Welspun Living Ltd

NSE:WELSPUNLIV

Earnings Call Analysis

Welspun Living Achieves Record Revenue Amid Challenges

In the second quarter, Welspun Living reported record revenues of INR 2,936 crores, a 16% year-on-year increase. Despite challenges arising from geopolitical issues affecting container availability, EBITDA grew by 7.5% to INR 421 crores. Net profit after tax reached INR 201 crores, up 2.2%. Looking ahead, the company maintains an EBITDA margin guidance of 15% to 15.5% for the year and aims for a revenue target of INR 15,000 crores by FY '27. The company is investing INR 1,050 crores over two years to enhance production capacity, indicating strong growth potential in both domestic and export sectors.

Strong Revenue Growth Despite Challenges

In the most recent earnings call for Q2 FY '25, Welspun Living Limited reported its highest-ever quarterly revenue of INR 2,936 crores, reflecting a robust year-on-year growth of 16% and a sequential 13% increase. The company has also achieved significant growth in the first half of FY '25 with revenues reaching INR 5,524 crores, which translates to a year-on-year growth of 16.2%.

Impact of External Factors

Despite the impressive revenue figures, several external challenges impacted profitability, primarily due to the ongoing Red Sea situation that led to significant increases in ocean freight costs—doubling from last year rates—and constraints on container availability. This situation has resulted in a 1% reduction in profitability, with the company incurring costs related to inventory build-up and distribution. The management remains cautiously optimistic and is closely monitoring the situation to minimize business disruptions.

Profitability and Earnings Growth

Welspun Living Limited reported a profit after tax of INR 201 crores for the quarter, marking a modest year-on-year growth of 2.2%. However, compared to the previous quarter, this represents an impressive 8.3% increase. Their earnings per share (EPS) also improved to INR 2.1 from INR 2.04 last year, and INR 1.93 last quarter. For the first half of FY '25, EPS stood at INR 4.03 compared to INR 3.7 in the previous year, indicating a 9% increase.

Positive Trends in Key Segments

The home textile segment, which is core to Welspun's operations, exhibited a notable year-on-year revenue growth of 15.3%, amounting to INR 2,713 crores for Q2, while the first half saw revenue of INR 5,100 crores, up 16.2%. The EBITDA for the home textile segment was INR 374 crores, with the margin improving to 13.8%. Meanwhile, the flooring business posted modest growth, yielding revenues of INR 250 crores, up 3% YoY, but stronger performance is anticipated due to new customer acquisitions.

Future Guidance and CapEx

Looking ahead, management has articulated ambitious growth targets, guiding towards a top-line growth of INR 15,000 crores by FY '27. A total of INR 1,050 crores in capital expenditure has been earmarked for expanding towel and bed linen processing capacities over the next two years, which should boost production by 1 lakh metric tons annually for towels and 144 million meters for bedsheets by FY '28. This expansion is expected to generate additional revenue of INR 750 crores from the new projects.

Resilience Amidst Market Dynamics

Amidst the uncertainty surrounding global supply chains and geopolitical tensions, Welspun Living Limited remains steadfast in its commitment to penetrating market share. The company's emerging businesses, including domestic consumer and advanced textiles, have contributed significantly to growth, with an increase of 22% in Q2 FY '25. The management is focusing on strengthening brand presence and anticipates a significant contribution from these segments towards overall revenue by FY '27.

Environmental and Social Governance (ESG) Initiatives

Welspun is incorporating sustainability deeply into their operational framework, aiming for 100% renewable energy utilization by 2030. Their recent ESG rating has notably improved to 66 from 44, placing them in the top 15% globally within their industry. This proactive approach towards sustainability not only enhances their brand image but may also appeal to environmentally-conscious investors.

Earnings Call Transcript 2025-Q2

[Operator]

Ladies and gentlemen, good day, and welcome to the Welspun Living Limited Q2 FY '25 Earnings Conference Call hosted by JM Financial. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ashutosh from JM Financial. Thank you, and over to you, sir.

[Ashutosh Somani, analyst]

Yes. Thanks, operator, and welcome, everyone, to the call. I will first thank Welspun Living Limited for giving JM Financial Institutional Securities the opportunity to host today's call. Without much ado, I'll hand over the call to Mr. Salil Bawa, Head, Investor Relations, Welspun Group, to introduce the management. Over to you, Salil.

