Iris Clothings Limited (IRISDOREME.NS) Q3 FY2026 Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Iris Clothings Limited Q3 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Harshvardhan Sarda. Thank you, and over to you.

Thank you, and good morning, everyone. I'm Harshvardhan Sarda, and I would like to welcome you all to our Q3 FY '26 earnings call. Quickly on financials during the quarter, we reported a revenue growth of 46% year-on-year, driven by production product and distribution enhancements. We expect these 2 factors coupled with strong demand for spring/summer 2026 to drive our growth in Q4 and expect that to be the best quarter for our company in this financial year. Niraj Agarwal, our CFO, will take you through the detailed numbers in the later part of the call. Commenting on our operational business in the past quarter, 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 208. This expansion is a clear indication of our growing market presence and the trust that our partners place in our brands. In the last quarter, we expanded our office space to allow ourselves to strengthen our team to drive growth going forward as well. In our quest for product excellence and innovation, we set up a state-of-the-art embroidery unit, which will help to enhance our product portfolio and drive additional value going forward. We also held our annual dealer conference in the month of December for the upcoming spring/summer season and have a very strong growth outlook for the next quarter. Looking ahead to the forthcoming quarter, we plan to expand our production capacity to 40,000 pieces per day and are very excited to introduce a whole new product range in coupon gift sets, along with woven nightwear and cases, reinforcing our commitment to product innovation and quality. 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. The new EU FTA deal and the new India U.S. trade deal also allows us to explore long-term opportunities for our manufacturing capabilities. 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 Q3 FY '26 financial numbers. Thank you, and over to you, Niraj.

Good morning, everyone, and thank you, Harsh. Let me briefly walk you through our financial performance. for quarter 3 of FY '26 and for 9 months ended FY '26. During the quarter, our total income grew by 46% year earlier, reaching INR 487 million compared to INR 334 million in the same quarter last year. For the 9-month period, total income stood at INR 1,305 million compared to crores 1,063 million in the corresponding period last year. This reflects early demand and improved scale of operations. Our EBITDA for Q3 FY '26 stood at INR 60.5 million, while for the 9 months FY '26, EBITDA was INR 184 million. Profit after tax for Q3 FY '26 increased to INR 30.1 million compared to INR 3.74 million in the same period last year. For the 9 months period, PAT rose to INR 97.6 million, up from INR 86.4 million, indicating sustained bottom line growth. PAT margins stood at 6% for our Q3 FY '26 and 7% for 9 months ended FY '26. In conclusion, FY '26 has been marked by strong revenue growth. We remain focused on operational efficiency while balancing growth as we move into the final quarter of the financial year. With this, we now open the floor for questions. Thank you.

[Operator Instructions] The first question is from the line of Nish Shah from Stellar AMC.

Congratulations on good set of numbers. My first question is, if you see a past kind of Q3 numbers, revenue numbers have always been on the lowest head. So what was [indiscernible] on the same?

Nish Shah, so winter was much stronger than what it was in the last couple years, primarily because the weather played good in our favor. And along with that, we had a very interesting product range for us. So that is one of the biggest drivers for growth in this quarter.

So going forward for Q4, can we expect much better numbers?

Our strongest quarter going forward. Q4 usually historically is also very strong for us because [indiscernible] summer season. And we -- from the dealer conferences and the kind of bookings we are doing, we expect it to be very strong quarter going forward.

Okay. And sir, secondly, on the margin front, margins are [indiscernible] so much about [ 6% ].

So I so margins are primarily because a couple of things. One, we introduced a lot of new winter products this year, which drove a lot of revenue for us. And along with that, we have introduced a few new product lines like woven go outside and woven night suits, which we are outsourcing from outside and not manufacturing directly. So that is where our decent hit on margins is coming from. Apart from that, we also did like a very big conference for our sales team, for our distributors, for our retailers as well to educate the customers about the new product range that we are doing. So that overall has been the hit on the EBITDA margin.

