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Welspun Group | Home Textiles Leadership

Welspun India Limited (WIL)

Investor Presentation February 2015


1


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


WIL – An Overview

3

Global leader in Home Textiles (Speciality) 1st 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


WIL - Financial Overview

Shareholding Pattern as on Dec 31, 2014 Summary Market Statistics

Consolidated Financial Summary – Continuing business*

*All figures re-grouped and restated to show the continuing textile business

4

* On TTM basis

29,329

36,473

44,954

39,367

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

FY12 FY13 FY14 9M FY15

Revenue in INR Million

5,960 6,438

10,253 9,956

0

2,000

4,000

6,000

8,000

10,000

12,000


EBITDA in INR Million

Promoters, 73.31%

Mutual Funds, 4.50%

Banks, 0.18%

Non-Institutional

Public, 17.30%

Insurance Cos, 2.48%

FII, 2.23%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


7

12 16 17

26 28

32 36

45

FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014

WIL – Revenue Milestones

5

WIL Revenue in Rs. Billion

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.

• 1993: Towels facility at Vapi

• 2000: JV for bath robes

Pre-2005

Towels & Sheets Facility at Anjar

Entry into bath rugs & top of bed


Structural Change in Global Textile & Specialty Textile

Welspun India – Global Leader in Home Textiles

Financial Highlights

Road Ahead – Maintaining leadership

6


Structural Change: Asian Dominance in Home Textiles

Textiles and Clothing

US$784 bn

Textiles

US$313 bn

Home textiles

US$45 bn

• China: 36%

• India : 5%

• China: 34%

• India : 6%

• China: 35%

• India : 11%

Source :- WTO - 2013 data, Texprocil, Company estimates 7


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


Structural Change: Tailwinds favoring India

India Advantage

Socio-economic

factors

Competitive costs

Good quality, surplus cotton available 2nd largest producer of cotton; expected to be

largest in MY14-15 Exporter of cotton and yarn

Democracy with stable government Better environmental and labour law compliance

Raw material

availability

Supportive Govt.

policies

Factor costs, particularly power and wages, competitive with other key producers Chinese costs have risen substantially

Textile Upgradation Fund scheme Holistic enabling environment

Integrated textile

presence

Significant presence across the value chain from cotton to made-ups

9


Structural Change: Reflecting in India’s market share

Source: WTO 2013 data

India’s Global textile exports

10

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

4.16% 4.32%

5.09% 5.20% 5.35%

6.05%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

0

2

4

6

8

10

12

14

16

18

20

2008 2009 2010 2011 2012 2013

Textile exports (US$ bn)- LHS Market share - RHS


27%

33% 38%

45% 47% 47%

29% 30%

24% 22% 24% 23% 26%

21% 22% 18% 17% 17% 18%

16% 16% 15% 13% 13%

2009 2010 2011 2012 2013 2014

Sheets (Cotton) India China Pakistan ROW

30% 31% 35% 36% 36% 37%

23% 27%

25% 26% 26% 26% 22% 23% 24%

22% 23% 23% 24% 20%

16% 15% 16% 15%

2009 2010 2011 2012 2013 2014

Towels (Cotton) India China Pakistan ROW

US Imports from Various countries – Market share

Structural Change: Home Textile Market Share

Source: Otexa, YTD December Data

India’s share increased by 7 percentage points in 5 years

India’s share increased by 20 percentage points in 5 years

11


Structural Change: Advantage India in Addressable opportunity

12

Market Size

US market

European market

Other markets

Home textile market at US$45 bn

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.)

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%

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






13


WIL

Home Textiles

Leadership

Global scale

Global customer base and brands

Presence in multiple

categories

Focus on innovation

Significant market share

in key geographies

Clients moving towards Vendor

Consolidation

One –stop Solution provider

Leadership: WIL - Well Placed to Address Global Opportunities

14


Leadership: Focus and Execution

Focussed on Home Textiles as a differentiated End-to-end Solutions Provider

Widest product range in Home Textiles segment

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

Bath Bedding Flooring

Towels Sheets Carpets

Bath robes TOB Rugs

Basic and Fashion Bedding

15


Rest of India , 22%

Welspun, 14%

China , 26%

Pakistan, 23%

ROW, 16%

US Import of Cotton Towels in 2013

Rest of India , 38%

Welspun, 9%

China , 24%Pakistan, 17%

ROW, 13%

US Import of Cotton Sheets in 2013

Leadership: Categories

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


• Wal Mart • Bed Bath & Beyond • Macy’s • J C Penney • Target • Kohl’s • K Mart- Sears ….. and many more

Leadership: Best-in-Class Customer Base

• 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

• Spaces- Home & Beyond • Welhome

17


Leadership: Global Reach & Delivery Model

18


“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

2nd Largest Bedding Supplier

4th Largest

Bath Rugs Supplier

Leadership: Scale

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


Leadership: Brands and Innovation

Exclusive Licensee for towels

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

Other Key Innovations

a. Eco Dry Towels

b. License for Flex Fit

Brands and Licenses Innovation and Patents

20


Leadership: Enhancing Resilience

Further working to develop Lat Am, Asia pacific, Indian markets and exploit the full potential of European markets.

