Aditya Birla Fashion and Retail Limited — Q2 FY26 earnings call

Call held 5 Nov 2025

Management summary

Aditya Birla Fashion and Retail Limited reported a robust 13% YoY revenue growth to ₹1982 crores in Q2 FY26, driven by strong performance across all segments including Pantaloons, Ethnic Wear, and new brands like OWND! and Tasva. Despite significant investments in brand building and new store rollouts leading to a moderation in consolidated EBITDA margins to 5.9% and a PAT loss of ₹295 crores, management expressed confidence in sustained growth and profitability improvements, particularly in the second half of the fiscal year due to the seasonal nature of some businesses.

Highlights

  • Consolidated revenue grew 13% YoY to ₹1982 crores, demonstrating strong and broad-based growth across key segments.

  • Pantaloons achieved a 7% like-to-like growth and 6% overall growth, with profitability higher by 180 basis points at the retail network level.

  • The ethnic business portfolio delivered 11% YoY growth to ₹505 crores, with a 280 basis points Y-o-Y EBITDA margin expansion.

  • TCNS showed strong recovery with 19% L2L growth and a 900 basis points margin improvement, with plans to become a key profitable growth driver.

  • OWND! and Tasva, new growth engines, are expanding rapidly, with OWND! revenue up 43% YoY and Tasva targeting over 100 stores by fiscal year-end.

Concerns

  • Consolidated EBITDA grew by 7% with margins at 5.9%, a moderation primarily driven by higher investment in brand building and marketing initiatives (advertisement spend higher by 200 bps).

  • PAT stood at a loss of ₹295 crores in Q2 FY26, compared to a normalized loss of ₹277 crores in the same quarter last year.

  • TMRW's losses were higher than desired, and the luxury retail segment experienced choppiness due to pre-opening expenses for Galeries Lafayette.

  • Cautious consumer sentiment persists across key categories, and localized disruptions (rains in Kolkata, Northeast closures) impacted shopping momentum during the festive period.

Key financials

2 periods

Headline

  • Revenue (Consolidated)
    ₹1,982 Cr
    YoY +13%
  • EBITDA (Consolidated)
    —
    YoY +7%
  • EBITDA Margin (Consolidated)
    5.9%
  • PAT (Consolidated)
    ₹-295 Cr

H1

  • Revenue (Consolidated)
    ₹3,813 Cr
    YoY +11%
  • EBITDA (Consolidated)
    ₹286 Cr
    YoY +24%
  • EBITDA Margin (Consolidated)
    7.5%

What they filed

Q1 FY27: revenue up 10.6%, net profit down 6.4% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue1,761 2,201 1,719 1,831 1,982 +13%2,374 +8%1,990 +16%2,026 +11%
EBITDA77 293 199 106 62 −19%302 +3%188 −6%111 +5%
Net profit-175 -42 -24 -234 -295 −69%-137 −226%-164 −583%-249 −6%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Pantaloons
    ₹1,142 Cr Revenue6% Growth7% Like-to-like Growth13.7% EBITDA180 bps Retail Network Profitability Improvement
  • Ethnic Business (Overall)
    ₹505 Cr Revenue11% Growth20% Like-to-like Growth280 bps EBITDA Margin Improvement
  • Ethnic Business (Excluding TCNS)
    34% Growth
  • Designer-led Portfolio
    32% Growth39% Sabyasachi L2L Growth26% Goodview L2L Growth
  • Tasva (Premium Ethnic Wear)
    58% Revenue Growth38% Like-to-like Growth
  • TCNS
    19% Like-to-like Growth900 bps Margin Improvement₹240 Cr Revenue13% Like-to-like Revenue Growth (similar accounting)
  • OWND!
    43% Revenue Growth
  • Luxury Retail
    13% Growth
  • TMRW (Digital Brand Portfolio)
    27% Growth

