Iris Clothings Limited — Q1 FY26 earnings call

Call held 11 Aug 2025

Management summary

Iris Clothings reported a robust Q1 FY26 with a 19% YoY revenue increase to INR37.4 crores and an 8.7% PAT growth. The company successfully raised INR47.5 crores via a rights issue, expanded its distributor network to 194, and launched new product lines. While gross margins were impacted by a one-time sales promotion, management expects EBITDA margins to stabilize at 19-20% from Q2 FY26 onwards and targets 50% revenue growth for FY26.

Highlights

  • Total revenue increased by 19% YoY to INR37.4 crores in Q1 FY26.

  • Profit after tax (PAT) grew by 8.7% YoY to INR2.6 crores.

  • Successfully raised INR47.5 crores through a rights issue to support growth initiatives.

  • Expanded distributor network by 8 new distributors, increasing the total to 194.

  • Launched new innerwear line, sportswear offerings, and a well-received travel wear collection.

Concerns

  • Gross margins were lower in Q1 FY26 due to a one-time big sales promotion event.

  • Target for the working capital cycle for FY26 is still being finalized.

Key financials

  1. Revenue ₹37.4 Cr +19%YoY
  2. EBITDA ₹5.3 Cr
  3. PAT ₹2.6 Cr +8.7%YoY

What they filed

Q1 FY27: revenue up 26.3%, net profit up 52.5% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue41 33 40 37 44 +7%49 +46%60 +50%47 +26%
EBITDA8 6 8 5 7 −11%6 −0%11 +33%8 +53%
Net profit4 2 4 3 4 +7%3 +27%6 +44%4 +52%
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 ₹7 Cr
    • Adding embroidery machines to portfolio
    • Adding printing machines to portfolio
    • Enhancing production and upgrading technology
    So additional capex will be somewhere around INR7 crores to INR8 crores for the new additions.

Guidance & targets

Revenue

  • Revenue Growth Revenue · FY26 · High confidence around 50%
    we expect revenue to grow at around 50% for this year.

    — Harshvardhan Sarda

  • Export Revenue Share Revenue · next year · Medium confidence 5% to 6%
    Export is somewhere around 4% for our total revenue and we expect it to grow up to 6% -- 5% to 6% in the next year.

    — Harshvardhan Sarda

Profitability

  • EBITDA Margin Profitability · Q2 FY26 onwards · High confidence 19% to 20%
    we expect our EBITDA margins to remain around the 19% to 20% level.

    — Harshvardhan Sarda

Capacity

  • Production Capacity Capacity · forthcoming quarters · High confidence 38,000 pieces per day
    we plan to expand our production capacity to 38,000 pieces per day.

    — Harshvardhan Sarda

Distribution

  • Number of Distributors Distribution · end of the year · High confidence around 205
    we plan to take that to around 205 distributors by the end of the year.

    — Harshvardhan Sarda

Retail

  • Number of EBOs Retail · FY26 · High confidence around five to six
    we are definitely targeting around five to six EBOs for this year.

    — Harshvardhan Sarda

Capex

  • Additional Capex for New Additions Capex · within this year · High confidence INR7 crores to INR8 crores
    So additional capex will be somewhere around INR7 crores to INR8 crores for the new additions.

    — Harshvardhan Sarda

What to watch in Q2 FY26

EBITDA Margin Stabilization

Q2 FY26 onwards
Current Impacted by one-time sales promotion in Q1
Target 19-20%

Why it matters

Verifying the stabilization of EBITDA margins is crucial for assessing the company's profitability and operational efficiency post Q1's one-time impact.

we expect our EBITDA margins to remain around the 19% to 20% level.

Risks & concerns

  • Input Cost and Currency Volatility

    medium

    Analyst raised concern about volatility impacting EBITDA margins, but management expressed confidence in maintaining margins through strategic actions.

    Analyst acknowledged

  • Lower Gross Margins in Q1

    low

    Management attributed the lower gross margins to a one-time sales promotion event and expects normalization to 19-20% EBITDA margins from Q2.

    Analyst downplayed

Q&A highlights

7 direct
Revenue Guidance & Capex Cycle Direct
our revenue remains in line with what we have communicated before, in line with our current growth numbers. We expect revenue to grow at around 50% for this year.

Analyst sought clarity on future revenue trajectory and capital expenditure plans, which management addressed with a specific growth target for FY26.

Asked by Deepali Kumari

EBITDA Margin Sustainability Direct
we are very confident that by working with our partners and trying to book early in terms of raw material costs and driving efficient sales mechanisms, we are very confident that we'll maintain EBITDA margins as the specified levels.

