Welspun India turns around UK's 150-year-old Christy

Welspun India has turned around UK's largest terry towel brand called Christy, which it had acquired it in July 2006.

The UK retailer earned an EBITDA of £2.7 million in the year ended June 2007 on the back of 17 per cent growth in sales, said Welspun India director Akhil Jindal in Mumbai today.

Christy's, which was losing money, customers and market share when it was acquired by Welspun, has reversed the tide by winning back customers, adding new ones and expanding its reach by opening more shop-in-shops.

''We have been able to infuse confidence in Christy's customers that we are here for the long term. Many of them have visited us and seen our plants, which can support their requirements,'' said Jindal. The clients seemed to have bought in.

Back in July 2006, when Welspun acquired 85 per cent stake in Christy's parent CHT Holdings for $28.7 million (Christy management retained 15 per cent and control), the UK company was at the crossroads: it had posted a small loss of £300,000 and its customers were exploring other suppliers.

''They were losing key accounts and were staring at a big loss if they did not take corrective action,'' said Jindal. That's when the two companies saw value in a marriage and sewed an alliance after a courtship of over six months.

The value proposition: Christy's got a backbone in Welspun's plants, which could help it cut costs and stay competitive, while Christy's gave Welspun access to the UK market, which it had been trying to crack open without much luck.

Christy's also helped Welspun move into brands, since Christy's is to towels what Rolls Royce is to automobiles and commands a huge premium. For instance, Welspun's towels retail in the US for $10, which Christy's sells for £10.

The UK manufacturer sells to leading UK chains such as Debenhams, John Lewis, Marks & Spencer, House of Fraser and Selfridges, through retail stores, shop-in-shops and supplies (private labels). It also has a presence in the US and Ireland.

The company has been able to turn around its operations by increasing its topline, winning back customers and amortising its fixed costs over a larger base. It added 17 shop-in-shops in Debenhams last year, besides other customers.

How significant is this turnaround? ''It's significant, considering it's a swing from a negative EBITDA of £300,000 £to £2.7 million or $6 million, which translates into an EBITDA margin of 7-8 per cent,'' added Jindal. It posted a top line of $80 million in the year ended July 2007.

Since Christy was its first acquisition, Welspun was keen about its success. ''This will make room for us to pursue inorganic growth,'' said Jindal. Welspun has plans to bring the brand to India and expand it in the US.

Right now, Christy's sourcing accounts for 10-15 per cent of Welspun's business. ''By 2008-09, we expect Christy's to contribute 20 per cent to our consolidated revenues in home textiles of around $500 million,'' added Jindal.

Welspun is India's leading manufacturer of terry towels. It is among the top five producers of terry towels in the world and exports more than 90 per cent of its sales directly to leading retailers including Wal-mart, Bed Bath and Beyond, Linen n Things.