Welspun India Ltd (WELSPUNIND) Q2 FY23 Earnings Concall Transcript

Welspun India Ltd (NSE:WELSPUNIND) Q2 FY23 Earnings Concall dated Nov. 08, 2022

Corporate Participants:

Biplab Debbarma — Antique Stock Broking — Analyst

Abhinandan Singh — Head, Group Investor Relations

Dipali Goenka — Chief Executive Officer & Joint Managing Director

Sanjay Gupta — Chief Financial Officer

Analysts:

Abhishek Nigam — B&K Securities — Analyst

Abhineet Anand — Emkay Global — Analyst

Tarang — Old Bridge Capital — Analyst

Ram — BSE — Analyst

Alpesh Thacker — Antique Stockbroking — Analyst

Jojo Shaju — Alpha Invesco Research Services Limited — Analyst

Ankit Pande — Quant Mutual Fund — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Q2 FY’23 Earnings Conference Call of Welspun India Limited hosted by Antique Stock Broking. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Biplab Debbarma from Antique Stock Broking. Thank you, and over to you sir.

Biplab Debbarma — Antique Stock Broking — Analyst

Thank you, Lee. On behalf of Antique, I would like to welcome you all to the Q2 FY’23 earnings conference call of Welspun India Limited. I would now like to hand over the call to Mr. Abhinandan Singh, Head, Group Investor Relations, Welspun Group to introduce management and take it further. Over to you, Abhinandan.

Abhinandan Singh — Head, Group Investor Relations

Thanks, Biplab, and good afternoon to all of you. On behalf of Welspun India, I welcome all of you to the company’s Q2 FY’23 earnings call. We have with us today Mr. Rajesh Mandawewala, Managing Director; Ms. Dipali Goenka, Joint Director and CEO; Mr. Altaf Jiwani, the company’s Chief Operating Officer; and Mr. Sanjay Gupta, Chief Financial Officer, along with myself.

You already have seen the financial results. Those are also available on the company’s website welspunindia.com. As usual, we will start the forum with opening remarks by our leadership team and then we will open the floor for your questions. One the call gets over, should you have any further queries that remain unanswered post the earnings call, please feel free to reach out to us.

With that, I would now like to hand over the floor to our CEO. Over to you.

Dipali Goenka — Chief Executive Officer & Joint Managing Director

Good evening, everyone and thank you for taking the time to join us today, which happens to be a market holiday. I would like to share some perspectives on the operating highlights of our performance during the quarter under review, after which Sanjay will share some highlights from our financial metrics. Our performance during quarter two FY’23 demonstrates our leadership in terms of scale, quality and customer relationships, with a growing branded portfolio, which has enabled us to deliver a growth performance in an environment that has been very challenging.

Revenues during quarter two FY’23 registered a sequential growth of 8% quarter-on-quarter to INR2,137 crores and it was down 15% on a year-on-year basis. In such unprecedented times, this reflects our ability to maintain wallet share across key customers on the back of this deep strategic relationships that we have that many of our global customers in the face of high inflationary pressures and demand headwinds.

Our emerging businesses, domestic retail, brands and e-commerce, flooring and advance textiles continue to perform well, contributing 29% to overall revenues, up from 25% year-on-year. On a year-on basis, the emerging businesses revenues overall remained at the same level at last year same quarter. Domestic home textiles retail has shown significant growth during the quarter, with revenues growing by 31% year-on-year.

Our domestic retail business, as you may recall, has two power brands, Welspun and Spaces. We have seen very strong expansion in our retail footprint and I’m pleased to share that we have crossed as we speak 10,000 outlets across the country, a big milestone in the home textiles piece and reach in order to achieve by any player in India. This is almost twice the reach we had a year-ago, when we had around 5,200 outlets and way above any other competition and we now have a direct presence in 500 towns and cities. We also pleased to share that our marketing campaign with a new brand ambassador Akshay Kumar has met with tremendous success.

We continue to invest in this growth market. There we are striving to expand our leadership and our marketing spend reflects the same, being 10.5% of domestic revenues during quarter two. The recently launched flooring business, which as you may recall, broke-even in the preceding quarter, clocked a revenue of INR160 crores. The growth remains flat during the quarter as flooring business is also witnessing headwinds from U.S. due to demand slowdown. We have however started seeing good demand from hospitality, residential and commercial segments in U.S., U.K., and Middle East.

