Kewal Kiran Clothing Limited (KKCL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Kewal Kiran Clothing Limited Q4 FY '26 Earnings Conference Call. [Operator Instructions] Before we begin, a brief disclaimer. The presentation which Kewal Kiran Clothing Limited has uploaded on the stock exchange and their website, including the discussions during this call contains or may contain certain forward-looking statements concerning Kewal Kiran Clothing Limited business prospects and profitability, which are subject to several risks and uncertainties, and the actual results could materially differ from those in such forward-looking statements. [Operator Instructions] I now hand the conference over to Mr. Hemant Jain, Joint MD, Kewal Kiran Clothing. Thank you, and over to you, sir.

Good afternoon, everyone, and thank you for taking the time to join us today. Welcome to Kewal Kiran Clothing Limited Q4 and FY '26 Earnings Call. I'm joining by Mr. Pankaj Jain, President, Retail and Marathon Capital, our Investor Relations Advisor. We are pleased to report a strong close to FY '26 with Q4 marking yet another quarter of double-digit sales growth and taking full year growth of 20.9%. This performance is well ahead of the average growth rate envisaged in Vision 2028 and validates our brand-wide differentiated strategy. Let me talk -- let me walk you through some of the key highlights for the quarter and financial year. Consolidated revenue for Q4 FY '26 stood at INR 325 crores, up by 12.4% year-on-year and for FY '26 stood at INR 1,212 crores, led by strong growth in both volumes and value. April volume growth on a consolidated basis saw an encouraging growth of 16% year-on-year, driven by strong design capabilities and sustained consumer demand for our product. Coming to our operational performance. Our performance reflects the scalability, resilience and execution strength of our operating model driven by disciplined execution of focused growth strategy across brands and channels, strong consumer traction led by our fashion forward design-led product portfolio. Agility in navigating a competitive landscape while sustaining market shares and profitability. Some notable operational highlights across our brand. First Killer; continued its sustained growth journey with double-digit sales growth in FY '26 and now operated 457 EBOs. The SSG for Q4 '26 is 6.8% and for the year FY '26 is 9.4%. Kraus delivered robust sales performance and growth in EBITDA margins at par overall KKCL margin profile. On track to evolve a significant player in women's casual wear market, started getting good traction in MBOs export market and expanded EBOs network to 28. Focus now towards further improvement in working capital cycle. Junior Killer posted high sales growth in FY '26, validating our focused entry into kids wear. Backed by disciplined execution, the brand is gaining strong traction. Lawman, with this strategic repositioning towards D2C model, the brand has started showing positive traction and consumer acceptance, resulting in robust sales growth in FY '26 and now operated 90 EBOs. Integriti recorded notable growth in both Q4 and FY '26 year-on-year, driven by a renewed focus and targeted brand building efforts. On the profitability front, EBITDA came in at INR 238 crores for FY '26 and INR 62 crores for Q4 FY '26, reflecting a staggering 25% and 18% growth year-on-year, respectively. EBITDA margin expanded upward of 19% for both the quarter and financial year, driven by efficient operational performance surpassing our guided range of 17% to 18%. Our execution-led operational discipline enabled us to grow at scale while protecting profitability, resulting in a strong EBITDA margin of 19.6% for FY '26. On the channel of sales front, our EBO large format stores, MBO and online channel reported a healthy double-digit growth in FY '26, validating the effectiveness of our go-to-market strategy. Revenue grew 16% year-on-year in retail and 8% year-on-year in non-retail Q4 FY '26. FY '26 retail grew 24% and nonretail grew 17% year-on-year, underscoring consistent broad-based momentum across formats. In line with our strategy to expand our brand footprint, we added net 57 EBOs in FY '26, taking our total to 66 stores as on March 31, 2026. Coming to our outlook and strategy. The robust performance in FY '26, particularly the contribution from Kraus Casuals give us the confidence to raise our growth and ambitions backed by an inorganic acquisition strategy. We continue to achieve the Vision 2028. However, we aim to further accelerate the growth target from 15% CAGR to 20% CAGR in the next 3 years, and it's expected to be meaningfully supported by a well-defined acquisition framework. While acquisitions may not materialize uniformly each year, our 3-year strategic road map is designed to deliver this accelerated growth trajectory. Backed by our core principle of stability, sustainability and scalability, we remain confident in our ability to achieve this ambition. With that, I would now like to open the floor for question.

[Operator Instructions] Your first question comes from Shubham Jain from Counter Cyclical.

I just have 2 quick questions. Sir, firstly, on the monetization side of our land in Goregaon, any update on that?

