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Ladies and gentlemen, good day, and welcome to Welspun India Limited Q4 FY '23 Earnings Conference Call hosted by Nuvama Institutional Equities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Nihal Mahesh Jham. Thank you and over to you.
Yes. Thank you so much. On behalf of Nuvama Institutional Equities, I would like to welcome you all to the Q4 FY '23 and FY '23 conference call of Welspun India. I will now hand over the call to Mr. Salil Bawa, Head Group of Investor Relations. Thank you. Over to you, sir.
Thanks, Nihal. Good afternoon to all of you. On behalf of Welspun India Limited, I welcome all of you to the company's Q4 FY '23 earnings call. Along with me today, we have Ms. Dipali Goenka, Managing Director and CEO. And I also have Mr. Sanjay Gupta, Chief Financial Officer.
We hope you have had a chance to review the investor presentation that we filed with exchanges today. It is also available on our website, welspunindia.com. During the discussion, we may be making references to this presentation, please do take a moment to review the safe harbor statement in our presentation. As usual, we'll start the forum with opening remarks by our leadership team and then we'll open the floor for your questions. Once the call gets over, should you have any further queries that remain unanswered post the earnings call, please feel free to get in touch with me.
With that, I would like to hand over the floor to Ms. Dipali Goenka, Managing Director and CEO. Over to you.
Thank you, Salil. Good afternoon, everyone, and thank you for taking the time to join us today for the Quarter 4 FY '23 analyst call. I would like to share some perspectives on the operating highlights of our performance during the quarter under view. After which Sanjay would share some highlights from our financial metrics.
We are starting to see some green shoots of increased order inflows from big box retailers as they're able to destock the high inventory levels of last year. On the back of the same, on a quarter-on-quarter basis, revenues jumped up by 15% to reach INR 2,195 crores for Quarter 4. Our domestic consumer business continued on its growth trajectory, clocking 31% growth year-on-year for FY '23 with a revenue of INR 550 crores and 9% growth in Quarter 4 year-on-year.
Wealth Fund, brand has grown 33% year-on-year in FY '23 and continued to be the most widely distributed home textile brand in the country, with presence in 500-plus towns and 11,170 plus outlets, up by 4,500 in FY '23 and plus 570 added in Quarter 4. A reach not adhered to achieved by any home textile player in India.
Domestic consumer business share in the overall revenue of the company has more than doubled from 3.7% in FY '21, to 7.7% in FY'23. To strengthen our leadership position, we continually being investing in domestic business and our marketing spend has been 8% during FY '23. Despite the continuing investment, the business has reached a breakeven EBITDA in the current year. Operating cash flows from the domestic business has also improved due to efficient use of capital employed as we have been continually bringing down our net working capital.
Major reasons apart from a breakeven EBITDA has the reductions in inventory holdings from 123 days in FY '19 to 65 days in FY '23 and debtors from 108 days in FY '19 to 56 days in FY '23. Welspun brand was chosen to be among top 50 brands of Asia in the prestegious brands of Asia aboard 2022, '23. Welspun is the only brand from the textile industry to feature among this year's winners.
To realize our vision of [Foreign Language] Welspun, we have been investing in brands globally, and we have witnessed tremendous growth there through growth both owned and licensed brands portfolio. Our global branded business includes Martha Stewart, Scott Living in U.S. as well as Christie in U.K.
They have grown by 50% during Quarter 4 year-on-year and cumulatively grown 10% in FY '23. Our domestic brands have grown 22% and licensed brands Scott Living and Martha Stewart continue to grow at 65% in FY '23. This is definitely a positive uptick in contrast to the overall market scenario.
The share of overall brand has also increased to INR 1,584 crores 22% of our overall revenues in '23, up from 16% year-on-year. Economic conditions for the first half to 2023 looks similar to the conditions that prevailed in Quarter 4, 2022 in U.S., with consumer sentiments remaining low due to high inflation. In the last 1 year, consumers' wallet share shifted towards more necessary items and hence retailers had landed up with high inventory levels of home textile products, which were at relatively higher price point due to higher input cost of raw materials like cotton and historically high ocean freight. We are now starting to see a gradual decline in retailers inventory levels. Major retailers, however, are providingly -- providing conservative guidance in the face of inflation worries and macroeconomic uncertainty for 2023 after touching a double-digit EBITDA last quarter, we're delighted to share that the company has achieved highest EBITDA in last 6 quarters, talking 14.6% in Quarter 4, up 30% year-on-year and 40% quarter-on-quarter. Out of 4 C's, cotton, coal, container and finally, the customer, which impacted our margin in the previous quarters, cotton and container have collected starting last quarter onwards, while coal prices continue to remain at elevated levels as is the case with the energy basket.
