Through its flooring unit, Welspun begins to eat into Chinese global domination

Establishing a new business and expanding it amid the novel coronavirus, or COVID-19, pandemic may not be the best idea. But Welspun India is doing exactly that with its new flooring business, and is beginning to pull it off.

The textile major's unit Welspun Flooring, which had commissioned a new manufacturing unit in Telangana late last year, has bagged international orders from customers who had till now sourced products from China. The unit manufactures products such as broadloom carpets, carpet tiles, click and lock tiles, and artificial grass.

"We have already shipped to customers in the Middle East and the US," said Mukesh Savlani, CEO, Welpsun Flooring. "We will soon ship to Southeast Asia, Europe, Australia and the UK. These are customers who have been buying from Chinese companies till now, and were looking for alternatives," he added in an interaction with Moneycontrol.

Much of the demand is for interlock tiles, also called hard flooring. Soft flooring products include carpet tiles and boardroom carpets.

Interestingly, China has a near-complete domination in these countries, with a market share of over 90 percent. But twin developments have forced customers to look at other options to ensure steady supply.

First came in September 2019, when a trade war ensured between the US and China. US President Donald Trump increased import duties on Chinese imports. This included a hike in duty of flooring products to 25 percent from 10 percent.

The steep tariff increase helped Welspun India to attract interest from global companies, giving it a good reason to advance the opening of its new flooring facility in Telangana. It had earlier planned to open the facility in December 2019.

The facility at present has a production capacity of 10 million square metre annually. This will be ramped up to 40 million sq m in a phased manner over the next two years.

The second development that evoked interest among more customers was the COVID-19 outbreak in China.

Given that much of the demand is for the hard flooring product, it plans to double its production to 6 million sq m later this year, and to 9 million sq m by mid-2021. The expansion is part of the company overall investment of Rs 1,153 crore into the facility.

While these are early days, Welpsun Flooring will be hoping to continue to expand its global footprint. Its initial success now reflects in its financial results. In the just concluded first quarter, the unit's revenue jumped 144 percent to Rs 25.4 crore from a year ago. In comparison, Welpsun's flagship textile business suffered a 31 percent drop in revenue at Rs 1,184 crore.

Welspun Flooring is among the first players in the domestic market to offer flooring products that go beyond the traditional tiles, which is led by Kajaria.

"Many of the things in indoor furnishing have become readymade and customised and it is getting easier for customers to use them. This includes wallpapers. But when it comes to flooring, traditional tiles continue to dominate," Savlani said.

Welspun Flooring is betting to change that as much of the flooring products offered by the company are mostly imported for customers in India. Not only does the company promises to complete installation within a day (with a disclaimer that more time will be needed for a bigger houses), the costs are comparable to traditional tiles, it said.

"When one factors in the cost of replacing and installing traditional tiles, and this includes transportation and labour, our products are similarly priced," Savlani said.

The company has created a network of 450 dealers and 51 distributors across Indian cities. "We plan to expand this to 1,200 dealers over the next one year," the CEO said.