73%

60%

27%

40%

20%

30%

40%

50%

60%

70%

80%

FY10 FY14

Geographical Revenue Mapping US Sales ROW Sales

53%

41%

20%

25%

30%

35%

40%

45%

50%

55%

FY 10 FY14

% Sales - Top 5 Customers

21


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

22

60

80

100

120

140

160

180Index (Jan 10 = 100)

Contact price – Sample contract with one of our clients for a particular product


Leadership: Recognitions

2012 2013

Golden Peacock Eco-Innovation Award

Wilkinson Award for Best Product.

Tesco Homeshop Gold Supplier Award.

Texprocil Awards 2011-12 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

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 2012-13 Special Gold Trophy for

Highest Global Exports

Gold Trophy for Highest Exports of Terry Towels in Made-ups

5 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 2014.

“Best Corporate Social Responsibility Practices” award at Global CSR Excellence Leadership award 2014 by World CSR Congress.

2014

23


“Global CSR Excellence & Leadership award”

World CSR Congress 2012 and 2013

“Outstanding CSR in Textiles Sector”

Wockhardt Foundation 2011

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 5050.

Environment & Health - Drinking water purification RO plant in Vapi reaching out to approx. 6200 people.

- Welspun has planted 2,29,654 Trees at Anjar.

Leadership: Social, Environmental and Corporate Values

24


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


Financial Highlights: Income statement (Continuing business)

(Rs. in million)

Consistent improvement in financial performance

27

•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)

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


Financial Highlights: Balance Sheet

Debt increase in FY14 mainly on account of backward integration capex

(Rs. in mn except Ratios )

28

Average interest cost of long-term debt

at ~7%

** Net Current Assets does not include Cash & Cash Equivalents

* P&L figures annualised

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

Net Fixed Assets (incl CWIP) 17,995 18,615 25,609 27,361

Net Current Assets** 6,290 8,221 9,991 7,924

Solvency ratios FY12 FY13 FY14 9M FY15*

Fixed assets/Long term debt 1.47 1.68 1.35 1.41

Gross debt/Equity 2.64 2.04 2.73 2.24

Net debt/Equity 2.23 1.76 2.40 1.93

Long term debt/Equity 1.65 1.12 1.71 1.45

Net Long Term Debt / Equity 1.25 0.84 1.38 1.13

Net debt/Op. EBITDA 2.98 2.93 2.89 2.08

EBIT/Interest 1.43 2.52 3.55 3.38


Financial Highlights: Improving Operating and Return Ratios

Strong improvement in ROE and ROCE over the years

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

29

Operational ratios FY12 FY13 FY14 9M FY15*

Fixed Asset turnover 1.63 1.96 1.76 1.92

Total Asset turnover 0.83 0.95 0.87 0.98

Inventory days 83 82 82 73

Debtor days 28 28 33 33

Payable days 59 50 50 46

Cash conversion cycle 52 60 65 60

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%


Key Financials - Trends (Continuing business)

29,329

36,473

44,954 39,367

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000


Rs.

in m

illi

on

Revenues

5,960 6,438

10,253 9,956

0

2,000

4,000

6,000

8,000

10,000

12,000


Rs.

in m

iili

on

EBIDTA (Reported)

1,986 2,248

4,195 3,784

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500


Rs.

in M

illi

on

PAT After Minority

3,603 4,178

6,237 6,236

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000


Rs. i

n M

illio

n

Cash PAT


Key Ratio Trends

* Annualized ; # Adjusted for one time Depreciation Impact of Rs. 4,960 mn; $ Net worth reduction on account of one-time Depreciation

