Iris Clothings Limited (IRISDOREME) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Iris Clothing Ltd. Q1FI27 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 zero on your touchstone phone. Please note that this conference has been recorded. I now hand the conference over to Mr. Hirshwardhan Sardar, Business Head. Thank you, and over to you, sir.

Good morning, everyone. Thank you for joining us today for our Q1 FY27 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. We strengthened our omni-channel 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. We also expanded our product portfolio with the launch of our newborn gift set range, a fast-merging category that complements our growing omni-channel 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 Infinia, subject to shareholder and regulatory approvals. This strategic acquisition marks our entry into the rapidly growing atleisure segment and represents an important step towards building a diversified multi-category apparel business. We believe the combined strengths of Iris Clothings and Infinia 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 omni-channel capabilities, and delivering sustainable, profitable growth. I will now hand over the call to Neeraj Agarwal, our Chief Financial Officer, who will walk us through the Q1 and

F52027 financial numbers. 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 FY27. Talking about the key financial highlights of Q1 FY27, our total income was 47.2 crores compared to 37.4 crores in Q1 FY26. EBITDA during the quarter grew by 53% year-on-year and stood at 8 crores as against 5.3 crores in Q1F by 26, with an EBITDA margin of 17.12%. Additionally, profit-after-tax for the quarter witnessed robust growth of 53% year-on-year from 2.63 crores in Q1 FY26 to 4 crores in Q1 FY27. 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 1 on the touch room telephone. If you wish to remove yourself from the question queue, you may press star and 2. 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 Divyant from Trinitra Asset Managers. Please go ahead.

Hello, good morning, sir. Thank you for the opportunity. So my first question was, as our product portfolio is expanding beyond that sphere 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 growth which is coming in this category, is it coming from the liquid 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, 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 get that this innerwear, sportswear, and travelwear, how this is contributing to the revenue?

So, travelware has done very well for us in the last winters, and we expect that to grow very significantly this year, winters as well. 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 casual wear that we currently have, the core athleisure for kids that we have.

Okay, the last question is like, over the years, the average order size has been increased from the distributor ends, or like, or like the growth is primarily driven from the adding new distributors.

So, a recent 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, but our distributors who have been with us for the last 7, 8, 10 years, they have been growing, which is where majority of the growth is coming from.

And last question, sorry again, 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, a very significant market is from the west of India, which is Maharashtra, Gujarat, Rajasthan, and Punjab, which contributes to around 40% of the overall revenue. But having said that, the next few growth potential pockets that we are looking at, we are looking at Uttar Pradesh as a very significant growth potential for us. In the next year or so, we are investing in adding distributors in smaller towns in Uttar Pradesh. And along with that, I think the northeastern part of India, Assam, Isoram, that part is also doing increasingly well for us.

Okay, thank you, sir.

Thank you.

Thank you. Reminder, anyone who wishes to ask a question may press star and one on the touchstone telephone. Ladies and gentlemen, anyone who wishes to ask a question may press star and one on the touchstone telephone. The next question is from the line of Nish Shah from Shailar AMC. Please go ahead.

Hello. Hello, hi. Thank you for the opportunity, and congratulations for a good set of numbers. My first question is, we are seeing a little margin improvement in this offer. So, can you please explain how much was given by IR audios, and how much info like the program is?

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. And also, you mentioned in the opening remarks that you have expanded into QuickCommerce. So, could you please share which platform you have with us today?

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.

Okay, I know it's really too early, but how has there been traction so far in the performance?

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 soon. We'll have a quick commerce assortment very soon, and that will help us expand the overall quick 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 good commerce, correct?

So, gifting will be a big part of the focus. Along with that, our innerwear and basic at leisure wear will be a part of good commerce. A wider assortment will be difficult to manage initially on good commerce. So, we will start with very focused categories that we expect to increase very significantly.

Okay. And this category would only be available in quick commas or also will be leveraging a website and EBOs which we have currently?

Absolutely. The same product will be available across our platforms. We'll leverage the same product in our distribution, in our stores, in our online D2C channels as well.

Understood. Also, sir, if you could please explain how much would you be investing in Infinia? Have you decided some world-class number like what 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 Infinia will be.

Okay, and how do you, are you planning to fund the transaction?

Oh, we plan to fund the transaction through our internal approach.

Okay. Also, could you please explain the characteristic rationale behind acquiring the infinia? So, basically, it is in completely different segment. So, are you expecting any other synergies or just a different category addition into our business?

So, this has been very strategic because when we look at Infinia, it is in a very similar product range that we manufacture. So, there's a lot of manufacturing synergies that we can generate with Infinia. 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 years, 45 years. And for Infinia 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 can. And it helps us expanding to a much wider apparel category as well.

Understood. Is there any synergy possible in the sourcing and manufacturing part? Or the distribution network will...

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.

Okay. What was the number for Infini and F526 revenue margin profit activity?

I'm sorry, I missed. I think your question was humbled.

I want to know the numbers for Infinear as a standard on a standard basis, the revenue margin and the profitability numbers.

So, I think this year, Infinear is targeting somewhere around 40 crocs in revenue, and margins will be in the 7 to 8% range.

Okay. So, when the acquisition is completed, I feel the margins will get lower, will get impacted because of the consolidation. Is my understanding correct?

We expect margins to remain at similar levels that we currently have.

Consol basis? 17-18%?

Yes.

Okay. And once the synergies and we successfully, I mean, when we successfully complete the transactions, do you think the Ingenia business will be margin-operative? 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.