So that would be [indiscernible]

Yes. This year, we expect it to -- this quarter, we expect it to bounce back [indiscernible].

Okay. So that's why that is the reason why other expenses have also gone up.

Exactly. Exactly. That is [indiscernible].

So going forward. Q4 onwards, can we expect margins to stabilize around 18%, 19%, which we have been guiding over the last few quarters?

Yes, we are on track to [indiscernible].

Okay. So also on the EBO side, how is the [indiscernible] performing.

So the 7 EBOs that we have opened in the last year, all 7 are decently stable now. And I think both are -- all 7 are growing. Going forward, we expect to add a few new stores in the upcoming quarters and explore another area of the country rather than just focusing on the East.

And all the EBOs have gone profitable are still to be retained.

Yes. All our lives have turned profitable and retain both [indiscernible].

Okay. So sir, what is the time line and target we have said for '02. [indiscernible] we can...

So I think to like eventually turn breakeven would be around we are targeted 16, 15 to 16 months for an EBO to turn breakeven for us.

Okay. And we have been guiding to add 5 to 6 EBOs by March '26. So we're still with that number or...

I think there will be a few changes in that number. It might be delayed by a quarter, but -- so we want to set strong foothold in newer regions and hence [indiscernible] for that.

So which new region are we targeting currently?

We are targeting cities like Hyderabad, Bangalore, Chennai. These are 3 cities which we are primarily targeting to open stores.

Okay. Yes. And one more thing just on if you can -- as we have mentioned in the press release that we have entered in super manufacturing can defer on way. So given I could just can live in manufacturing of [indiscernible] and everything. So in the entire value chain.

The embroidery comes in the value chain of the apparel. Since we are launching infant wear products and expanding that category. Embroidery is a very interesting value add to the kind of products that we do. So that was one piece which we are missing from our entire puzzle. And now that, that has been completed, we are a fully integrated garment manufacturing unit with all capability is possible.

The next question comes from the line of Kunal Agarwal from Arihant Capital. Your voice, we cannot hear you. There is a lot of breakdown.

Can you hear me?

No, no. It's not proper. Your voice is getting cracked?

Now?

You can proceed, and we'll let you know.

Okay. So can the [indiscernible] increased from [indiscernible].

Ms. Kunal, we cannot understand your question to early because of the network connectivity maybe from your end? You can do you can join back the queue, if you want.

That's Okay. Yes.

The next question comes from the line of [indiscernible] from Safi Capital.

Am I audible?

Yes, you are.

Yes. Okay. Sir, you guided that we're planning to stores, but that will be delayed by, I think, 1 quarter, right?

Yes. Yes, absolutely.

Yes. So what's the CapEx was over an average?

So on average, our CapEx per store is around INR 2,500 per square feet. And since they are targeting around 1,000 square feet store, it will be around 25 lakh just for [indiscernible].

Okay. That's the we take [indiscernible] Okay. And how long does it take like us are so to remature?

So we expect a period of 12 to 15 months for the store to mature and usually this on the break season at the 15 to 16 month period.

Okay. Okay. All right. And how many EBOs are you planning for FY '27?

FY '27, we are planning around about 15 to 20 years.

And we will be -- if you would just give us the geographical split, that will be really helpful.

We're primarily targeting these 3 cities as we mentioned, as [indiscernible]. And Bombay is something that we are also exploring along that. So these are the 4 cities that we are primarily, but we want to open in a very cluster-based approach and not have a very scattered approach to India opening.

And all these geographies also we target ever time line for breakeven and for maturity?

Yes.

Okay. And I think you mentioned yes, I think our margins were around 12% also this quarter. You mentioned that they'll return to 18% to 19%. So although there was one one-off because of the confidence that we had, but other than that, what are some of the margin drivers that will help us get back to the 18%, 19% level?

