Campus Activewear Limited — Q4 FY25 earnings call

Call held 29 May 2025

Management summary

Campus Activewear delivered a strong FY25 with 10% revenue growth to INR 1,593 crores and significant margin expansion, driven by volume growth, distribution expansion, and cost control. Despite a challenging macro environment and a 2% ASP decline due to product mix, the company improved its working capital days and saw impressive 150% growth in its sneaker portfolio. The BIS inventory clean-up is progressing slower than expected, with a minor margin impact anticipated.

Highlights

  • FY25 Revenue grew 10% YoY to INR 1,593 crores, driven by 12.3% volume growth.

  • FY25 EBITDA margin expanded 120 bps to 16.1% due to disciplined cost control and working capital management.

  • FY25 Gross margin improved 20 bps to 52.3% from procurement and production efficiencies.

  • Sneaker portfolio showed impressive 150% growth in FY25, with Haridwar II facility commencing production in March 2025.

  • Net working capital days improved from 92 in FY24 to 71 in FY25, reflecting operational efficiency.

Concerns

  • BIS inventory clean-up was slower than anticipated, with an expected 20-40 bps margin hit in the coming year.

  • FY25 ASP declined 2% to INR 639 per pair, primarily due to a higher mix of open footwear and accessory sales.

  • Q4 FY25 PAT margin slightly depleted to 8.5% from 8.9% last year due to higher depreciation from impairment of dip lines.

Key financials

2 periods

Q4 FY25

  • Revenue
    ₹406 Cr
    YoY +11.5%
  • EBITDA Margin
    18.7%
  • PAT
    ₹35 Cr
    YoY +7.3%

FY25

  • Revenue
    ₹1,593 Cr
    YoY +10%
  • Volume
    24.9 million pairs
    YoY +12.3%
  • ASP
    ₹639
    YoY -2%
  • Gross Margin
    52.3%
  • EBITDA Margin
    16.1%
  • PAT
    ₹121.2 Cr
    YoY +36%
  • ROCE
    22.3%
  • ROE
    17.2%

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.

Capital allocation

high confidence
  • Capex ₹21 Cr
    • Haridwar II facility for manufacturing high quality uppers for sneakers ₹21 Cr
    The commercial production from our Haridwar II facility for manufacturing high quality uppers for sneakers during March 2025. Your company will be benefited for this additional capacity for the full year during FY26. ... It's an investment of around INR 21 crores, will be amortized over a period of 15 years.
  • Debt Debt disclosed
    Our balance sheet continues to demonstrate strength and robust return ratios such as ROCE and ROE of 22.3% and 17.2% respectively as on 31st March 2025 and we continue to be a debt free company. ... Interest line now is a reflection of only the ROU assets. So whatever leasehold premises we have in terms of EBOs and warehouses, we create a ROU, right to use and depreciation is charge on those asset and interest components is there. So, both in the depreciation and interest line component goes and that's what is sitting in the interest. This quarter you see a higher interest which is purely due to increase of two assets. We took a warehouse in Kulana for our online business chief warehouse and also, we have taken this Haridwar II facility for the sneakers. So that is on a lease on premise and also, we took a raw material warehouse house, so we have added three leasehold assets in this quarter.

Guidance & targets

Profitability

  • EBITDA Margin Profitability · next year · Medium confidence 17-19%
    So, Ali, the aspiration, certainly you know is intact and as you can see, we're trending towards the guided margin and you know the initiatives we've taken are sort of panning out in that direction. So, at this moment, we don't see any headwinds with respect to margins... I think if we can predict one year, that's a big achievement. So, over a year's time for sure, like we should fall within the range of what we've guided.

    — Nikhil Aggarwal

Distribution

  • Counter Additions Distribution · year on year · High confidence 1500 counters
    So along with you know we expect at least an addition of let's say 1500 counters year on year and along with that an increase in the world share, you know or each outlet. So that will lead to you know the basically the growth in the distribution channel.

    — Nikhil Aggarwal

Product Mix

  • Women's Category Share Product Mix · this year (FY26) · Medium confidence go up from this mark
    While the aspiration is there to certainly grow this category slightly higher. So, but we have premiumization in the women category. So, the ASP for the women category has gone up for us and this year we expect women share to definitely go up from this mark.

    — Nikhil Aggarwal

Product

  • Sneaker Volume Contribution Product · FY26 · High confidence go up
    And so, the volume contribution is roughly about 8.5% for this year, and it should definitely go up in FY26 given the new plant is also online now.

