Sai Silks — Q3 FY26 earnings call

Call held 20 Jan 2026

Management summary

Sai Silks reported a moderated Q3 FY26 performance with revenue and PAT declines, primarily due to a festive calendar shift and degrowth in men's and kids' wear. However, the nine-month period showed strong growth, with revenue up 16.1% and PAT up 50%, driven by improved margins and operational efficiencies. The company is aggressively pursuing store expansion, targeting 80,000-85,000 sq ft for FY27, funded by internal accruals, while also evaluating the Valli format's unit economics before further rollout.

Highlights

  • Revenue from operations for the 9 months ended December 31, 2025, grew by 16.1% year-on-year to INR1,234 crores.

  • PAT for the 9 months ended December 31, 2025, increased by 50% year-on-year to INR108 crores.

  • PAT margin for the 9 months ended December 31, 2025, improved by 200 basis points to 8.77%.

  • Gross margin for Q3 FY26 improved by 40 basis points year-on-year, increasing to 42.2%.

  • Company is on track to comfortably meet the desired FY26 store expansion target of 65,000 square feet, with a possibility to open beyond.

Concerns

  • Revenue from operations for Q3 FY26 was INR411.25 crores, a moderation compared to INR448.5 crores in Q3 FY25.

  • Profit after tax for Q3 FY26 stood at INR38.4 crores, down from INR46 crores in Q3 FY25.

  • The Indian ethnic apparel retail market experienced moderated demand in Q3 FY26, primarily due to the shift in the festive calendar (Dasara moving to Q2).

  • The men's and kids' wear category experienced degrowth in Q3 FY26, contributing to the overall degrowth in the KLM business.

Key financials

2 periods

Q3 FY26

  • Revenue
    ₹411.25 Cr
    YoY -8.3%
  • Gross Margin
    42.2%
    YoY +0.4%
  • PAT
    ₹38.4 Cr
    YoY -16.5%

9M FY26

  • Revenue
    ₹1,234 Cr
    YoY +16.1%
  • PAT
    ₹108 Cr
    YoY +50.4%
  • PAT Margin
    8.8%
    YoY +2%

What they filed

Q1 FY27: revenue down 1.1%, net profit down 13.3% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue347 449 399 379 444 +28%411 −8%419 +5%375 −1%
EBITDA55 79 58 57 72 +31%70 −11%61 +5%52 −9%
Net profit24 46 14 30 40 +67%38 −17%33 +136%26 −13%
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 65,000 square feet entirely through internal generations for FY27 expansion
    • Retail space addition (9M FY26) 54,500 square feet
    • Retail space addition (Q3 FY26) 20,500 square feet
    • Warehousing implementation ₹22 Cr
    For the next year, we want to go a little bit more aggressively compared to this year. We have a strong store expansion plan, and we wanted to extend the current target from 65,000 to almost like about close to 80,000 to 85,000 square feet. ... So right now, all the internal generations are free for us because the entire expansion was funded by IPO funds and working capital was already brought to0 by the beginning of the year. Hence we will have the entire current year generations available for us for expansion in the next year.
  • Debt Debt disclosed
    Broadly, we are holding an inventory of INR770 crores to INR800 crores at this point of time where working capital borrowings are 0. ... This will be a cycle till we undertake a larger expansion and wherever required, if there is any shortfall of funds at any point of time, we would go in for working capital borrowings. But as I foresee, we will not be requiring any borrowings for working capital until the second half of FY '28.
  • Liquidity Liquidity disclosed Unutilized INR22 crores from IPO funds are earmarked for 2 warehouses, with utilization expected by March 31.
    So we have this unutilized INR22 crores for 2 warehouses. So do we plan to utilize this for the 2 warehouses? ... But on the overall front, I think, ma'am, what I wanted to tell is the unutilized funds that are currently there in the monitoring account, more or less, I think we should be able to have the utilization completed by 31st of March.

Guidance & targets

Revenue Growth

  • Full Year Revenue Growth Revenue Growth · FY26 · Medium confidence 15%

    Previously 18-20% → 15%

    I think after seeing a quarter 3 performance, we wanted to be giving you a conservative approach of being able to achieve the 15% kind of a number.

    — R. Bharadwaj

  • Full Year Revenue Growth Revenue Growth · FY27 · High confidence 15-20%
    The goal, sir, is to actually have a 5% SSG and a 15% kind of a new store rollout addition. Both put together, it's going to be 20%. That's the goal that we internally have been working with. But to answer your question in short, yes, we should be able to target anything between 15% and 20%.

    — R. Bharadwaj

Gross Margin

  • Gross Margin Gross Margin · Next Full Year · High confidence 42-43%
    But on the overall front, the gross margin side, I think achieving a 42% to 43% in the next full year should be achievable.