With the inventory at retailers level starting to come at a normalized level, the revised prices at consumer level, we expect to see an uptick in consumer demand for Home Textile, so due to concurrent downward economic situation, it might be a gradual increase and take a couple of quarters to revive back to normal levels. As we might say, cautiously optimistic.
Emerging businesses. Our emerging businesses, domestic consumer business brands, Advanced textile and flooring businesses grew 24% in Quarter 4 year-on-year and 12% during FY '23. Its share to our overall revenues has been steadily going up over the last few years and is currently at 34% in FY '23 as compared to 26% in FY '22. The Advanced Textile business witnessed a robust 26% growth year-on-year in Quarter 4 FY '23 and overall 43% in FY '23, fueled by increased capacity of Spunlace and Telangana commissioned in March last year.
Following normalization of ocean freight, customer supplies in U.K. and EU has regained momentum. We have secured a large quarterly business from a new customer who is a market leader in fem care and wipes in the country. Further strong order book from key existing customers in Wet wipes would drive the revenue and ensuing quarters.
In domestic market as well, we have penetrated aggressively, resulting in domestic revenue growth of 48% year-on-year FY '23.
Flooring. Flooring clocked a revenue of INR 208 crores in Quarter 4 grew 24% quarter-on-quarter and 10% year-on-year. Big ticket buyers of U.S.A. and U.K. are bringing back the business despite the slowdown still continuing in both the geographies. Institutional commercial segment has also shown phenomenal growth, both in the U.S. and U.K.
Middle East is continuing to strengthen and have been able to make inroads in Australia markets. Our domestic market front in flooring, we are continuing to see substantial growth and good demand built up in commercial and institutional segments. Residential segment has also started picking up. Domestic flooring hit its highest quarterly revenue crossing the INR 100 crore mark during this year with 43% growth in Quarter 4 year-on-year and overall 81% growth in FY '23.
ESG. Our ESG practices not only make us responsible corporate citizen but also makes the business sustainable. Our investment in STT plant has clearly helped us in lowering water cost substantially. Further, usage and investment in green energy would bring down power costs substantially, at the same time, reducing dependence on the coal and its price variability.
Welspun adoption of ESG practices is world leading, and we are by far the best in the industry. It was corroborated convincingly through our latest Dow Jones Sustainability Index of 59 which puts us in top 5 percentile score among the companies assessed. The average industry score was 21, which we confirmed that Welspun is the beacon when it comes to doing business responsibly and socially. The latest one is 23% better than the last quarter of 48. We're also glad to inform that Welspun achieved Apex India Green Leaf Award 2022 in platinum category from -- for its sustainability performance at Anjar facility.
With this, I would like to hand over to Sanjay, who will take you through the financial highlights. Thank you.
Thank you, Dipali, and greetings, everyone. I'll give you a brief overview of the financial numbers for the Quarter 4 and financial year '23 before we open for question and answer. During quarter 4 financial year '23, we reported revenues of INR 2,195 crores, up 15.2% quarter-on-quarter and down 2.4% year-on-year. Financial year '23 revenues was at INR 8,215 crores, down 11.4% on a like-to-like basis.
EBITDA margin for the quarter stood at INR 320 crores, that is 14.6% which is up by 361 basis points year-on-year and by 257 basis points quarter-on-quarter. For financial year '23, we reported EBITDA of INR 874 crores, that is 10.6% with a contraction of 359 basis points year-on-year on a like-to-like basis. Cotton prices and freight costs continue to price downwards during Quarter 4 financial year '23, and impact of the same can be seen in our margins in Quarter 4.
The average quarter cost during Quarter 4 was INR 65,000 per candy as compared to 69,000 per candy in quarter 3 of financial year '23. Profit after tax after minority interest for the quarter is at INR 129 crores vis-a-vis INR 44 crores last quarter, INR 51 crores year-on-year. And financial year '23 that is INR 203 crores vis-a-vis INR 528 crores year-on-year on a like-to-like basis.
Our consolidated EPS for Quarter 4 is at INR 1.28 per share as compared to INR 0.53 per share year-on-year. Financial year '23 EPS stood at INR 2.02 per share vis-a-vis INR 5.29 per share on a like-to-like basis. On the ForEx front, our average exchange realization for the U.S. dollar during Quarter 4 was 80.48 compared to 77.43 in the corresponding quarter last year.
We continue to use free cash flow to reduce our debt, which is steadily taking us towards making our core business long-term debt-free in a couple of quarters. At the end of financial year '23, net debt stood at INR 1,534 crores. This is INR 375 crores lower than INR 1,909 crores a quarter ago and INR 695 crores lower than INR 2,229 crores a year ago.