7.8 9.5

19.9

22.4

41.8 50.3

-

10.0

20.0

30.0

40.0

50.0

60.0

FY 10 FY 11 FY 12 FY 13 FY 14# 9M FY15*

EPS in Rs./Share

7.67%

7.15%

11.9%12.2%

16.2%16.8%

1.00%

6.00%

11.00%

16.00%

21.00%

FY 10 FY 11 FY 12 FY 13 FY 14# 9M FY15*

ROCE (Post Tax) %

2.8x

2.3x 2.2x

1.8x

2.4x

1.9x

1.0x

1.2x

1.4x

1.6x

1.8x

2.0x

2.2x

2.4x

2.6x

2.8x

3.0x

FY 10 FY 11 FY 12 FY 13 FY 14$ 9M FY15*

Net Debt / Equity

4.8x

4.8x

3.0x

2.9x

2.9x

2.1x

1.5x

2.0x

2.5x

3.0x

3.5x

4.0x

4.5x

5.0x

5.5x

6.0x

FY 10 FY 11 FY 12 FY 13 FY 14 9M FY15*

Net Debt / EBITDA






32


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


Road Ahead: Maintaining Leadership | Quality & Scale

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

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

34


Summary: Key Investment Considerations

35

Welspun India

Clear Leader in Large and Addressable Market with Favourable Growth

Dynamics

Broad, High Quality Product Portfolio

with Well-Recognised Brands

Entrenched Customer

Relationships across Geographies

One Stop Solution Provider from Product

Development to Supply Chain Management

Best-in-class Manufacturing

Infrastructure and Distribution Network

Strong Operational Cashflows with

Deleveraging and Dividends as Key

Focus

Highly Experienced Management Team Focussed on Value

Creation


Annexures

36


India – Only Textile Exporter with Cotton surplus

COUNTRY OPENING

STOCK OUTPUT IMPORT CONSUMPTION EXPORTS

ENDING STOCK

WORLD 101.7 119.2 34.0 112.2 34.0 108.6

INDIA 11.5 30.5 1.1 24.0 4.7 14.4

CHINA 62.7 30.0 7.0 36.5 0.1 63.2

U.S. 2.5 16.1 0.0 3.8 10.0 4.7

PAKISTAN 2.5 10.2 1.0 10.5 0.5 2.7

BANGLADESH 1.0 0.1 4.5 4.4 0.0 1.2

Cotton Balance Sheet – MY 2014-15 Projections (In mn Bales - 480 LB)

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.

Source :- USDA. Status as of January 2015

37


Benchmarking Input Costs

Wages, Power Cost, Manufacturing Cost Competitiveness

Source :- GHERZI

India’s Position:-

Wages are Half of China’s.

Power costs at par with China, Pak, Turkey.

Competitive in manufacturing costs.

100

601

214 174 160

89 53

0

100

200

300

400

500

600

700

Ind

ia

Turk

ey

Ch

ina

Egyp

t

Ind

on

esia

Pak

ista

n

Ban

glad

esh

100 101 94 93

76 63

34

0

20

40

60

80

100

120

Ind

ia

Ch

ina

Pak

ista

n

Turk

ey

Ind

on

esia

Ban

glad

esh

Egyp

t

Wages (Base India =100) Power Costs (Base India =100)

100

140

111 99 98

87

0 20 40 60 80

100 120 140 160

Ind

ia

Turk

ey

Ch

ina

Ind

on

esia

Pak

ista

n

Ban

glad

esh

Manufacturing Costs (Base India =100)

38


39

Bed Technologies

• Flexifit (exclusive licensee)

• Eversmooth

• Cotton Touch

• Smart Bedskirt

• Perfect Sheet

• Hygro Comfort

• Bleach safe

Bath Technologies

• Hygro cotton

• Quick Dry

• Bleach safe

• Eucalyptus

• Silk

• Bamboo

• Aerospun

• Spot Stop

Sleep Solutions

• Earth Pillow

• Sneeze eezzz

• Hygrofil

• My Favorite Pillow

Rugs

• Bleach safe

• Eucalyptus

• Drylon

• Hygro

• Quick Dry

• Aerofil

• Hygro cotton

Innovative Product Range

../Sales data March 2011.xls


Branded Sales Trend

530

700

290360

470

700

FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 (E)

India Branded Sales (Rs Million)

1,565

1,411

1,5471,741

2,334

2,686

FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 (E)

Christy Branded Sales (Rs Million)

Branded Sales ( Rs. in Mn) FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 (E)

Spaces 80 150 180 290 430 580

Welhome 450 550 110 70 40 120

India Branded Sales 530 700 290 360 470 700

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


Thank You

For further details, please contact:

Harish Venkateswaran

General Manager - Group Finance and Strategy

Email: [email protected]

Akhil Jindal

Director – Group Finance and Strategy

Email: [email protected]

Company Website: www.welspunindia.com

41

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