[Salil Bawa, executive]

Thank you, Ashutosh, and good afternoon to all of you. Happy Diwali before we start. And on behalf of Welspun Living Limited, I welcome all of you to the company's Q2 and H1 FY '25 earnings call. Along with me, I have today Ms. Dipali Goenka, Managing Director and CEO; and Mr. Sanjay Gupta, Chief Financial Officer of Welspun Living Limited. We hope you have had a chance to review the investor presentation and the deck that we filed with the exchanges today. It is also available on our website.

During the discussion today, we may be making references to this presentation. I would request you to take a moment to review the safe harbor statement in the presentation. As usual, we will start the forum with opening remarks by our leadership team. And post that, we'll open the floor for any questions. Once the call gets over, should you have any further queries that remain unanswered, please feel free to reach out to us.

With that, I would now like to hand over the floor to Ms. Dipali Goenka. Over to you, ma'am.

[Dipali Goenka, executive]

Thank you, Salil. Good afternoon, everyone, and thank you for taking the time to join us today for our Q2 FY '25 analyst call. I would like to share some highlights of our operating performance as well as some achievements during the quarter under review, after which Sanjay would share highlights from our financial metrics.

We are pleased to share that we have seen our revenues jump to an ever quarterly highest of INR 2,936 crores, growing by 16% Y-o-Y and 13% quarter-on-quarter. The upcoming holiday season in U.S. has seen increased buying from all major retailers. Consequently, we witnessed higher capacity utilization on the back of seasons rollout at over 90% -- 95% of our terry towels, bedsheets and rugs units. We continue to have sustained EBITDA achieving INR 421 crores, growing by 7.5% Y-on-Y and 7% quarter-on-quarter.

Quarter 2 revenues and more specifically, the profitability could have been better if not for the challenges we witnessed in terms of Red Sea issue. As mentioned in Q1 discussions, we kept a vigil on this front to ensure that we do not get affected adversely. However, we were faced with multifaceted challenges in terms of not only rising container rates, but also nonavailability of containers and ships. This resulted in some buildup of inventory and higher cost of warehousing and transportation. In addition, we had to incur higher unavoidable ocean freight at about 2x of last year as a force majeure due to increased voyage time and decreased container supplies despite our long-term relationships with the liners. With a major distribution presence in U.S., we were able to ensure minimum disruption in revenues, but delays in FOB shipments due to nonavailability of container ships have affected revenues of our different businesses to some extent.

We would continue to keep a close watch on this dynamic situation to ensure minimum disruption to the business. Despite persistent concerns surrounding the durability of growth and interest rate policy, the U.S. economy continued to show resilience in the current year with a Q3 growth of 3.4% and 2024 GDP growth expected at 2.8%, helped by recent 50 basis points cut in Fed rates and further expected rate cuts.

In the short term, a faster pace of interest rate cuts by the Fed should allow households to take on more debts and support continued growth in consumer spending. Consumers have retained the ability to spend and are driving solid economics in U.S.A. Driven by continuing strong orders for retailers and distributors across the product segment, our overall exports grew by 18% in Q2 and 19% in half one Y-on-Y. India continues to be the leading supplier of terry towers, bedsheet to U.S.A. And as per the OTEXA data, India continued to enjoy dominant market share in exports to U.S.A. for TTM August 2024 period, both in terry towels at 43% and in bedsheets at 40% -- at 60% in value term.

India has strengthened its share in bedsheets by 10% and stayed flat in terry towels as compared to last year in the same period. Though the overall export to U.S.A. in value terms during this period remained at the same level in terry towels and grew by 5% in bedsheets due to geopolitical issues during Q2 FY '25, Welspun Living Limited, however, witnessed a growth of 7% and 39%, respectively, solidifying a relationship in U.S.A. exports further.

Innovation is a key USP in all our endeavors. Our innovation products continues to be the major contributor to our revenues at 23%, growing by 13% Y-o-Y. Domestic retail. India continues to outshine with an expected GDP growth rate of 6.8% in Q2 vis-a-vis 6.7% in Q1 and inflation hovering up 5% during the quarter. The retail sector demand, however, continued to remain sluggish in Q2 as well and growth of 5% in September and 2% in July and August 2024 as per the [indiscernible] report. With the festive demand coming up, we have seen some green shoots of growth in September 2024. And despite subdued retail market conditions, we have seen a growth of 10% in our domestic retail business, clocking a revenue of INR 159 crores. We have been expanding our reach continuously into newer territories and channels and are hopeful to witness increased offtakes in this festive season.

