Iris Clothings Limited — Q2 FY26 earnings call

Call held 7 Nov 2025

Management summary

Iris Clothings reported healthy top-line growth in Q2 and H1 FY26, with total income increasing by 7% and 12% respectively. The company expanded its distributor network and launched new product categories, while also upgrading its ERP system. However, margins saw moderation due to raw material price changes and product mix, and the initial FY26 revenue guidance is under review.

Highlights

  • Q2 FY26 total income grew 7% YoY to ₹443 million, demonstrating healthy top-line growth.

  • H1 FY26 total income grew 12% YoY to ₹818 million, reflecting steady demand for products.

  • Expanded distributor network by onboarding 8 new distributors, reaching a total of 202, strengthening market footprint.

  • Launched a new collection of travel coord-sets for kids, receiving overwhelming market response.

  • Completed ERP system transition to SAP Business One, enhancing operational efficiency.

Concerns

  • EBITDA margin moderated to 15.9% in Q2 FY26 (from 19.5% last year) and 15.1% in H1 FY26 (from 19.3% last year) due to raw material price changes and product mix.

  • FY26 revenue growth guidance of 50% is likely to be moderated due to unstable market conditions, with new guidance expected next quarter.

Key financials

2 periods

Q2

  • Total Income
    443 Mn
    YoY +7%
  • EBITDA Margin
    15.9%
  • PAT
    41 Mn
    YoY +7%

H1

  • Total Income
    818 Mn
    YoY +12%
  • EBITDA Margin
    15.1%
  • PAT
    67 Mn
    YoY +8%

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 Capex disclosed From right issue (equity)
    • Working capital and new capacity additions (from right issue) ₹47 Cr
    • Incremental stitching capacity (per 1,000 pieces/day) ₹1 Cr
    So, the funds have been deployed for working capital and these new capacity additions that we have done. (Page 5) ... incremental basically, increments stitching capacity for 1,000, every 1,000 pieces per day addition. On average, Rs. 1 crore is the overall investment in CAPEX. That is the thumb rule that we follow. (Page 7)

Guidance & targets

Profitability

  • EBITDA Margin Profitability · next couple of quarters · Medium confidence 18% to 19%
    going forward, in the next couple of quarters, we look at margins being stabilized somewhere around 18% to 19%.

    — Harshvardhan Sarda

  • EBITDA Margin Profitability · overall year · Medium confidence 17% to 18%
    Yes, overall, it would be around 17% to 18%.

    — Harshvardhan Sarda

Capacity

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

    — Harshvardhan Sarda

  • New Product Category Capacity Capacity · initially · High confidence 3000 pieces per day
    So, initially, we start with 3000 pieces per day for the new product categories overall, but essentially scale it as we go forward.

    — Harshvardhan Sarda

Retail Expansion

  • New EBOs Retail Expansion · FY26 · Medium confidence around that number

    From 5 to 6 new EBOs in FY'26 today

    So, EBOs is something that we are still exploring the exact model for EBOs, but I think we will stick to somewhere around that number.

    — Harshvardhan Sarda

Revenue

  • Revenue Growth Revenue · FY26 · Low confidence moderated

    Previously 50% → moderated

    Not really. I think that would be slightly moderated given the market demand that we currently have. So, I think guidance will be able to give you a better guidance at the end of next quarter.

    — Harshvardhan Sarda

Revenue Mix

  • Export Revenue Share Revenue Mix · this year · High confidence 4% to 5%
    The export market has been stable. We will do around 4%, 5% of export this year.

    — Harshvardhan Sarda

  • Disney Product Revenue Share Revenue Mix · overall year · High confidence 3% to 4%
    Disney overall is somewhere in the 3% to 4% of our overall revenue. In the overall year, guidance will be around 3% to 4%.

    — Harshvardhan Sarda

Cost

  • Disney Royalty Cost Cost · for Disney · High confidence 12%
    And the royalty is somewhere around 12% for Disney.

    — Harshvardhan Sarda

Retail Performance

  • Store Payback Period Retail Performance · High confidence 15 to 18 months
    And we expect a payback period of 15 to 18 months for the stores.

    — Harshvardhan Sarda

Distribution Network

  • New Distributors Distribution Network · with summer season in Q4 · High confidence around 10
    we will target around 10 distributors in addition for the overall growth.

    — Harshvardhan Sarda

What to watch in Q3 FY26

EBITDA Margin Stabilization

next couple of quarters
Current 15.9% (Q2 FY26)
Target 18-19%

Why it matters

Crucial for profitability, as margins have compressed due to raw material costs and product mix.

But going forward, in the next couple of quarters, we look at margins being stabilized somewhere around 18% to 19%.

Risks & concerns

  • Margin Compression due to Raw Material Prices & Product Mix

    medium

    Q2 and H1 FY26 EBITDA margins moderated due to changes in raw material prices and a shift in product mix towards higher-cost winter season products.