Over the last 4 years, our net debt to equity has come down to 0.38x as on 31st March '23 versus 1.09x as on 31st March 2019. In financial year '23, we spent INR 275 crores towards the balance Capex for expansion projects of flooring, advanced textile and home textile businesses and other maintenance CapEx. The Board of Directors have in this meeting has today approved buyback of equity shares of the company for an amount of upto INR 195 crores at a price of INR 120 per share. The promoters will be tendering 100% of the eligibility under the buyback.
Apart from this, the Board has also approved dividend of INR 0.10 per share. The company's outflow for the buyback and dividend would be INR 250 crores, which includes the tax outflow. Over the last 4 years, Hence, we have distributed 32% of our free cash flow on an average to the shareholders with accumulative INR 648 crores distribution out of free cash flow generation of INR 2,002 crores during the same period.
Financial year '23 total distribution also works out to 32% of our free cash flow. During the same period, however, we continued reduction in net debt from INR 2,962 crores in financial year '20 to INR 1,534 crores by end of financial year '23. Quarter 4 financial year '23 posed business home textile revenue stood at INR 2,017 crores versus INR 1,768 crores in Quarter 3, up by 15% quarter-on-quarter, and are almost at the same level year-on-year, which was INR 2,073 crores during the same period last year.
In financial year '23, core business revenues totaled to INR 7,638 crores as compared to INR 8,686 crores on a like-to-like basis, which is down by about 12%. Quarter 4 EBITDA for home textile stood at INR 293 crores at 14.5% as compared to 11.6% quarter-on-quarter and 11.7% year-on-year. Financial year, '23 EBITDA of home textile is INR 798 crores at 10.5% compared to 15% year-on-year on a like-to-like basis. During the quarter, revenue from flooring business was INR 208 crores, up by 24% quarter-on-quarter and 10% year-on-year.
EBITDA was INR 9 crores as compared to INR 3 crores quarter-on-quarter. Financial year '23 flooring business recorded revenue of INR 706 crores as compared to INR 661 crores year-on-year, growing by 7% and EBITDA of flooring business for financial year '23 was INR 18 crores compared to a loss of INR 14 crores in the previous year.
On the back of expected increased capacity utilization and increased customer demand, the companies are well set to achieve a top line growth of 10% to 12% in financial year '24. Over the last few months, input cost have directed downwards meaningfully, this coupled with our drive towards cost optimization and improved efficiency, aided further by relatively better business prospects and outlook. We believe we should be able to achieve annual EBITDA margin of 15% in financial year '24.
Building on our vision of [Foreign Language] Welspun and our leadership in home solutions space in India. Domestic consumer business is expected to grow in excess of 25% in financial year '24 with a positive EBITDA. With all expansions being over, there will be no new CapEx except for investing in renewable energy initiatives, where also we would be exercising judicious capital allocation to getting into JVs where possible.
In financial year '24, therefore, projected CapEx will be approximately INR 300 crores. Out of this INR 200 crores will be mainly towards investing in renewable energy power plants at Anjar and balance of maintenance CapEx to maximizing operating cash flows and potential capital allocation policy, we will continue to bring down our net debt position, and we are striving towards achieving a net debt below INR 1,000 crores by the financial year '24 end. We continue to remain focused on our strategic priorities and growth pillars. We continue to lay invested on our long-term goal of sustainable growth and profitability and deleveraging our balance sheet.
With this, I'll now leave the floor open for question and answer. Thank you.
[Operator Instructions] The first question comes from the line of Omkar Shintre from Motilal Oswal.
Congratulations on a good set of number. I just wanted to ask that our gross margins has dropped by around 3% sequentially, while the EBITDA margins have risen on back of muted other expenses. So can you just give an -- first -- sight on what has happened over here?
So, overall, so margins have been up. There have been some adjustments of inventory in this quarter due to it, there has been a slight increase in the cost of goods sold. However, there is no cause of worry from any other direction.
Okay. And also, our tax rate has been lower as compared to previous 3, 4 quarters due to the deferred tax adjustments. So can you just brief about that? That -- what can we expect going forward?
Yes, you touched it rightly. So there were some deferred tax adjustments, which were happening in the first 3 quarters, which is now completed. And from going forward, now the tax rate would be 25.17%.
Next question comes from the line of Prathamesh Sawant from Axis Securities Limit.
So sir, one question, can you just throw some light on how are you planning -- how have you done the inventory reduction and will this be a case going forward, as overall, the inventory cycles have been turning down in the entire industry. So just, can you throw some light on the inventory cycle?
Yes. So overall, operating inventory, we have brought down. Though if you see our total inventory is the remaining more or less the same because we have built up the cotton inventory in the March and for the season. However, our operating inventory is down by about 20% overall. This has been through concerted deferred factories and at our sales locations to reduce our holding levels and also reduce the aging inventory in the system. And this will continue. So we would not let the inventory to increase and not let the inventory to go to 18.