Welspun brand witnessed a healthy growth of 20% Y-o-Y and continue to be the most widely distributed home textile brand in the country. Brand Spaces has outgrown the category in modern trade channel, emerging as a leading brand within the category of gaining market share, though the modern trade segment degrew Y-o-Y. We have continued our investment in domestic market with marketing spend to the tune of 10% for improving brand visibility and salience as well as a focus to build profitable business growth.

Emerging businesses. Our emerging businesses of domestic consumer business, global brands, advanced textiles and flooring businesses grew 22% year-on-year in quarter 2 FY '25 and contributed to close to 33% of the total revenue of the company. Our global brands owned as well as licensed have continued to give us an edge in all our markets and grew by a staggering 58% during the quarter. With all our licensed brands, be it Martha or COCOCOZY or Disney in Europe, opening up additional shelf space with the key retailer [indiscernible] creating newer avenues for us.

Flooring. The challenges we witnessed due to Red Sea issues impacted our flooring deliveries to some extent, and the business grew by a modest 3% Y-on-Y and 10% quarter-on-quarter, recording revenues of INR 250 crores. We continue to focus on the home improvement business and have added new big-ticket customers across all geographies. We have also diversified by tapping opportunities with OEMs in U.S. and making strategic tie-ups to strengthen our positions in Australia and New Zealand.

Similarly, we are gaining good traction from large retailers and big-ticket distributors in U.S. and Middle East for soft flooring and in the U.K. and UAE for hard flooring. On domestic market front, we continue to see strong growth in hospitality and commercial segments in all our key markets in India. Domestic flooring grew by 28% Y-o-Y. The Advanced Textile business witnessed an 18% growth Y-o-Y in quarter 2 FY '25 with a revenue of INR 148 crores. Capacity utilization of a new Telangana’s Spunlace facility has reached 55%. Our Spunlace sales continue to be strong in all our key global markets, forging new partnerships in U.S., Europe and India. with our innovative and sustainable non-wovens. Spunlace and Needle Punch segment experienced strong quarter 2 sales growth driven by new orders and strategic partnerships, while Wet Wipes expanded globally with existing brands and new customers.

ESG is embedded in every aspect of operations at Welspun, keeping us ahead of our peers globally in sustainable practices. We are well on a journey towards achieving 100% RE by 2030. And in this regard, the Board has in quarter 2 approved JV for setting up of additional 4.6-megawatt solar plant at Telangana for flooring and advanced textile plants. This, along with the 2-megawatt JV already operational since last quarter together would meet about 20% of the power requirements at Telangana facility. We are also happy to announce that Welspun has scored 66, up from 44 last year in Ecovadis ESG rating with the Silver Award, placing us in the top 15% in the industry globally and reiterating our focus and commitment towards sustainability.

We are committed towards our strategic objective of future growth in all our businesses and also continue to achieve larger share in the global home textile markets, keeping a new China Plus One strategy of global retailers and more specifically, achieving our future plan of growing about 5x in the domestic market over the next 5 years. Hence, the Board has reviewed the need for further investment to set up additional capacity over next 2 years to meet this demand growth with a total CapEx investment of INR 1,050 crores, including INR 341 crores informed earlier.

We continue to be cautiously optimistic of the operating performance for FY '25. While the positive signs of cooling inflation and Fed rate cuts in the U.S. are encouraging, the concern around potential instability due to current geopolitical issues might result in volumes picking up only gradually at a relatively muted pace in H2 FY '25. Plus, if the Red Sea situation persists, it would add further to these challenges. We, however, are focused, as always, on steering through these challenging times and are committed towards the guided revenue and profitability targets for the year.

With this, I would now like to hand over to Sanjay, who will take you through the financial highlights. Thank you, Sanjay.

[Sanjay Gupta, executive]

Thank you, Dipali, and seasoned greetings, everyone. I'll give a brief overview of the financial numbers for quarter 2 before we open for Q&A. During quarter 2, we reported highest ever quarterly revenue of INR 2,936 crores, up 15.5% year-on-year and 13% Q-on-Q. For H1 financial year '25, revenues are at INR 5,524 crores, up 16.2% year-on-year. EBITDA margin for quarter 2 stood at INR 421 crores, that is 14.3%, growing by 7.5% year-on-year and 7% Q-o-Q. H1 '25 EBITDA stood at INR 814 crores, that is 14.7%, 11% higher than last year.

