US Tariffs CRUSH Welspun Living's Profits! Earnings PLUMMET by 93% - Is This a Warning for Indian Textiles?

Welspun Living, a prominent textile company, announced a significant financial downturn for the quarter ending September 30, 2023. Its net profit saw a drastic decrease of 93.5% compared to the same period last year, plummeting to ₹13 crore from ₹201 crore. Revenue from operations also declined by 15% year-on-year, falling to ₹2,441 crore from ₹2,873 crore, although it showed a 15% sequential growth from the June quarter. The primary reason cited for this sharp decline is the imposition of a 50% US tariff on August 27, which has severely impacted the company's profitability and export performance. This tariff also affected the previous quarter, leading to a 52% drop in net profit and an 11% fall in revenue. Earnings Before Interest, Tax, Depreciation, and Amortization (EBITDA) rose by 57% to ₹153 crore, but the EBITDA margin contracted significantly by 610 basis points, from 12.4% to 6.3%. Despite the current pressures, Welspun Group Chairman BK Goenka remains optimistic about the future. He believes the global tariff situation is a temporary phase and that India is well-positioned to benefit from shifts in global sourcing. He also highlighted confidence in the domestic market's growth momentum, rising consumption, and recent GST reforms. Furthermore, Goenka pointed to new market opportunities through trade agreements like the India-UK FTA. Impact: This news directly impacts Welspun Living's stock valuation and investor sentiment. It also serves as a cautionary signal for other Indian textile companies with substantial exposure to the US market, potentially affecting their stock prices and profitability. The overall impact on the Indian stock market might be moderate, concentrated within the textile sector. Rating: 7/10 Terms: EBITDA: Earnings Before Interest, Tax, Depreciation, and Amortization. It's a measure of a company's operating performance before accounting for non-operating expenses like interest, taxes, and non-cash expenses like depreciation and amortization. Basis Points: A basis point is 1/100th of 1%. A change of 100 basis points equals 1%. In this context, a 610 basis point decrease in margin means the margin has fallen by 6.1 percentage points.