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    Khadim India

    KHADIM
    Consumer Durables·14 Feb 2025
    Management Summary

    Khadim India reported a mixed Q3 FY25, with revenue growing 2.5% YoY to ₹160.2 crores, but profitability metrics like gross margin, EBITDA, and PAT declined significantly due to increased discounting and flat same-store sales growth. The company is focusing on volume growth through price reductions, new product launches including an athleisure segment, and expanding its retail footprint and distribution network. The demerger process is nearing completion, expected to be effective by April 1, 2025.

    Highlights

    6

    • Revenue of ₹160.2 crores in Q3, up 2.5% YoY.

    • Total retail store count reached 890 with 61 new store openings during 9M FY25.

    • Retail segment contributed 66.1% of total revenue in Q3 and 63% for 9M FY25.

    • Volume of retail business increased from 1,749,000 pairs to 1,796,000 pairs in Q3.

    • New athleisure segment with MRP of ₹500-750 to be introduced, expected to enhance gross margins.

    • Demerger process is nearing completion, expected to be effective by April 1, 2025.

    Concerns

    6

    • Gross margins declined by 110 basis points in Q3 to 44.6%.

    • EBITDA for Q3 degrew by 18.7% YoY to ₹14.8 crores.

    • PAT for Q3 degrew by 36% YoY to ₹1.2 crores.

    • Same store sales growth (SSG) is currently flat/no growth.

    • Distribution segment continued to incur losses in Q3, though losses have declined.

    • Gross margin impacted by increased discounting (discount sales increased from 20-22% to 30-32%).

    What Changed1

    vs Q4 FY25

    Guidance items13 → 6 (-7)
    Key financials

    Metrics

    10

    Periods

    2

    Q3 FY25

    5
    • Revenue
      ₹160.2 Cr
      YoY+2.5%
    • Gross Margin
      44.6%
    • EBITDA
      ₹14.8 Cr
      YoY-18.7%
    • PAT
      ₹1.2 Cr
      YoY-36%
    • Retail Volume
      17,96,000 pairs

    9M FY25

    5
    • Revenue
      ₹474.6 Cr
      YoY+0.7%
    • EBITDA
      ₹51.5 Cr
      YoY-4.8%
    • PAT
      ₹4.2 Cr
      YoY-20.5%
    • Retail ASP
      ₹539
    • Distribution ASP
      ₹96

    Segment breakdown

    Revenue Contribution (Q3 FY25)Revenue Contribution (9M FY25)
    Retail Segment66.1%63%
    Distribution Business31.2%32.2%
    COCO Stores——
    Heatmap· 2 shared metrics

    Guidance & targets

    6
    CategoryTargetPriority
    Profitability
    Distribution Segment Breakeven
    Breakeven
    		Medium
    Profitability
    Overall FY26 Performance
    Better compared to FY25
    		Medium
    Revenue
    Athleisure Segment Contribution to Total Sales
    1% or 2%
    		Medium
    Volume
    Retail Volume Growth
    Volume growth
    		Medium
    Volume
    Same Store Sales Growth (SSG)
    Increase SSG
    		Medium
    Volume
    Volume Growth from New Stores
    Some volume growth
    		Medium

    Distribution Segment Breakeven

    FY26
    CurrentIncurring losses in Q3 FY25
    TargetBreakeven

    Why it matters

    Achieving breakeven in this segment is a stated management goal and crucial for overall profitability.

    See, we have already told that in the distribution segment this year we are trying to reduce the losses, and in the next year we will try to do breakeven.

    How to verify

    guidance_and_targets[category='Profitability'][metric='Distribution Segment Breakeven']

    Risks & concerns

    4
    RiskSeverity

    Gross Margin Compression due to Discounting

    Gross margins declined by 110 bps in Q3 FY25 as discount sales increased from 20-22% to 30-32% to clear old stock and drive volume. — Management acknowledged

    medium

    Flat Same Store Sales Growth (SSG)

    The company is currently experiencing no growth in same store sales, prompting a strategy of price reduction to boost volume. — Management acknowledged

    medium

    Continued Losses in Distribution Segment

    The distribution segment continued to incur losses in Q3 FY25, although management aims for breakeven in FY26. — Management acknowledged

    medium

    Challenging Macro Market Conditions

    Management noted that current market conditions are not good, but the company is implementing various strategies to increase sales. — Management acknowledged

    medium

    Q&A highlights

    8

    “It is pending with the NCLT for final hearing. ... Within this financial year. ... Whenever the NCLT order comes, the first day of the next month the demerger will be effective.”

    Provides clarity on the expected completion timeline for the significant corporate demerger.

    asked by Arnav Sakhuja

    2 min read5 chapters

    Detailed Narrative

    01

    Q3 & 9M FY25 Financial Performance Overview

    Khadim India reported a 2.5% year-over-year revenue growth in Q3 FY25, reaching ₹160.2 crores. However, profitability was impacted, with gross margins declining by 110 basis points to 44.6%, and EBITDA degrowing by 18.7% to ₹14.8 crores, resulting in a PAT of ₹1.2 crores (36% YoY decline). For the nine-month period, revenue grew 0.7% to ₹474.6 crores, with EBITDA at ₹51.5 crores (4.8% degrowth) and PAT at ₹4.2 crores (20.5% decline).

    02

    Retail and Distribution Segment Performance

    The retail segment contributed 66.1% of total revenue in Q3 and 63% for the nine-month period. The company expanded its retail footprint, reaching 890 stores with 61 new openings in 9M FY25, comprising 222 COO stores and 668 franchise stores. The distribution business accounted for 31.2% of Q3 revenues and 32.2% for 9M FY25, onboarding 50 new distributors to reach a total of 776.

    03

    Strategic Shift Towards Volume and Margin Impact

    Management indicated a strategic shift to focus on volume growth, particularly through price reductions in the Khadim brand. This led to an increase in discount sales from 20-22% in FY24 to 30-32% in Q3 FY25, which was a primary factor for the 110 basis point decline in gross margins. The volume of retail business increased from 1,749,000 pairs to 1,796,000 pairs in Q3, supporting the volume-driven strategy.

    04

    New Product and Channel Initiatives

    Khadim India plans to introduce a new athleisure segment in the upcoming spring/summer season, with products priced between ₹500-750, initially targeting 50 stores in Eastern and Southern India, expecting 1-2% contribution to total sales in FY26. The company is also refining its online strategy, focusing on selective product baskets and digital marketing, while acknowledging that online is a lower-margin business.

    05

    Demerger and Future Outlook

    The demerger process is awaiting final hearing with the NCLT and is expected to be effective by April 1, 2025. Management is confident that the new athleisure segment and other higher-margin products will enhance gross margins in coming quarters. They aim for the distribution segment to achieve breakeven in FY26 and expect overall FY26 performance to be better than FY25, driven by volume growth, new store additions, and improved same-store sales growth.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.