Campus Activewear Limited — Q2 FY26 earnings call

Call held 12 Nov 2025

Management summary

Campus Activewear reported a strong Q2 FY26 with 16% revenue growth and a 40% surge in PAT, primarily driven by its distribution network and premiumization strategy. Margins saw healthy expansion, with EBITDA margin at 14%. Despite some online sales disruption and increased borrowings for working capital, the company remains optimistic about future demand spurred by GST reductions and capacity expansion plans.

Highlights

  • Revenue grew by 16% Y-o-Y to ₹387 crores, driven by distribution channel growth.

  • Profit after tax surged by 40% Y-o-Y to ₹20 crores.

  • EBITDA margin improved by 140 bps to 14%, reaching ₹55 crores.

  • Gross margins increased to 53.9% from 52.8% last year due to better product mix.

  • Net working capital days improved to 82 days from 92 days last year.

  • Women's share in revenue mix improved from 14.2% to 16.2%.

Concerns

  • Online sales showed modest growth of 5.7% due to timing shift of major festive sales post GST reforms.

  • Overall revenue growth was adversely impacted by approximately 2% due to a change in business model with online channel partners.

  • Experienced 15 days of disruption in September due to GST cut announcement and postponement of festive season sales.

  • Higher inventory buildup for the upcoming season, though net working capital days improved.

  • Current borrowings increased to meet immediate working capital requirements.

Key financials

  1. Revenue ₹387 Cr +16%YoY
  2. PAT ₹20 Cr +40%YoY
  3. Gross Margin 53.9%
  4. EBITDA ₹55 Cr
  5. EBITDA Margin 14%
  6. PAT Margin 5.1%
  7. Pairs Sold 5.75 Mn
  8. Average Selling Price ₹672
  9. Net Working Capital Days 82 days
  10. Return on Capital Employed 16.6%
  11. Return on Equity 18%

What they filed

Q1 FY27: revenue up 12.2%, net profit up 18.2% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue333 515 406 343 387 +16%589 +14%456 +12%385 +12%
EBITDA38 82 71 49 50 +32%110 +34%82 +15%55 +12%
Net profit14 46 35 22 20 +43%64 +39%44 +26%26 +18%
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

  • Distribution Channel
    20% Growth
  • Online Channel
    6% Growth
  • Women's Category
    16.2% Revenue Mix
  • Kids & Child Category
    4% Revenue Mix
  • Men's Category
    78% Revenue Mix
  • Premium Segment (₹1500+)
    57.2% Saliency₹50 ASP Improvement

Capital allocation

high confidence
  • Capex ₹230 Cr
    • New factory at Pant Nagar to augment premium upper capacity ₹110 Cr
    • Routine or maintenance CAPEX (stores, IT infra, molds) ₹40 Cr
    Operationally, we are committed to investing in our future. We are excited to announce plans for the new factory at Pant Nagar to further augment our premium upper capacity. (Nikhil Aggarwal); So, Gaurav, this outlook on CAPEX is for 3 financial years. So, in the year 1, which is current financial year, we are just focusing towards setting up an upper line here which would augment the capacity by roughly 3 lakh pairs per month, which 36 lakh pairs per year. Then in phase 2, it will be a repeat of this. And then in phase 3, we will augment our assembly capacity. So, there's a 3-year road map and the CAPEX will be distributed over these 3 years. Of course year 1 has a higher skew because of the land and building CAPEX. (Sanjay Chhabra); So, including this land and building, we are likely to spend around INR 110 crores to INR 115 crores in Pant Nagar. (Sanjay Chhabra); So, overall, our outlook remains same for the routine or maintenance CAPEX as we call it, around INR 40-odd crores which would include some CAPEX on stores, some CAPEX on IT infra and of course the regular CAPEX on molds for sole. So, the range of INR 40 crores to INR 50 crores is our regular maintenance CAPEX. Apart from that, there will be this Pant Nagar thing, that CAPEX will be there. (Sanjay Chhabra)
  • Debt Debt disclosed
    Our current borrowings have increased during the quarter to meet our immediate working capital requirements, but we see these borrowings to normalize by end of financial year. (Sanjay Chhabra); So, many of our vendors are falling in the definition of MSME so our payment terms to them have got revised from 90 days to 45 days. These 2 trigger points have led to a higher working capital requirement. (Sanjay Chhabra)

Guidance & targets

Profitability

  • Overall A&P expense Profitability · entire year · High confidence 8.5%
    So, yes, advertisement is just a phasing effect like we have seen about 10.5% A&P expense in Quarter 2, which should have been 8.5%, right? So, this is just a phasing thing. We expect the overall A&P expense for the entire year to still end up at around 8.5%, same as last year.

