Sai Silks

Sai Silks (Kalamandir) Limited reported a robust Q1 FY26, with revenue growing 42% year-over-year to INR379 crores, up from INR267 crores in the prior year. EBITDA saw a significant 200% increase, reaching INR57.13 crores compared to INR19 crores, while PAT surged over 1,300% to INR30 crores from INR2 crores. Gross margin improved to 42.07% from 41.26%, and same-store sales growth (SSSG) stood at a strong 29%.

The strong Q1 performance was primarily driven by a favorable wedding calendar and the early onset of the wedding season, which significantly boosted footfall, particularly in bridal and festive wear categories. The overall market sentiment remained positive, with a noticeable uptick in both premium and mid-range ethnic apparel, reflecting continued cultural affinity and evolving lifestyle aspirations in the South Indian market. Sarees continue to be the preferred choice for weddings and occasion wear.

The company opened one new Varamahalakshmi Silks store in Q1, bringing the total retail presence to 69 stores across 7.27 lakh square feet. Despite a slight delay in Q1 due to rains, the company remains on track to add 65,000 retail square feet for the full year, with 2 stores in the pipeline for the next 15 days. Sai Silks also announced a new format called 'Valli Silks', targeting low-price silks and fancy sarees with 20-25% lower capex, aiming for compact store formats of 3,000-4,000 sq ft.

Gross margins expanded to 42.07% in Q1 FY26 and are considered sustainable at 42%. The company sees scope for further EBITDA improvement, targeting an additional EBITDA by year-end and aiming for an EBITDA margin of around 20% by FY27. This improvement is expected to be driven by operational leverage and better product assortment, particularly from the contribution of Varamahalakshmi Silks stores.

Management acknowledged that inventory days are currently on the higher side, impacting overall return on capital metrics. However, they are actively working on inventory optimization, with a goal to reduce inventory days to approximately 130-135 days by FY27. This is a continuous process, and they expect to achieve this target once new stores mature and contribute to anticipated productivity levels.

The Kalamandir (KLM) brand showed positive footfall and SSSG in Q1. The company's strategy for KLM involves changing stock, reducing SOR inventory, and improving product assortment. In the near to medium term, the focus for KLM is on refining product availability and achieving consistent SSG growth rather than expanding the format with new stores, with potential expansion considered 1-2 years down the line after metrics are sorted.

Management confirmed that the tax overhang from previous years is completely closed, and there will be no further tax provisions required from the company. They also clarified that promoter-related tax issues are being handled by the promoter group, who have confirmed they will not raise money by selling or pledging shares for this purpose, thus not affecting the company's financials.