Iris Clothings Limited — Q4 FY25 earnings call

Call held 16 May 2025

Management summary

Iris Clothings reported strong FY25 performance with 20.1% revenue growth to INR 146.6 crores and improved operational profitability, despite a Q4 demand slowdown and margin pressures. The company successfully completed a rights issue raising INR 47.5 crores and announced a 1:1 bonus share issue. Management is optimistic for FY26, targeting 30-35% revenue growth, expanding capacity, and launching new product lines.

Highlights

  • FY25 Consolidated Income grew 20.1% YoY to INR 146.6 crores, demonstrating robust revenue growth throughout the year.

  • Q4 FY25 PAT grew 28.6% YoY to INR 4.5 crores, indicating significant improvement in profitability.

  • The Board approved the issuance of bonus equity shares in a 1:1 ratio at INR 2 per share, rewarding existing shareholders.

  • A capital raise of INR 47.5 crores was successfully concluded via a rights issue in April 2025, providing funds for operational efficiency and business growth.

  • The distributor network expanded by 21 new distributors, bringing the total count to 186, enhancing market presence.

Concerns

  • Q4 FY25 Total Income declined to INR 40.3 crores from INR 42.1 crores in Q4 FY24, a 4.28% YoY decrease.

  • The company faced margin pressures from higher input costs, particularly in the fourth quarter.

  • Management noted a 'sudden drop in demand' in Q4, impacting expected growth.

Key financials

2 periods

Headline

  • Consolidated Income (FY)
    ₹146.6 Cr
    YoY +20.2%
  • Net Profit (FY)
    ₹13.1 Cr
    YoY +7.4%
  • Tax Rate (FY)
    9.9%

Q4

  • Total Income
    ₹40.3 Cr
    YoY -4.3%
  • EBITDA
    ₹8.2 Cr
    YoY +15.5%
  • EBITDA Margin
    20.4%
  • PAT
    ₹4.5 Cr
    YoY +28.6%

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 ₹6 Cr
    • Incremental stitching and finishing facilities to expand production capacity ₹6 Cr
    So, the current capex that we are planning for this year is primarily incremental capex in terms of stitching capacity, where we will be doing around INR5 crores to INR7 crores of capex, which will take our production capacities from 34,000 pieces to around 38,000-39,000 pieces.
  • Dividend ₹2/share (special)
    I am happy to announce that the Board has approved the issuance of bonus equity shares to existing shareholders in a one-to-one ratio, offering one fully paid-up bonus equity share of INR2 for each existing fully paid-up equity share.
  • Liquidity Liquidity disclosed A rights issue of INR 47.5 crores was successfully concluded in April 2025, with proceeds primarily deployed for working capital requirements, general corporate affairs (branding), and incremental capex.
    In April 2025, we successfully concluded a rights issue that garnered significant interest from our valued shareholders, resulting in a capital raise of INR47.5 crores. The proceeds will be strategically deployed to enhance our operational efficiency and accelerate business growth, allowing us to grab new opportunities in the market. ... So, a lot of the capital will be used for, you know, primarily working capital requirements. And we are planning to use some in general corporate affairs, like branding and maybe some incremental capex, but most of that incremental capex, we expect to serve some profits in our business.

Guidance & targets

Distributor Network

  • Total Distributor Count Distributor Network · by end of this year · High confidence 210-215

    From 186 today

    So, we plan to take the count from 186 to around 210-215 by the end of this year.

    — Harshvardhan Sarda, Business Head

Exports

  • Exports Revenue Share Exports · this year · Medium confidence 5%

    From 3% today

    And we expect exports to be around 5% this year for us.

    — Harshvardhan Sarda, Business Head

Production Capacity

  • Pieces per day Production Capacity · FY26 · High confidence 38,000-39,000

    From 34,000 today

    Looking ahead to FY26, we plan to expand our production capacity to about 38,000 pieces per day. ... So, the current capex that we are planning for this year is primarily incremental capex in terms of stitching capacity, where we will be doing around INR5 crores to INR7 crores of capex, which will take our production capacities from 34,000 pieces to around 38,000-39,000 pieces.

    — Harshvardhan Sarda, Business Head

Revenue

  • Revenue Growth Revenue · this year · High confidence 30-35%
    And we are very confident that we'll be able to achieve around 30%-35% growth in revenue this year.

    — Harshvardhan Sarda, Business Head

  • Total Revenue Revenue · this year · High confidence INR 200-210 crores
    And we expect our revenue growth from here to go up to, say, INR200 crores, INR210 crores this year is what we are targeting.

    — Harshvardhan Sarda, Business Head

Profitability

  • EBITDA Margin Profitability · overall year · High confidence 20%
    I expect profitability to remain somewhere around that 20% EBITDA numbers.