But sir, won't that be a problem because largely since earlier, the issue was that timing had to match. That's why we used to maintain high country level. So don't those issues concern as moving forward.
So I will just step in here. I will -- I just wanted to say that for us, I think to hold on the cotton inventory is something that is very, very important. The rest will be managed by complete kind of analytics and the turnaround times, which we are working on in efficiency. And you already know that we have our ancillary parks, which are absolutely close to our factories. So our packaging also comes just in time. So for us, I think it will be very, very -- we are going to very -- really follow a prudent inventory management system. And as I spoke earlier about the retail inventory as well. So we are definitely going to be focusing on -- actually reducing our working capital exposure as well.
Okay. Fair enough ma'am. And secondly, you won't be concentrating in the cotton inventory like earlier. Will that be the thing?
Beg you pardon. Your question, please, again -- if you can repeat.
You won't be holding on to the cotton inventory. One of your competitor intent was in holding on to cotton inventory, but -- do you basically, my question is to understand what is your take on the cotton prices going up? Do you see them staying at 60,000, 63,000 levels because there was some news of cotton association stating that cotton prices may rise to 70,000 because cotton farmers are holding on to cotton. So just your view on the cotton, please.
So I'll just give you a perspective. So hence, I mean, as Sanjay pointed out, we also -- we have holding cotton for the next 6 months right now. And our prices -- average price would be between 60,000 to 65,000 per candy. That is where we are looking at average, and that's why we are looking at the business plan as well.
Okay. And just some highlights on what are the cotton yarn spreads right now that you are witnessing?
The cotton yarn spread has not changed. So it has remained the same, more or less. There have been a 3% to 4% increase in the last 2 to 3 months, but it has now remained flat.
So I just also wanted to tell everybody here that I know there has been an aberration in our cotton planning last year. And there has been a lot of diligence in the way we are going to be looking at our cotton planning. So a lot of focus on how are we going to look at our prices even in the cotton. So hence, we have taken on and built in 6 months of cotton and capped our numbers from 60,000 to 65,000. And everywhere, there's been a lot of prudence looking at our prices in the terms of cotton.
Okay. Okay. And just one last question from my side. I've seen your marketing spend has been increasing, and it has also been resulting into a higher share from the higher growth in the branded business. So just wanted to understand your focus on the branded business. And just can you throw some light on whether it will be more focused on the domestic part or on the export way?
So let me just tell you one thing. As we've seen the global dynamics and looking at India becoming the fifth largest economy, the markets in India are relatively growing. So while our focus on the global markets will still continue, but are -- growing and investing in our own brands here, which are Spaces and Welspun will continue to grow. And you already have seen that our growth has been.
We already have around 11,170 stores this year. And the same-store rate -- growth rate will be continuing to be every year. So next year, we're targeting around -- reaching around 25,000 [MBOs]. So that is something that we will be in the quest of. So in principle, in short, India is going to be a very key focus for our growth for our domestic brands because this is going to be a very -- India is a great story and a great opportunity, hence, focus on our global markets will continue. As we spoke about Martha Stewart and Scott Living. That definitely is a licensed brand focus. Second, Christy, which has our own brand in U.K., had again another growth strategy. And we've already signed off a licensed brand in U.K. and Europe as well, Disney, which will again have its own growth plan as well.
Next question comes from the line of Biplab Debbarma from Antique Stockbroking.
Good afternoon and congratulations on the good set of numbers. So my first question is as Dipali ma'am mentioned that in a couple of quarters, we'll return to the normal level. So just trying to understand. What are the parameters of -- what numbers would suggest that we are back at the normal level with cost [indiscernible]
Your definition of normal levels if you can define in terms of cotton in the terms of growth, if I just want to know. But however, I'll take this question and give you a perspective about the core business growth and overarching business, right?
So I just wanted to tell you that these last couple of quarters, we got hit by the 4 Cs, cotton, coal, container and customer. Destocking has happened in the global markets. And I'm talking about United States of America, while people have been talking about recession, but the retail numbers actually grew by 2.9% in U.S.A.
So we definitely see that destocking is done, the commodities are down, the freight costs are down. And retailers who are holding higher cost inventories. They're also coming down. And hence, there is an opportunity for kind of the growth there. So that's what we are seeing.
However, when I talk about U.K. and Europe, I still will be a little bit conservative in the approach. So U.S.A. definitely will be cautiously optimistic. U.K., Europe are little slow. However, GCC markets, Australian markets, we definitely will see some growth there. And India will be a market where we definitely are focusing on. And when we talked about commodities, like cotton, cotton we already are derisking ourselves and the other and freight factors are also behind us. We already know that the freight cost is at $2,000 today.