On Domestic market, front and flooring, we are seeing a good demand buildup in India in commercial as well as institutional segments. The advanced textiles business witnessed a robust 54% growth year-on-year in quarter two FY’23, also reflecting the contribution from its new expanded capacity in Telangana that was commissioned in March this year. We also wanted to share with immense pleasure and pride that Welspun India has been named the Best Managed Companies 2022 in India by Deloitte. This recognition based on a rigorous benchmarking against some of the best companies across the range of industries is an outcome of the hard work, fashion and partnering ideas that Welspun India’s leadership has brought to life over the years.

This reaffirms our continued focus on a culture of growth and innovation and the integration of environmental, social and governance, ESG considerations in the governance structure and business operations to attain the highest level of good governance practices. As you remains at the core of everything that we do as Welspun, we are happy to share that Welspun India Sustainability case study is now a part of curriculum across universities in, U.S., Canada, France, Europe and Taiwan. The study highlights the importance of sustainable practices in the textile sector and the entire spectrum of such activities at Welspun that set an example.

Coming to the external environment, we are seeing decades high inflation in the U.S., U.K., and Europe in the range of 8% to 9%. Fed rates have been increased the fourth time recently with U.K., and Europe falling suits. However, U.S. GDP rebounds to 2.9% growth over two successive GDP contractions that retail sales showing resilience, growing marginally in the last two quarters. The Indian economy continues to shine with GDP up by 13.5% and retail sector growing by 15% to 20% during the quarter.

Over the past few quarters, we have been witnessing significant cost pressures due to commodity prices, cotton in particular, having touched unprecedented historical high levels. Moreover, given the pervasive nature of inflation, we have also seen customers’ world by re-prioritize their spending behavior on essential versus discretionary items. This has put pressure on demand for commodities globally, hence for the past couple of months, there has been visible moderation in cotton prices and freight rates too have begun to correct due to the same. In addition the cotton crop yields in India is expected to be up by 7% to 8%, better this year.

Welspun India is unique given a combination of capabilities and manufacturing that is towel, sheets, TLB and rugs, fueled by innovation and a deep customer understanding and reach. Along with this our license brands, Martha and Scott are giving us an additional niche, adding value through differentiated offering and additional shelf space. Our Indian domestic market is the brightest spots with our leadership in the segment to a deep reach with 10,000 stores, which we are striving to increased multi-fold to realize the vision to be Har Ghar Welspun. This not only enables us to be resilient during difficult times, but also allows us to benefit once external conditions improve.

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

Sanjay Gupta — Chief Financial Officer

Thank you, Dipali, and greetings, everyone. I’ll give you a brief overview of the financial numbers for the quarter and H1 financial year ’23 before we open for question-and-answer. During quarter two financial year ’23, we reported revenues of INR2,137 crores, down 15% year-on-year, but up 8% quarter-on-quarter. YTD H1 revenues reached to INR4,116 crores, down 11% on a like-to-like basis, that is after taking out the impact of quarter four financial year ’21, RoSCTL accounted for in H1 of financial year ’22.

EBITDA margin for the quarter stood at INR152 crore, that is 7.1%, which is lower year-on-year by 984 basis points and quarter-on-quarter by 167 basis points. For YTD, H1 financial year ’23, we have reported EBITDA of INR325 crore, with a contraction of 894 basis points year-on-year on a like-to-like basis.

Cotton prices touched historical highs during quarter two of financial year ’23 and the impact of the same in our margin would have been much higher, but for the various measures taken by the company in cost specialization across both. The average cotton cost consumed during quarter two was INR83,000 per candy as, compared to INR48,000 per candy last year same quarter and INR75,000 per candy during the last quarter.

Profit after tax after minority interest for the quarter is at INR9 crore vis-a-vis INR22 crore last quarter and H1 financial year ’23 PAT is INR31 crore vis-a-vis INR342 crore year-on-year on a like-to-like basis, reflecting the earlier mentioned factors. Our consolidated EPS for quarter two of financial year ’23 at INR0.08 per share as compared to INR2.01 per share year-on year. H1 financial year ’23 stood at INR0.31 per share vis-a-vis INR3.46 per share on a like-to-like basis in H1 of financial year ’22.