Capital allocation

high confidence
  • Capex Capex disclosed
    • H1 FY26 Capex ₹260 Cr
    • H2 FY26 Capex for OWND! (30 stores) and Tasva (30 stores) ₹100 Cr
    • H2 FY26 Capex for OWND! (30 stores) and Tasva (30 stores) ₹125 Cr
    Sir, just a question regarding the CapEx. If we see from the cash flow statement, the capex for H1 is around INR260-odd crores. And I'm assuming that we have also a strong store expansion plan both in OWND! and also in Tasva and the other pieces. So, what should be the capex for the H2 part of the business? So, capex primarily will be in OWND! around 30 stores and Tasva around 30 stores. I don't think more than INR100 crores to INR120 crores, INR125 crores will be spent on capex in these 2 businesses.
  • Debt Debt disclosed
    No, no, Devanshu, I'm comparing the cash. The borrowings are in subsidiary companies, please understand.
  • Liquidity Cash ₹2,150 Cr ABFRL held gross cash of INR2,150 crores at consolidated level as of September '25. Management stated no cause of concern on cash availability.
    As of September '25, ABFRL held gross cash of INR2,150 crores at consolidated level. So, we don't have any concern around the cash availability across all the businesses of ABFRL.

Guidance & targets

Margin

  • Pantaloons Segment Margin Margin · future quarters · High confidence 15-17%
    So, we indicated when we met investors in the month of April that the segment margin should be in the range of around 15% to 17%. We will aspire to go to we'd like to maintain that.

    — Jagdish Bajaj

  • Pantaloons Gross Margin Margin · future · Medium confidence north of 50%
    So, I think Pantaloons, as we have established over a period of time, is closer to 50%. We would like it to be north of 50% gross margin, where we have not yet reached. But that's the progression we have made over a period of time.

    — Ashish Dikshit

Store Count

  • OWND! Store Count Store Count · this fiscal year · High confidence >100 stores
    OWND! continued to gain strong traction, with revenue up 43% Y-o-Y. The brand expanded its footprint by adding 10 new stores in Q2 and now have 59 stores, and is on track to add 30-plus stores in the second half of the year, strengthening its position in the youth and Gen Z fashion segment.

    — Jagdish Bajaj

  • Tasva Store Count Store Count · this fiscal year · High confidence >100 stores
    Tasva is poised for continued growth, targeting to exit this fiscal year with more than 100 stores.

    — Jagdish Bajaj

  • Pantaloons New Retail Identity Rollout Store Count · next 3 years · Medium confidence 50 stores
    So, you can safely assume that over the next 3 years, there will be probably another 50 stores that will undergo this change, and there will be probably another 50 new stores that will come in with this new retail identity.

    — Sangeeta Pendurkar

Profitability

  • TCNS Profitability Profitability · next year · High confidence profitable
    Yes, yes. I think by next year, the only losses will still be remaining in Tasva. TCNS would have completely turned around and designer portfolio as a whole is quite profitable.

    — Ashish Dikshit

Store Productivity

  • Store Profitability Store Productivity · future · Medium confidence closer to 25%
    And that number needs to be closer to 25% to be able to leverage the overheads, advertising and everything else.

    — Ashish Dikshit

Private Label Share

  • Private Label Share in Pantaloons Private Label Share · future · Medium confidence 70-75%
    Our ambition would be to get closer to 70%, 75%. But that's a journey that private brands have to deserve that space.

    — Ashish Dikshit

What to watch in Q3 FY26

Pantaloons Segment Margin

next 3-4 quarters
Current 13.7%
Target 15-17%

Why it matters

To assess if marketing investments translate into improved profitability and if the segment can reach its stated target margin band.

So, we indicated when we met investors in the month of April that the segment margin should be in the range of around 15% to 17%. We will aspire to go to we'd like to maintain that. But the intermittent period for next 3, 4 quarters, you may see some more advertisement and marketing spend in both the business line in one segment called Pantaloons segment.

Risks & concerns

  • Cautious consumer sentiment

    medium

    Overall demand environment remained largely in line with previous quarters with cautious consumer sentiment across key categories.