    — Nikhil Aggarwal

What to watch in Q1 FY26

BIS Inventory Liquidation Impact

Next quarter
Current Expected 20-40 bps margin hit in coming year
Target Clarity on actual margin impact and progress of liquidation

Why it matters

Directly impacts profitability and reflects efficiency in managing regulatory changes.

So, on the non-BIS side, while you know we have made significant progress, but there has been it's been slightly slower than we anticipated. We were expecting to liquidate a big portion of it by March end but there has it's been slightly slower than that, but it is all like, you know, under control and it's basically we're expecting you know in line with 20 to 40 bps of a margin, you know hit on in this specter of the non-BIS inventory in the coming year and nothing more than that.

Risks & concerns

  • BIS Inventory Liquidation Impact

    medium

    Slower than anticipated BIS clean-up, expecting a 20-40 bps margin hit in the coming year as a routine liquidation budget.

    Management acknowledged

  • Challenging Macro Environment

    medium

    Company operated in a 'challenging macro environment' and 'subdued environment' impacting consumer demand, though Campus performed well due to execution.

    Management acknowledged

  • ASP Decline due to Product Mix

    low

    FY25 ASP declined 2% due to a conscious mix shift towards higher open footwear and accessory sales, but gross margins were maintained.

    Management downplayed

Q&A highlights

5 direct
ASP decline despite premiumization efforts Partial
Gaurav, the right yardstick to measure this would be that are we able to maintain our margins. So, if you see margins despite higher mix of open footwear, despite accessories mix, despite liquidation of non-BIS inventories or margin on a full year basis has reflected an improvement of 20 basis points. So, we have certain margin thresholds on which we work and whatever is the mix, I mean we don't dilute the margins.

Analyst questioned why ASP declined despite premiumization, and management clarified it was a strategic mix shift to maintain margins, not a negative trend.

Asked by Gaurav Jogani

Online volume growth and channel strategy Direct
So, hi Gaurav and also the effort is actually across all channels, right? We operate every channel strategically in a way that it should have a meaningful contribution to the overall top line. So there is no like conscious effort in terms of this specific number for online. But this is as per the demand and of course there was a higher proportion of outright sales this year in the online business versus market place and you know some of the ASP increase can also be attributed to that, but there is no like so this is part of the demand and there is no like strategic or conscious effort to maintain this number in terms of volume.

Analyst questioned the relatively lower online volume growth, and management explained it's demand-driven and part of a balanced, strategic channel approach.

Asked by Gaurav Jogani

BIS inventory clean-up progress and margin impact Direct
So, on the non-BIS side, while you know we have made significant progress, but there has been it's been slightly slower than we anticipated. We were expecting to liquidate a big portion of it by March end but there has it's been slightly slower than that, but it is all like, you know, under control and it's basically we're expecting you know in line with 20 to 40 bps of a margin, you know hit on in this specter of the non-BIS inventory in the coming year and nothing more than that.

Management provided an update on the BIS clean-up, acknowledging it's slower than expected but under control, with a quantified margin impact.

Asked by Ali Asgar Shakir

Q4 Other expenses and Depreciation increase Direct
The other expense has gone up from INR 90 crores to around INR 108 crores, which is correct. A large chunk of this, around INR 10 crores is higher A&P spend both on the digital media front and on the sales promotion side... And on the depreciation front, from INR 19 crores to INR 22 crores, I explained that it has a one off impairment head of our DIP lines which we have impaired.

Analyst questioned significant increases in Q4 other expenses and depreciation, which management explained with specific reasons (A&P spend, DIP line impairment).

Asked by Ali Asgar Shakir

Distribution counter expansion and future growth Direct
So, the overall universe is actually quite large and it's about 40-45K and we're just at 26k. So, but what we have done, the strategy for us is to first obviously get to all the relevant, most relevant counters for us as a brand and the category and that's how we are we're doing that. So along with you know we expect at least an addition of let's say 1500 counters year on year and along with that an increase in the world share, you know or each outlet. So that will lead to you know the basically the growth in the distribution channel.

Management provided specific targets for distribution expansion, outlining the market potential and their strategy for adding new counters.

Asked by Prerna Jhunjhunwala

Interest expense increase despite debt-free status Direct
Interest line now is a reflection of only the ROU assets. So whatever leasehold premises we have in terms of EBOs and warehouses, we create a ROU, right to use and depreciation is charge on those asset and interest components is there. So, both in the depreciation and interest line component goes and that's what is sitting in the interest. This quarter you see a higher interest which is purely due to increase of two assets. We took a warehouse in Kulana for our online business chief warehouse and also, we have taken this Haridwar II facility for the sneakers. So that is on a lease on premise and also, we took a raw material warehouse house, so we have added three leasehold assets in this quarter.