On the forex front, our average exchange realization for the U.S. dollar during quarter two was INR80.79 per dollar, compared to INR75.83 per dollar in the corresponding quarter last year. We are witnessing the continual increase in interest rates by governments globally in all our markets to rein in the inflation there. Considering the current market conditions further increases also look very imminent. In such a situation, our ability to continually deleverage and maintain debt levels at a very healthy level has allowed us to stand in good stead.

During H1 of financial year ’23, we have seen some positive impact starting to stream in from measures undertaken to enhance efficiencies and to improve cash flow even as we did not shy away from investing in innovation and brand building that are key drivers of long-term growth. At the end of quarter two, net debt stood at INR1,998 crore, this is INR141 crore lower than INR2,139 crore a quarter ago, and INR535 crore lower than INR2,533 crore a year-ago. The expansion projects of flooring, advanced textiles and home textiles businesses, which were in different stages of progress, had some balance capex remaining which we plan to complete during financial year ’23. In H1 of financial year ’23, we have spent INR194 crores towards these and other maintenance capex.

In our journey to be more environment-friendly and being carbon-neutral, the company is planning to put about 30MW solar power facility at its Anjar location and the Board has approved an investment of INR200 crores for the same, which would be funded through issuance of green bonds or debentures. This will take us closer to our goal of achieving 20% renewable energy by 2025 and 100% by 2030. The power plant should be operational by quarter one of financial year ’24 and about INR50 crore to INR60 crore of capex for the same is expected to be incurred in financial year ’23.

Now coming to segmental results, quarter two financial year ’23 core business, home textile revenues stood at INR2,011 crore versus INR1,852 crore in quarter one financial year ’23, up sequentially by 9% quarter-on-quarter and down 15% year-on year from INR2,374 crore during the same period last year, due do earlier mentioned factors. YTD H1 financial year ’23 core business revenues totaled to INR3,863 crore as compared to INR4,398 crore on a like-to-like basis, down by 12%.

Quarter two EBITDA of home textiles stood at INR128 crores at 6.3% as compared to 9.3% quarter-on-quarter and 17.4% year-on year. H1 financial year ’23 EBITDA of home textiles is at INR299 crore, which is 7.7% compared to 17.9% year-on-year on a like-to-like basis. During the quarter, revenue from flooring business was INR160 crore same as last year same quarter EBITDA was also at almost the same level at INR4 crore as compared to INR5 crore year-on-year. YTD H1 financial year ’23 flooring business recorded revenues of INR329 crores as compared to INR281 crore year-on-year growing by 17%. H1 financial year ’23 EBITDA of flooring business for INR6 crore compared to a loss of INR22 crore during the same period previous year.

With this, I’ll leave the floor open for question-and-answer. Thank you.

Questions and Answers:

Operator

Thank you. [Operator Instructions] The first question is from the line of Abhishek Nigam from B&K Securities. Please go ahead.

Abhishek Nigam — B&K Securities — Analyst

Yeah. Hi, thank you so much for giving me the opportunity. So the first question that I have is on the capex side, so I understand Vapi, Anjar is operationalized now in first half, so how much capex should be build-in for second half or anything substantial remaining?

Sanjay Gupta — Chief Financial Officer

Yeah. Hi, Abhishek. So we have spent most of the capex that was required to be done for Anjar and Vapi. Anjar actually the territorial capacity has been increased from 85,400 metric tons to 290,000 metric tons by quarter two. And there is no major capex remaining. For the balance year, you may see hardly about INR40 crore to INR50 crore more capex during the H2 for balancing and maintenance capex.

Abhishek Nigam — B&K Securities — Analyst

Fair enough. And is it possible, I see some pretty good reduction in debt in the last six months or so, but is it possible to give some guidance in terms of gross debt or net debt be by say end of FY’23?

Sanjay Gupta — Chief Financial Officer

We have been continuously reducing our net debt and what I can say is that we will continue to reduce the net debt going-forward. Giving a particular number currently is difficult, but we would be reducing from this level downward only.

Abhishek Nigam — B&K Securities — Analyst

Fair enough. And the 200 MW plant, sorry INR200 crores for the solar plant, so that will be incurred mostly next year, is it?

