Iris Clothings Limited (IRISDOREME) Q4 2026 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Iris Clothing's limited Q4 and FY26 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. Thus, you have been able to go through them. As a reminder, all participant lines will be in the lesson-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on a touch-to-one phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Harshwar Dhan Sarda, Business Head. Thank you, and over to you, sir.

Good morning, everyone. Thank you for joining us today for our Q4 and FY26 earnings call. I am pleased to share our progress and achievements over the past year, along with our strategic vision for the future. Irish Clothing has delivered robust revenue growth during the year, alongside significant improvement in operational profitability. FI26 has been a transformational year for the company as we continued our evolution from a garment manufacturing company into a fast-growing branded kitware player. Our performance reflects the increasing strength of the Doremi brand, expanding customer franchise, and the resilience of our business model. A key growth driver during the year was the expansion of our distributor network, particularly across the B2B channel, which significantly improved our market reach and sales momentum across regions. The addition of new distributors, coupled with growing brand acceptance, helped us deepen penetration in the organized kids' by market and contributed strongly to our Q4 performance. Over the years, we have built a scalable distribution-led platform supported by product innovation, category diversification, and a consumer-centric approach. We are also seeing encouraging opportunities to expand wallet share as we gradually widen our product offerings. Another important milestone during the year was the launch of our dedicated direct-to-consumer platform. This marks a strategic step in our omnichannel journey and reflects our vision of building a future ready and digitally integrated brand. We believe this initiative will strengthen online sales, deepen customer engagement, and provide valuable consumer insights to support long-term brand building. Despite continued investments towards expansion and brand-building initiatives, we delivered strong profitability growth supported by scale benefits and improving operational efficiencies. We remain optimistic about the long-term opportunity and the organized KJV market, driven by rising disposable incomes, increasing preference for branded apparel, and higher spending per child. With Doremi positioned in the affordable premium segment, we believe we are well-placed to capitalize on these evolving consumer trends. Going forward, we remain focused on expanding our distribution network, strengthening brand equity, scaling digital capabilities, and driving sustainable profitable growth. I will now hand over the call to Neeraj Agarwal, our Chief Financial Officer, who will walk us through the Q4 and FY2026 financial numbers. Thank you and over to you, Neeraj.

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 Q4 and FY26. Talking about the key financial highlights of Q4 and FY26, our total income was 60.4 crores compared to 40.2 crores in Q4 and FY25. Consolidated income during FY26 witnessed a significant growth of 30.5% year-on-year, reaching 190.8 crores against 146.2 crores, reported in FY25. EBITDA during the quarter grew by 34.1% year-on-year and stood at 11 crores as against 8.2 crores in Q4 FY25, with an EBITDA margin of 18.2%. EBITDA for FY26 was INRI 29.4 crores as compared to 28.3 crores in FY25. EBITDA margin of 15.4% in FY26. Additionally, profit after tax for the quarter witnessed robust growth of 43.5% year-on-year from 4.48 crores to 6.4 crores. During FY26, net profit was 16.1 crores compared to 13.1 crores. In FY25, growth of 23.4% year-on-year basis. 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. Thanks.

Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the touchstone telephone. If you wish to withdraw yourself from the question queue, you may press star and 2. Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles.

First question is from the line of Aditya

Banerjee from Aryan Capital Market. Please go ahead.

Oh, yeah. Hi. So, my first question is that given that EBITDA margins declined from 19.3% in FY25 to 15.4% in FY26, can the company provide a bridge explaining the primary drivers of this compression, specifically the impact of the increase in COGS versus investments in B2C rollout?

Right. Hi, Kaurav. Thank you for your question. So, hi, Agitya. Thank you for your question. So, primarily, EBITDA margins, if you see, quarter four have been decently improved. However, since we have been robustly expanding revenue, we have added a few new product categories, which are, you know, value in nature and super competitive in terms of pricing. To drive that market, you know, the pyramid of the market at the bottom so that we can capture specific stores which were certainly out of our reach until now. So since we have entered those competitive products for which we will see value in terms of growth this year. Hence, one of the reasons for EBITDA margin decline has been that. Secondly, since we launched D2C in Q4, there has been significant spending in terms of branding and creating the entire platform. So that has also been impacting the margins. Apart from that, we also did a big distributor event for summer's conference. This has also impacted the margins for this year.

Okay, great. So, the question is that with a planned greenfield expansion of 2 lakhs square feet and an estimated capital outlay of 50 crores, what are the projected asset turnover and incremental revenue expectations once this facility reaches optimal utilization?

So once this factory reaches optimal utilization, we will see additional 300 crores coming in from that facility. So overall, yeah, additional 300 crores. So we are targeting somewhere around 500 crores from this facility over the next two years when the facility is in place.