Analyst sought clarification on rising interest expense for a debt-free company, and management explained it's due to ROU assets from new leasehold properties.

Asked by Gaurav Jogani

FY26-FY27 EBITDA Margin aspiration of 17-19% Partial
So, Ali, the aspiration, certainly you know is intact and as you can see, we're trending towards the guided margin and you know the initiatives we've taken are sort of panning out in that direction. So, at this moment, we don't see any headwinds with respect to margins... I think if we can predict one year, that's a big achievement. So, over a year's time for sure, like we should fall within the range of what we've guided.

Analyst pressed for a firm commitment on margin targets, and management reiterated the aspiration while emphasizing the dynamic environment.

Asked by Ali Asgar Shakir

3 min read 7 chapters

Detailed narrative

Q4 & FY25 Performance Overview

Campus Activewear reported a healthy 10% YoY revenue growth to INR 1,593 crores for FY25, driven by higher volumes (up 12.3% to 24.9 million pairs). Q4 FY25 revenue grew 11.5% to INR 406 crores, with volumes up 7.8% to 6.2 million pairs. The company achieved significant margin expansion in FY25, with gross margin improving by 20 bps to 52.3% and EBITDA margin rising by 120 bps to 16.1%, primarily due to procurement efficiencies and disciplined cost control.

Strategic Growth Drivers & Distribution Expansion

Growth was fueled by expanded distribution (up 9% in FY25, 9.6% in Q4), accelerating online sales (up 11.7% in FY25, 15.2% in Q4), and the launch of over 250 new styles. The company expanded its retail footprint by 30 new stores, bringing the total EBO count to 296. Management highlighted strong execution in expanding distribution reach to 23,000 outlets in Q4 FY25, up from 19,600 last year, with a target to add 1500 counters annually to tap into the 40-45k overall market universe.

Product Mix and ASP Trends

Despite overall premiumization efforts, FY25 ASP declined by 2% to INR 639 per pair, primarily due to a conscious strategic decision to increase the mix of open footwear (from 14.2% to 15.2%) and higher accessory sales, which have lower ASPs. However, Q4 FY25 ASP improved to INR 658 from INR 636 last year, driven by higher ASP in distribution and online channels. Management emphasized maintaining gross margins (52.3% in FY25) as the key metric despite mix shifts.

Sneaker Portfolio and Capacity Expansion

The sneaker portfolio demonstrated impressive growth of 150% in FY25, contributing approximately 8.5% to total volume. To support this growth, the Haridwar II facility commenced commercial production in March 2025 for manufacturing high-quality uppers for sneakers, representing an investment of INR 21 crores. This additional capacity is expected to benefit the company's sneaker volume contribution and overall growth in FY26, with management anticipating continued strong traction in this segment.

Profitability and Cost Management

FY25 EBITDA margin expanded by 120 bps to 16.1%, and PAT margin expanded by 130 bps to 7.5%, driven by lower SG&A (after provisions in prior year) and disciplined cost control. Q4 FY25 PAT margin saw a slight depletion to 8.5% from 8.9% last year, attributed to higher depreciation from the impairment of outdated DIP lines (INR 2 crores). Management reiterated an aspiration to achieve an EBITDA margin of 17-19% in the coming year, supported by NPD and cost control.

Balance Sheet and Operational Efficiency

Campus Activewear remains a debt-free company, with strong return ratios: ROCE of 22.3% and ROE of 17.2% as of March 31, 2025. Net working capital days improved significantly from 92 in FY24 to 71 in FY25, reflecting a focus on operational efficiency and inventory management. The company also went live with SAP on April 4, 2025, to streamline operations and enhance inventory control, laying the foundation for scalable growth. Interest expense increased in Q4 due to ROU assets from new leasehold warehouses and the Haridwar II facility.

BIS Inventory and Market Outlook

The liquidation of non-BIS inventory was slower than anticipated, but management stated it is under control, expecting a 20-40 bps margin hit in the coming year as a routine liquidation budget. Despite a challenging macro environment and subdued consumer demand, management sees positive momentum and expects industry growth to resume, especially benefiting organized players, as BIS implementation progresses. They noted a significant drop in imported goods volume from China due to BIS.

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