    — Harshvardhan Sarda, Business Head

  • Store EBITDA Profitability · with more scale · Medium confidence 20%

    From 10-15% today

    And speaking about store EBITDA, store EBITDA currently is at the 10% to 15% level, but we expect with more scale, we would be touching around 20% at the store level as well.

    — Harshvardhan Sarda, Business Head

New Product Line

  • Innerwear Revenue New Product Line · Q3-Q4 · Medium confidence INR 6-7 crores
    Ballpark numbers would be somewhere around INR6 to INR7 crores for Q3-Q4. So, it will be an entry to the market to understand what it is.

    — Harshvardhan Sarda, Business Head

Store Expansion

  • New Stores Opened Store Expansion · this quarter · High confidence 3-4
    But we plan to open around three to four stores this quarter, this and the next quarter.

    — Harshvardhan Sarda, Business Head

Long-term Vision (2030)

  • Distributor Count Long-term Vision (2030) · by end of 2030 · Medium confidence 300+
    In terms of distributors, we expect to be around 300 plus distributors.

    — Harshvardhan Sarda, Business Head

  • EBO Count Long-term Vision (2030) · by end of 2030 · Medium confidence 300+
    EBOs is something that we are still, you know, cautiously taking approach, but we expect around 300 plus EBOs by the end of 2030.

    — Harshvardhan Sarda, Business Head

  • Revenue Growth Rate Long-term Vision (2030) · next few years · High confidence 30%+
    Absolutely. We are definitely looking at 30% plus growth rate over the next few years.

    — Harshvardhan Sarda, Business Head

What to watch in Q1 FY26

FY26 Revenue Growth

next quarter (for progress update)
Current FY25 growth 20.1%
Target 30-35% growth for FY26

Why it matters

To assess if the company is on track to achieve its ambitious FY26 revenue growth target after a flat Q4.

And we are very confident that we'll be able to achieve around 30%-35% growth in revenue this year.

Risks & concerns

  • Sudden demand drop in Q4

    medium

    A sudden drop in market demand impacted Q4 revenue expectations, though recovery was noted in April.

    Management acknowledged

  • Margin pressures from higher input costs

    medium

    Increased yarn costs in December/January led to margin pressure in Q4, but costs have since calmed down.

    Management acknowledged

  • Delays in inventory production

    low

    Some delays in inventory production exist, but the company states it does not lead to write-offs as products can be sold in subsequent seasons.

    Management acknowledged

Q&A highlights

7 direct
Q4 Revenue Performance and FY26 Growth Outlook Direct
Up until Q3, we were around 28%-29% up in our revenue. So, I think overall, first three quarters, our performance was in line with what we were expecting. And similarly, the expectation was to improve slightly better, maybe achieve around 30%-32% growth in Q4 as well. But because of a sudden drop somewhere in the demand in the market. ... we are very confident that we'll be able to achieve around 30%-35% growth in revenue this year.

Management explained the Q4 revenue flatness due to an unexpected demand drop but provided strong confidence and a specific growth target for FY26, indicating a recovery.

Asked by Resha Mehta

Gross Margin Decline and Input Costs Direct
So, primarily input cost for us is yarn cost, which is raw material cost per fabric, which went up slightly in the month of, say, December, January. But that has already calmed down and we figure that it will remain somewhat flattish for the upcoming seasons. And we are trying to predict that and make some early commitments so that we can grab it at a better time.

Management clarified the reason for Q4 margin pressure (yarn costs) and outlined their strategy to mitigate future impact, providing insight into cost management.

Asked by Resha Mehta

Inventory Management and Write-offs Direct
we do not really have any inventory write-offs because most of our inventory, even if it is late, say, for example, summer products. If that came in the month of May because of some production delays, we are very confident that that will get sold at the same price in the month of November when the summer season starts again.

Management's explanation of their inventory policy, stating no write-offs due to the nature of their products, provides comfort regarding asset quality and future profitability.

Asked by Resha Mehta

Capacity Expansion and Revenue Potential Direct
So, the current capex that we are planning for this year is primarily incremental capex in terms of stitching capacity, where we will be doing around INR5 crores to INR7 crores of capex, which will take our production capacities from 34,000 pieces to around 38,000-39,000 pieces. And we expect our revenue growth from here to go up to, say, INR200 crores, INR210 crores this year is what we are targeting.

Management provided specific capex figures and the resulting increase in production capacity, directly linking it to the FY26 revenue target, offering clear growth drivers.

Asked by Priyam Shah

Foray into Innerwear Segment Direct
So, innerwear, kids innerwear is something where there's not a lot of branded organized players in that segment. And from our market itself, we have realized that there's a very strong demand for someone to come in with a fantastic product in kids innerwear. ... Ballpark numbers would be somewhere around INR6 to INR7 crores for Q3-Q4.