As already informed by Dipali, we witnessed a challenging quarter due to the Red Sea issues and the resultant impact it had on the availability of containers and ships, leading to some volume impact in our businesses. as well as in the cost of carrying the inventory.

In addition, ocean freight doubling had further financial impact during the quarter. Despite these challenges, company has been able to achieve highest ever quarterly revenue. We had impact in our profitability of about 1% due to the various related costs we incurred owing to the Red Sea issue and some higher investment in terms of marketing costs for our India and global brands, which have grown in excess of 50% during the quarter. However, we still have been able to see a year-on-year increase in EBITDA value by 7.5% Profit after tax after minority interest for the quarter is at INR 201 crores vis-a-vis INR 197 crores year-on-year, growing by 2.2% versus last year and by 8.3% versus last quarter.

H1 PAT stood at INR 387 crores vis-a-vis INR 358 crores year-on-year, an increase of 8%. Consequently, our consolidated EPS for quarter 2 stood at INR 2.1 per share as compared to INR 2.04 per share last year same quarter, up 3% and INR 1.93 per share last quarter, which is up 9%. For H1, EPS stood at INR 4.03 per share as compared to INR 3.7 last year, which is up 9%.

On the ForEx front, our average exchange realization for the U.S. dollar during quarter 2 was INR 84.29 compared to INR 83.35 in the corresponding quarter last year. For H1, it stood at INR 84.1 compared to INR 82.85 in the corresponding period last year. Net debt stood at INR 1,832 crores versus INR 1,562 crores on June '24, higher by about INR 270 crores. This increase is a timing difference due to the payment for buyback of shares of INR 343 crores we have done during this quarter.

The interest cost due to the borrowings for increased working capital requirement owing also to the Red Sea challenges and the RBI repo rate being remaining unchanged have gone up to INR 55 crores from INR 34 crores last year. With reduction in working capital planned in ensuing quarters, we will save on this cost. Segmental results. For quarter 2 core business home textile revenue stood at INR 2,713 crores versus INR 2,352 crores in quarter 2 last year, up by 15.3% year-on-year.

For H1 '25, core revenue stood at INR 5,100 crores versus INR 4,390 crores in H1 of '24, up by 16.2%. Quarter 2 EBITDA of home textile stood at INR 374 crores at 13.8% as compared to INR 359 crores year-on-year, an increase of 4%. H1 [indiscernible] EBITDA was at INR 723 crores at 14.2% as compared to INR 672 crores year-on-year, up 7.6%. During quarter 2 '25, revenues from flooring business was INR 250 crores, up by 3% year-on-year. EBITDA is at INR 22 crores, that is 8.8% as compared to 8.3% last year. H1 revenue for flooring was INR 478 crores, up 2% year-on-year and EBITDA at INR 43 crores, that is 9% as compared to 8.2% last year.

In terms of CapEx for quarter 2 financial year '25, we spent INR 286 crores towards CapEx, majorly towards the new towel project at Anjar and the pillow project in U.S. For H1, the total CapEx stood at INR 492 crores. The Board had earlier approved for an additional towel capacity of 6,400 metric tons for being set up at an outlay of INR 341 crores, which is nearing its completion in quarter 3. The Board has now approved Phase 2 for one, setting up of facilities for additional 1 lakh meters per day bed linen processing capacity; second, setting up of post [indiscernible] of 40 metric tons per day for more backward integration of towel facilities; and third, increasing towel looms to produce 3,600 metric tons per annum.

This will be at a total outlay of INR 709 crores to be incurred over next 2 years through its wholly owned subsidiary, Welspun Home Solutions Limited. with total investment now, including the INR 341 crores of INR 1,050 crores in Anjar. The additional CapEx would be equally spread over 2 years in financial year '26 and '27. This would increase our bed linen processing capacity to 4 lakh meters per day, that is 144 million meters per annum and towel capacity to 1 lakh metric ton per annum. This will make Anjar facility having the largest home textile capacity globally. The internal capacity expansion would decrease the variabilities in the cost of outsourcing, ensuring better customer service and profitability. The new project in full capacity will result in an additional revenue of INR 750 crores in addition to about INR 400 crores in the TT project as we had informed earlier.

