Khadim India Limited — Q3 FY26 earnings call

Call held 16 Feb 2026

Management summary

Khadim India reported a challenging Q3 and 9M FY26 with significant revenue and EBITDA declines, primarily attributed to a subdued demand environment, strategic inventory reduction, and higher employee costs. Despite the downturn, the company is focusing on premium sub-brands, athleisure expansion, and omnichannel growth, with an improved gross margin in Q3 and positive outlook for FY27 margins and profitability. Working capital management, particularly inventory and debtors, remains a key focus.

Highlights

  • Partnership with Skechers progressing positively, with sequential doubling of sales and strong consumer acceptance.

  • Athleisure portfolio witnessing steady consumer interest and selective distribution expansion.

  • Walkers delivered a healthy year-on-year growth of 9.9% in men's formal and semiformal categories.

  • Sharon maintained stable performance with refreshed designs and improved in-store merchandising.

  • Gross margin improved in Q3 compared to the first two quarters, with a target of 49-50% for FY27.

Concerns

  • Q3 FY26 revenue declined 21.8% year-on-year to INR 86.2 crores.

  • Q3 FY26 EBITDA declined 31% year-on-year to INR 11.1 crores.

  • Company registered a minor loss of INR 0.2 crores during Q3 FY26.

  • 9M FY26 revenue declined 12.5% year-on-year to INR 283.5 crores.

  • 9M FY26 EBITDA declined 24.5% year-on-year to INR 37.2 crores.

  • PAT decline in 9M FY26 primarily due to higher employee-related costs from revised Labor Code implementation.

  • Gross margins for 9M FY26 declined to 48.2% from 53.1% last year due to discounting and price cuts.

  • High institutional debtors (INR 35-36 crores) and slow payment cycles impacting working capital.

Key financials

2 periods

Q3 FY26

  • Revenue
    ₹86.2 Cr
    YoY -21.8%
  • EBITDA
    ₹11.1 Cr
    YoY -31%
  • EBITDA Margin
    12.8%
  • Loss
    ₹0.2 Cr

9M FY26

  • Revenue
    ₹283.5 Cr
    YoY -12.5%
  • EBITDA
    ₹37.2 Cr
    YoY -24.5%
  • EBITDA Margin
    13.1%
  • Gross Margin
    48.2%

What they filed

Q1 FY27: revenue down 18.7%, net profit down 38.8% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue161 110 94 96 102 −37%86 −22%84 −11%78 −19%
EBITDA19 16 16 12 14 −29%11 −31%12 −25%8 −37%
Net profit2 1 1 1 2 −28%-0 −116%1 −18%1 −39%
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

medium confidence
  • Debt Net ₹110 Cr
    This year, I mean, debt will remain because we have reduced the stock. So again, some stock we require. So it will be more or less in the INR110 crores range. Whatever we have in December, around INR114 crores, we will be having INR110 crores debt.
  • Liquidity Liquidity disclosed Company is focusing on reducing working capital by optimizing inventory and debtors days.
    So we are -- by March end, we will again reduce the working capital with creditor and inventory days. So we have consciously done this.

Guidance & targets

Profitability

  • Gross Margin Profitability · FY27 · Medium confidence 49-50%
    I think around 49%, 50% will be the steady state of gross margin in FY '27.

    — Indrajit Chaudhuri

  • EBITDA Margin Profitability · FY27 · Medium confidence 14-14.5%
    However, I think based on the cost structure and the sales and the margin for the next year, we can expect in FY '27 around 14% to 14.5% EBITDA.

    — Indrajit Chaudhuri

  • PAT Margin Profitability · FY27 · Medium confidence 2-2.5%
    Around 2% to 2.5%.

    — Indrajit Chaudhuri

Revenue

  • Top Line Revenue · FY27 · Medium confidence INR 350 crores
    Sure, sir. And just what I could gather is, from a top line perspective, FY '27 should be more like a INR350 crores kind of a top line with 14%, 14.5% EBITDA margin.

    — Devanshu Bansal

Working Capital

  • Inventory Days Working Capital · next quarter · High confidence 105-107 days

    From 117 days today

    Inventory, we have reduced the inventory, as I told from inventory days of 131, it has come down to 117 days now. And by next quarter, we'll be landing up around 105 to 107 days.