Management articulated the strategic rationale for entering the kids' innerwear market, highlighting a gap in organized players and quantifying initial revenue expectations, signaling a new growth avenue.

Asked by Priyam Shah

Retail Business Roadmap Partial
So, the roadmap for retail is something that we are also clearly watching and understanding our strategy. That is something that is in the works. We are trying to build a team. We are getting some consultants on board as well to understand what exactly should be the retail rollout strategy. I think we'll be able to answer more concretely on this in the next quarter call because that is something that we're still building on this quarter.

While not providing immediate specifics, management acknowledged the importance of a clear retail strategy and committed to providing a more concrete update next quarter, indicating active development in a key growth area.

Asked by Priyam Shah

Utilization of Rights Issue Capital Direct
So, a lot of the capital will be used for, you know, primarily working capital requirements. And we are planning to use some in general corporate affairs, like branding and maybe some incremental capex, but most of that incremental capex, we expect to serve some profits in our business.

Management clarified the primary use of the recently raised INR 47.5 crores, emphasizing working capital and strategic investments over large-scale capex, which is crucial for understanding capital allocation priorities.

Asked by Shruti Sharma

Long-term Vision and Growth Rate Direct
So, see Priyam, if I talk about 2030, we expect ourselves to be one of the biggest, the biggest kids wear brand, one of the biggest kids wear brand in the country. ... Absolutely. We are definitely looking at 30% plus growth rate over the next few years.

Management outlined an ambitious long-term vision to be a leading kidswear brand by 2030, backed by a commitment to sustain a 30%+ growth rate, providing a clear strategic direction.

Asked by Priyam Shah

3 min read 7 chapters

Detailed narrative

Q4 & FY25 Financial Performance Overview

Iris Clothings reported a robust FY25 with consolidated income growing 20.1% YoY to INR 146.6 crores, up from INR 122 crores in FY24. Operational profitability also saw significant improvements, with FY25 EBITDA at INR 28.3 crores and an EBITDA margin of 19.3%. However, Q4 FY25 saw a slight dip in total income to INR 40.3 crores from INR 42.1 crores in Q4 FY24, attributed to a sudden demand drop and margin pressures from higher input costs. Despite this, Q4 PAT grew 28.6% YoY to INR 4.5 crores.

Strategic Expansion & Distribution Network

The company significantly expanded its market reach in FY25 by adding 21 new distributors, bringing the total count to 186. Management aims to further grow this network to 210-215 distributors by the end of the current year. Additionally, five new exclusive brand outlets (EBOs) were opened during the year, contributing to enhanced market presence and customer engagement, particularly noting a sales spike in the Eastern zone during Durga Puja.

Product Innovation & New Launches

FY25 marked the successful launch of a new line of winter sportswear for kids, which has been well-received for its quality and innovation. Building on this, Iris Clothings plans to introduce a new innerwear line in Q3 and Q4 of FY26, targeting INR 6-7 crores in revenue from this segment. This strategic move aims to capitalize on the strong demand in the kids' innerwear market, which currently has few branded organized players.

Capital Raise & Utilization

In April 2025, Iris Clothings successfully concluded a rights issue, raising INR 47.5 crores. These proceeds are primarily earmarked for working capital requirements, with a portion allocated to general corporate affairs, including branding, and some incremental capex. This capital infusion is intended to enhance operational efficiency and accelerate business growth, enabling the company to pursue new market opportunities.

Outlook & Future Growth Plans

For FY26, Iris Clothings is targeting a robust 30-35% revenue growth, aiming for a total revenue of INR 200-210 crores. This growth will be supported by an incremental capex of INR 6-7 crores to expand production capacity from 34,000 to 38,000-39,000 pieces per day. The long-term vision for 2030 is to become one of India's biggest kidswear brands, with plans for over 300 distributors and EBOs, and sustained 30%+ growth rates.

Profitability & Margin Management

While Q4 FY25 experienced margin pressures due to increased yarn costs in December and January, management noted that these costs have since stabilized and are expected to remain flattish. The company aims to maintain an overall EBITDA margin of approximately 20% for FY26. Furthermore, store-level EBITDA, currently at 10-15%, is projected to reach around 20% with increased scale and operational efficiencies.

Retail Strategy & EBOs

Iris Clothings is adopting a cautious and research-driven approach to its retail expansion. The company plans to open 3-4 new stores in Q1 FY26 and is actively building a dedicated team and engaging consultants to refine its retail rollout strategy. A more concrete update on the retail roadmap is expected in the next quarter, as the company focuses on identifying optimal geographical areas for expansion.

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