Okay, understood. Just one more thing. What is growth drivers doing things 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 a decent part of the growth. Apart from that D2C 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 D2C business will be growing at much higher rate than the normal business. Is that what I think or not? I'm wrong.

Yes, yes, absolutely.

Okay. And on console level, how do you think will it grow at?

We expect to grow at a 30% to 35% growth rate, definitely.

Okay, margins in similar lines?

Margin in similar lines, yes, yes, yes, slight improvements in margins is something that we expect.

Are we planning any other inorganic conditions in short-term income?

Not currently. Another very important growth lever that we are trying to tap is trying to leverage the FTA agreements that the government has recently signed up with Europe and the United Kingdom. So, we are trying to explore some wide-label opportunities, if we can, for our manufacturing setup.

Understood.

Thanks.

Okay, so I joined by the crew and all the rest. Thank you, Neil. Thank you.

Thank you. Reminder, anyone who wishes to ask a question may press star and 1 on the touchstone telephone. Ladies and gentlemen, anyone who wishes to ask a question may press star and 1 on the touchstone 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 congratulations 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, D2C or end-to-end from manufacturing to customer end, like from opening to own shows and all of that. So how should we see the strategy and growth prospect for us? 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 using that as a leverage to expand into the D2C space. So I think that is the overall growth strategy that we are looking at.

But when we say, you know, we are, you know, expecting 100 COCO schools going forward, if I'm not wrong, in by FI 30, right? So, how should we choose that? What's the plan over there? Any target market, any geographic specific target market, any strategies that you can share on that front? We have done a couple of shows 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. 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, was about the overall breakup of the margins. So, I think that is fairly simple. If there is a product which is at 100 rupees MRP, we expect rentals to be in the 20 to 25 percent range. Other expenses for the store comes up to around 10 to 12 percent. So, we, and our overall gross margin is at 65%. So, we are left with 20-25% EBITDA at the store level when the store matures.

But, and this is primarily Cocoa Shoes model. So, are we also looking for Pupo as well or this 100th store would be on Cocoa?

We are just exploring how the Koko, we have a lot of interest coming in from our distributors and our retailers who are very eager to open franchisee stores for us. But we want to explore the first 20-25 stores on Koko model, 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. We are already building the pipeline in terms of franchisee inquiries that is currently coming in.

So, my last question would be, since we have a licensing agreement with, you know, Disney, are you planning to have any other licensing agreement? Are we in a talk to, you know, other agreement or other sort of things? Or it would be now, it would be more of, so 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, 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 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 just last one would be, you know, since the licensing agreement that you already told that, you know, you are not looking for or probably, you know, the business as business evolved, it will evolve further 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 it would be defined?

So, a percentage of sales of our licensed goods 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. So, if you can share the total revenue, how much would be the licensing brand revenue?

Licensing brand revenue last year was around 5 crore.

So, only 5 crore and in that we are paying 12%. Exactly. Oh, that's a small for us.

But at 1%, again, we are, our prices for those products is higher than our regular products. So, we build that into the margin.

Sure. Okay. Thank you a lot, sir, for answering all the questions.

Thank you. Thank you, Sam.

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. I have just two questions. Can you provide a more specific timeline for when construction will begin and when the first phase of this new capacity will be commercially operational?

So, we plan to, you know, close planning 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.

You are also planning, like, from 300 crore to 500 crore incremental revenue from this new facility? Okay. So, how does the company plan to break the gap of this much more than right with the greenfield?

Sorry to interrupt, Ms. Zipali. Your voice is not audible.

Okay. Am I audible now?

Your voice is cracking.

Okay. Am I audible?

Yes, sir. Please go ahead.

Okay. So on the tasking, like, you are targeting 300 to 500 crore of incremental revenue from this new facility over two years. So, like, how does the company plan to bridge the gap to this much higher than rate before the grain field site?

Uh, Dipali, I didn't get your question correctly. Can you please come again? I think the voice is cracking somewhere.

I am just asking, like, how this whole quarter one, you already done, like, 47 crore of revenue. And you are, like, previously targeted, like, 300 to 500 crore of incremental revenue from new facilities. How is the plan to break the gap to this much higher rate before the greenfield site is fully operational?

So before the greenfield side 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, end when the project is operational, that is when the incremental revenue will start coming in. So, we expect the incremental revenue from the new project to be at least two years away from now.

Okay. And can you please give us the breakup of 300 EVOs for upcoming five years? Like how many EVOs you will add per year so you can go to 300 EVOs?

So, Dipali, EBO's strategy is something that we are still working out on, as I just previously answered. We have built a strategy on how are we going to scale to the first 100 EBOs in the next couple years, and then if we want to open up Kofo, once those first 25-30 stores are up and running, that is when we'll start, you know, defining how do we get to bigger, multiple EBOs from there in terms of geography and in terms of growth.

Your D2C performance, like, what is the actual revenue in the D2C segment? And if you can also tell me about your, like, channel contribution.

So our D2C performance has been doing well. E-commerce overall has been providing. So last year, we did around... 5% overall from our e-commerce business, and we expect that to be around 10% to 11% in this year, from our overall e-commerce business.

So, like, for overall e-commerce, it's still 10%. Out of that, 7% like, other platform.

Sorry, Ms. 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 touchstone telephone. The next question is from the line of Hershit Kabra from Individual Investor. Please go ahead.

Hello, Hershey, camera, please go ahead.

As the participant is not responding, we will disconnect the line. Ladies and gentlemen, that was the last question. I would now like to hand over the contents 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 Clothing Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.