    Management acknowledged

  • EBITDA margin compression due to investments

    medium

    Moderation in margins primarily driven by higher investment in brand building and marketing initiatives, with advertisement spend higher by 200 basis points.

    Management acknowledged

  • PAT loss

    medium

    PAT stood at a loss of INR295 crores in Q2 FY'26 compared to a normalized loss of INR277 crores in the same quarter last year.

    Management acknowledged

  • Losses in new growth ventures (Tasva, TMRW)

    medium

    Tasva still has losses, and TMRW losses are higher than liked due to marketing investments for growth.

    Management acknowledged

  • Localized disruptions impacting sales

    low

    Issues related to rains in Kolkata and closure in Northeast impacted shopping momentum for a brief while during peak festive period.

    Management acknowledged

  • Choppiness in luxury retail margins

    low

    Luxury retail margins are choppy due to ongoing expenses for Galeries Lafayette before its opening.

    Management acknowledged

Q&A highlights

7 direct
Cash utilization and capital raising needs Direct
I think the first part, Devanshu -- the first half of the year is when most of the inventory buildup and everything happens for the season. Second half, if you look at our company level sales, it's almost 60-40 for second half versus first half and so is our cash collection. So dramatically, higher cash collection in the second half versus first half, while the inventory buildup happens in the first half over second half.

Analyst questioned significant cash burn in H1 and potential need for additional capital, which management clarified is seasonal and H2 will see better cash generation.

Asked by Devanshu Bansal

Pantaloons L2L growth and margin impact Partial
The advancement, of course, did give us higher footfalls and gave us a good traction, but that got wiped off. All I can say at this point of time, if it was not for the external disruption, our growth would have been even higher, though overall, we believe that the quarter has been quite good for Pantaloons.

Analyst probed the sustainability of Pantaloons' L2L growth given festive preponement and margin drop, with management attributing it to external disruptions and marketing investments.

Asked by Devanshu Bansal

TCNS growth and profitability outlook Direct
Yes, yes. I think by next year, the only losses will still be remaining in Tasva. TCNS would have completely turned around and designer portfolio as a whole is quite profitable.

Analyst sought clarity on TCNS's overall growth and profitability trajectory, with management confirming a turnaround and profitability by next year.

Asked by Devanshu Bansal

Pantaloons new retail identity and refurbishment costs Direct
So, we've just started this journey. We've got 3 stores with the new retail identity. All the stores, and we had committed to opening about 15 stores this year. And all the stores that you will see opening now in terms of design will follow the new retail identity.

Analyst inquired about the rollout plan and costs for Pantaloons' new retail identity, which management detailed as a gradual process for new and renovated stores.

Asked by Gaurav Jogani

Ethnic business profitability breakdown Direct
We have very marginal losses in TCNS now. Most of the losses are Tasva and some of the other smaller designer businesses. But don't go by quarterly performance. I was mentioning, in ethnic businesses, particularly related to wedding, the revenues in second half is about 70%, the designer ethnic wear.

Analyst sought a clearer picture of profitability within the ethnic segment, distinguishing between profitable and loss-making sub-segments like Tasva and TCNS.

Asked by Gaurav Jogani

Luxury retail margin choppiness Direct
So it's a very small business right now. And Galeries Lafayette, while the store may not have opened, expenses are still going on, and the revenue will start counting once we store open. So on a small business, when you add something like this, there will be a choppiness for some time.

Analyst questioned the significant drop in luxury retail margins, which management attributed to pre-opening expenses for Galeries Lafayette.

Asked by Sameer Gupta

TMRW losses and capital utilization Direct
No, I think you're right, Kunal. The losses are a little higher than what we would have liked. We have been trying to sort of push higher growth rate in this business. Especially post investment, we felt that some of the brands which have not shown that kind of revenue growth, we should inject more marketing.

Analyst inquired about the increasing losses in TMRW, with management explaining it's due to investments in marketing for higher growth.