Sanjay Gupta — Chief Financial Officer

Yes. As I said about 25% of capex we will do during this year and the balance will happen during next year and it will be operational by end of quarter one of next year.

Abhishek Nigam — B&K Securities — Analyst

Perfect. Thank you so much. I’ll come back in the queue then. Thanks.

Operator

Thank you. [Operator Instructions] We’ll move onto the next question that is from the line of Abhineet Anand from Emkay Global. Please go ahead.

Abhineet Anand — Emkay Global — Analyst

Yeah. Thanks for the opportunity. While ma’am did touch upon lot of subjects that we have done, I just wanted to first understand from a likely strategy perspective and overall system. Business at Martin went from 1Q to 2Q and we are in November this 3Q for us, how has this changed? If you can highlight on that because everything boils down to the sales that being probably do because [indecipherable] are almost at 1Q and 2Q similar. So my first question is on the business environment how do — what are the changes, has it changed in a positive sense or what’s your update on that?

Dipali Goenka — Chief Executive Officer & Joint Managing Director

So business environment subdued and let me now give you a perspective, while U.S. GDP — we saw the retail — the retail sales grow a little bit, but it continues to be challenged and we will — we — actually lot of retailers have forecasted the holiday seasons to be a little bit subdued. So the main reason in U.S. would be the take of the inventory that they are still carrying from the past year. So that’s where we are seeing the demand slowdown and we just saw one of the report of the wallet share. The wallet share is basically moving towards traveling and experiences, rather than home, white goods etc.

So we are seeing a muted demand in U.S.A as the recession and inflation play the role. U.K. and Europe are also, I think for them the biggest challenges energy right now and it is going to be a long winter, while we say this, I think it’s going to take a couple of few more quarters to see U.S., Europe and U.K. come back to where it is. U.S. will come back faster, maybe by quarter one of our financial year, we’ll see some kind of a movement have happening upwards. While I see all this, I think the important thing for us not to forget is India, India is going to be the brightest spot right now as we see the GDP, growing by 13.5% and we have invested reasonably in India in the brands Spaces and Welspun. And that’s where we will see our growth happening as that.

And I can — if I can give you a perspective of the commodities as well, commodity is definitely are coming down but they on the back of demand as well. So the freight costs have come down. The cotton prices are relatively softer, but still dynamic. The energy basket still remains very dynamic yet not softened up as yet.

Abhineet Anand — Emkay Global — Analyst

Okay. The second question, just to check in cotton [Technical Issues] Sanjay did allude to the point that our average cotton purchases are 83%. Those numbers probably should come down significantly at least 20%, 25% in 3Q. I mean everything remain same, let’s assume the demand remain the same. Because of just the cotton price shall — that should be an expansion on the gross margin. Is this right to like assume that?

Dipali Goenka — Chief Executive Officer & Joint Managing Director

So I will just give you a perspective, so while the cotton prices are coming down, but I think, let’s not forget that we are holding certain amount of inventory as well. So we are holding a little inventory, we are covered around 20% of the cotton and we’ll continue to cover and by the time when we see the impact coming of the new cotton, it will be quarter four, because inventory still is there in our system, to that extent, in the quarter three.

Abhineet Anand — Emkay Global — Analyst

Okay, thanks. Last one from me, although the overall portfolio, what percentage now is B2C given what we have been doing a lot of focus on the B2C side.

Sanjay Gupta — Chief Financial Officer

So overall, B2C, the brands in e-commerce is about 18%, 19% of our total debt.

Abhineet Anand — Emkay Global — Analyst

Okay. Thanks for taking my questions.

Operator

Thank you. The next question is from the line of Abhishek Nigam from B&K Securities. Please go ahead.

Abhishek Nigam — B&K Securities — Analyst

Yeah, actually my question has been well answered. So no, thanks.

Operator

Thank you. [Operator Instructions] The next question is from the line Biplab Debbarma from Antique Stock Broking. Please go ahead.

Biplab Debbarma — Antique Stock Broking — Analyst

Thank you. Good evening, everyone. My question is more related to FTA. Let’s achieve SKU with the U.K., we know there has been discussion has been going on for some time, but let’s say, optimistic, let’s say that the U.K. — FTA with U.K. and you comes into — the sign that you FTA with U.K. and EU. And so just trying to understand how big would be that market. And what would be the quantum of opportunity for the Indian home textile companies as well as for Welspun India?

