Karnika Industri Q4 FY26 earnings call

Karnika Industries delivered a robust FY26, with revenue from operations growing 44% year-on-year to INR248 crores, up from INR173 crores in FY25. EBITDA increased 43% to INR37 crores, maintaining a healthy 15% margin despite strategic investments. Profit after tax (PAT) saw a significant 57% rise to INR28 crores, with the PAT margin improving to 11.4%. Q4 FY26 also demonstrated strong momentum, with revenue at INR72 crores (18.8% YoY growth) and PAT at INR9 crores (48.6% YoY growth), achieving a 13% PAT margin compared to 10.4% in Q4 FY25.

A pivotal strategic development in FY26 was the integration with Kidcity, which contributed INR24-25 crores to the company's revenue for the year. This integration is designed to significantly enhance Karnika's consumer reach and strengthen its presence in retail and direct-to-consumer channels. Management projects Kidcity revenue to triple in the next financial year (FY27) and reach INR200-250 crores by FY28-29, forming a comprehensive kidswear ecosystem.

The Indian children's apparel market is expected to grow at a CAGR of nearly 5%, reaching approximately USD17.4 billion by 2034, driven by rising disposable incomes and increasing urbanization. Karnika aims to leverage this growth, targeting an overall CAGR of 30-35% over the next three to four years. The company's strong distribution network, comprising 150+ partners and 2,500 trusted clients across 28 states, positions it well to capture market share from unorganized players.

Karnika's operating model, characterized by deep sourcing, strong product development, and asset-light manufacturing, allows for efficient scaling and operational flexibility. Normalized PAT margins are expected to be in the 11-13% range over the next 2-3 years, post-consolidation and raw material price impacts. The company is actively working to improve its working capital cycle, with a plan to reduce it by 100 days in the coming financial year from the current approximately 4 months.

Karnika plans to fund its standalone expansion through internal accruals and warrant funds from promoters, while Kidcity's expansion will require external funding. The company is also strategically investing in acquiring property for commercial places and developing an integrated in-house manufacturing setup to enhance cost control and scalability. An other income of INR9 crores in FY26, primarily one-time^📎, resulted from a strategic investment in an IT sector company that was sold in March 2026.

Karnika's strategic priorities for FY27 and beyond include expanding its omnichannel retail footprint, strengthening D2C and marketplace channels, and deepening penetration in Tier 2 and Tier 3 markets. The company is also focusing on improving operating leverage and maintaining disciplined capital allocation for sustainable growth. While US orders are currently held back due to geopolitical changes, Karnika is strategically shifting its focus towards big corporate clients like Zara, H&M, and DMart to drive future growth and market diversification.