    — Indrajit Chaudhuri

  • Debtors Days Working Capital · FY27 · Medium confidence 120 days
    Now we are focusing on the debtors. So hopefully, debtors days we'll try to reduce it to 120 days.

    — Indrajit Chaudhuri

Product Mix

  • Premium Sub-brands Contribution Product Mix · next 3-4 years · Medium confidence 20-25%
    Hopefully, by as you call 3 to 4 years, these two will contribute around 20% to 25%.

    — Indrajit Chaudhuri

Channel Mix

  • Online Sales Contribution Channel Mix · next year · Medium confidence 10%

    From 3-4% today

    Next year, we have a target of increasing the online sales to 10%.

    — Indrajit Chaudhuri

What to watch in Q4 FY26

Inventory Days Reduction

next quarter
Current 117 days
Target 105-107 days

Why it matters

Indicates effective working capital management and inventory optimization.

Inventory, we have reduced the inventory, as I told from inventory days of 131, it has come down to 117 days now. And by next quarter, we'll be landing up around 105 to 107 days.

Risks & concerns

  • Subdued demand environment and pressure on discretionary spending

    high

    Q3 FY26 marked by a relatively subdued demand environment, particularly in value-driven segments, impacting overall consumption trends.

    Management acknowledged

  • Impact of revised Labor Code and government norms on costs

    medium

    PAT decline in 9M FY26 primarily attributed to higher employee-related costs and compliance adjustments due to new regulations.

    Management acknowledged

  • Franchisee margin pressure

    medium

    Franchisees are experiencing margin pressure due to reduced sales, though the company is working to improve secondary sales and cost efficiency.

    Management acknowledged

  • High institutional debtors and slow payment cycle

    medium

    Around INR 35-36 crores of institutional debtors are outstanding, with some being more than 6 months old, impacting working capital.

    Management acknowledged

  • Challenges in athleisure rollout due to store infrastructure

    low

    Small store sizes and lack of changing rooms in many outlets hinder aggressive expansion of the athleisure segment, particularly for ladies' products.

    Management acknowledged

Q&A highlights

6 direct
Revenue decline breakdown (volume vs price vs store closures) Partial
Around 7% to 8% decline is because of the store closure. And also here, as Rittick pointed out, the creditors days has come down from 131 days in September 2025 to 117 days. So we are -- by March end, we will again reduce the working capital with creditor and inventory days. So we have consciously done this.

Analyst sought a detailed breakdown of the 21.8% YoY revenue decline, which management attributed to strategic inventory reduction, store closures (7-8%), and working capital optimization efforts rather than just price/volume.

Asked by Riya Malik

Premium sub-brands contribution to total retail revenue Direct
So sub-brand would be about 60% and 40% is the mother brand Khadim's.

Clarified the current contribution of premium sub-brands (British Walkers, Sharon) to total revenue and the target for future growth (20-25% in 3-4 years) with slightly higher margins (2-3% more).

Asked by Rutuja Gohil

Skechers partnership revenue contribution and store rollout plan Direct
It's a very pilot project we have done this year. So it's around INR1.5 crores to INR2 crores. But hopefully, in next year, we will increase and now I think it's around 20 stores.

Provided specific revenue figures (INR 1.5-2 crores) and store count (20 stores) for the Skechers pilot project, indicating its early stage but positive progress.

Asked by Rutuja Gohil

Higher other income in Q3 Direct
Since we have closed some shops in this quarter, so this is mainly because of the impact of the liability written off for the Ind AS thing. So for that reason, it has increased. No, no. That's one-off numbers.

Clarified that the higher other income was a one-off event related to liability write-offs from closed shops, indicating it's not sustainable going forward.

Asked by Anupam Jain

Gross margin decline and FY27 outlook Direct
In third quarter, the margin has improved. Again, in the next year with the premium product being sold -- the percentage is higher, the margin will definitely improve.

Addressed the decline in 9M gross margins (48.2% vs 53.1%) due to discounting and price cuts, but highlighted Q3 improvement and projected a 49-50% steady-state gross margin for FY27 driven by premium product mix.

