Iris Clothings Limited (IRISDOREME.NS) Q1 FY2026 Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Iris Clothings Limited Q1 FY '26 Earnings Conference Call. [Operator Instructions] Please note that the conferences being recorded. I now hand the conference over to Mr. Harshvardhan Sarda, Business Head. Thank you, and over to you, sir.

Thank you, Shubam. Good afternoon, and thank you for joining our earnings call for the first quarter of fiscal year '25/'26. We appreciate your presence as we review the company's performance for this period. I'm pleased to report that during Q1, Iris Clothings has achieved decent top line growth, with an outcome of our strategic initiatives, which have been meticulously designed and implemented by our dedicated team. We anticipate the forthcoming fall/winter season to be a driver for additional growth, positioning us to achieve robust results in the forthcoming quarters of FY '26. We maintain our confidence in our capacity to drive growth while maintaining our profitability. Commenting on our operational business, we have seen significant developments, particularly in the B2B segment. We have expanded our distributor network by adding 8 new distributors during the quarter, increasing our total to 194. This expansion is a clear indication of our growing market presence and the trust that our partners place in our brand. Recently, we have also successfully raised capital through a rights issue totaling INR 47.5 crores, which will be strategically allocated to support our growth initiatives. Also, company has allotted bonus equity share in the ratio of 1:1 to the members of the company on 7th of July 2025. Now looking ahead to the forthcoming quarters, we plan to expand our production capacity to 38,000 pieces per day. We are excited to introduce our new inner wear line and enhance our sportswear offerings, reinforcing our commitment to innovation and quality. We recently launched a travel wear collection, which has been very well received by our distributors, and we expect it to contribute to our commitment to expansion of product offerings for our customers. We anticipate strong growth driven by organic demand and new capacity additions while also focusing on enhancing our retail D2C segment to accelerate our growth trajectory and create value for our stakeholders. Iris Clothings remains dedicated to elevating the DOREME brand and advancing the company to the next level of growth. We are grateful for your continued support and look forward to an exciting year ahead. I will now hand over the call to Niraj Agarwal, our Chief Financial Officer, who will walk us through the Q1 FY '26 financial numbers. Thank you, and over to you, Niraj.

Good morning, everyone. Thank you, Harsh. Thank you all for joining us today. I am pleased to share that we have delivered robust performance in Q1 FY '26. Talking about the key financial highlights for Q1, our total revenue witnessed a remarkable increase of 19% year-on-year, reaching INR 37.4 crores, up from INR 31.4 crores in Q1 FY '25 while our EBITDA for the quarter was INR 5.3 crores. Additionally, profit after tax for the quarter was INR 2.6 crores as against INR 2.4 crores in Q1 FY '25. PAT grew by 8.7% in Q1 FY '26. To summarize our financial performance, we remain focused on driving operational excellence and executing our strategic initiatives that support long-term growth opportunity. With this, we can now open the floor for questions. Thank you.

[Operator Instructions] The first question comes from the line of Deepali Kumari from Arihant Capital Markets Limited.

Sir, I just wanted to ask what's your revenue guidance for FY '26 and '27. And like where do we stand on the current CapEx cycle in terms of [ commencing ] time line and what incremental assets are achievable post-stabilization?

Thank you for your question. So Deepali, our revenue remains in line with what we have communicated before, in line with our current growth numbers. We expect revenue to grow at around [indiscernible] for this year.

Okay. And sir, like with the recent volatility in input cost and currency. So what's your [indiscernible] to sustain the EBITDA margin at the current levels?

So we are very confident that by walking with our partners and trying to book array in terms of raw material costs and driving efficient sales mechanisms, we are very confident that we'll maintain EBITDA margins as the [indiscernible].

Okay. And sir, [indiscernible] CapEx [indiscernible], can you give some outline of new product development and what will you launch this year or [ after ]?

So as already identified that we recently launched a very interesting collection, which has been very well received by our distributors who launched the travel wear collection. Similarly, in line with that, we are very eager to enhance our sportswear offerings for this season as well. We did a winter wear collection for sportswear. We are also looking at adding product categories to our infant wear collection. So overall, we are looking at expanding our product categories and our offerings to our end consumers. So that we are more connected to the brand that we invest.

Okay. And sir, how many EBO you are targeting for FY '26?

That is something that we are still figuring the strategy out, but we are definitely targeting around 5 to 6 EBOs for this year.

Okay. And is there any EBOs such breakeven or profitable?

So for the current year, we have 2 EBOs, which have definitely broken even, which has been for more than a year. It's almost 1.5 years. And those 2 EBOs have broken even for us. And we are confident that going forward, we'll have a very interesting strategy to work around with our EBOs.

[Operator Instructions] The next question comes from the line of Nish Shah from Stellar AMC.

