Cantabil Retail India Limited (CANTABIL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Cantabil Retail India Limited Q2 and H1 FY '26 Conference Call. [Operator Instructions] Before we begin, a brief disclaimer. The presentation which Cantabil Retail India Limited has uploaded on the stock exchange and their website, including the discussion during this call contains or may contain certain forward-looking statements concerning Cantabil Retail India Limited business prospects and profitability, which are subject to several risks and uncertainties and actual results could materially differ from those in which forward-looking statements. [Operator Instructions] I now hand the call over to Mr. Vijay Bansal for opening remarks. Over to you, sir.

Good evening, everyone. On behalf of Cantabil Retail India Limited, I extend a warm welcome to all participants joining us for the Q2 and H1 FY '26 Earnings Conference Call. Joining me today are Mr. Deepak Bansal, Whole-Time Director; Mr. Basant Goyal, Whole-Time Director; Mr. Shivendra Nigam, Chief Financial Officer; Ms. Poonam Chahal, Company Secretary; and our Investor Relations adviser from Marathon Capital. We trust you have had the opportunity to review our Q2 and H1 FY '26 results. The earnings presentation and financial statements are available on the stock exchange and the company website. Cantabil Retail India Limited commenced FY '26 on a strong note, building on the momentum of landmark FY '25. The company delivered healthy growth in revenue and profitability, supported by strong same-store sales growth, disciplined execution and growing brand dominance across markets. This strong performance during H1 FY '26 highlights the consistent execution of our strategic road map and reinforces our commitment to driving profitable sustainable growth. The volume expansion delivered self trade increasing consumer confidence. Increasingly, we are observing early sign of demand recovery in recent months, driven by government initiatives on GST rationalization and favorable monsoon conditions across most part of the country. These factors, alongside upcoming wedding and winter season are poised to strengthen both rural and urban consumption and further boost overall consumer sentiment. I now hand over the call to Mr. Shivendra Nigam for giving updates on the financial performance for the quarter. Thank you.

Thank you, sir, and a warm welcome to everyone. Coming on the numbers, stand-alone performance highlights for H1 FY '26. Revenue from operations for H1 FY '26 grew by 20% to INR 335 crores as compared to INR 279 crores in H1 FY '25. EBITDA for H1 FY '26 grew by 23% to INR 91.1 crores as compared to INR 73.9 crores in H1 FY '25. EBITDA margins for H1 FY '26 stood at 27.2% as compared to 26.5% in H1 FY '25. PAT for H1 FY '26 grew by 19% to INR 21.4 crores as compared to INR 18 crores in H1 FY '25. PAT margins for half year ended FY '26 stood at 6.4% as compared to 6.4% in H1 FY '25. Coming to the standalone performance highlights for quarter 2 FY '26, our revenue from operations in Q2 grew by 16% to INR 176 crores as compared to INR 151 crores in Q2 FY '25. EBITDA for Q2 FY '26 grew by 22% to INR 42.1 crores as compared to INR 34.5 crores in Q2 FY '25. EBITDA margins for quarter 2 stood at 23.9% as compared to 22.8% in quarter 2 FY '25. PAT margins for quarter 2 FY '26 grew by 3% to INR 6.8 crores as compared to INR 6.6 crores in Q2 FY '25. Our PAT margins for quarter ended FY '26 Q2 stood at 3.8% as compared to 4.3% in quarter 2 FY '25. We will begin the Q&A session and for open forum.

[Operator Instructions] The first question is from the line of Arnav Sakhuja from Ambit Capital.

So if our average store size is around 1,350 square feet. And if you look at the stores that have been opened in the last year, correct me if I'm wrong, the size has been around 1,960 square feet. So is this a deliberate strategy that we are following to open larger stores?

Your voice is not clear. What I understood the question is, my current size is opening is 1,350 square feet as compared to, 2 years back it's a shorter format, right? That's the question. And what's the strategy behind it?

No. My question is more on the lines of in the last 1 year, the stores that we have opened, the average square feet is larger than that of the average square feet of our entire store network. So I just wanted to know is there are deliberate strategy to open larger stores?