Margin driver is highly be our production, our manufacturing and kind of raw materials that we purchased. So eventually, that is where the profit margins need to remain. So we expect it to bounce back to around 18% in this quarter.

Okay. And for the retail B2C segment, how are we planning to scale that up? And what is the margin differential that you could share?

So for retail, along with the retail, we are also planning to enhance our D2C own website as well this quarter onwards, and we expect a lot of -- we'll spend decently on ads and get the brand build online as well. So we expect to spend some time on the D2C own website segment along with the EBO retail segment.

And how do the margins differ?

So margins, we expect of course, we expect the margins to take a hit, but we would want to see how it progresses over the next couple of quarters, and then we'll be able to comment more on the margin front on that.

And any sort of orders per day were targeting from the retail segment?

From the retail segment, we are targeting around 1,000 orders per day by the end of next year.

By FY '26 -- by the end of FY '26?

Yes.

[Operator Instructions] The next question comes from the line of [ Deepak Carva ], an individual investor.

Congratulations for a good set of numbers. I want to know can you provide some light on how do we see infant we are [indiscernible] adding to overall revenue mix going forward?

So Deepak, we expect infant wear to be a big contributor. Currently, it is around 12% of our overall revenue. We expect it over the next couple of years to become almost 40% of the total revenue for us. And as for swimwear and another, that will be -- so since it's a niche product, it will be a high-margin product, but the overall mix would be around about 5%.

Okay. And like given the current market situation, what revenue growth can we expect for FY '27, '28? And also, if you can give some color on the margins of FY '27, '28?

So margins, we would expect it to remain somewhere around 18%, 19% EBITDA numbers. And in terms of revenue growth, we expect a high growth around 40% is something that we are targeting for the [indiscernible].

And like some detail on your digital platform, how will have to initiate drive overall growth?

So digital platform is something that we are just reexploring and reenhancing our entire website experience, our social media experience. The idea is to build the brand very, very strongly online because that is one of the strongest assets in this world that we live in to build the brand and which will eventually impact the overall business as well because that basically gives customers visibility of the brand across platforms. So that is the idea in building the digital presence initially.

The next question comes from the line of Kunal Agarwal from Arihant Capital.

Is my voice clear now?

Yes.

Okay. Sir, can you maybe discuss about what is like your guidance towards FY '27 and becoming experts like the fourth quarter?

So we expect as I already said, we expect quarter 4 to be our strongest quarter for this year. And going forward over the next year, we are expecting very good growth, a robust growth of around about 40% to 45% is something that we are expecting over the next year. That is the overall guidance.

Okay. And do we expect to reach like EBITDA margin to return to the historical level 16% to 18% anytime soon?

Yes, absolutely. We expect that to reach in this quarter itself.

Okay. And sir, like there is a very in the competitive segment. So how is Iris differentiating its products like branding, pricing and product innovation to maintain the market share?

So it has always been very, very competitive, and that is where our product quality has always been the biggest driver for us to differentiate ourselves because of -- in all manufacturing capabilities, it enhances the product quality overall and helps us to give value to the customer at a very good price. So that overall is our biggest moat to win in a very, very competitive market that we are operating.

Okay. And third, like this with this core CapEx, the daily capacity has an increase like from 34,000 to 40,000 pieces. So what is the current utilization level in this operating? And how quickly can this new capacity be absorbed?

So current utilization, last quarter, we did around 28,000 prices per day. But we expect in this quarter to achieve somewhere in the 32,000 to 34,000 pieces per day.

Okay. And sir, from this digital platform, what kind of revenue contribution that you're targeting?

I'm sorry, I missed your question.

With the digital platform that we have launched so what is the revenue contribution that we are targeting from the online channel?

So from the overall online channel, including marketplace and our website, we expect around 10% contribution in the next month.

In the next few months. And so we expect...

Next FY.

[Operator Instructions] Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Harshvardhan Sarda for closing remarks.

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 so much.

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