With this, I will now leave the floor open for Q&A. Thank you.

[Operator]

[Operator Instructions] We have the first question from the line of Vaibhav Jain, an investor.

[Unknown Attendee]

Am I audible?

[Sanjay Gupta, executive]

Yes, Vaibhav.

[Unknown Attendee]

Just one question from my side. Just wanted to know after all our CapEx, what will be the debt after we're sort of done with the CapEx?

[Sanjay Gupta, executive]

So we had guided towards a debt of about INR 1,400 crores to INR 1,500 crores by the end of this year, which is financial year '25, which will continue. And with this investment and other maintenance CapEx, we should be in the range of INR 0 to INR 200 crores net debt by financial year '28.

[Unknown Attendee]

Okay, sure. Okay. Net debt. So this is including the repayments that we are going to do on the...

[Sanjay Gupta, executive]

Yes. So net debt, I'm talking about. Net debt should be INR 0 crore to INR 200 crore.

[Operator]

[Operator Instructions] We have the next question of the line of Biplab from Antique Stockbroking. Mr.Biplab, will go off the speakerphone, your voice is not clearly audible.

[Biplab Debbarma, analyst]

Am I audible now?

[Operator]

Yes, much, much better.

[Biplab Debbarma, analyst]

Okay. Advance Diwali wishes to you all. I have a couple of questions. First is on the breakdown of CapEx, I just missed it. And what is the total CapEx and what is the breakdown of that CapEx? And how much CapEx we have done till date?

[Sanjay Gupta, executive]

So CapEx for this year, we have done about INR 492 crores till H1. And this CapEx is mainly in the towel project at Anjar and the pillow project at Ohio.

[Biplab Debbarma, analyst]

And including the recent -- the additional capacity announced today, how much more we have to incur?

[Sanjay Gupta, executive]

So this year, we will continue to be at our INR 800 crores to INR 850 crores that we had guided towards. But the additional CapEx that we have announced today of INR 709 crores for the bedsheet and towel additional capacities that will be incurred over 2 financial year of financial year '26 and '27.

[Biplab Debbarma, analyst]

And what would be the capacity of these 2 towel and bedsheet, sir?

[Sanjay Gupta, executive]

So towel capacity will increase to 1 lakh metric ton per annum and bedsheet capacity will increase to 144 million meters per annum with this addition.

[Biplab Debbarma, analyst]

Okay. Okay. And this CapEx, this -- the existing CapEx and the additional CapEx that is INR 709 crores and the existing CapEx of INR 800 crores, that will lead to how much of top line, sir?

[Sanjay Gupta, executive]

So we are guiding towards a top line of INR 15,000 crores by financial year '27, and we are adhering to that.

[Biplab Debbarma, analyst]

Okay. So this would be the CapEx. That's all. After that, there is no CapEx needed to reach to that.

[Sanjay Gupta, executive]

There will be some additional CapEx for maintenance CapEx of INR 150 crores, INR 200 crores. But yes, I have guided towards 0 net debt by financial year '28 with all these investments.

[Biplab Debbarma, analyst]

Okay. Okay. Sir, second question is what is the contribution of emerging business to your revenue and EBITDA in the first of this FY '25? And by FY '27, where do you see this emerging business growing to in terms of revenue and EBITDA?

[Dipali Goenka, executive]

Yes. I'll take this, Biplab. Our emerging actually businesses that include domestic consumer business, global brands, Advanced Textiles and Flooring businesses. They grew 22% year-on-year, and they contributed around 32% -- 33% of the total revenue of the company. And we are looking at it growing to the extent of around 45% as we go forward by '27, '28.

[Biplab Debbarma, analyst]

And what would be the EBITDA contribution of this business by FY '27?

[Dipali Goenka, executive]

It will be the same, actually because this is also owing to our brands in India and our licensed brands and flooring. So it will remain the same contribution base.

[Sanjay Gupta, executive]

So overall, EBITDA margin will be same in both the businesses.

[Operator]

[Operator Instructions] We have the next question from the line of Bhavin Chheda from Enam Holdings.