Dipali Goenka — Chief Executive Officer & Joint Managing Director

So I think U.K. and Europe predominantly are actually — because of the whole FTA advantage, our neighboring countries have — they have the advantage in terms of bedding and sheets as well. So the opportunity, because it gives us a kind of see the direct impact of around 9.3%, so definitely that basket of U.K., definitely would be something that will make us more competitive. The retailers across U.K. are definitely looking at India in the terms of a stable democracy and economy. So that could be a very big added advantage to India as a country as well. And of course, when we talk about Welspun, so our portfolio that we have in diverse towel, sheets, rugs and TLB, we will be standing to gain. But also add-on here are the majority of the towel programs that run on the U.K. shops are managed by Welspun, they are basically Welspun products.

Biplab Debbarma — Antique Stock Broking — Analyst

So in terms of size, this market would be — did Europe market would be as big as U.S. or ballpark, I mean, we are just trying to understand how big the market?

Dipali Goenka — Chief Executive Officer & Joint Managing Director

So the market is not as big as U.S.A. It is actually — it is around a fragmented market of 29 countries. And also I must tell you that the opportunities are there, but the demand if I look at, you can’t compare both U.S., U.K., and Europe. They’re very, very different in terms of consumption. U.S.A is far bigger the largest. And also to just add on that the U.K. FTAs closers and the European FTA is a little further ahead.

Biplab Debbarma — Antique Stock Broking — Analyst

Okay. Okay and — if and when this FTA happens, how quickly do we think Welspun can ramp-up to address those markets?

Dipali Goenka — Chief Executive Officer & Joint Managing Director

So I can just tell you a few things here. Our customers — we are in touch with all the customers and the customers are in touch with us. I think the important thing as I earlier also I spoke about the relationships that we have with the customers. I think is very, very strong and those are the kind of conversations we already having with most of them.

Biplab Debbarma — Antique Stock Broking — Analyst

Okay. And one final question if I may, on the cotton. As you say that cotton prices has become softer but still dynamic. So is the supply started hitting the market and if they give if the cotton prices settles down at say, INR60,000 to INR65,000 per candy, do you think we’ll see some improvement in our EBITDA margin?

Dipali Goenka — Chief Executive Officer & Joint Managing Director

So, let me just put it in a very clear perspective to you, see cotton prices will come down. So if they come in at INR65,000, freight will need to — freight is coming down, the energy costs still is a little — a little stiff there, but it will all ride on the supply-and-demand. I think the demand in the market as it comes in is where the volume comes in and hence the bottom line will come in. Right now that is where we are seeing a subdued demand, but at least the next quarter or so.

Biplab Debbarma — Antique Stock Broking — Analyst

Okay. Thanks. Thank you.

Operator

Thank you. We move onto the next question that is from the line of Tarang from Old Bridge Capital. Please go ahead.

Tarang — Old Bridge Capital — Analyst

Hi, good evening. Just wanted an update on the flooring business, if you could split them between domestic and export turn. Just give us some sense, I mean, is the demand environment as somber as you’re seeing it in your bedsheets business from textile business for the exports market and some view on the domestic as well?

Dipali Goenka — Chief Executive Officer & Joint Managing Director

So I think let me just — when you talk about flooring, I think, I must tell you that for us, our domestic business is growing in double digits and that’s where we have seen a growth of around 124% in each one, especially, due to commercial and institutional SKUs. While I say this, the international business still is a little soft because again linked to the demand that is there. So we will see the global markets also growing as we see the markets — the whole economy is shaping up a little better.

What was your next question if I may ask, please?

Tarang — Old Bridge Capital — Analyst

Yes. So basically, I wanted to understand — I mean, would it be fair to presume that the feelers that you’re getting for your home textile business, it’s pretty much the same for your exports business in the flooring space, subdued demand and probably that business will probably take time? Or are you seeing some imports coming in from some other countries and you’re losing market share there?

Dipali Goenka — Chief Executive Officer & Joint Managing Director

For India?

Tarang — Old Bridge Capital — Analyst

For exports. Flooring exports.

