Iris Clothings (NSE:IRISDOREME) Q1 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to Iris Clothing Limited q one FY twenty seven earnings conference call. Please note that some of the statements made in today's discussion may be forward looking in nature and may involve risk and uncertainties. Documents relating to the company's financial performance is available to the stock exchange. Trust you have been able to go through them. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then 0 on your touch tone phone. Please note that this conference is being recorded. I now hand the conference over to mister, business head. Thank you, and over to you, sir.

0:46 Good morning, everyone. Thank you for joining us today for our q one FY twenty seven earnings call. We are pleased to report another quarter of strong financial and strategic progress. During the quarter, the company delivered a 53% year on year growth in net profit supported by expanding EBITDA margins, reflecting the strength of our business model, disciplined execution and continued focus on operational excellence. Beyond our financial performance, the quarter marked a significant phase in our growth journey as we executed multiple strategic initiatives aimed at strengthening our market position, expanding our addressable opportunities, and building a future ready apparel platform.

1:34 We strengthened our omnichannel strategy with the launch of our direct to consumer platform, enabling us to engage directly with consumers while complementing our existing distribution network. Building on this momentum, we expanded into quick commerce, making our products more accessible and enhancing convenience for today's digitally connected consumers. On the manufacturing front, we commissioned our state of the art in house embroidery facility equipped with advanced Japanese machinery. This investment strengthens our integrated manufacturing capabilities, enhances product differentiation, particularly in premium and infant wear, and provides greater flexibility to respond to evolving consumer preferences.

2:21 We also expanded our product portfolio with the launch of our newborn gift set range, a fast emerging category that complements our growing omnichannel presence. Available across retail stores, digital platforms, and quick commerce, This initiative allows us to tap into a high potential gifting segment while further strengthening our value added offerings. Another significant strategic milestone during the quarter was the board's approval of the proposed acquisition of a 51% stake in Infenia, subject to shareholder and regulatory approvals. This strategic acquisition marks our entry into the rapidly growing athleisure segment and represents an important step towards building a diversified multi category apparel business.

3:09 We believe the combined strengths of Iris Clothings and Infineon will create a scalable platform for accelerated growth, wider market reach, and long term value creation. Collectively, these initiatives reflect our commitment to investing in innovation, expanding our distribution ecosystem, strengthening manufacturing capabilities, and creating multiple growth engines that will drive the company's next phase of growth. Going forward, we remain focused on expanding our distribution network, strengthening our brand equity, scaling our digital and omnichannel capabilities, and delivering sustainable profitable growth. I will now hand over the call to Meera Zavirwal, our Chief Financial Officer, who will walk us through the q one and FY twenty twenty seven financial numbers.

4:02 Thank you. Thank you, Harsh. Good morning, everyone. Thank you all for joining us today. I am pleased to share that we have delivered strong performance in Q1 FY 'twenty seven. Talking about the key financial highlights of Q1 FY 'twenty seven. Our total income was 47.2 crores compared to INR 37.4 crores in Q1 FY 'twenty six. EBITDA during the quarter grew by 53% year on year and stood at INR 8 crores as against 5.3 crores in Q1 FY 'twenty six, with an EBITDA margin of 17.12%.

4:49 Additionally, profit after tax for the quarter witnessed robust growth of 53% year on year from 2.63 crores in Q1 FY 'twenty six to INR 4 crores in Q1 FY 'twenty seven. In summary, our focus remains on strengthening operational efficiency and leveraging growth opportunities to create long term values. With this, we can now open the floor for questions. Thank you. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question, may press star and one on the touch tone telephone. If you wish to remove yourself from the question queue, you may press star and 2.

5:35 Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Divyansh from TriNetra Asset Managers. Please go ahead. Hello. Good morning, sir. Thank you for the opportunity. So my first question was, like, as our product portfolio is expanding beyond the and entering into new categories, so can you share that how these new categories are performing in terms of overall revenue? And apart from it, the group which is coming in this category, is it coming from the repeat order or just initial distributor placement has been done? So currently, since we have been adding product categories for the last couple years, I think growth...

6:25 These these segments that we added, particularly infant wear, has started to perform for us, and that is where a decent part of the growth is coming from. But having said that, majority of the growth is still coming from the existing categories that we had, which is, you know, the repeat purchases that are happening and expanding distribution of the existing product categories. Okay. And can you check that this in our sportswear and travelwear, how this is contributing to the total revenue? Also, it is... Travelwear has done very well for us in the last winter, and we expect that to grow very significantly this year with those as well.