Yes, it's a deliberate strategy to open a larger store. Our earlier company average size was around 1,300 square feet. And now we are moving to the 1,600 square feet for the new stores which are coming. We are doing the bigger stores because in the bigger stores, the EBITDA margins are better. We are getting better sales and we are getting a better display for our merchandise and customer experience is also getting enhanced in the bigger stores. So in the smaller stores, we were underperforming. And in the bigger stores, we are getting the optimal performance for the company.

And these bigger stores that have been opened over the last 1 year, are these more of male, female, kids or a mixture of all these?

These are a mixture of all. So we have family stores, we have men's and ladies' stores. We have only men's stores. So these are the mixture of all. And in only exclusively men's store also, we have increased the size a little bit. And definitely, family stores are definitely bigger, but in men's and then ladies' stores also, size is going bigger.

The next question is from the line of [ Arjun Gaikwar ] who is an individual investor.

I wanted to understand that whether the company has any specific strategies or initiatives in place to further improve the PAT margins going forward, so that it can drive a stronger EPS growth? If so, can you please share what kind of margin improvement the management is targeting over the next few years?

So on an annualized basis, we are always working to increase our margin on EBITDA level as well as PAT margin. So this year also -- last year, we closed approximately 10.5%. This year, very much hopeful we are crossing 11%. It may somewhere in between 11% to 12%. And going forward also, this continuously improvement in PAT margin, you'll be able to see. The reason is mainly the more we will get in the same-store sales growth, mostly the expenses are fixed. The left-hand side of my P&L has always been fixed. So the moment I'll get more sales, more top line would have been there, which we are projecting going forward this year onwards. So our PAT margin would definitely increase.

[Operator Instructions] The next question is from the line of Mr. [ Arpan Rathore ] from Insight Advisory.

Congratulations on a decent revenue growth. I have a couple of questions. Though the revenue growth for the quarter has been 16%, even with a little shift in festive season, I see PAT margins not going up proportionately. Any specific reason? Or how should we budget in for the full year cycle?

So there are 2 main reasons for comparison. Number one, this quarter, we have opened approximately 29 stores, right? So the moment we open that store, it will take some time to get full revenue. However, overall store is that even in the 3 years -- sorry, 3 months or 1 month, they are on a breakeven level. So there is proportionately on a percentage basis that has been reducing. Number two, my Ind AS adjustment, that is Ind AS 116 adjustment is increasing. In last quarter Y-o-Y, my Ind AS impact for the quarter was INR 1.2 crores. And this quarter, it is INR 2.1 crores because we have opened more stores, the larger stores would have been there. So obviously, rental cost is increasing. The moment I will have a more rental cost, my Ind AS expenses, Ind AS 116 will be increasing. So these are the 2 main reasons, 3 Ind AS numbers, if you have seen in our presentation as well on H1 basis against INR 20 crores at H1 last year. This year, we have grown up to 20% to INR 25 crores.

So taking this question further and with all the new store addition plans which you have, how much revenue number we should budget in for the current fiscal year and FY '27?

So last year, we closed at INR 721 crores, and we are very much on track for the 20% growth. So this year, it should cross INR 850 plus crores. And by this pace, next financial year, by FY '27, we are crossing INR 1,000 crores of the revenue mark. That is our vision as we speak as well. And on this basis, all the PAT margins that I just told -- replying the previous question, it would be approximately 11% to 12% for this financial year and then going further 12% to 13% next financial year.

So INR 850 crores means INR 515-odd crores or INR 20-odd crores in the balance 2 quarters, isn't it too high or you are confident there?

No, no. That's the confidence because we have everything on our track as well. My H1 is approximately 38%, 39% of my overall revenue because the winter comes, festival season come, my ticket size is significantly increasing. So these are the absolute number on track. INR 850 crores plus is on track.

And just if you can highlight the impact of GST rationalization which has come in. Are we seeing any green shot there? Or how is the company working on those things?