I just want to ask some questions. First question on -- a follow-up on previous. So are you looking -- with the EBOs you said 5, 6 for this year. So any new areas or geographies you're looking for just Kolkata for now?

No. For this, we are looking at Mumbai for now because Mumbai being one of our biggest markets for the brand as of now. We are looking at expanding into Mumbai for our EBOs.

Okay. And one more thing, why are the gross margins being so less. Is there any onetime impact also?

So this is a onetime impact. It was a big sales promotion that we did and multiple other factors, but we expect our EBITDA margins to remain around the 19% to 20% level.

So for Q2 onwards, it will be stabilized around 19%?

Yes, yes.

We should look at a year-on-year basis?

No. I think Q2 onwards, we'll look to stabilize with around 19%.

Okay. And one more thing, you said the capital allocation will be for the growth initiatives. So can you please elaborate something on that?

I'm sorry, can you come again? I think I missed your question.

You said in the earlier comments that capital allocation, which you raised capital, will be towards your growth initiatives. So can you elaborate on that?

So currently, we are allocating capital, as discussed, was primarily to drive working capital initiatives and just some general corporate purposes to expand our team, to expand our new initiatives that we are looking at. For example, EBO is one. B2C is one initiative. Expansion of our product categories is one initiative. So embroidery machines. We're expanding our CapEx by adding embroidery machines to our portfolio. We are adding printing machines to our portfolio. So enhancing production and upgrading our technology and production as such.

Okay. And on that 4,000 capacities, it will be added per day manufacturing. So how much will that cost, the CapEx?

So additional CapEx will be somewhere around INR 7 crores to INR 8 crores for the new additions.

And when will it get operational?

Within this year. Within the next few months. Yes.

[Operator Instructions] As there are no further questions from the participants, I now hand the conference over to the management for closing comments. Thank you, and over to you, sir.

Thank you once again for your trust in us and for being a part of our journey. We look forward to sharing our successes with you in the next earnings call. In case you have any other query post this call or anything remains unanswered, you may please connect to our IR team.

Sir, we have one question. Can we take it?

Yes.

The next question comes from the line of Deepali Kumari from Arihant Capital Markets Limited.

Sir, can you like give a mix between domestic and export revenue? And how do you see this evolving over the next 2 to 3 years?

So currently, most of our revenue comes from our domestic segment because that is where our brand is placed at. Having said that, we have some export presence. Export is somewhere around 4% for our total revenue, and we expect it to grow up to 6 -- 5% to 6% in the next year.

Okay. And like, sir, e-commerce, how much you are doing?

So e-commerce, we are doing a bit, FirstCry. FirstCry is around 8% of our overall revenue.

Okay. And your own website?

Our own website is something that we are still trying to strategize on how to go ahead. So there's a lot of -- not a significant part of the revenue which is coming from our own website as of now. We have not promoted the website yet.

Okay. And sir, like how many distributors you have currently? And like what is your plan to increase that?

So currently, we have around -- this year -- for this quarter, we have around 194 distributors. And we plan to take that to around 205 distributors by the end of the year.

Okay. So like you are more focused on B2C only.

No. We plan -- we are very, very focused on our B2B market, and we want to expand that very, very strongly as well.

Okay. And sir, like what is your targeted working capital cycle for FY '26?

That is something that we are still working around. I think we'll be able to give you a better answer at the end of next call.

Okay. And so like you have said like 38,000 of pieces per day. So how much is the capacity utilization?

We are currently at around 80% capacity utilization.

Okay. And that will be improved on...

I think it will remain somewhere around that number because some 34,000 to 38,000 just incremental capacity. We're not doing a big capacity, big CapEx currently which will have some [ added ] capacity. So the incremental capacity would be -- remained in that 80% capacity utilization.

Okay. And sir, like you have like completed 1 year for your EBOs for [indiscernible]. So like can we know the revenue of that like for 1 year, how much revenue you have done?

So for one of the EBOs, the revenue was around INR 800 per square feet per month in one area. So that is something that we -- that is in line with our expectation. Our expectation is that if our rentals come somewhere around the 25% of our -- 20% to 25% of our revenue numbers, our store level EBITDA is very profitable, and we aim to improve that going forward.

Okay. And sir, what is your average selling price as of now?

Our average selling price at the MRP level is somewhere around INR 480. However, our distributor is still fixed rate.

Sir [indiscernible] is like per [indiscernible] breakeven of all the expenses, like how much goes to raw materials and how much goes to other expenses?

Per product [indiscernible], Deepali, [ we'll have to work ], and we can share it with you.

[Operator Instructions] As there are no further questions from the participants, I now hand the conference over to management for closing comments. Thank you, and over to you, sir.

Thank you. Thank you. Thank you once again for your trust in us and for being a part of our journey. We look forward to sharing our successes with you in the next earnings call. In case you have any other queries post this call or anything remains unanswered, you may please connect to our IR team. Thank you.

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