Okay. My second question is follow-up. And my second question is on the -- I mean, in terms of numbers, in FY '24 in the export market, would you be going back to FY '22 kind of level numbers in terms of sales, would that be considered as normal? I'm talking about export on this -- also for FY '22 numbers in FY '24.
So I will just put in a few things here in perspective. And when you're talking about exports, I'm going to put in a kind of a rider here, and it is being cautiously optimistic. So while destocking is happening, we are looking at a growth of around 10% to 12% in entirety at [WIL] and that is where we are looking at the trend to be. So while the core business will also grow, we're also looking at our emerging businesses also continuing to grow. So definitely flooring, advanced textiles and our retail, and brands, which actually have contributed 36% to our top line this year as well. So yes, I will just say -- the rider is cautiously optimistic, growth of around 10% to 12% this year.
Overall growth of 10% to 12%. Is that what...
Yes, yes.
And then one final question. So you mentioned debt -- target debt being 0 in the next -- in few quarters -- and just trying to understand by -- why -- by FY '25, '26 by -- when we expect the net debt to be 0?
So we are guiding towards the less than INR 1,000 crores net debt by financial year '24 end. And by financial year '25, we should be getting closer to net debt 0.
By FY '25?
Yes.
Okay. One final question is, sir, just on the flooring business, in this financial year, have you -- have you -- did you breakeven in this financial year in flooring business?
Yes. Flooring business EBITDA was INR 18 crores this year. which was about 3% EBITDA and it has remained positive EBITDA for all the quarters.
Next question comes from the line of Bhavin Chheda from Enam Holding.
Yes. Congratulations to the team for excellent performance across all businesses. Just a few questions. First on the flooring, if I see the quarter-on-quarter utilization levels, it has gone up, but from 30% to 34%, plus 10%, but the value sales have gone up by 34%. So what's the mismatch there?
So actually, here, I'll just add on, I'll give you a perspective here. So while you see that, I must tell you, we also have another business of bath rug, which is again a part of the core business. And so that's where you can see the yarn. The whole -- everything coming together in the terms of the numbers. So our demand on rugs has also increased. So it is complementing both our core business of bath rugs as well as our flooring business together.
And I think even the margins for the quarter has improved substantially, I think, for the flooring for the first time, you're crossing 4% EBITDA margin. So any margin outlook for flooring business since now it's close to achieving a critical size of INR 200 crores quarterly run rate, this would improve further going into '24 and also on the top line run rate if we are confident on improving the run rate further?
Definitely, Bhavin. So we -- as we have been speaking earlier as well. So the margin in flooring business would continue to grow as we increase our capacity utilization and as our revenues grow. And we have a good growth target for this business as well as Dipali mentioned, and so the EBITDA would definitely go up from this level as well as to how much we are not in a position to give you a number right now, but it will be higher than previous year definitely.
Second question is on the buyback of INR 195 crores, which is announced at the -- it's a tender of [INR 120 crores] a price. Company is already undergoing an ESOP-related buyback and completed, I think, close to INR 70 crores out of INR 150 crores. So can both these schemes go simultaneously or ESOP buyback is largely over?
No, both are changes can go side by side. There is no embargo.
Okay, there is no embargo. So both can continue til -- til the time line -- until the monetary limit of what we here had already announced?
Correct.
Okay. And Sanjay, I'm assuming your INR 1,000 crore net debt below INR 1,000 crores in '24 is also assuming you're completing INR 195 crores buyback and whatever ESOP-related buyback. So I assume you have included all those numbers when projecting net debt guiding a net debt below INR 1,000 crores.
Correct. You are correct.
Next question comes from the line of Abhishek Nigam from B&K Securities.
Congratulations on a great set of numbers. So just 3 questions. One, with respect to guidance, so I understand the 10% to 12% top line guidance but margins, EBITDA margins, should we assume maybe slightly higher than what you had in the fourth quarter. Is that a fair assumption?
So we have given Abishek guidance for about 15% EBITDA for the whole year.
Okay. So this is for FY '24 full year. Okay. That helps. And the solar plant, which starts in the second half of this year. How much annual savings can we expect in FY '25 because that is the first year of -- full year of operations.
So Abhishek, solar plant, the per unit cost is actually much better than the coal plant, which is roughly about 50% cost. And the solar plant that we are putting up is -- will meet about 20% of our energy requirement. So taking into account that 6% is our energy cost for the year, when it srarts in half year time, it should save us about 20% of 6%, half of that to about 0.5% to 0.6%.
Also, I must just add on here, it also gives us stability in our supply. I mean, we all know how the crude and the coal behaved. So definitely, this will give us a sustainable source of energy too.