Okay, okay. Thank you. And my third question would be that regarding the launch of the dedicated D2C platform, what are the target customer acquisition costs and expected customer lifetime value metrics as the company transitions into a future-ready omnichannel ecosystem?

Right. So the target customer acquisition cost that we are looking at currently is around 250 to 300 rupees for a product. For an average bill value that we are currently getting is around 1500 to 1600 rupees. That is the target cash that we are looking at.

Okay. And the other question would be that both return on equity and return on capital employed saw significant declines in FY26 from their FY24 peaks. So what operational levers are being pulled to return this matrix to the 20% plus range?

So, as I said, we are experimenting with multiple product categories. So, we are recently planning to launch an infant gift set collection, trying to add a few new product categories, which will provide us with higher margins and take us to the optimal 90 to 20% EBITDA margins that we are looking at.

Okay, okay, great. And my other question is that the type 2 equity ratio improved sharply to 0.14 times in FY26. So does the company intend to fund the upcoming 50 crore greenfield projects through internal accruals or is the plan to re-average the balance sheet?

We are still evaluating our best options for that, but funding it through internal accruals is definitely an option since we do not have any long-term debt on our books currently.

Okay, okay. And the other question is, the company currently has 216 distributors across 26 states. Beyond the initial focus on instant regions for EBOs, which specific states are being prioritized to reach the Vision 2030 target of 300 distributors?

So, currently, we are targeting the southern part of India. So, Telangana, Andhra Pradesh, Karnataka, that is a big focus for us. That is where our presence needs to increase. Apart from that, Uttar Pradesh is one state which we are focusing on expanding our reach in that place.

Okay, okay. And, um... So, one more question. With the introduction of the categories like kids, winter sportswear, and woven suits, how do you foresee the product mix evolving by FY27, and which category is expected to have the highest contribution to bottom line growth?

So, highest contribution, we are looking, since we launched Woven products, Woven will become a big part. So, we have primarily been a niche company for the last decade or so. In the last year, we have recently gotten into Woven, which is a completely different volume, and there are multiple products that we plan to add in that category in the next couple years. So, we see woven pants, woven sets, woven night suits as a big category overall in the upcoming couple years. Apart from that, infant wear, which has been around 12-13% of our mix, we plan to increase that to around 20%, which will be a big driver for margins overall in the business.

Okay, okay, great. And my other question is, so, apparently, the company has been exporting to around a few countries with a target of 12 by third.

Hello, hello.

Yes, I think I lost. Yeah, yeah. As a target of 12 by 2030, is the international strategy focused on organic brand growth of Auremi or the averaging the pharma approval for Disney products to enter more regulated Western markets?

So currently, the focus is primarily on growing through the Doremi brand by taking that to more international markets, finding bigger retailers in specific regions, and selling our brand to them. That is the primary focus for exports in our strategy.

Okay, okay, great, great. And the last question from my side would be, in the... Despite of the 30.5% growth in total income for FY26, how has the company managed its working capital cycle, and are there any plans to further optimize warehousing and dispatch units to improve speed to market?

So our working capital cycle, since the growth of this has become much better from last year because of that improvement in revenue. And to improve the working capital cycle, we are planning to optimize our manufacturing cycles and reduce that by significant margins to improve the overall working capital cycle.

Okay, okay. Okay, thank you so much. Thanks.

Thank you. Next question is from the line of Nisha from Stellar AMC. Please proceed.

Hi, sir. Good afternoon. Thanks for the opportunity. So my first question is with regard to digital platforms. So you said that the customer acquisition cost would be around 250 to 300 rupees. So what strategy have you kept in place since the customers want to be having the benefit of touch and feel? And also today's kits are very choosy with respect to the design they want to wear. So what are the target customers and what is the strategy in place?

So, digitally, our strategy is very clear to offer a wide variety of...

Sorry to interrupt, sir. Your voice is breaking.

Hi. Apologies for the... I don't know what... whatever happened with the network. So, Neil, I think let's start off with your question. Are you still online, Neil?

Yeah, yeah, yes.

Yes. So, talking about the digital platform that we have launched, the idea and the strategy overall as a company is to leverage our wide experience of being a branded kidsware company for the last 20 years and using that brand experience by going into a different distribution network, which is the online network. So, digitally, we want to be present in multiple product categories, serving the same audience, and Offer a variety of products to our consumers in a much more, you know, hygienic environment for them to make that purchase. So that is the overall digital platform idea that we currently have.

Just as well, we were already present in other online marketplaces like Amazon, First Play. So was this our own digital platform really a need which we spent?

Absolutely. So we are not on Amazon currently. First Cry, we are doing significantly well on First Cry, which is what makes us very, very confident that we as a platform can offer better variety, can offer better experience to our customer who really wants our products and are searching for them on First Cry. They can directly come to us as well and expand that overall vision of the brand in the minds of the customers.