Asked by Anupam Jain

Asset-light model and future expansion strategy Direct
Yes. Obviously, asset-like model seems, we'll expand more through franchisee and in case of COCO, we'll only open where there is a strategic point and there is profitability.

Confirmed the company's strategic shift towards an asset-light model, prioritizing franchisee expansion and only opening COCO stores in profitable, strategic locations.

Asked by Viral Jain

Online sales percentage and margin Direct
See, around 3% to 4% of the sales comes from online. Online, there are 2 types of sales. One is the sale from our own website and the omni sales from the retail. So there, the margin is around 10% and whereas in the marketplace, the margin is 1% to 2%.

Provided a breakdown of online sales contribution (3-4%) and margins (10% for own website, 1-2% for marketplace), indicating a focus on own platforms for better profitability and a target to increase online sales to 10% next year.

Asked by Ankit Shah

Athleisure rollout strategy and store suitability Partial
What happens in athleisure is that if you compare to our stores, there are stores which are very small, where we cannot put up the athleisure thing. So that is also a hindrance for us because we don't have a changing room. For ladies, the athleisure, we cannot give a changing room.

Revealed challenges in aggressive athleisure rollout due to store size limitations and lack of changing rooms, especially for ladies' athleisure, impacting distribution strategy.

Asked by Anupam Jain

2 min read 6 chapters

Detailed narrative

Subdued Demand and Financial Performance

Khadim India faced a challenging Q3 FY26, with revenue from operations declining by 21.8% year-on-year to INR 86.2 crores. EBITDA for the quarter also saw a significant drop of 31% to INR 11.1 crores, resulting in a minor loss of INR 0.2 crores. For the nine months ended December 31, 2025, revenue decreased by 12.5% to INR 283.5 crores, and EBITDA fell by 24.5% to INR 37.2 crores, with the PAT decline primarily attributed to increased employee-related costs from revised Labor Code implementation.

Strategic Focus on Premium Brands and Athleisure

Despite the overall market slowdown, the company's premium sub-brands, British Walkers and Sharon, showed positive traction. Walkers achieved a 9.9% year-on-year growth in men's formal and semiformal categories, while Sharon maintained stable performance with refreshed designs. The Skechers partnership, a pilot project, saw a sequential doubling of sales, contributing INR 1.5-2 crores and expanding to 20 stores. Management aims for premium sub-brands to contribute 20-25% of total revenue in the next 3-4 years, up from the current 60% for all sub-brands.

Inventory and Working Capital Management

A key focus for the company was disciplined inventory management, with inventory days reduced from 131 to 117 days, targeting 105-107 days by the next quarter. This strategic reduction in inventory contributed to the Q3 sales decline but is expected to improve working capital. The company is now also prioritizing the reduction of high institutional debtors, which currently stand at INR 35-36 crores, aiming to bring debtors days down to 120 days in FY27.

Omnichannel Strategy and E-commerce Growth

Khadim India is intensifying its omnichannel presence, with online sales currently contributing 3-4% of total revenue. The company aims to increase this to 10% next year, focusing on its own websites (khadims.com, britishwalkers.com) for better margins (10% vs 1-2% on marketplaces). New product lines are being developed specifically for online channels to ensure profitable sales, and the company is streamlining its online operations through third-party logistics like Ekart.

Store Network and Expansion Plans

As of Q3 FY26, Khadim India's retail footprint included 864 stores, comprising 195 company-owned outlets (COCO) and 669 franchise-operated outlets. The company has closed unprofitable stores in the past two years, contributing to the sales decline. Future expansion will primarily be through an asset-light franchisee model, with new COCO stores opened only in strategic, profitable locations. East and South India remain the primary regions for expansion, with West India being de-focused.

Margin Outlook and Cost Management

Gross margins for 9M FY26 declined to 48.2% from 53.1% due to discounting and price cuts, but Q3 saw an improvement compared to earlier quarters. Management projects a steady-state gross margin of 49-50% and an EBITDA margin of 14-14.5% for FY27, driven by a higher contribution from premium products and disciplined cost management. The company also targets a PAT margin of 2-2.5% for FY27, aiming for a top line of INR 350 crores.

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