Yes, sure, sure. So 0.5%, 0.6% EBITDA margin and the very stable supply. And last question. So what is exactly driving down the lower debtor days and lower working capital -- and is this -- could we expect further correction? Or is this kind of where things should be -- I mean, given that it's also already down quite a bit.
No. Actually, we'll maintain this or try to do better. It is all by financial prudence, planning, everything. It is at all levels, actually. It is at the warehouses, whether in the United States of America or retail warehouses in India, to are planning teams, how are they working at the factory and also the manufacturing teams working on a turnaround time to deliver faster. So that's where we are looking at. And as I said, that our ancillary vendors are just right across. So we also had just-in-time inventory there. So it is going to be the prudence we are going to definitely follow. And and will maintain at the same level or maybe a little bit more better. The only inventory that we'll be coming will be cotton, which is around 6 months.
And so turn around time all across the system is being tightened. So we are questioning ourselves whether the time line can be further reduced. So even in debtors, there turnaround time of all the documentation are being brought down to half and then to further below that. And hence, this will continue. And we'll try to bring down our net working capital cycle further down from this slide.
The next question comes from the line of Vikas Jain from Equirus.
My first question is with respect to our commentary with respect to the inventory that we talked about at the retailers level. So just one -- a few more comments from your side as to like how would we raise the inventory versus a normalized level right now? And -- is there some more pain less into the system where they are either -- or it will take some more time for the complete normalized ordering from the retailer side -- or is it like the end demand is itself been -- that is why the retailers are like holding on with their order book or giving a normalized order -- so what is exactly -- it is the -- still the inventory levels are relatively higher? Or is there the end consumer which would be or with the driving loan orders from a normalized time.
No there are two. I'll give you a perspective here. So to your point about the inventory, it's a combination. So destocking has already started, but we see that it might just be extended to the Quarter 1 as well to a little bit because we all know that they might be holding on some stocks, which could be a higher retail and that enhance that is where it could be also impacting them. So it's a mix.
So while the destocking has already started, we definitely will see through the Quarter 1 as well. I honestly feel one more thing on this that the retail sales are owing to the -- the 3 price points that the consumer looks at -- and that's where you can definitely see the offtake on. And the commodity prices have played a great role in it, whether it's cotton or the freight. So Quarter 1 would be where we'd be seeing a little bit better position also coming in.
Correct. Correct. So sir, just to extend this question. So are you seeing since the cotton and the freight prices have come down. So is it like the realization per feed that you used to do probably for the last couple of quarters. Is there a decline that we are seeing right now in the orders that we have received -- the issues that we talked about?
No. So it's not -- so patent dry. So what we are saying is that -- because the goods goes in a FOB now, 4 months back, a container of towel of $40,000 was going at $8,000, which was 20%. It is now going at $2,000, which is 5%. So the retailer is, of course, saving that 15%. And hence, that will result into a reduction in the consumer level price. So that is what we are alluded.
So -- but there is the operation that has been seen from the retailer side to drop or reduce our realization. Is that what you're trying to say?
Yes, yes. So it is all relative. So as the cotton prices and freight prices are going down, they are reaping the benefit of that. Cotton prices have not come down to the extent that they can demand certain reductions so much. However, there are some markdown and some promotions that we continue giving to them and hence, that is continuing. But as such, there is no pressure.
Sure. Sure. Second question, just wanted one clarification that you mentioned about the 15% EBITDA margin, that was for the home textile division or it was also about the head of a company level.
I'm sorry, is a consolidated level.
The consolidated level. Okay. So then at a home textile segment, probably that number would transfer into 18% to 20% again, beating the normalized level.
About 17%, 18%. Yes.
Next question comes from the line of Umesh Matkar from Sushil Finance.
Congratulations on a good set of results considering the tough economic environment. My first question is that considering that the cotton prices have come off, are we competitively in better situation as compared to other neighboring countries?
Yes. I think I'll just tell you, and I think last year, we were at the receiving end. We were actually absolutely, the highest in our prices in the terms of cotton compared to our neighboring countries. This year, in fact, India has been better off compared to the other countries as well. And I must also tell you that India has actually -- which had lost its position to our neighboring countries this quarter, has actually taken on and gained that position, whether it is in towels from China and sheets from Pakistan. And it has come back to its original level.
Okay. That is good to hear. My second question is, pardon me if I have repeated -- I'm repeating it. I just like to know about the tie-up with the Disney that you have done in the last quarter. So what sort of arrangement we have done with them -- and will it contribute significantly to the top line in 1 to 2 years. Also, I would like to add that we were expecting around INR 15,000 crores of top line in FY '26. So with this arrangement, are we -- can we expect even more revenue in FY '26?