Dipali Goenka — Chief Executive Officer & Joint Managing Director

Of course, I think it’s the same headwinds that we are seeing for flooring and for home textiles as well.

Tarang — Old Bridge Capital — Analyst

Got it. Thank you.

Operator

Thank you. The next question is from the line of Ram from BSE [Phonetic].

Ram — BSE — Analyst

Yes. Hi. Thank you for letting me ask this question. I have a couple of questions. The first is, as we can see from the presentation, the focus of the company is now on the retail business of India, where we are mentioning that we are now presenting 10,000 stores across 500 towns. So I just want to understand from the management, what is the plan and the strategy going forward in terms of the stores and towns, maybe for the next couple of years? And second question is where do you see India business in terms of the percent of overall sales contributing — contribution over the next couple of years?

Dipali Goenka — Chief Executive Officer & Joint Managing Director

So retail, India is going to be a very important market for us. And as you saw the growth coming to 10,000 stores, our goal is towards Har Ghar Welspun and we definitely are looking at it growing to that extent. And we will target the Tier 1, Tier 2, Tier 3 and the Tier 4 towns as well. For us, this is the growth, and this is the impetus that we are looking at. While — and it will actually contribute around 15% of our overall business as Welspun India in the next three to four years.

Ram — BSE — Analyst

So in that sense, the export business will still remain a dominant business?

Dipali Goenka — Chief Executive Officer & Joint Managing Director

So I’ll tell you one thing. I think if you look at the whole pie, while the export business will continue to be growing the wages, the retail business will also grow at its pace. So you know the Indian market, how it is. So while we are talking about that growth coming in, that definitely will take that — take some time to take over. I mean we’ve been talking about $1 billion revenue here. So I think that portion of India will be a little slow.

Ram — BSE — Analyst

Understood. And just one last question. So if our understanding is correct about various businesses since the contribution margin from the global market is much higher than the Indian market. Is that understanding correct?

Dipali Goenka — Chief Executive Officer & Joint Managing Director

No. I think with — I might just add on here, and I will like to just steady in state that our domestic businesses because of our brands will be able to give us the margins far more stronger than the global markets because that’s a private label. And private label has a competitive thing across the world. And there, again, it is all about $1.01 difference that you have. So definitely, that is something we will — I must have to add on that our brand gives us that kind of an opportunity. And we are — as a brand, domestic brand is EBITDA positive this quarter.

Ram — BSE — Analyst

Perfect. Thank you so much. That’s all from my side and all the very best for future growth.

Dipali Goenka — Chief Executive Officer & Joint Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Alpesh Thacker from Antique Stockbroking. Please go ahead.

Alpesh Thacker — Antique Stockbroking — Analyst

Thank you for taking my question. My first question is more from the industry perspective. If you look at OTEXA data, that suggests that the pain is more for India versus other competing nations. And especially, Pakistan is moving up. So any read throughs on that? And the second one is — and vis-a-vis like industry, how are we fared as a company for this quarter, especially in the U.S. exports market?

Dipali Goenka — Chief Executive Officer & Joint Managing Director

So I tell you our perspective, so why you see the OTEXA data for today, but I think the OTEXA data is very, very dynamic. And I think India is at a bright spot for outsourcing from anywhere, any part of the world, whether it is China or Pakistan or Bangladesh. So why this is kind of a blip that you see? But India is the opportunity that all the retailers and the world are looking at. So definitely, I feel we definitely stand a very huge opportunity there.

Secondly, as a company, I think, for us, the important aspect, what we see, we — along with the private labels, our licensed brands saw a great rise around 22% kind of an uptick in our revenue. And that, I think, is kind of something that we are seeing globally, which actually adds on more shelf space.

And actually, also, just to also give you a perspective, I think a very interesting point is that last year, our cotton prices in India made us less competitive to the other markets like Pakistan and the others. Now I think the India cotton prices as we go forward will become more competitive. And as the ocean freights are coming down, India will have that opportunity here.

Alpesh Thacker — Antique Stockbroking — Analyst

Got it. Got it. Thanks. And my second question is more of a bookkeeping question. So what amount of e-scripts of RoSCTL do we have currently? And is there any discount at which they are trading? And that’s it from my side.

Sanjay Gupta — Chief Financial Officer

Yes. So currently, as of September end, we have in hand about INR150 crores of is — it’s in hand and the discount at which this trading is at about 2%.