So GST impact, yes, 22nd of the September is a landmark date, we're completely passing it on the benefit to the consumer. The differential of 7% because our -- most of our average selling price is approximately INR 1,150. So between from INR 1,000 to INR 2,500, my sale is accumulated approximately 60% on an annual basis. For this, we are completely passing the benefit to the customer. We are passing this benefit to the customer. So we have seen a momentum, by passing this [indiscernible] the benefit to the customer momentum is there. GST rationalization benefit is going forward, will be giving because the footfalls are increasing.

How was October, if you can just indicate in terms of revenue build up because Diwali was also there.

Very good double-digit growth in October as well, we registered.

Okay. And store addition target for the full year? You said 630 now, so we should close the year by 650 or 660 or more than that?

It is close near 675 stores.

675. And of the additions which we are planning, they would generally be the larger size stores, right?

So our new average size store we are opening is around 1,625. So same we are projecting for the next 2 quarters.

So considering that this is a strategic move, are we also looking to relook at the old stores or to increase the size or something of that sort? Or this is only for the new store which you will add?

So we are increasing the size of the old stores also, but only in the special cases, not all the stores wherever there is expiring is coming or where we see a potential whereby increasing the size of the store, the sales can be increased in a much better manner. Only in those stores, we are increasing the sizes.

Sure. If I may ask 1 or 2 more questions. I have seen the company very conservative and when it comes to the borrowings. But September, I can see this borrowing which has happened. So was it more to do with the seasonal impact? Or are we going the -- we borrowing way?

So we are 0 debt company for last 4, 5 years. September, if you have seen, there is another investment is also there. So INR 22 crores is a net borrowing, but that is not the borrowing. We are utilizing some working capital limit for the September season pile up of the inventory for the winter. So in the month of September, hardly some utilization of the working capital is there. Overall, it's a debt-free going forward also.

Yes. So strategically, we will maintain the net 0 debt position on a longer basis, right? A few quarters...

A couple of months in a year, we're utilizing the limits.

The next question is from the line of [ Chandragupta ] who is an individual investor.

I just have one question. Sir, when you are looking for a location to open a new store, what are the things you look for in that location? And also what are the things you avoid? Do you have some, such checklist or whatever you may call it? How do you identify a location by this method?

So first, there are 2 financial criteria that we should be able to get minimum INR 1 crores of a sale in a year. And second is it should be a profit-making store and growth making store. Second criteria for hunting these kind of locations where we get these type of numbers is that location should be in the part of the market. It should have a good parking facility, approach should be good. It should not be narrow road. The market should have a future where other brands can also hunt for location and open their stores when they plan to come in that particular city. It should have a good frontage. We generally go for a frontage which it's bigger than 15 feet. The landlord should provide a good space for the signage. So -- and these locations are generally in the Tier 1, 2 or in the district headquarters. We are not going in the tehsil level towns or tehsil towns. So these are the no-go areas. The old concept of retail where there is a huge rush of the people but there is no parking space available. So, these kind of places we are avoiding.

But malls you are avoiding, is it? Or you are opening in malls also?

Mall, our presence is less. We have around 10% of the stores in the malls. So we are majorly high street based brand.

Okay. And if there are many similar stores, competing stores around then is that plus point or a minus point? How do you look at it?

Presence of other retail brands, we consider it as a positive point. We don't consider it as a negative point.

[Operator Instructions] The next question is from the line of Arpan Rathore from Insight Advisory.

Thank you for taking my questions back. I just have few operational details which I wanted. One is how much was the contribution or in terms of revenue from our online sales?

So, overall contribution from the online sales, there is actually a change in the billing method for the 2 major players. I'm handing over the call to Mr. Basant Goyal, who is heading -- our Whole-Time Director, heading our e-commerce.

Yes. Basically, so there is a change in the e-commerce space in terms of the billing of the e-commerce platform. So earlier, they used to be -- the revenue used to be booked as a sale value, including the freight cost. But now the major e-commerce companies, they have separated that e-commerce freight cost into a separate company. So that is not booked in the revenue right now. So that is why in terms of revenue, the e-commerce sales have -- in terms of quantity, the e-commerce sales have grown by 20% in the first half. But in terms of value, if you see that the growth can only be seen as 8%.