[Bhavin Chheda, analyst]

Yes. Congratulations to the entire team for the record turnover and decent profits. 2, 3 questions. First, on the margin side, as you mentioned that the container freight continues to hit margins. So can you give us more granular data on what kind of sales are happening on FOB and what kind of sales are happening where we have to take into account freight and what has been the trend for the last 12 months? And when does this normalize.

[Dipali Goenka, executive]

Our FOB is actually now 80%. That contributes to our turnover. But I must tell you that owing to the quarter 3 of ours vis-a-vis the quarter 4 of our retailers, this is the time there's a holiday season. So while having said that, we had to tide over the Red Sea issues because we had to look at the challenges of containers and ships, which actually led to the volume impact because we had to take on warehouses to store the increased inventories, planning the entire -- the allocation with containers because you know that till 15th of August, China had sucked in the entire freight inventory from here. So we were very time bound for the holiday season. So Red Sea and along with the whole availability of the inventory of the containers led to the impact on what you see.

[Sanjay Gupta, executive]

So overall, we have given about 1%, out of which 0.7% was because of higher freight and other inventory-related costs and 0.3% we incurred more on marketing because we are growing our brands massively across the world. So that's the breakup of 1% that we had to incur higher. However, with -- going forward, we hope that this is arrested as we have seen some betterment happening from October. So we would be keeping our fingers crossed for this quarter as well to ensure that we don't get hit more by this with this quarter.

[Bhavin Chheda, analyst]

Sure. Second question is on Advanced Textile and domestic retail, how are this shaping up in terms, both in terms of growth and in terms of margin profile vis-a-vis our other businesses?

[Dipali Goenka, executive]

So Advanced Textiles actually has grown by 18% year-on-year and with a revenue of around INR 148 crores. So let me tell you that Spunlace and Needle Punch, actually, we have been able to experience strong quarter 2 sales growth. And in the future also for the global markets, we see an upside in this because of our strategic partnerships for innovative and sustainable non-woven actually. And for India, as the Indian market, as you've seen right now, while we're looking at India, we are looking at a growth that the holiday season, as Diwali is just right down the corner. We have seen some green shoots in September. And our Welspun brand has witnessed a healthy growth of around 20% year-on-year. And it's the most widely distributed home textile brand. So are we feeling very, very optimistic about the Indian market, while there has been that little sluggishness in the quarter 2. But as the quarter 3 comes in where there's marriage season, there's Diwali there, we definitely will see that upside coming up.

[Bhavin Chheda, analyst]

And in terms of margins, domestic retail, are they above breakeven? And are they still burning cash? Any idea?

[Sanjay Gupta, executive]

So domestic retail, it is still at near the breakeven low single-digit EBITDA. And as the business will pick up this year, we will -- we would start seeing more EBITDA percentage coming from here. And the advanced textile we are at the similar margin of the entire home textile. Yes.

[Dipali Goenka, executive]

And let me just tell you for the retail growth. We continue to invest around 10% into our marketing as well for the brand reach across the country.

[Bhavin Chheda, analyst]

Okay. So the single-digit EBITDA is after accounting for marketing in that division of...

[Dipali Goenka, executive]

Yes.

[Sanjay Gupta, executive]

Correct.

[Operator]

We have the next question the line of Kaustubh Pawaskar from Sharekhan.

[Kaustubh Pawaskar, analyst]

Sir, Red Sea has been a risk to our profitability for a while, and we have been -- it has been impacting our profitability, though we are achieving good numbers at the revenue level. So are we looking at any alternatives or alternative route option? Or is it something which is feasible for us so that we can have a better numbers at the profitability level or something on that front, have we given a thought on it or some other alternative which will help us to see margins inching up for us?

[Sanjay Gupta, executive]

Yes. So we are definitely continuing to try in this regard -- drive hard in this regard. So we didn't actually got hit in the last quarter of last year and the first quarter of this year when the Red Sea issues continued to persist. However, quarter 2, it actually reached to a 3-year high of 3x of container rates and the availability also got impacted as Dipali stated, due to China cutting out the entire capacity in August. Hence, it became unavoidable for us despite our good relationship with the liners and keeping on top of this, but still you got impacted. But we would try to are maintaining it.

And with our major distribution presence in U.S. we are we ensure minimal disruption in our revenues. So we should -- we are keeping a tab on this, and we should tide over it. However, we are cautiously optimistic on this. Yes.