Alpesh Thacker — Antique Stockbroking — Analyst

Okay. Thank you. That’s it from my side.

Operator

Thank you. The next question is from the line of Jojo Shaju from Alpha Invesco Research Services Limited. Please go ahead.

Jojo Shaju — Alpha Invesco Research Services Limited — Analyst

Hi. Thank you for giving me this opportunity.

Operator

Sorry to interrupt, sir. We are unable to hear you. Can you speak a bit louder?

Jojo Shaju — Alpha Invesco Research Services Limited — Analyst

Hello. Am I audible now?

Operator

Yes, sir. Please go ahead.

Jojo Shaju — Alpha Invesco Research Services Limited — Analyst

Okay. So thank you for giving me this opportunity. My question is regarding the domestic flooring business. So can you give some idea what is the average realization per square meter?

Sanjay Gupta — Chief Financial Officer

So it will be difficult for us to give you a number on the per square meter because there are various types and various product portfolio. So I can give you a range of — it is in the range of the vitrified tiles that we get. And so very difficult to give you one number for the —

Dipali Goenka — Chief Executive Officer & Joint Managing Director

However, we are getting a great traction in the commercial and institutional business, and I think that’s a huge opportunity for us.

Jojo Shaju — Alpha Invesco Research Services Limited — Analyst

Okay. And out of the 18 million square meter capacity right now, what is the capacity to click n lock tiles, carpet tiles and wall to wall presence? Can you give the breakup for them?

Sanjay Gupta — Chief Financial Officer

So we are about half and half between the hard flooring and soft flooring right now.

Jojo Shaju — Alpha Invesco Research Services Limited — Analyst

Okay. So half is going to the soft flooring and the rest is hard flooring?

Sanjay Gupta — Chief Financial Officer

Yes, yes.

Jojo Shaju — Alpha Invesco Research Services Limited — Analyst

Okay. And on the domestic flooring business, are you catering to pan India? Or are you focusing on certain specific geography like, let’s say, since your plant is in Southern market, you’re just capturing only for the southern market? Or is it in pan India?

Dipali Goenka — Chief Executive Officer & Joint Managing Director

It’s pan India. We are focusing on pan India, and I think that’s where we are, like we’re looking at our commercial and institutional space, it is across the country.

Jojo Shaju — Alpha Invesco Research Services Limited — Analyst

Okay. Thank you. That’s it from my side.

Operator

Thank you. [Operator Instructions] The next question is from the line of Abhineet Anand from Emkay Global. Please go ahead.

Abhineet Anand — Emkay Global — Analyst

Yes. My question is to Sanjay sir. Just I wanted to say, if you can give a very broad breakdown of the HT, we have three businesses there. Within HT, we typically you only give the numbers as a whole. A broad number, can you share that 60% is 70% is towels, sheets. Is it possible to give some number?

Sanjay Gupta — Chief Financial Officer

No. We actually don’t give those numbers, so it will be difficult to provide you with the number.

Abhineet Anand — Emkay Global — Analyst

Okay. The second question, I think just harping on the OTEXA data, while I agree that India is a opportunity that a lot of global retailers are looking at. But if one takes a longest view, if I say 10 years back, we — India has gained a lot of share in U.S. on the cotton bedsheet and towel side, right? We are 50%, 55% at this moment. So the scope of increase looks very difficult there because there is a lot of other areas where the scope looks easier, and the government — if you look on to the government incentive plans, PLIs are all probably not towards this part of textile, it’s more towards garmenting where India is very low. So is it fair to assume that the growth rates in this part especially in U.S. will remain not so high compared to the other segments?

Dipali Goenka — Chief Executive Officer & Joint Managing Director

So while I can say you are right in the terms of cotton, but I think when I talk about Welspun’s portfolio, it is very diverse. We are not only doing cotton towels and cotton sheets, we also do fashion bedding and we also do utility bedding and rugs and carpets. So that makes the diversity portfolio very, very strong. So I think that’s where India stands a big chance. And for us, that’s a huge opportunity.

Abhineet Anand — Emkay Global — Analyst

So what percent of our portfolio is fashion and utility? And how has it moved in the last few years? Is it possible to know that?