    — R. Bharadwaj

EBITDA Margin

  • EBITDA Margin EBITDA Margin · Next Year · High confidence 17-18%
    And on the EBITDA margin side as well, 17% to 18% is something that we are targeting for the next year.

    — R. Bharadwaj

PAT Growth

  • PAT Growth PAT Growth · FY26 over FY25 · High confidence 35%
    You said 35% PAT growth for full year, right, on a Y-o-Y basis, FY '26 over '25. Correct.

    — R. Bharadwaj

Store Expansion

  • Retail Area Addition Store Expansion · Next Financial Year · High confidence 80,000-85,000 square feet

    Previously 60,000-65,000 square feet → 80,000-85,000 square feet

    for the next year, we want to go a little bit more aggressively compared to this year. We have a strong store expansion plan, and we wanted to extend the current target from 65,000 to almost like about close to 80,000 to 85,000 square feet.

    — R. Bharadwaj

Advertisement Expenditure

  • Advertisement Expenditure (absolute) Advertisement Expenditure · Ongoing · High confidence 2.5%
    See, on the absolute advertisement expenditure, our internal goal is 2.5%. That's where our goal is.

    — R. Bharadwaj

Advertisement & Business Promotion

  • Advertisement & Business Promotion Expenditure Advertisement & Business Promotion · Ongoing · High confidence Under 4-4.5%
    On the ADVT and business promotion expenditure, both put together, we should be able to be under 4%, 4.5% on the maximum side. But the way things are happening, we are aggressively taking a stand to keep it well under 4%.

    — R. Bharadwaj

Store Productivity

  • Varamahalakshmi Tamil Nadu Revenue per sq ft Store Productivity · End of '27 · High confidence 45,000 Rs

    From 37,000-37,500 Rs today

    Tamil Nadu currently is delivering on an average around INR37,000 to 37,500 per square feet. There is a potential for it to go up to 45,000 by the end of '27. So on - staggered basis, this will deliver another 7,000 to 7,500 in the next 4, 5 quarters to come.

    — KVLN Sarma

SSSG Growth

  • KLM Business SSSG Growth SSSG Growth · End of Q4 FY26 · Medium confidence Low single-digit positive
    And the way we think the remaining quarter for Q4 also goes, we should be able to end with a low single-digit positive SSSG growth for KLM as a business.

    — R. Bharadwaj

What to watch in Q4 FY26

Valli format unit economics and expansion model

By end of March (Q4 FY26).
Current Still being evaluated, similar to Kalamandir but with reduced capex/inventory; no new Valli stores planned for Q4 FY26.
Target Proper model built, ready for aggressive expansion.

Why it matters

Crucial for validating the scalability and profitability of the Valli format, which is a key part of future expansion strategy.

If you could give me another quarter, like by the end of March, it would at least complete about 6 to 9 months of complete operations and probably make sense. In this next quarter, we don't have any new Valli stores planned. So what we wanted to do is, like, we wanted to have a proper model build in terms of how we wanted to take it forward and only then we will add new Valli stores.

Risks & concerns

  • Moderated demand due to festive calendar shift

    medium

    Dasara, which contributed meaningfully to Q3 last year, occurred in Q2 this year, leading to lower footfalls and conversions in Q3 FY26.

    Management acknowledged

  • Degrowth in men's and kids' wear category

    medium

    This category, particularly within the KLM business, was significantly affected in Q3 FY26, causing overall degrowth.

    Management acknowledged

  • Higher rental costs in new markets

    medium

    Rental costs in new markets like Mumbai are significantly higher than in existing states, requiring active negotiation to fit rent-to-revenue ratios.

    Management acknowledged

Q&A highlights

5 direct, 1 evasive
FY27 Store Expansion Plans and New Geographies Direct
for the next year, we want to go a little bit more aggressively compared to this year. We have a strong store expansion plan, and we wanted to extend the current target from 65,000 to almost like about close to 80,000 to 85,000 square feet. So the markets where we wanted to look at is both on the current 4 states as well as into the newer territories. As we speak, we are exploring newer markets in terms of Maharashtra and Kerala as well.

Clarified aggressive expansion targets for FY27 and confirmed exploration of new states like Maharashtra and Kerala, indicating strategic market diversification.

Asked by Ankit Gupta

Outlook for Q4 FY26 and FY27 Wedding Dates Direct
Compared to this financial year, next financial year wedding dates are more by 10 percent. So last year to this year, it's already increased. And compared to this year to next financial year, it's even more than the current year. So it's looking very decent.

Provided a positive outlook on wedding dates for FY27, suggesting strong underlying demand for ethnic wear and potential for sustained growth.

Asked by Ankit Gupta

Q2+Q3 Growth Rate and FY26 Guidance Revision Direct
On the full year side, what we have initially guided is around 15% to 18%, while 18% is still the target. I think after seeing a quarter 3 performance, we wanted to be giving you a conservative approach of being able to achieve the 15% kind of a number.