We are still under negotiations for that.

Okay. And what is your expectation when can we complete that part?

As of now, the decision is still standstill. We can update this decision on a quarter-to-quarter basis on every con call.

Okay, sir. Secondly, sir, on the acquisition that we had done in Kraus, 50% stake, are we planning to increase that stake going forward?

There is nothing changed for first 5 years period. After then, there can be some.

And any other acquisitions that you have been planning in other segments form of inorganic growth?

We are open for opportunities, and we're also looking for some.

Okay, sir. Sir, lastly, you raised your guidance from 10%, 15% to 20% plus. Where are you particularly expecting that growth to be coming from?

So what I'm trying to say is that, okay, organically, our growth, we still say that it should be around 15% to 18%. The additional vacuum of close to around 5% shall be covered by an inorganic acquisition.

[Operator Instructions] The next question comes from the line of Rushabh Shah from BugleRock PMS.

Sir, a few calls back, you had said that you see significant export potential for our flagship brands like Killer, Kraus especially in markets with a strong youth. So just wanted to know -- what wanted to have the look of those markets, which are those markets what is the export potential -- and any internal targets you have to reach in exports for the next 5 years?

The exports for KCL, the exports doesn't actually contribute significantly. However, most of the countries which they export to, including Kraus is Middle East and Saudi, okay? You have known the case scenario that over the last 3 months, okay, it has been disturbed. And that's the reason, okay, exports have been a little bit disturbed. Going to the article which we said right now that all the channels have been growing. And we think that, okay, the export is going to remain constant or may degrow for the next year.

Okay. Sir, my second question is KKCL has also launched the athleisure segment. So how has that segment grown for us? And what do you think about...

It's a part of the entire brand, okay? Some categories move upward, some categories move -- . We are not treating it at a separate format.

Yes. So, sir, what do you think about this segment? Can this segment going ahead in the next, let's say, 4 to 5 years can be as big as the jeans segment we have?

Too early to speak about it. As I said that we are treating it as a category only, or as one of the category sales for us. We are not treating it as a separate or a sub brand.

Okay. So my next question is I wanted to know from the vision perspective....

Little bit loud, please.

Yes. Sir, I wanted to know more from your vision perspective. And this question is not for just, let's say, 2 to 3 years but a long-term thought process. The question is that newer brands or categories like Killer Junior, Kraus, and also the older ones like Lawman, Integriti, do you think these can become as big as the Killer brand? And any steps we have taken, we can see them as a huge brand like Killer jeans over the coming years?

See, every brand was launched with a separate mindset, separate price bracket and a separate TG? Okay. Definitely, we had some problems for some of the brands, okay, we have restrategized our strategy, and we have started seeing traction towards it. And I definitely feel that all the such brands have that potential to go where Killer is as of today.

Your next question comes from the line of [ Arpan Rathore ] from Insight Advisory.

Congratulations on a great set of numbers, and more encouraging is the revision and guidance upward, even considering the current market volatility. So my question is emanating from that only, what is the impact of war on us obviously, we're not too much in export, but the raw material prices have increased substantially across commodities. So what is the impact? Are we able to pass on in terms of revision in price or are we looking at revision in channel pricing?

[Foreign Language] We don't want to lose the revenue. Some percentage we will pass on to the consumer. We don't know as such [Foreign Language] We don't want to loss the revenue. [Foreign Language]

That's good to hear. Any color on the working cap.

[Foreign Language] Yes, sir, please. Hello?

Yes, sir. The line for the current participant has dropped from the queue. We'll move on to the next question. The next question comes from the line of Lakshminarayanan K G from Tunga Investments.

Yes. Good results, especially on the working capital front you have done pretty well. And I think you have sustained the operating margins also, recently enhanced it a couple of basis points. Sir, a few questions from a sale of Kraus brand, how that actually contributed to the growth for the full year? I think this full year is the first financial year with Karus both in the base line as well as towards the end of Fy '26? That is my question.

Growth for Kraus have been in upwards of more than 20%.

And how much Kraus contributes now? Is it when compared to last year to this year?

We generally give the numbers on a consol basis scenario. We don't give brand-wise numbers.

Got it. And in terms of -- because there has been some -- due to GST, there has been some pricing revisions. And is there any stock level loss we had to take? Or is that entire the pre-GST stock has been out of the system. Just tell me, how that actually got handled?

After the GST changes, which was happened on 22nd of September, okay, for the first -- the third quarter, the company had to pass on the entire GST benefit to the consumer, okay? Going forward or maybe for FY '26, we feel that the impact of GST is neutral for the company. For some brands, it's more and for some brands, it's less.