    — Nikhil Aggarwal

  • EBITDA margin aspiration Profitability · steady-state / going forward · Medium confidence 17-18%

    From 16% today

    The aspiration is always there. We still maintain and that's what we are working on in terms of the premium portfolio and eventually, the premium portfolio will deliver much higher margin as well. So, net-net like going forward, we should be expecting margin growth.

    — Nikhil Aggarwal

Revenue

  • Overall growth Revenue · whole year · Medium confidence double-digit growth
    So, we hope to continue the same momentum as we have done in Quarter 2 and we're still aspiring for a double-digit growth for the end of the year like for the whole year.

    — Nikhil Aggarwal

Debt

  • Borrowings normalization Debt · end of financial year · High confidence normalize
    Our current borrowings have increased during the quarter to meet our immediate working capital requirements, but we see these borrowings to normalize by end of financial year.

    — Sanjay Chhabra

Capacity

  • Premium upper capacity augmentation Capacity · per year · High confidence 3 lakh pairs per month
    So, in the year 1, which is current financial year, we are just focusing towards setting up an upper line here which would augment the capacity by roughly 3 lakh pairs per month, which 36 lakh pairs per year.

    — Sanjay Chhabra

Distribution

  • EBO expansion Distribution · next 2-3 years · High confidence 70-75 stores per year
    Next 2-3 years, we do expect to get back to the earlier momentum of at least 70 to 75 stores per year ramping up to, let's say, close to 500 stores in the next 3 years, right?

    — Nikhil Aggarwal

Product Launch

  • Apparel launch Product Launch · Q3 · High confidence launching
    apparels we are just launching in this quarter, Quarter 3, and some stores have already been launched.

    — Nikhil Aggarwal

What to watch in Q3 FY26

Borrowings normalization

end of financial year
Current Increased due to working capital needs and MSME law changes
Target Normalized

Why it matters

To assess the company's financial health and working capital management efficiency.

Our current borrowings have increased during the quarter to meet our immediate working capital requirements, but we see these borrowings to normalize by end of financial year.

Risks & concerns

  • Disruption from GST cut announcement and festive season postponement

    medium

    Experienced 15 days of disruption in September due to GST cut announcement and festive season sales postponement, impacting PBT.

    Management acknowledged

  • Higher inventory buildup for upcoming season

    low

    Despite improved working capital days, there was a higher inventory buildup for the upcoming season.

    Management acknowledged

  • Increased borrowings for working capital

    low

    Current borrowings increased to meet immediate working capital requirements, but expected to normalize by year-end.

    Management acknowledged

  • Revenue impact from online channel business model realignment

    low

    Overall revenue growth was adversely impacted by approximately 2% due to online channel partners directly charging goods transportation charges.

    Management acknowledged

Q&A highlights

7 direct
Impact of channel's focus on clearance of higher price inventory on growth Direct
So, we did face 15 days of disruption in September after the GST cut announcement and by the postponement of the festive season sales, the PBT and all. But yes, we were well positioned by then for the quarter and we have been able to still deliver like 7.5% volume growth in spite of that.

Analyst inquired about potential growth impact from inventory clearance, and management acknowledged a 15-day disruption but still reported 7.5% volume growth.

Asked by Devanshu Bansal

Channel inventory levels and potential for faster growth in Q3 Direct
So, I mean we do expect GST benefit to create better demand for sure and what we can do from our side is basically focus on execution on the back end and front end. That is what we have primarily done and built up inventory both at the company level and good primary, right, at the distribution level. So, as and when as the markets open up, we are fully geared up to capitalize on the demand.

Analyst probed if channel inventory was normalized for faster Q3 growth, and management confirmed readiness to capitalize on demand with built-up inventory.

Asked by Devanshu Bansal

Cost of uppers and soles sourced from third parties vs in-house production Direct
The costing part of course in-house is always slightly better compared to outsourced version. The initial CAPEX is our investment to do.

Analyst sought clarity on the cost advantage of in-house production for uppers and soles, which management confirmed as being 'slightly better'.

Asked by Devanshu Bansal

Decline in online absolute volumes and impact of Big Billion Days sale shift Direct
That's correct, Gaurav, yes. So, there has been a shift of sales that way, but the marketing has been spent with that regard.

Analyst questioned the online volume decline, and management confirmed it was due to a sales shift, implying benefits for Q3.

Asked by Gaurav Jogani

Increase in LFS doors and its contribution to D2C offline growth Direct
That is correct, yes. LFS has picked up quite well with the addition of new doors and new accounts. So, while we are stable on the EBO front and LFS export little bit and also both of them have contributed to the additional D2C offline growth.