So actually, I will give you a perspective, not only on Disney, I will give you a perspective on overarching our licensed brands, and I think that is very, very important. So licensed brands actually have given us the opportunity to get extra shelf space. So while you have private labels, you have that limiting space with our licensed brands, whether it's United States of America, Europe, we get an additional shelf space. And hence, that's where the great opportunity is. And it also helps us to target a different profile of a consumer.
So definitely, that's the great opportunity that we have. And when you talked about the INR 15,000 crores, we are absolutely focused on our top line numbers. And we know that when we -- and as I earlier pointed out, that the emerging businesses are contributing around 36% of the top line. That will see continuing to grow, whether it's flooring, advanced textile, retail and the brands, and that will actually constitute -- and we are absolutely geared up towards our numbers that we have committed. So retail definitely is going to grow. Our emerging businesses definitely are going to grow, and licensed brands will continue to add on that extra shelf space that is needed.
Next question comes from the line of Abhishek Jain from Arihant Capital.
Abishek, you have to be a little loud.
Yes, yes. I am now. Okay. Am I audible Sir?
Yes, better.
Sir, just wanted to understand on the [Barmenl] side, how the things are shaping up? And on the B2B side, how the things are picking up? And what is the current utilization Sir.
So I'll just tell you about [Barmen] and I'll give you advanced textile business. We witnessed a growth of around 21% year-on-year in Quarter 4 FY '23 and we feel that next year, we are definitely going to -- we are geared up to grow this and I'll read this number. Today, our capacities would be at around, say, 50% to 60% which we will continue to grow next year. And it will be owing to the freight cost as we spoke about, the freight costs have come down and new markets and the U.K. markets have opened up and globally, also the markets have opened up. And India market definitely is again a great opportunity for our wet wipes as well. So that's why we'll see that -- we will definitely have an upside there too.
And on the gross margin side, on an overall basis, do you see from -- as you just mentioned, there are some inventory adjustment was there in Q4. Do you see from this quarter onwards, there will be some pick up? And what is the outlook on the same ma'am?
We definitely -- I mean, we spoke about the numbers of Quarter 4, where the destocking has already happened by the customers. And it might still continue because some retailers might be having some high-price inventories till the Quarter 1. So I think it will take 1 more quarter for them to just destock in entirety. But however, that trend has already begun because we also have seen that the freight costs have come down, the commodities have come down. So that has added on to tend to revert back to the original retail prices.
And last question ma'am, what will be the advertising revenue onto retail to the more retail presence right now. So what will be our advertising and marketing cost for FY '24?
So we have spoken about 8% of our revenue for retail. So retail today is at around 8%, and we are looking at growing that by 30%.
By FY '25.
No. No. Same year-on-year , I'm talking about, yes.
Okay. Okay. And ma'am, what will be like FY '25 plus be right now ex-exports or ex the traditional business what will be the mix on the residual business like the retail and the normal side. Retail will be 45% -- 30% to 40% on overall between. What will be the target in 3 years? Are we see retail share on overall pipe?
So retail currently is at about 7.7% of our total revenue, which we grew up to about 11% to 12% in -- by financial year '26. Our overall emerging business as we talk about, which includes retail branded advanced textile and flooring which is currently a 36% share of the total revenue will grow up to about 45% of our total revenue by financial...
And what will be the CapEx number, sir?
CapEx for next year will be INR 300 crores, INR 200 crore will be for putting up the renewable energy plan and the balance INR 100 crores for maintenance.
Congratulations on good set of numbers.
Next question comes from the line of Roshan from B&K Securities.
Sir, in stand-alone, so the stand-alone revenue seems to be flat despite if you see the home textile revenue is up -- so I mean is there anything to read into this?
So on a quarter-to-quarter basis, we can't see and get any meaningful results out of it. But if we are asking, yes, sales would've happened to U.S. in the last quarter and then now this quarter, U.S. sales must have happened larger than the export from India. So -- that's why this difference you see in the stand-alone and the consolidated results. But on a year-to-year basis, it will look to be the same].
Okay. And can you tell you what would be the impact from Bed Bath & Beyond to the top line approximately.
So Bed Bath & Beyond used to be a major customer for us but we have now -- we have not taken that into account for our future.
In fact, for the past 2 to 3 years, we have been looking at -- and being very, very conservative on Bed Bath & Beyond. So we actually also -- and i think i also will say that we will also not respond to this retailer in specific -- but I would just say that we have adequately covered to a policy of credit insurance in advance, and that's where we are.
Next question comes from the line of Monish Ghodke from HDFC Mutual Funds.
In Flooring business, what would be the mix between export and domestic?
So I will actually -- here -- I will just give a perspective. Definitely, both the businesses are growing simultaneously for us. And this actually facility was actually put in as a green facility for the domestic business. And now we are seeing an opportunity in the domestic business and as well as in the exports.