And any price increases we have taken in the last few months?

[Foreign Language] We have that room.

And the e-commerce channel, is it growing ahead of your growth? Or is it in line with your company's growth?

It's in line with the company.

Okay. And in terms of full price sales, can you just give a sense of how much it was for the menswear and the womenswear -- because around 65%.

Full-price sell through is close to around 60%.

Okay. And when you started the year and ended the year, what are the areas which actually did better than what you anticipated for FY '26? And what are the areas which did not do well as per your expectations for FY '26?

[Foreign Language] End of the day we have to achieve that business target. [Foreign Language] Yes. We are focusing on Tier 3. [Foreign Language]

Got it. And sir, in the other segment, which includes innerwear and perfume, glasses and so many other things that has actually also grown ahead of our overall growth, I believe, right? Can you just explain as to within that, which segment is growing in the other faster?

Our major focus is on the apparel business. All the accessories business is impulse buying. [Foreign Language] Our major focus is on the apparel side like jeans, shirt, trouser, t-shirt, winterwear, jackets, sweatshirts, sweaters. So our major focus is on that. We are not major focusing on the innerwear or some socks or some of the accessories business. Yes, we do that. But it's -- because the brand is all about the lifestyle, we have to keep all these things, but our major focus is on the apparel.

The next question comes from Manoj Thakur from Motilal Oswal.

Congratulations on great set of numbers, both on the operational front and as well as on the revenue growth. So I just had a couple of questions on my side. So regarding our development and progression of Kraus on the margin front, how we were back about 1 year back and how we are doing now? What has been our focus in creating the additional EBITDA margin that we can get from Kraus?

[Foreign Language]

Yes, yes. Great set of number, sir, as I said. On a store guidance level, what are we targeting for next couple of quarters and full year?

Full year should be around net around 50 to 70-odd stores.

These are all majorly EBOs.

All EBOs. We are talking about EBOs only.

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

So my -- continuing from the conversation wherein I dropped off. Can you give some sense on the working capital.

Can you be a little louder and clearer?

Okay. My question is regarding the working capital. What are the short-term and long-term working capital days, which we are looking at?

Okay. The working capital should stay anywhere between a limit of 130 to 140-odd days.

And this is same for Kraus and the company on a stand-alone basis?

This is the overall limit structure. Okay, Kraus, it will be a little higher.

Any specific reason?

Okay. Most of it business is skewed towards LFS and retail. That is the reason.

Definitely, we are the manufacturing company. We are not the vendor-based selling [Foreign Language] There is a WIP, so when we are manufacturing [Foreign Language].

Very true.

[Foreign Language].

Right. So my second question is linked to that only. Kraus currently, everything is outsourced in terms of manufacturing. This is correct, right?

True. Yes.

So and considering that we have on a stand-alone basis, enough capacities wherein we can actually work -- absorb that manufacturing also. Any plan there?

That's not the plan for the immediate future also, okay? Currently, the KKCL is only operating at 100% efficiency structure.

Okay. So any CapEx, which considering that the growth targets have been revised upwards, obviously, with acquisitions, but then also on a stand-alone basis, you will need some capacity expansions.

So, not much, okay? As we said, okay, close to around INR 30 crores to INR 35 crores is the requirement for CapEx. That includes the front end as well as the back end on a year-on-year basis.

Sure. Secondly, in the opening remarks, you had made a pointed remark on growth with alongside acquisitions. So any plan which have been drawn up? I know it's very difficult to point at any specific company currently, but which segment or like we did Kraus, so which would be the other segment which we will be looking at? Any broad strategies around that? Obviously, the name value, everything can't be discussed currently, but broad, broad parameters just for our understanding.

So more importantly, we are right now open for all the company structure. We just define whether we can add to the synergies and we look at it from an ROCE perspective, whether we -- that synergy and ROCE can deliver. Okay? We are also -- we are open for our competitive categories also as well as premium as well as the value segment. We are even open for any gender specific.

The next question comes from the line of Sahil Doshi from Thinqwise.

Just one on the Integriti, which we said has done exceedingly well this quarter. And so could you just talk a little more on Integriti and for FY '27 with the pivot in the brand strategy, can we start expecting better numbers on that?

Yes. Okay. We have changed the price strategy for that, and we have started seeing interesting results. We have also started gaining counters on the multi-brand as well as same-store formats. We feel, okay, the growth will be in line as what we are talking about the company.

Okay. So meaning the transition in terms of modern trade and number of counters, are we complete in terms of the entire plan?

No... There is huge vacuum left yet.