Highlighted a potential slowdown in growth compared to initial expectations and a more conservative full-year guidance, prompting investors to adjust expectations.

Asked by Akhil Parekh

FY27 Growth Strategy (SSSG + New Store Rollout) Direct
The goal, sir, is to actually have a 5% SSG and a 15% kind of a new store rollout addition. Both put together, it's going to be 20%. That's the goal that we internally have been working with. But to answer your question in short, yes, we should be able to target anything between 15% and 20%.

Provided a clear breakdown of the FY27 growth strategy, combining organic same-store growth and new store additions, offering transparency on growth drivers.

Asked by Rahul Jain

Unit Economics of Valli Format and Expansion Pause Evasive
If you could give me another quarter, like by the end of March, it would at least complete about 6 to 9 months of complete operations and probably make sense. In this next quarter, we don't have any new Valli stores planned. So what we wanted to do is, like, we wanted to have a proper model build in terms of how we wanted to take it forward and only then we will add new Valli stores.

Indicated that the Valli format's unit economics are still being evaluated and refined, with a pause in expansion, suggesting it's not yet fully optimized for aggressive rollout.

Asked by Rahul Jain

Disconnect between 9M Growth and SSSG, Confidence for Aggressive Expansion Direct
Okay. So what I was trying to communicate is when a continues a format by format, if you are able to clock a positive SSG growth, that gives us confidence for us to like start expanding beyond the current levels. While the last year and the previous year, all are disrupted because of other factors, with Varamahalakshmi format and the Valli Silks format taking into shape.

Addressed a key investor concern about the sustainability of growth driven by new stores versus organic same-store growth, and management's rationale for their expansion confidence.

Asked by Hitaindra Pradhan

3 min read 6 chapters

Detailed narrative

Q3 FY26 Performance Impacted by Calendar Shift

Revenue from operations for Q3 FY26 stood at INR411.25 crores, a moderation from INR448.5 crores in Q3 FY25. This decline was primarily attributed to the shift in the festive calendar, with Dasara occurring in Q2 this year compared to Q3 last year, leading to lower footfalls and conversions. Despite this, gross margin improved by 40 basis points year-on-year to 42.2%, driven by pricing discipline and an improved product mix. Profit after tax for the quarter was INR38.4 crores, down from INR46 crores in the previous quarter.

Strong 9M FY26 Growth and Margin Expansion

For the nine-month period ending December 31, 2025, the company delivered robust performance, with revenue from operations growing 16.1% year-on-year to INR1,234 crores, up from INR1,063 crores in the prior year. Net profit for the same period increased by 50% year-on-year to INR108 crores, resulting in a PAT margin of 8.77%, a 200 basis point improvement from 6.7% in the previous year. This reflects improved operational leverage, better cost discipline, and enhanced operational efficiencies across the business.

Aggressive Store Expansion Strategy for FY26 and FY27

The company is on track to meet its FY26 target of adding 60,000 to 65,000 square feet of retail space, having already added 54,500 sq ft across 11 new stores by 9M FY26. For FY27, the expansion plan is even more aggressive, targeting 80,000 to 85,000 sq ft. Over 50% of this expansion is expected to be in the Varamahalakshmi format, chosen for its capable format, better capital allocation, and margin profile.

Strategic Entry into New Markets and Format Focus

Sai Silks is exploring new markets such as Maharashtra and Kerala, with initial plans to open 1-2 stores to understand consumer behavior before aggressive expansion. The expansion will primarily be driven by the Varamahalakshmi format, supported by Valli, focusing on sarees while also integrating kurtas, kurtis, and lehengas. The company maintains a strategy of not closing any stores, reflecting disciplined expansion and a total retail footprint of 7.7 lakh square feet as of December 31, 2025.

Controlled Expenditure and Funding for Growth

In Q3 FY26, the company consciously controlled advertisement and business promotion expenditures, shifting aggressive spending to Q2 due to the festive calendar. This strategy contributed to margin protection, with the target for advertisement and business promotion expenditure set to remain under 4-4.5%. The company confirmed that its FY27 expansion, estimated at approximately INR100 crores (including working capital), will be fully funded by internal generations, with no working capital borrowings anticipated until H2 FY28.

Valli Format Under Evaluation for Optimization

While 11 Valli stores have been operational for over six months, management is pausing further expansion in Q4 FY26 to build a robust operational model and enhance efficiencies. The goal is to make the Valli format attractive for a potential investor-friendly franchisee model within the next 12-15 months, ensuring it operates with similar unit economics to the Kalamandir format but with reduced capex and inventory levels. The unutilized INR22 crores from IPO funds, earmarked for two warehouses, are expected to be utilized by March 31.

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