7:12 Along with that, sportswear is something which is still developing. We are adding products to it every season. So sportswear is something which is developing, but majority of the growth is coming from the core casualwear that we currently have, the core athleisure for kids that we have. Okay. And the last question is, like, over the years, the average order size has been increased from the distributor end or, like, any... Or, like, the growth is primarily driven from the adding new distributors only? I I I... So more... A decent part of the growth has come from increase in distributors revenue. And, of course, we have been adding our footprints to multiple regions by adding distributors.

8:02 But our distributors who have been with us for the last seven, eight, ten years, they have been growing, which is where majority of the growth is coming from. And last question. Sorry. Can you help us understand, like, some particular reason from where the major growth has been come and from where you expect the growth opportunity over the next year in the India across regions? So our markets are very significant market is from the West Of India, which is Maharashtra, Gujarat, Rajasthan, and Punjab, which contributes around 40% of the overall revenue. But having said that, the next few growth potential pockets that we are looking at, we're looking at Uttar Pradesh as a very significant growth potential for us in the next year or so.

8:57 We are investing in adding distributors in smaller towns in Uttar Pradesh. And along with that, I think the Northeastern part of India, Assam, Mizoram, that part is also doing increasingly well for us. Okay. Thank you, sir. Thank you. You. Reminder, anyone who wishes to ask a question may press star and one on the touch tone telephone. The next question is from the line of Nish Shah from Shailar AMC. Please go ahead. Hello? Hello? Hi, audible? Hi. Yes. Yeah. So thank you for the opportunity, and congratulations for a good second.

9:50 First question is we have seen little margin improvement in this quarter. So can you please explain how much was driven by higher volumes and how much came from, like, the? So I think primarily margins have improved from higher volumes. Increase in volumes have led to the increase in margins. Since overall costs have been rising in the last quarter because of rise in raw material prices, so most of the margin is driven from higher volumes currently. Okay. Understood. And, also, you mentioned in the opening remarks that you have expanded into BigCommerce. So could you please share which platform you have with? So currently, we have started with BigBasket in around four cities for now with our newborn gift set range, and we plan to expand to other platforms as well.

10:50 Okay. I know it's really too early, but how has there been traction so far in good commerce? The traction has been good. It's just started. It's been a month overall. So I think traction has been received well, and we expect that to become so we'll have a quick commerce assortment very soon and that will help us expand the overall e commerce growth. I think gifting as a category since we launched will become a bigger part in the entire quick commerce segment. Understood. And main focus would be gifting part only in quick commerce. Correct? So gifting will be a big part of the focus. Along with that, our innerwear and basic athleisurewear will be a part of the commerce. A wider assortment will be difficult to manage initially on the commerce. So we will start with very focused categories that we want to that we expect to increase very significantly.

11:53 Okay. And this category would only be available in quick commerce or also will be leveraging our website and EBO which we have currently? Absolutely. Well, the same product will be available across our platforms. We'll leverage the same product in our distribution, in our stores, in our online d two c channels as well. Okay. Understood. Also, sir, if you could could please explain how much would you be investing in in India? Like, have you decided on what part of the life or is it? We're just in the process of finishing that. So I think we'll have more updates regarding that in the next quarter in terms of what the strategy going forward for Infineon will be.

12:43 Okay. And how do you... Are you are you planning to fund the transaction? Oh, we plan to fund the transaction through our internal approvals currently. And, Okay. Also, could you please explain the strategic rationale behind acquiring, like, between Infineon. So, basically, it is in completely different segment. So are you expecting any other synergies or just if... No different category addition into our business? So this has been very strategic because of... Because when we look at Infinea, it is in a very similar product range that we manufacture. So there's a lot of manufacturing synergies that we can generate with Infinea.

13:28 Along with that, if we look at the end customers for our kids wear products, our kids wear products are primarily bought by parents who are from the age of 25 to 40, 45. And for Infineon, also, the target market is similar. So with the same distribution network, with expanding distribution network, we can definitely... There's a lot of synergies that we see for this brand. And it has us expanding to a much wider apparel category as well. Understood. Is there any synergy possible in the sourcing and manufacturing part? The distribution network will I I think there's a lot of synergies in the sourcing and manufacturing part because the supply chain is very, very similar to our product supply chain.

14:20 Okay. So what was the for Infini and the revenue margin profitability? I'm sorry, I missed. I think your question was humbled. Can you please repeat that? I want to know the numbers for Infineon as a stand on a stand alone basis, the revenue margin and the profitability numbers. So I I think this year, Infine is targeting somewhere around 40 crores in revenue, and margins will be in the seven to 8% range. Okay. So when the acquisition is completed, I feel the margin... Our margins will get lower and then get impacted because of the consolidation.