So the product SKUs would be different in our own platform?

Absolutely, absolutely.

Okay, and are we creating visibility on the website? What is the footfalls? How are we creating the profitability?

Since we have just started, it's been a couple months. Currently, we have received a decent response, and we are doing around 300 pieces per day in terms of orders, and we plan to ramp that up very, very fast over the next six months.

Okay, so I'm going forward. Our focus would be to...

So quick commerce is something that we are still exploring with multiple partners, but our primary focus will be to build our own digital platform and of course also improve our presence on specific platforms like First Cry as well.

Okay, and where will we get the funding for the marketing? Internal or we will be raising some debt?

So that is something that we are still working around with. Primarily, currently we are using through our internal accruals that the company is generating. Funding is something around that we are exploring as we ramp up our expansion.

Okay. What contribution are we expecting from the digital platforms in the next 2-3 years?

This year, specifically, we are expecting somewhere around 10% overall from our digital platforms, and next year we are targeting around 20-25% of the overall revenue coming from digital.

So, as I can see, we don't have much cash in our balance sheet. So, internal accruals, I don't think, will work out in your term.

As I said, we are, as we plan on expansion, we are very, very aggressively discussing on how to fund this. We either raise debt or raise funds.

Okay. Sir, are the margin profiles better if we sell through D2C model rather than going to distributors or other marketplaces?

So, initially, since we are in digital, initially, we have to spend on advertising and getting those customers. Once the customer lifetime value starts kicking in, the margins start improving. So, initially, we'll have to take a hit on margins, but that is our investment for the future. As we go ahead, margins will start improving massively.

So, how much gross margins are we expecting when everything is settled now?

When everything is settled out, we are expecting around 65% gross margins coming in.

And EBITDA margins?

EBITDA margins we target around 20-22%.

And roughly which year do we expect this to kick in?

We expect the next two years. At the end of the second year, we are expecting this to kick in. Okay, we expect this to start kicking.

Okay. Till then, can we expect margin profile to be around 15-16%?

We expect margin profile to slightly improve to somewhere around 18%. That is our target.

Okay. Sir, any development of the EBO fund?

EBO front, we are exploring, as I said in the previous question, we are exploring regions like Telangana, Karnataka, Maharashtra to expand EBOs. So, hopefully, we will see some development happening in this quarter.

Okay, and for this also, we will be raising debts, correct? For the EBOs?

We are still not going to raise that for EBOs. As I said, funding is something that we are still working on, and we will be more clear in the next quarter, where the entire development is going forward.

So, any plans for raising further equity?

As I said, we are still exploring the opportunities that we currently have.

Okay.

So, going forward, what will be a focus to develop a digital platform at a much higher focus or going towards EBO?

I think digital will be more focused, but EBOs will be part of our omnichannel strategy to create that brand experience for the customers.

Okay. And so, we also had 4,000 additional capacity, 4,000 pieces per day. When will it be operational?

So, the factory is already operational. We will get to full capacity in the next couple months.

Okay. Thank you. I will join by the team.

Thank you.

Thank you. Before we move to the next question, a reminder to the participants to ask a question, you may press star and 1. Next question is from the line of Madhur Gandhi from SIEA School of Business Studies. Please go ahead.

Yeah, good morning, sir. I just wanted to ask three questions. The first one is due to the, like you said, that companies export. So, how do the raw material price fluctuation impact profitability, may be there as there is a rise in price of junk fruit. So, does that impact profitability?

So, if the raw material rise continues, it will definitely... Our margins. But currently, we are, since we have decently covered, we are currently looking at what the, how this entire raw material pricing situation shapes up over the next month or so.

I think, Amaya, we'll be okay.

My next question is, so now, as you said, that we are going to do a D2C platform. So, company approaches scaling. So, while maintaining the margin, how will you approach the scaling that you have planned?

Madhur, I think there's a long time now, so I missed your question. I'm sorry.

Oh, I'm sorry, sir. So, company is doing DTC. So, how does company approach this level of scaling while maintaining the margin?

As I said, Madhur, please

request you to self-mute your line if there's background noise from your head. Please go ahead, sir.

Yes. So, Madhur, just to answer your question, since we are right from manufacturing to distribution, since we are this vertically integrated and we have had a vast experience in the space that we are currently operating in, so scalability will not be a challenge. It's just a change of platform. So initially, of course, we will have to take a hit on margins at the digital front, but having said that, in the next couple years, as it starts to scale up, we will definitely achieve the profitability that we are targeting.

Oh, yeah. Thank you for that.

Thank you.

Thank you. Participants to ask a question, you may press star and one. Ladies and gentlemen, anyone who wishes to ask a question may press star and 1 on your touchtone telephone.