    Both acknowledged

  • Market Demand Instability impacting Revenue Guidance

    medium

    Unstable market conditions in the last quarter are leading to a likely moderation of the initial 50% FY26 revenue growth guidance.

    Management acknowledged

Q&A highlights

4 direct
Margin Moderation vs. Guidance Direct
So, primarily, the moderation in margins has been because of some changes in raw material prices and our product mix as well, the kind of products that we have been purchasing. So, that is the primary reason for margins being 16%. But going forward, in the next couple of quarters, we look at margins being stabilized somewhere around 18% to 19%.

Analyst challenged management on missed margin guidance, leading to an explanation of cost pressures and a revised short-term outlook.

Asked by Nish Shah

FY26 Revenue Guidance Revision Partial
Not really. I think that would be slightly moderated given the market demand that we currently have. So, I think guidance will be able to give you a better guidance at the end of next quarter.

Management indicated a likely downward revision of the 50% FY26 revenue growth target but deferred providing a new specific number, highlighting market instability.

Asked by Nish Shah

EBO Expansion Delays Partial
So, EBOs is something that we are still exploring the exact model for EBOs, but I think we will stick to somewhere around that number.

Analyst questioned the lack of new EBOs despite prior guidance, revealing that the company is still refining its EBO model, which could impact retail expansion timelines.

Asked by Nish Shah

CAPEX for Capacity Expansion Direct
incremental basically, increments stitching capacity for 1,000, every 1,000 pieces per day addition. On average, Rs. 1 crore is the overall investment in CAPEX. That is the thumb rule that we follow.

Provided a clear unit cost for capacity expansion, indicating the capital intensity of increasing production.

Asked by Deepali Kumari

New Product Category Strategy Direct
the travel coord-sets that we currently launched, that became a decent contributor to the overall revenue. And the fabric for that is something that we have imported and using much higher quality fabrics, much more expensive fabrics. So, hence, that is the primary reason because winter we have tried a few new products around that segment which will be a reason for the moderation.

Explained the impact of new, higher-quality product launches on revenue contribution and margin profile.

Asked by Diya

Distributor Sales Realization Direct
So, our realization from the MRP of the product is 50%. So, we give, if the product which is priced at Rs. 100 MRP. Our realization from our distributor stands in the 50% margin.

Clarified the company's pricing strategy and margin structure with distributors.

Asked by Diya

2 min read 6 chapters

Detailed narrative

Strong Top-Line Growth in Q2 and H1 FY26

Iris Clothings reported a healthy 7% year-on-year growth in total income for Q2 FY26, reaching ₹443 million. For the first half of FY26, total income grew by 12% year-on-year to ₹818 million, driven by strategic initiatives and steady demand. This performance reflects the success of the company's efforts in expanding its market presence and product offerings.

Margin Moderation Due to Raw Material and Product Mix

Despite revenue growth, EBITDA margins moderated to 15.9% in Q2 FY26 (from 19.5% last year) and 15.1% in H1 FY26 (from 19.3% last year). Management attributed this primarily to changes in raw material prices and a shift in product mix, particularly with higher-cost fabrics for new winter season collections. The company expects margins to stabilize around 18-19% in the next couple of quarters and 17-18% for the full year.

Strategic Expansion in Distribution and Capacity

The company expanded its B2B distributor network by onboarding eight new distributors in Q2, bringing the total count to 202. Looking ahead, Iris Clothings plans to add approximately 10 more distributors by Q4 FY26, focusing on the Northern side. Production capacity is targeted to expand to 38,000 pieces per day in the forthcoming quarters, with an initial 3,000 pieces per day dedicated to new product categories.

New Product Launches and Portfolio Diversification

Iris Clothings launched a new collection of travel coord-sets for kids, which has received an overwhelming market response and contributed to revenue. The company is also set to introduce new infant gift sets and an innerwear line, reinforcing its commitment to innovation. These new products, often utilizing higher-quality and more expensive fabrics, are part of the strategy to drive growth and enhance brand appeal.

ERP System Upgrade and Capital Deployment

The company successfully transitioned its ERP system from Tally to SAP Business One, a strategic move aimed at enhancing operational efficiency and scalability. Funds from a recent ₹47 crore right issue have been deployed towards working capital and these new capacity additions. Management noted that an incremental 1,000 pieces per day in stitching capacity requires an average investment of ₹1 crore.

FY26 Revenue Guidance Under Review

The initial FY26 revenue growth guidance of 50% is likely to be moderated due to unstable market conditions experienced in the last quarter. Management stated that a better, revised guidance would be provided at the end of the next quarter. The export market is expected to contribute 4-5% of total revenue this year, and Disney-licensed products are projected to account for 3-4% of overall revenue with a royalty cost of approximately 12%.

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