So that would be one time -- one year impact, otherwise, next year onwards, it should be comparable, right?

Yes, yes. Next year, you will see the growth that should be more comparable to this year because the structure would remain the same.

Okay. Secondly, in terms of capacity, I see a capacity of 2 lakh square feet, which can produce 1.8 million garments as per your presentation. Now that expansion track has been there and we are budgeted for another 50, 60 stores expansion this year and next year onwards. Do we see any capacity expansion happening or we will rely more on the job workers?

So yes, total sales as you said, our overall production require 60% is fulfilled by own manufacturing through our factory, Bahadurgarh factory, which has a capacity of 18 lakh feet as well as job worker. Job workers like own production. So 60% we are selling and feeding from our production and 40% is FOB. However, there is no plan to further extend in our own factory and job work is going to increase. So additional capacity would come from the job work mainly and FOB. But broadly, the ratio would be 60-40.

So this will come down, right? Because now that we are planning to reach INR 1,000 crores of turnover in FY '27, that's your vision statement, But the capacity will remain the same, right, production capacity?

Let me clarify one thing one more time. I have my production capacity. So there are 2 ways of production, own production as well as what we are procuring from Ludhiana. Own production is 60%, it has 2 parts. One is my factory, which has been able to specialized store plant, which has been able to produce 18 lakhs of the garment and balance through job workers. Job workers like our job workers, we are getting the [indiscernible] control is ours. So yes, no more factory is in the planning immediately. So job worker portion would be increasing. But overall, on the requirement basis, 60% and 40% broadly would be same.

So those job workers are dedicated job workers on our own or how is it? Dedicated Job worker.

They've been dedicated, yes.

If you can just share the number of designers you may have because ultimately, everything is how good you design, right, in fast fashion world, the designing capabilities are something which is of paramount importance. So is there a number which you can share?

So we have 5 designers. So they are handling different categories like men's, ladies, kids are 3 categories and men's also there are the subcategories. So these 5 designers are taking care of the designing section.

[Operator Instructions] The next question is from the line of Aditya Iyer from Morde Food.

I just have one basic question -- one of the basic questions that I just wanted to know what is the type of loan of the working capital that you mentioned? Is it a term loan or...

You are talking about loan -- loan borrowings, right?

Yes, the borrowings. Yes.

We are 0 borrowing company. For the last 4, 5 years [indiscernible]. We have a 0 debt company. Long-term borrowings have never been in the company even before 2022. We are only having a working capital limits in the bank, which we are hardly utilizing in a couple of months. Overall basis, we are a debt-free company and cash surplus company. If you have seen in the last balance sheet also, we have [indiscernible] around surplus fund. This year on the balance sheet, it will be more than that.

And another question in September '22 and '23 quarter, the net profit margin was comparatively higher than '24 and '25. So, any specific reason for that?

You're talking about FY '22, '23 versus FY '25, '26, right?

No, no. September quarter '22, September quarter '23 and September quarter '24 and September quarter '25.

I need to revisit the number, obviously. So -- but overall, on an absolute basis in terms of percentage, because we are opening up more stores, it is slightly the lean quarter for the industry as well. So maybe a couple of percentage would have been there because Ind AS impact is also there now increasing. Earlier, it was hardly INR 50 lakhs, INR 60 lakhs for the quarter. Now it is INR 2.1 crores for the quarter for that number. However, for the quarter-wise FY '22, '23, I'll revisit and give you specific answer. We can connect it separately.

One last question. Can I get a brief overview on how is the lease liability treated in accounting terms?

