as volatility in raw material prices and fluctuations in foreign currency.
WAMIL is of strategic importance to WIL; the same is demonstrated by the support from WIL. The support has been in the form of WAMIL, its 100 percent wholly-owned company, wherein WIL has infused 28 percent of the project cost, which stood at Rs. 82.96 crore, and in the form of equity and zero percent cumulative convertible debentures (CCDs). To count on the aforesaid financial support, the unconditional and irrevocable corporate guarantee provided by WIL is valid until the creation and perfection of the security, sponsor undertaking, and non-disposable undertaking. Besides financial support, WIL will reinforce WAMIL in terms of brand leveraging and distribution networks in India and export markets such as the USA and UK, amongst others.
Acuité believes that WAMIL will benefit from the operational and financial support of its parent, WIL, over the medium to long term.
WIL’s presence in the non-woven spunlace segment assists WAMIL and exposes it to low demand risk.
WAMIL has been established to cater to the potential demand of WIL’s existing elite customer base present in the non-woven spunlace segment, along with other players in the export and Indian markets. WIL has an established presence in the manufacturing of non-woven spunlace rolls at its manufacturing facility in Anjar, Gujarat. The suppliers here are well-known, as similar plants and machinery have already been acquired earlier by the promoter company, which also has established raw material linkages with companies like Grasim Industries Limited and Indorama Corporation, amongst others. Other supporting factors, such as process and technology, which are proven and well-known brands of "welspun" with their existence in export markets, will aid WAMIL in the future. In the non-woven spunlace segment of the WIL, it deals with the world’s top customers. Out of the current capacity of the top end-users, WIL is able to cater to merely 7 percent of the demand. In order to tap the demand from current customers and consider it a growing business segment, promoters proposed to implement a large dedicated manufacturing facility for technical textiles, i.e., nonwovens, in Telangana.
Acuité believes that the demand risk will remain low for the company given that the business is already known to its parent, i.e., WIL, going forward.
Strategic location of the plant and established marketing arrangements
WAMIL's manufacturing plant is strategically located in Ranga Reddy district, Telangana State, which has proximity to the city of Hyderabad. It abuts the Nagarguda-Shamshabad road to the south and the Hyderabad-Shahbad road to the east. The site is 25 kilometres from NH 44, which connects to various cities in Telangana and the rest of India, and has access from various roads to the national highways, which connect to various states of India. It offers a location advantage with the southern region being a textile hub, with ease of access for its raw materials, as well as expanding its distribution and dealer network in the southern region and across India.
With the majority of Welspun Group's manufacturing base in Gujarat, WAMIL was planned in Telangana with the objective of accomplishing its manufacturing base in a newer geography, enabling ease of doing business. With WIL’s strong presence in the export and domestic markets, WAML will have a market readily available with the support of WIL. Besides, WIL’s presence in the USA and Europe (WIL derives almost 80–90 percent of its revenues from exports to these geographies) will likely help WAMI leverage the brand presence of ‘Welspun’. For spunlace rolls, WAMIL shall cater to the existing customers of WIL and new customers too. It basically exports to over 35 countries, with customers including global giants from the health-hygiene segment like Reckitt Benckiser (Dettol), Nice-Pak, Rockline, Cardinal, Johnson & Johnson, ITW, Cascades, 3M, Essity, etc., as well as domestic brands like Himalaya, amongst others.
Acuité believes that key factors like strategic location, partial integration, and an established distribution network will assist WAMIL in scaling up its operations and reporting relatively better operating margins.
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