Detailed Narrative
Q2 and H1 FY26 Financial Performance
Khadim India reported Q2 FY26 revenue from operations at ₹101.6 crores (INR 1,016 million), with a gross profit of ₹47.87 crores (INR 478.7 million) and a gross margin of 47.1%. EBITDA for the quarter was ₹13.79 crores (INR 137.9 million), reflecting a 13.6% margin, while PAT stood at ₹1.68 crores (INR 16.8 million) with a 1.7% margin. For the first half of FY26, revenue was ₹197.3 crores (INR 1,973 million), gross profit was ₹93.5 crores (INR 935 million) at a 47.4% margin, EBITDA was ₹26.12 crores (INR 261.2 million) at 13.2%, and PAT was ₹2.54 crores (INR 25.4 million) at 1.3%.
Impact of GST Reduction and Demand Outlook
The recent implementation of the GST cut for footwear under ₹2,500 is expected to significantly boost demand, especially in the lower and mid-category markets. Management anticipates a margin improvement in Q3 FY26, targeting 50-51%, as the full effect of GST and reduced discounting takes hold. Footfalls are expected to grow during the marriage season (November 15 - December 15) and the subsequent winter season, with a projected demand growth of 7-8% in the medium term, similar to pre-COVID levels.
Brand Performance and Product Strategy
The company's sub-brands, British Walkers and Sharon, demonstrated strong performance with double-digit volume growth. British Walkers is expanding its range to higher price points (₹2,000-₹7,000) with new designs, including handcrafted leather shoes and wide-fit options. Sharon is also focusing on premium comfort and lightweight EVA soles, with plans to increase its design lines from 50-60 to a higher number. The Athleisure range, launched last quarter, is gaining traction and is being scaled up.
Retail and E-commerce Channel Strategy
Khadim India's retail footprint stands at 893 stores, comprising 210 company-owned outlets and 683 franchise-operated outlets. The company is strategically closing loss-making COCO stores, with approximately 30 such closures impacting Q2 sales. E-commerce sales are performing decently, contributing around 4% in Q2, and the company has partnered with an agency to enhance its online operations. The focus is on building a balanced and scalable retail network while deepening brand relevance.
Working Capital Management
The company is addressing its high inventory and receivables, which combined are approximately ₹340 crores. Institutional debtors account for ₹32-35 crores. Management is actively working to reduce stock through discounts and flushing out obsolete inventory, and to improve collections from franchisees. The target is to achieve a working capital cycle of 90 days, comprising 90 days of stock, 90 days of debtors, and 90 days of creditors.
KSR Footwear Demerger and Listing Update
The listing of KSR Footwear Limited, the company's distribution subsidiary, is expected to occur early next week. The delay was attributed to the transfer of authorized capital from Khadim India to KSR, which required approvals from the ROC and Ministry of Corporate Affairs, taking 2-3 months. Subsequent queries from NSE and BSE also contributed to the timeline. The distribution business clocked a turnover of approximately ₹100 crores in H1 FY26 and is expected to become profitable from the next financial year.