While it took a lot of time, a couple of years for the Indian market to open up because of the COVID and the other issues. But now with the institutions, hospitality, they are really growing significantly, whereas also our domestic business in the terms of residential is very, very, very high. So I feel that -- I will just give you that both are growing quite well. And our impetus will also be on the domestic business more than anything else. We achieved the highest ever number in the domestic flooring business this year, around INR 100 crores.
And on investor presentation, this annual capacity of flooring, it shows operationally 18 and expected is 27%. So is there any capital work in progress?
No, no. So just some balancing equipment should be required to start the additional capacity, which we are not doing until we reach the 18 capacity. Once we reach that capacity, we will put those balancing equipments to make it to 27%, which will not be much capital.
Okay. And sir, what is our strategy to reach full capacity in flooring? Like is there any -- like what would be our focus area?
So our focus area will be also the soft flooring here. And we want to grow the soft flooring, whether it's a wall-to-wall carpet, carpet tiles and a bath rugs, and we are seeing a great potential there across the globe. And that will be in the segments of institutions, hospitality, retail and residential.
Okay. And if I may ask, what were the key materials for the soft flooring business?
So it is basically microfiber, nylon. These are 2 important materials that we need for the soft flooring.
Is it available in India or imported?
So the microfiber is available in India, nylon is something that we import.
Okay. Okay -- and ma'am, this renewable CapEx, which we are doing INR 200 crores, what kind of payback period and ROCE we can expect?
Pay tax period is less than about 3 years for the same.
And then what kind of net savings we will have annual savings approximate number?
I had just given it out so our -- thought -- this will meet our 20% of our energy bill. So this year, we should sales of about 0.5% to 0.6%.
Okay. So could you give me a number?
So 0.5% to 0.6%, we'll come to about INR 40 crores.
Next question comes from the line of [Chinmay] from MK Global.
Sir, if I just had a request, if you could repeat the guidance which you have given in terms of top line and EBITDA margins for FY '24?
You want it to be repeated?
Yes. If you could just repeat it, I had missed that.
Yes. So we have given a guidance of about 10% to 12% growth over this year, financial year '24 in terms of revenues. And in terms of EBITDA, around 15% on a consolidated basis.
My next question is with respect to the cotton prices. So although the cotton prices have fallen down from that height. However, the Cotton Association of India has been stating that because of low output expected going ahead, there is still the volatility, so how are we going to tackle that? Is it only the basis of the 6-month inventory that we have in terms of inventory management?
Yes. So as per our cotton buying policy -- so we buy our season cotton by March. And so we have bought the entire season cotton, which will see us through the season, which will end by September. And when the new season comes in, we'll start buying for the new season prices. So any intervening increase in prices is not expected to hit us if needed.
If you could please share the average cotton price per kilogram or maybe cotton candy.
It's 60,000 to 65,000 per candy.
60,000 to 65,000. Alright. And in terms of supply chain management, there has been recent I mean, study as well in terms of supply chain disruption. So are there any other improvements or any other positions we have taken in order to improve the supply chain?
The supply chain, I must tell you that we're completely looking at the entire supply chain in the terms of a turnaround time in terms of the complete. And -- also, I must also give you a perspective. The freight costs had gone up. And also, we knew that there was an uncertainty when those products are going to reach the shores of the retailers or the countries. Now that has opened up.
But for us, at Welspun we are absolutely investing in technology. We are looking at actually how we are planning our cotton as we've already spoken about, how are we planning our actions and packaging? And how are we actually effectively planning our turnaround times and reverting back to our customers. So from the point of sale to our manufacturing, there's a complete alignment in the terms of visibility as well and the speed to market. So there's a lot of work on that, that's being done here.
Thank You. Ladies and gentlemen, that was the last question for today. We have reached the end of question-and-answer session. I would now like to hand the conference over to the management for closing comments.
Thank you, everyone, for being here. So Welspun has always led the industry in setting benchmark of performance as well as corporate governance. We are committed towards growing our domestic consumer business aggressively to improve our leadership here further. India is the shining star among all global economies, and this would be a priority area of growth. So as to touch as many lives as possible and to realize our vision of [Foreign Language] Wealth Fund.
On the export front, while we are seeing a definite uptick in demand, we are cautiously optimistic given the slowdown worries still persisting for the near term. We are, however, committed towards the guidance we have provided for FY '24 and our long-term objective of profitable growth through continued investments in brand and innovation. At the same time, it is in our DNA to do business socially and responsibly. And in this direction, our work towards achieving our ESG goals would continue unbeated, be it in energy, water, carbon footprint, diversity on governance front.
Our recent industry meeting score of 59 by DJSI reaffirmed, our leadership on ESG front. Thank you for your continued interest in Welspun India. For any other queries, please feel free to connect with Salil and Sanjay.
Thank you. On behalf of Welspun India Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.