Asked by Kunal

Impact of GST rate changes on ethnic wear Direct
On the higher end of ethnic wear, the GST, as you know, has increased from 12% to 18%. I do not think at this point of time that this 5%, 6% increase in GST, almost all of which we have to pass to customer will have any significant shift because the price points at which it's operating, consumer is unlikely to move to value option because you don't get that kind of product -- that quality of products.

Analyst asked about the impact of recent GST rate changes on consumer sentiment and potential shift to value pricing, with management indicating minimal impact on higher-end ethnic wear.

Asked by Hemant Shah

3 min read 6 chapters

Detailed narrative

Q2 FY26 Consolidated Performance Overview

Aditya Birla Fashion and Retail Limited reported a consolidated revenue of ₹1982 crores for Q2 FY26, marking a 13% year-on-year growth. Despite this strong top-line performance, consolidated EBITDA grew by a more modest 7%, with margins moderating to 5.9% from 6.2% in the prior year. This margin compression was primarily attributed to increased investments in brand building and marketing, with advertisement spend rising by 200 basis points. The company recorded a PAT loss of ₹295 crores, compared to a normalized loss of ₹277 crores in Q2 last year.

Segmental Growth Drivers

Pantaloons delivered a 6% growth, reaching ₹1142 crores in revenue, supported by a 7% like-to-like growth. The ethnic business portfolio demonstrated robust performance, growing 11% year-on-year to ₹505 crores, with like-to-like growth exceeding 20%. Notably, the ethnic business (excluding TCNS) grew by 34% year-on-year. The designer-led portfolio also saw significant growth of 32% year-on-year, with Sabyasachi and Goodview (Tarun Tahiliani) achieving 39% and 26% like-to-like growth, respectively. The digital brand portfolio, TMRW, grew 27% year-on-year, and luxury retail expanded by 13% year-on-year.

Strategic Initiatives and New Brand Traction

The company launched OWND!, a new Gen Z focused brand, opening its first store in Bengaluru and expanding its footprint to 59 stores with 10 new additions in Q2. OWND! reported a strong revenue growth of 43% year-on-year and is on track to add over 30 stores in H2 FY26. Additionally, ABFRL unveiled its first Galeries Lafayette store in Kala Ghoda, Mumbai, a flagship destination spanning 90,000 square feet, underscoring its luxury play. TMRW successfully raised ₹450 crores during the quarter, completing its capital infusion.

Margin Dynamics and Investment Strategy

While overall EBITDA margins moderated, the ethnic business sustained its profitable growth trajectory, achieving a 280 basis points year-on-year improvement in margins. TCNS, a key part of the ethnic portfolio, showed strong recovery with 19% like-to-like growth and a 900 basis points margin improvement, driven by improved product performance and retail execution. Management indicated that Pantaloons' segment margin is targeted to be in the 15-17% range, with aspirations for gross margins north of 50%. The higher marketing investments are expected to drive future growth and brand positioning.

Capital Expenditure and Liquidity

Capital expenditure for H1 FY26 was approximately ₹260 crores. For H2 FY26, the company plans to spend an additional ₹100-125 crores primarily on expanding OWND! and Tasva, with around 30 stores each. As of September 2025, ABFRL held gross cash of ₹2150 crores at a consolidated level. Management confirmed that despite cash utilization in H1 due to inventory buildup, the cash availability across all businesses is not a concern, as H2 typically sees higher cash collection due to the seasonal nature of wedding-related businesses.

Outlook for Ethnic Business and GST Impact

The ethnic business, particularly wedding-related segments, is heavily loaded in H2, with 70% of revenues and 80-85% of profits expected in this period. Management anticipates TCNS to turn profitable by next year, while Tasva is expected to still incur losses. Regarding the GST increase from 12% to 18% on higher-end ethnic wear, management believes it will not significantly shift consumer behavior towards value options, as customers in this segment prioritize product quality over the marginal price increase.

This is an AI-generated summary of a publicly available earnings call transcript.
View original transcript

More Consumer Services earnings calls