Yes, sir. So Ind AS 116 is, every time we have out of 630 stores, 80% of the stores are on a lease basis, right? Now we are having lease rentals to be paid. Last year, my approximate lease liability was INR 80 crores plus. So what Ind AS says is, since you have all the control over the property, the long-term lease of 9 years, 12 years or 15 years. So this is like an asset you have been created. So you need to capitalize those on the basis of present value. And at the same time, you can -- need to create a lease liability. So new properties is to be taken, it's so similar. One side of balance sheet is the lease liability and other side is the right to use assets. And now this is just a presentational difference. Broadly, you need to convert rentals. We are in the business of rent. We are paying rentals, but you will be able to see there is no rental cost in there. This has been converted into depreciation as well as finance cost. We have a 0 finance cost because we are debt free, but still finance cost is showing and depreciation is showing on a very higher side. So INR 80 crores of broadly -- I'm just giving you the broad ballpark number, INR 80 crores of the rentals have been converted last year into the depreciation as well as finance cost. That is why theoretically, you have seen my EBITDA is showing 10% higher from the normal Ind AS EBITDA. This is what the broad concept of Ind AS 116.

The next question is from the line of Shrinjana Mittal from MS Capital.

Congratulations on a good set of numbers. I have 2 questions. One is, Shivendraji, can you help me with the number of company owned stores that we have on this quarter? First is that.

[indiscernible]

As on date the number of owned stores that we have. I think I have the number for last quarter, which was 475 as of June '25. As of September '25, what would that number be?

So we have opened out of 25 net stores, 1 store was franchisee being opened and the balance is the company owned stores.

The second question was on the depreciation side, depreciation number, would you include the capitalization for the new warehouse as well as the new office, which you are building?

Not yet. Not yet. Not yet because we are -- once it will be capitalized, we are moving in the month of January. That is when we shift, then it would be capitalized. Still that is a part of CWIP.

And just one more question, if I can squeeze in. So if in all the new category that we had started earlier with footwear, right, how has the trajectory been on the footwear side? How has that progressed?

Footwear side is going stable. So last year, we did well. This year also, we are targeting good number that we should end up with INR 30 crores of sales in a year.

The next question is from the line of Arjun Gaikwad, who is an individual investor.

I wanted to ask like given the Cantabil's extensive product portfolio across apparel, accessories and footwear, does the management have any plans to open larger format stores similar to in scale of some of the leading value retail brands to create a one-stop shopping destination where a customer can access the entire range under one roof?

Yes, we are opening bigger stores, we are opening stores with the size of 3,000 square feet and we have all the formats, men's, ladies, kids and footwear. But we are choosy about opening it because the bigger stores that carry bigger risk also. So the places where we are very sure about the sales we are opening at that places only, the bigger stores.

One extending this answer from Deepakji. There is a difference. Let me clarify it. The value store is very different. We are not value in the category of value store, we are positioning ourselves as a mid-premium segment, where ASP is approximately 1,050, we are operating at [indiscernible]. So the portfolio and the audience is different.

Yes, sir. The audience is different. I was just saying that we have like many products. So if I go to 1 store, then men's formal wear, then casual wear, women's formal, casual, everything, everything under one store. So that type of, I was asking.

Absolutely.

The next question is from the line of Chandragupta, who is an individual investor.

Sir, my question is in all these lease agreements that you are signing, I presume they would all be like 10-years or 15-years agreement for lease. So is there an exit clause in the agreement? If you feel after a couple of years or so, that location is not so good then do you have an exit from that?

Yes, most of the agreement, there is an exit option. Company can terminate the agreement any time after giving 3 months’ notice. So in few agreements, there is a 1-year lock-in that company can't terminate within first year of the -- start of the store. So -- but most of the agreements after 1 year, there is 3 months’ notice, we can terminate.

[Operator Instructions] Ladies and gentlemen as there are no further questions, I would now like to hand the conference over to Mr. Deepak for closing comments.

To conclude, H1 FY '26 has established a solid foundation for sustained growth. Our results highlight the enduring strength of the Cantabil brand, disciplined execution and rising consumer confidence. We remain focused on Vision 2027 that is driving scale, efficiency and long-term value creation for all stakeholders. We thank you all for your time today and for your continued trust and support in Cantabil Retail India Limited. We look forward to engaging with you in the coming quarters, as we continue our journey of growth, innovation and leadership. We hope we have been able to answer your queries. Please feel free to reach out to our CFO or IR team for any clarifications or feedback. Thank you all.

On behalf of Cantabil Retail India Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.