[Dipali Goenka, executive]

So I just wanted to just add on here. It also got augmented with the splitting of the INDAMEX and the U.S. port strike actually. That also gives that freight kind of an impact. But we have our warehouses in America. We are planning -- we plan quite effectively. But however, this time, it was really unavoidable with a lot of disruptions actually.

[Kaustubh Pawaskar, analyst]

Sir, my second question, in your initial comment, you mentioned and you gave some optimism about the improving demand environment in the U.S. market. So just -- can you just give us a broader perspective on this thing, whether this will continue or it is something which is just at this level and still you are -- it is kind of a wait and watch scenario, you don't have exact indication whether this will have a better prospect for us in the near term and the long?

[Dipali Goenka, executive]

So there are a couple of things I want to just put actually in perspective. One thing when I look at the big box retailers and what they are talking about, so they are exhibiting a neutral to positive outlook in general merchandise category today. And they started stocking up for the new festive season. The holiday season, they are looking at around 3.5% of growth right now.

The other important thing, let me just put forward very, very straightforwardly to you that India is in a sweet spot. India is now continuing to become an integral part of the supply chain for all the global retailers because being the most stable democracy, even with the neighbors that we see and along with the China Plus One strategy, I think India stands to gain as well. So it is the displacement plus the mildly kind of a cautious optimism that we see in the American market, both.

[Kaustubh Pawaskar, analyst]

And any thought process on whether exploring any new opportunities into newer geographies. As you said, that supply chain, we have a bigger opportunity going ahead. So any thought process on expanding reach into other geographies where we already have a presence?

[Dipali Goenka, executive]

We already are actually growing very strongly in U.K., Europe, where we, this quarter, actually have seen a double-digit growth. Australia, New Zealand, Japan, all of those areas. And it's not just in retail, but also in the hospitality segment, in the flooring segment and in the Advanced Textile segment and also with the licenses like Disney in the U.K. and the Europe as well. So let me tell you that while we talk about U.S.A. right now, but we have also seen double-digit growth in U.K. and Europe.

[Kaustubh Pawaskar, analyst]

And do you expect this mix of U.S. and other geographies to -- U.S. to come down over the period of time? Or do you expect U.S. to be a key market for us, while other will be growing along with the U.S. projects?

[Dipali Goenka, executive]

So I'll tell you one thing. While when I talk about the mix, U.S. actually contributes around 30% of the consumption of the home textile market globally. While that basket will continue to grow as we take the share of shelf there, but U.K. and Europe also considerably grow. Let us also be very, very clear on that the last quarter, the inflation was hitting these countries very, very hard. We saw that cooling out as the Fed rate cut there as well -- we saw that Fed rate happening cut there as well.

So we are going to see some kind of a cool down there and some kind of a hike in sales there. So definitely, it will be the mix. It will also have the domestic retail, which actually will -- today, it contributes around 6% of the top line. We are looking at that contributing around 10% of the top line. And the other businesses will continue to grow as we move towards the journey of INR 15,000 crores.

[Operator]

[Operator Instructions] We have the next question from the line of Tejal Nagmoti from Elara Capital.

[Tejal Nagmoti, analyst]

I just wanted to understand regarding the CapEx announcement that when are you planning as per the internal estimates for the facility to be fully utilized and achieve the INR 1,150 crores of target on full utilization.

[Sanjay Gupta, executive]

So Tejal, as I had informed, so we'll be spending this CapEx over next 2 years. So we will be ready by somewhere by quarter 3, quarter 4 of financial year '27 in phases. So the entire capacity utilization will come only by financial year '28.

[Tejal Nagmoti, analyst]

So we can build the capacity utilization by FY '28?

[Sanjay Gupta, executive]

Yes. Full will be by FY '28, will come in phases in financial year, '26, '27, and then '28 will be.

[Tejal Nagmoti, analyst]

And my second question was regarding the flooring business. Just wanted to understand that the growth still remains muted. When can we -- when is it expected to rebound for the flooring business.

[Dipali Goenka, executive]

So actually, let me just give you a perspective here. Our flooring business actually saw a revenue of around INR 250 crores, and it grew by a muted 3%, yes. It actually got impacted the biggest also by the Red Sea because most of them are CIF and DDP shipments. That's the reason. While we are continuing to focus on the home improvement business, we have added a few new big-ticket customers across the geographies. Like we have also diversified by tapping opportunities in OEMs in U.S. and making strategic tie-ups to strengthen our positions in Australia and New Zealand.