15:10 Is my understanding correct? We expect margins to remain at similar levels that we currently have. A consolidated basis, 1718%? Yes. Okay. And once the synergies and everything is... When we successfully... I mean, when we successfully complete the transactions, do you think the Incymia business will be margin accretive? Will it be possible to increase the margins of that business? Absolutely. Absolutely. We are very confident that we'll be able to improve margins on the console basis once the synergies start kicking in, which will happen right away.

15:57 Okay. Understood. Just one more thing. What key growth drivers do we think that we should watch out for the next two to three years? I think the key growth drivers for us will be expansion of our distribution overall. So the general trade distribution expansion will be decent part of the growth. Apart from that, B2C business, the e commerce segment, which we are focusing on, along with our retail business will be a major growth driver for the next two to three years. Okay. So B2C business will be growing at much higher rate than the normal business. Is that what I think or not? I'm wrong?

16:43 Yes. Yes. Absolutely. Okay. And on console level, do you think we will grow at? We expect to grow at a 30% to 35% growth rate definitely. Okay. Margins in similar lines? Yes. Yes. Yes. Client improvements in margin is something that we expect. Are you planning any other inorganic acquisition? Not currently. Another very important growth lever that we are trying to tap is trying to leverage the FDA agreements that the government has recently signed up with Europe and The United Kingdom. So we are trying to explore some white label opportunities if we can for our manufacturing setup.

17:36 Understood. Thanks. Okay. I'll join like the queue, and all the best. Thank you, Neil. Thank you. Thank you. Ladies and gentlemen, anyone who wishes to ask a question may press star and one on the touch tone telephone. The next question is from the line of Sanjay Ladha from Bastion Research. Please go ahead. Hi, sir. Thank you for the opportunity, and congratulation on a very good set of numbers. Sir, my first question would be, how should we see the growth prospect as primarily, you know, we were a distributor led business, which we are moving towards, you know, d to c or end to end from manufacturing to customer end, like, from shoe opening to shoes and all of that.

18:27 So how should we see the strategy and gross... Growth prospect for us now? You know, how things are changing there, if you can elaborate more on that side? So I think... See, the distribution model is very, very strong and intact, and it will keep growing at the pace that it is growing. But we expect that since we have built a very strong brand already in the markets currently, so we should capitalize on building that brand by taking it direct to the consumer and give our consumers who actually enjoy our products a much better environment with a wider variety of assortment for them to choose from. So that is the idea of keeping distribution growing at a certain pace and take... Using that as a leverage to expand into the d two c space.

19:23 So I think that is the overall growth strategy that we are looking at. But but when we say, you know, we we are, you know, expecting 100 Cocoa schools going forward, if I'm not wrong, in... By 05/30. Right? Yeah. So how how should we choose that, Madhava? What's the plan over there? Any any target market, any geographic specific target market, any strategies that you can share on that front? Absolutely. We we have done couple of thing... Couple of tools already. So what is the attraction on that side? If you can share unit economics there as well, it would be really great. So there are multiple questions inside. I will start off with your first question, which was the geography side. So in terms of strategic geography, we are currently looking at opening stores in Hyderabad, Bangalore, Chennai. These are the three cities that we are looking at opening stores for the next couple years because that is where we see very high growth potential coming in from retail stores.

20:32 And in terms of strategy, we expect to, you know, open stores in a cluster based model. So we don't want to have a very, you know, varied store approach where we open one store in Hyderabad and then go to one store in, say, Punjab or Jaipur. We want to have a cluster based approach. So if we are opening stores in Hyderabad, we want to capture the majority markets of Hyderabad first and then move on to the next one. So that is one strategy that we are planning for retail. Second question, I think, in there was about the overall breakup of the margins. So I think that is fairly simple. If there's a product which is at 100 rupees MRP, we expect rentals to be in the 20 to 25% range. Other expenses for the store comes up to around 10 to 12%.

21:22 So we... And our overall gross margins is at 65%. So we are left with 20 to 25% EBITDA at the store level when the store matures. That's okay. But... And and this is primarily Coco Shoes model. So are we also looking for Fufo as well, or this 100 store would be on We are just we are just exploring how the... We have a lot of interest coming in from our distributors and our retailers who are very eager to open franchise stores for us. But we want to explore first 20, 25 stores on CocoModel, get the model right, what should be the ideal size of the store, what should be the ideal assortment at the store, and then open it up to multiple franchisees.

22:17 We we are already build... Building the pipeline in terms of franchisee inquiries that we are... That is currently coming in. Okay. And then... So my last question would be, since we have a licensing agreement with, you know, Disney, you plan to have any other licensing agreement? Are we in a talks to, you know, other agreement or other sort of things? Or it would be... Now it would be more of... So one one is the licensing agreement and another one would be the fresh one which we are looking forward... Going forward. So licensing agreement is something that, you know, it will keep evolving as the business evolves because licensing is a lot about trends as well. If a certain character is doing very well in the media space, it would make sense for us to, you know, license the...