Participants, if you wish to join the question queue, you may press star and 1.

Next question is from the line of Majeed Ahmed, an individual investor. Please go ahead.

I'm audible, sir. Thank you.

Yes, you are audible.

Yes, sir. Sir, my first question that I have is for the EBOs, how much are we looking to expand for the coming years?

For EBOs, we are planning to add around 8 to 10 stores in this coming year.

Okay, sir.

Sir, as of now, how many stores do we have, sir? Currently, we have seven stores. Seven active stores. Okay, sir. And what is the KPEX for EBO, sir? What is the KPEX and what could be the payback period?

So the capex for EVO is around 2500 to 3000 rupees per square feet, which is for a 1000 square feet store that comes to around 30 lakh rupees for the capex only, plus there's inventory. And overall payback we see somewhere in the 18 to 20 months.

Sir, how do you see the competitive intensity in the marketplace currently? Because with the new players emerging within the private equity funded players and other international players getting into this market, how do you see the right to win for us to scale?

The right to win for us is definitely the experience that we have built over the last decade as a manufacturing-led company and a product-led company. Having said that, in the kids' wear space, apart from one very big player, there is not a lot of competition. Primarily, the market is still very unorganized and there is still a dearth of organized players. So our right to win is to become a big organized kids branded player in the market in the affordable premium segment that we operate in. Because if you look around, there's not a lot of competition in the organized kids wear space.

But sir, so how much do we exactly spend in marketing and making our brand? What are the channels are we trying to market? Is it pure pure digital marketing?

The first thing I've been exploring primarily is digital marketing, which is running ads through social media channels like YouTube, Instagram, Facebook. Apart from that, we have a lot of local marketing that we do at the distributor retailers, the retailers that we are currently selling to. So we have a lot of marketing that happens at that point of sale as well. So those are the two primary marketing channels that we are currently using.

Sir, in terms of the export, how do you see this XPA and others, how do you see that shaping up?

It is a good opportunity for India and players like us to explore the various FTAs that have been signed by the government of India, and we are keeping a close eye on opportunities that arise out of this agreement.

Sir, just wanted to know just the revenue from the EPOs and the segment margins currently. How much should we expect?

So currently, EBOs is contributing somewhere in the 1% range to the overall revenue of the overall company. So it's still very significantly smaller. We are planning to expand that from digital focus mostly and having EBOs as in more of an experience center for the overall brand.

So, the revenue has run two crores, sir.

Yeah, somewhere around.

How much are we expecting, sir? Yes, sir. I'm audible, sir. Going forward, how much do we expect this 1%?

How much do we expect overall to grow up to 3.5-4%? Just keep yours.

Finally, how much growth are we expecting next year? Any guidance?

We are very aggressive in terms of our growth. We expect 30 to 35% growth this year in terms of that.

Thank you, sir, and all the very best. Thank you, sir.

Thank you. Next follow-up question is from the line of Nisha from Stellar AMC. Please go ahead.

Hi, sir. Thanks for the opportunity again. My question is, earlier in the year, we said that we will be adding five to six new reviews by March 26th. Then in 2003, we said that the execution will be delayed by quarter or so. And until date, we are still in the exploring stage for identifying the new areas. Also, we are unsure of how the funds will be funded and the marketing spend of our digital platform. I understand it is not an easy decision to make, but when can we expect something concrete in this regards?

I think we'll see something concrete since we are still figuring a lot of things in the overall direction of the company. I think in the next six months, we'll have a concrete proposal on how this is shaping up. Since we have launched digital and we are seeing a lot of traction coming to digital, next six months, we'll get an idea on how this is expanded overall as a company.

Okay, sir. Don't we think that we are getting distracted by launching too many things, launching digital platforms and also focusing on EBOs side by side? Won't be making it difficult for us?

Not really, not really. I think EBOs and online goes hand in hand. It is an only channel strategy that has to be implemented for any brand which wants to come in and capture this space. We see a big, big gap in this entire market where there is no player which is doing, there's one very large player which is trying to do what we are replicating, which is first player. Apart from that, there is no big player which has come in and tried to capture this market. So we are very, very positive that the direction that we are going as a company is a very high growth. And a big, big opportunity for someone like us who has that experience over the last 15 years in building something similar and capturing that space and becoming one of the pioneers in the Kids Wear Apparel space.

Okay, so I got it. Thank you, and all the rest of the future.

Thank you.

Thank you.

Ladies and gentlemen, as there are no further questions from the participants, I now hand the conference over to the management for the closing comments.

Thank you once again for your trust in us and for being a part of our journey. We look forward to sharing our experiences with you in this journey.

In case you have any queries, post this call, or anything remains unanswered, please connect to our IRD. Thank you so much.

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