Dipali Goenka — Chief Executive Officer & Joint Managing Director

So I can just tell you here that when we talk about sheets and — and when we talk bedding, it will have sheets, TOB and utility. And you will — we have been in it very, very active through — as I spoke about our licensed brands like Martha and Scott, that actually contributes to our fashion bedding. And we have now got into utility bedding, that actually is the white bedding. So the shares go from here, and we have — we fill them up in the United States. So that is, again, a huge market for us. But I can’t actually — because it is an evolving one, so I can’t give you any numbers at the moment.

Abhineet Anand — Emkay Global — Analyst

And that — as I understand, that was the market is quite large and India isn’t there as yet, right?

Dipali Goenka — Chief Executive Officer & Joint Managing Director

India is not there because China dominated this. And now the opportunity for India is big here competitively. And for us — yes.

Abhineet Anand — Emkay Global — Analyst

And I’m assuming that these fashion and utility value would probably be at a higher margin than a simple bedsheet?

Dipali Goenka — Chief Executive Officer & Joint Managing Director

Yes. And also in terms of margins, and I think with the kind of facility that Welspun has in the terms of service and the warehousing and plus with the partnerships and tie-ups that we have, I think here we stand to gain.

Abhineet Anand — Emkay Global — Analyst

Thanks. Those are the questions.

Operator

Thank you. The next question is from the line of Ankit Pande from Quant Mutual Fund. Please go ahead.

Ankit Pande — Quant Mutual Fund — Analyst

Thank you for taking my question. My question would be around the U.S. I think as Dipali mentioned that the environment has been a little soft. So if you’re carrying inventories presumably not a very good December quarter. And if we carry inventories into Q4, then returning to double-digit margins could be a little bit of a question mark to the rest of the FY. So would that be some sort of a fair assumption, Dipali?

Dipali Goenka — Chief Executive Officer & Joint Managing Director

I can actually right now just broach on a few things here, and I think I must tell you that — see, one is the margins you’re talking about, the other you’re talking about the Q3 and the Q4, right, if I’m correct?

Ankit Pande — Quant Mutual Fund — Analyst

Yes.

Dipali Goenka — Chief Executive Officer & Joint Managing Director

So the thing that I basically spoke about was that Q3, the holiday season will be mild. And all the retailers still are carrying inventories. So to get that off will be a Q3 or a Q4. And post that, the things start looking up, also, on the back of the whole inflation and the recession that we see in the United States coming back to normalcy. And of course, when we talked about the raw materials, the cotton and the freight definitely also will be seeing that kind of mobilization by then. So whether you talk about a double-digit kind of the EBITDA, that’s something we’ll not be able to tell you right now, but that is the goal that we are moving towards. And that’s where we will be targeting ourselves to be.

Ankit Pande — Quant Mutual Fund — Analyst

And Sanjay, just for you. So we’re looking at strong cash flows for the remainder of the financial year. And you suggested that we’ll be able to further reduce the net debt. So if I were to expect and assume that by the end of the financial year, you could further be down the leverage. However, whatever sums that may be. So is that primarily going to come down to squeezing or an improvement of the working capital? Or is that more because our capex flow is limited at this stage?

Sanjay Gupta — Chief Financial Officer

Yes. So it’s basically because our capex will not be there, nor our operating cash flow will be reinvested into the business, and that is why our operating cash flow will be down, yes or cash net debt, sorry.

Ankit Pande — Quant Mutual Fund — Analyst

Thanks so much. Thank you and all the very best.

Operator

Thank you. Ladies and gentlemen, that is the last question. I now hand the conference over to the management for the closing comments.

Dipali Goenka — Chief Executive Officer & Joint Managing Director

Thank you. So I once, again, thank all of you who have joined us on this call today. As we shared, ours is a strong business with solid fundamentals. On the operations side, we’re already seeing some easing in supply side pressures and are very well positioned to benefit from an uptrend in macro conditions as and when that happens. From a long-term perspective, we are building upon our already very robust international footprint and are rapidly expanding our domestic retail business, led by our power brands, Spaces and Welspun. This is in line with the goal to achieve Har Ghar Welspun in the high potential domestic market.

I look forward to speaking to you again next quarter. Thank you for your continued interest in Welspun India. [Operator Closing Remarks]