23:11 With those people and launch a collection based on that. But our primary focus still as a brand remains on driving merchandise from our design houses rather than doing a lot of designs with licensing. Okay. Okay. And then, sir, just just last one would be, you know, since the licensing agreement that you already told that, you know, you are not looking for or or probably, you know, the the business that... As business evolve, it will evolve further or going forward. But how much, you know, how much royalty or fees we are paying to this licensing agreement as a percentage of sales, or how how how it would be defined?

24:00 So our percentage of sales of our licensed goods is is less than around 5% of our total sales. On that, the royalty that we pay is around 12% to our licensee. So it is not very significant in terms of the numbers. And that also what we are paying is we drive margins extra on those products from the customers. Okay. Sir, if you can share the total revenue, how much would be the licensing brand car revenue? Licensing brand car revenue last year was around 5 crores. So only 5 crores. And in that, we are in that, we are paying 12%.

24:50 Exactly. Oh, that's a very small again, cost. We are... Our prices for those products is higher than our regular products, so we build that into the margin. Sure. Okay. Yeah. Thanks a lot, sir, for answering all those. Thank you. Thank you, Sanjay. Thank you. The next question is from the line of Deepali Kumari from Aryan Capital Markets Limited. Please go ahead. Yeah. Hello. Thanks for the opportunity. Sir, I have just two, three questions. Like you have planned 50 karol greenfield facility in Rasvongar. So can you provide a more specific time line for when construction will begin and when the first phase of this new capacity will be commerce new office... Operation?

25:39 So we plan to, you know, close planning of the entire... Of the new facility in this financial year. And, hopefully, in the next financial year, the plant will be operational by the end of next year. Okay. You are also planning like from INR300 crores to INR500 crores incremental revenue from this new facility. How does the company plan to with the printer? Sorry to interrupt, miss Deepali. Your voice is not audible. K. I'm audible now. Your voice is cracking. Okay.

26:25 Am I audible? Yes, sir. Please go ahead. Okay. So I'm just asking, like, you are targeting three hundred to five hundred crore of incremental revenue from this new facility over two years. So how does the company plan to bridge the gap to this much higher run rate before the greenfield site? I didn't get your question correctly. Can you please come again? I think the voice is cracking somewhere. I'm just asking, like, how the the full quarter one, you already done like INR 47 crore of revenue. And you are like previously targeted like INR 300 crore to INR 500 crore of incremental revenue from new facility.

27:16 So like how how is the plan to break the gap to this much higher run rate before the greenfield site is fully operational? So before the greenfield site is operational, we plan to grow our capacity at 20%, 25% with incremental CapEx every year that we are doing. So we expect this year to be around 35% overall growth in terms of revenue. And next year, and when the project is operational, that is when that is when the incremental revenue will start coming in. So we expect incremental revenue from the new project to be at least at least two years away from now.

28:04 Okay. And, like, can you please give us the breakup of 300 EVO, like, for upcoming five years? Like, how how many reviews you will add per year so you can go to 300 reviews? So, Dipali, if your strategy is something that we are still working out on, as I just previously answered. We have built a strategy on how are we gonna scale to the first 100 DPOs in the next couple years. And then when if we want to open up Go for once those first 25, 50 stores are up and running, that that is when we'll start, you know, defining how do we get to bigger multiple EPOs from there in terms of geography and in terms of growth.

28:56 Okay. So d two c performance, like, what is the actual revenue in the d two c segment? And if you can also tell me about your, like, direct channel contribution. So our d two c performance has been doing well. Ecommerce overall has been providing. So last year, we did around 5% overall from our ecommerce business, and we expect that to be around 10% to 11 in this year from our overall ecommerce business. So overall ecommerce is still 10%. Out of that, seven is from, like, other platform.

29:43 Sorry, miss Deepari. Your voice is not audible. Please join the queue for the follow-up question. Ladies and gentlemen, anyone who wishes to ask a question may press star and one on the touch tone telephone. The next question is from the line of Harshit Kabra from Individual Investor. Please go ahead. Hello, please go ahead., please go ahead. As the participant is not responding, we will disconnect the line. Ladies and gentlemen, that was the last question.

30:29 I would now like to hand over the conference over to the management for the closing comments. Thank you once again for your interest in us and for being a part of our journey. We look forward to sharing our successes with you in the next earning call. In case you have any queries post this call or anything remains unanswered, you may please connect to our IR team. Thank you so much. Have a great day. On behalf of Iris Clothings Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.