Analyst questioned the sustainability of margins amidst input cost volatility, and management provided assurance with their strategy.

Asked by Deepali Kumari

Low Gross Margins in Q1 Direct
this is a onetime impact. It was a big sales promotion event that we did and multiple other factors, but we expect our EBITDA margins to remain around the 19% to 20% level.

Analyst raised a concern about lower gross margins, which management clarified as a temporary, one-time event with expectations for normalization.

Asked by Nish Shah

Capital Allocation for Growth Initiatives Direct
allocating capital, as discussed, was primarily to drive working capital initiatives and just some general corporate purposes to expand our team, to expand our new initiatives that we are looking at. For example, EBO is one. B2C is one initiative. Expansion of our product categories is one initiative. So embroidery machines. We're expanding our capex by adding embroidery machines to our portfolio. We are adding printing machines to our portfolio. So enhancing production and upgrading our technology and production as such.

Analyst sought detailed breakdown of capital allocation, which management provided, outlining specific investments in operations, retail, and manufacturing.

Asked by Nish Shah

Cost and Timeline of Capacity Expansion Direct
additional capex will be somewhere around INR7 crores to INR8 crores for the new additions. ... Within this year. Within the next few months. Yes.

Analyst inquired about the financial outlay and timeline for planned capacity enhancements, receiving specific figures and a timeframe.

Asked by Nish Shah

Domestic vs. Export Revenue Mix Direct
most of our revenue comes from our domestic segment, because that is where our brand is placed at. Having said that, we have some export presence. Export is somewhere around 4% for our total revenue and we expect it to grow up to 6% -- 5% to 6% in the next year.

Analyst sought clarity on revenue diversification, and management outlined the current mix and future growth targets for exports.

Asked by Deepali Kumari

Working Capital Cycle Target Partial
That is something that we are still working around. I think we'll be able to give you a better answer at the end of next call.

Analyst asked for a key operational efficiency metric, but management indicated it is still under review and will be provided later, suggesting it's an ongoing focus.

Asked by Deepali Kumari

Revenue from EBOs Direct
for one of the EBOs, the revenue was around INR800 per square feet per month in one area. ... Our store level EBITDA is very profitable and we aim to improve that going forward.

Analyst inquired about the performance of existing EBOs, and management provided a specific revenue metric and confirmed profitability at the store level.

Asked by Deepali Kumari

2 min read 6 chapters

Detailed narrative

Q1 FY26 Performance Overview

Iris Clothings reported a strong Q1 FY26, with total revenue increasing by 19% year-on-year to INR37.4 crores, up from INR31.4 crores in Q1 FY25. Profit after tax (PAT) also saw an 8.7% growth, reaching INR2.6 crores compared to INR2.4 crores in the prior year. EBITDA for the quarter stood at INR5.3 crores, reflecting a robust start to the fiscal year.

Operational Developments & B2B Expansion

The company significantly expanded its B2B distributor network, adding eight new distributors during the quarter, bringing the total to 194. Management plans to further increase this to approximately 205 distributors by the end of the year, reinforcing its strong focus on the B2B market. This expansion is a clear indication of growing market presence and partner trust.

Capital Raise & Bonus Issue

Iris Clothings successfully raised INR47.5 crores through a rights issue, which will be strategically allocated to support various growth initiatives. Additionally, the company allotted bonus equity shares in a 1:1 ratio to its members on July 7, 2025. These actions demonstrate the company's commitment to strengthening its financial position and enhancing shareholder value.

Product & Capacity Expansion Plans

Looking ahead, the company plans to expand its production capacity to 38,000 pieces per day, with an additional capex of INR7-8 crores for new additions like embroidery and printing machines. These additions are expected to be operational within the next few months. New product lines, including innerwear, enhanced sportswear offerings, and a well-received travel wear collection, are being introduced to broaden product offerings and meet customer demand.

Retail D2C & EBO Strategy

While the primary focus remains on the B2B market, the company is also developing its retail D2C segment. E-commerce, particularly through platforms like FirstCry, contributes around 8% to overall revenue. Iris Clothings aims to open five to six new Exclusive Brand Outlets (EBOs) in FY26, primarily in Mumbai, building on the success of two existing EBOs that have broken even and been operational for over 1.5 years.

Financial Outlook & Margin Management

Management guided for approximately 50% revenue growth for FY26 and expects EBITDA margins to stabilize at 19-20% from Q2 FY26 onwards. This comes despite a one-time impact on gross margins from a sales promotion event in Q1. The company expressed confidence in maintaining these margins through efficient raw material booking and sales mechanisms. Export revenue, currently at 4%, is targeted to grow to 5-6% in the next year.

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