And we are gaining good traction from large retailers and big-ticket distributors in the U.S. and the Middle East for soft flooring. Now let me come to the domestic market. We must say that we continue to see strong growth here in hospitality and commercial segment, where the domestic flooring actually grew by 28% year-on-year. So I think we -- I'll tell you that while we are seeing this kind of a little upheaval, but we are on the path of growth that we're talking about in flooring.

[Tejal Nagmoti, analyst]

And any guidance for the full year?

[Sanjay Gupta, executive]

For the entire business, we are -- we continue to stand on the guidance that we had given earlier with 10% to 12% growth of the total business with 15% to 15.5% EBITDA.

[Operator]

We have the next question from the line of Harshit Nagpal from YES Securities.

[Harshit Nagpal, analyst]

Am I audible?

[Sanjay Gupta, executive]

Yes, yes, sir.

[Harshit Nagpal, analyst]

So just a question to what you explained for the flooring business, the 10% to 12% growth is for the whole year, right?

[Sanjay Gupta, executive]

Yes. So 10% to 12% is for the entire business.

[Harshit Nagpal, analyst]

So my question was related to flooring will the revenue growth be between 2% to 3% as we have seen for the past few quarters? Or would it be greater going forward?

[Sanjay Gupta, executive]

So, for flooring, we are -- within the entire business, flooring will grow in the double digits this year.

[Operator]

[Operator Instructions] We have the next question of the line of the Biplab from Antique Stockbroking.

[Biplab Debbarma, analyst]

Sir, do we see margin improving in the second half? Or we see the margin deteriorating further because there is no certainty on the Red Sea?

[Sanjay Gupta, executive]

So yes, while we see the uncertainties of Red Sea, which is now settling down to some extent, but we are guiding towards an overall EBITDA of 15% to 15.5% for the year, and we are standing by it.

[Biplab Debbarma, analyst]

Okay. So that means that it is expected to improve, right, sir? Because the first half EBITDA...

[Sanjay Gupta, executive]

We are standing by that we will be achieving that for the year.

[Biplab Debbarma, analyst]

Okay. Okay, sir. And the second question is on the new CapEx. There you said that full capacity utilization would be visible in FY '28 only. So would we see any challenges in achieving our INR 15,000 crores of top line by FY '27 because the benefit of the new capacity would accrue only in FY '28.

[Sanjay Gupta, executive]

So from internal production, the sales would start coming in fully from financial year '28. However, we will keep -- start building the sales. So sales will not stop. So we'll have to get it manufactured through our ancillaries or through outsourcing, whatever, but we will continue doing so. We are not missing our target.

[Biplab Debbarma, analyst]

Okay. So this additional CapEx once they are on board fully operational, they would be replacing those ancillaries. Is that my understanding, correct?

[Sanjay Gupta, executive]

Correct.

[Operator]

That was the last question. I would now hand it over to the management for closing comments.

[Dipali Goenka, executive]

So quarter 2 has been a challenging quarter with the difficult operating conditions owing to Red Sea issues and the results and financial impact we had to endure. Despite the challenges, we have once again been able to show an outstanding revenue performance in all our businesses, leading to our highest ever turnover. It is heartening to see our global brands continuing on a stellar growth path, strengthening our focus towards B2C and being truly an FMCG of textile.

India continues to shine with around 6.8% GDP growth with conducive policies for India for the world, leading to greater share of Indian businesses in the global market as well as providing opportunities internally with growing consumption rates. Domestic business, both home textiles and flooring continue to grow with higher reach and visibility, cementing our leadership and thereby reinstating Har Ghar se Har Dil Tak Welspun.

We are committed towards the guidance we have provided for FY '25 and a long-term objective of sustainable and profitable growth. ESG remains a way of life at Welspun and our commitment towards being environmentally responsible and sustainable in operations continues unabated. With our focus on achieving our ESG targets for 2030, be it green energy, zero water usage, zero landfill or using 100% sustainable cotton and raw materials.

Thank you for your continued interest in Welspun Living. For any further queries, please feel free to connect with Salil and Sanjay. Thanks.

[Sanjay Gupta, executive]

Thank you very much.

[Operator]

On behalf of JM Financial, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.