Analyst linked D2C offline growth to LFS expansion, which management confirmed as a key contributor.

Asked by Gaurav Jogani

Accounting change for freight and fixed fee commission by Flipkart and Myntra Direct
So, in the earlier quarter, I mean this change has happened from 16th of June. So, in the earlier period we used to bill, let's say, for INR 1,000 and Flipkart and Myntra used to pay us INR 850 after deducting commission and freight. But now we are billing them for INR 850 because they are charging freight as a separate invoice to the consumer. So, consequently, my revenue has gone down by 12% to 15% and my expense also have gone down in these 2 lines, both freight line and commission line.

Analyst asked for clarification on a business model change with online partners, which management explained impacted revenue by 12-15% but also reduced expenses.

Asked by Resha Mehta

Increase in lease liabilities due to Pant Nagar facility Direct
So, our lease liabilities have increased primarily because of the Pant Nagar facility that is on a 71-year lease from SIIDCUL Industrial Development Authority. So, you would have seen our announcement when we did this acquisition. So, this acquisition is both land and building. Building has got capitalized in the fixed asset bucket or currently it is sitting in CWIP. But the land part, which is on a lease, is sitting in ROU and also in the lease liability.

Analyst questioned the sharp increase in lease liabilities, and management attributed it to the 71-year lease for the Pant Nagar facility.

Asked by Avinash Karumanchi

Revenue potential and margins for the export business Partial
So, I think it is too little early on this call to call out the next 2-, 3-year vision map. But maybe I think by the end of this year, we can call it out by, let's say, April. And margin, certainly it could be higher margin business given that we have lower cost than the other countries like China.

Analyst inquired about the long-term potential of the export business, and management indicated it's too early for a detailed roadmap but expects higher margins.

Asked by Resha Mehta

2 min read 6 chapters

Detailed narrative

Q2 FY26 Performance Overview and Growth Drivers

Campus Activewear reported a strong Q2 FY26 with a 16% year-on-year revenue growth, reaching ₹387 crores. Profit after tax surged by 40%, amounting to ₹20 crores. This performance was primarily driven by a robust 20% growth in the distribution business. The company also saw an improvement in gross margins to 53.9% from 52.8% last year, contributing to a 140 basis points expansion in EBITDA margin to 14%.

Product Mix and Premiumization Strategy

The company's premiumization strategy continued to yield positive results, with the saliency of the ₹1,500-plus price point segment improving from 45.2% to 57.2% year-on-year, leading to an ASP improvement of ₹50. The women's category's share in the revenue mix increased from 14.2% to 16.2%, supported by new product development and the onboarding of actor Kriti Sanon as the new brand ambassador. The sneaker portfolio, a key focus area, grew over 100% year-on-year, contributing significantly to premium segment growth.

Channel Dynamics and Online Business Realignment

While the distribution channel showed strong 20% growth, online sales experienced modest growth of 5.7%. This was partly influenced by a timing shift of major festive sales post-GST reforms. A business model realignment with online channel partners, where they directly charge goods transportation, adversely impacted overall revenue growth by approximately 2% but also reduced freight and commission expenses by ₹8 crores. The company maintains healthy channel inventory levels, consistently around 100 days.

Capacity Expansion and Supply Chain Control

Campus Activewear is investing in its future with plans for a new factory at Pant Nagar, focusing on augmenting premium upper capacity. This CAPEX plan, totaling ₹230 crores over three financial years, aims to add 3 lakh pairs per month (36 lakh pairs per year) of upper capacity. The current year's spend in Pant Nagar is estimated at ₹110-115 crores. This investment is strategic to gain better control over the supply chain, especially for high-end premium uppers, and to leverage state-of-the-art technologies for high-quality production.

Capital Allocation and Working Capital Management

The company's net working capital days improved to 82 days from 92 days last year. However, current borrowings increased to meet immediate working capital requirements, partly due to higher inventory buildup for the upcoming season and revised payment terms for MSME vendors (from 90 to 45 days). Management expects these borrowings to normalize by the end of the financial year, noting that fixed deposits are also held for arbitrage benefits.

Future Outlook and Strategic Initiatives

Campus Activewear remains optimistic about future demand, anticipating a boost from recent GST rate reductions. The company aims for double-digit growth for the full year and aspires for EBITDA margins of 17-18% in the steady state, building on the current normalized 16%. EBO expansion, which was paused this year to focus on profitability, is expected to resume at 70-75 stores per year, targeting 500 stores in the next three years. The company is also launching apparel in Q3 and sees exports as a lucrative long-term opportunity.

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