Khadim India Limited — Q4 FY25 earnings call

Call held 26 May 2025

Management summary

Khadim India reported a mixed Q4 FY25, with revenue growth and margin expansion, but a decline in PAT. The company successfully completed its demerger, setting the stage for KSR Footwear's listing. Management is optimistic about FY26 volume growth driven by reduced MRPs, new product introductions like athleisure, and strategic store expansion, despite anticipating initial gross margin pressure in the retail segment.

Highlights

  • Q4 FY25 revenue of ₹149.1 crores, up 3.8% YoY.

  • Gross margin improved by 62 basis points in Q4 FY25 to 46.9%.

  • FY25 gross profit margin improved by 130 basis points to 46.7%.

  • Successful completion of the demerger process for the distribution business into KSR Footwear Ltd.

  • Volume degrowth arrested in FY25, with expectations for volume growth in FY26.

Concerns

  • Q4 FY25 PAT declined 10.1% YoY to ₹0.92 crores.

  • Macroeconomic environment remained challenging with muted demand.

  • Retail segment gross margins expected to be lower in early FY26 due to strategic MRP reductions.

Key financials

2 periods

Q4 FY25

  • Revenue
    ₹149.1 Cr
    YoY +3.8%
  • Gross Margin
    46.9%
  • EBITDA
    ₹15.18 Cr
  • EBITDA Margin
    10.2%
  • PAT
    ₹0.92 Cr
    YoY -10.1%
  • PAT Margin
    60%

FY25

  • Revenue
    ₹623.7 Cr
    YoY +1.4%
  • Gross Profit Margin
    46.7%
  • EBITDA
    ₹66.6 Cr
  • EBITDA Margin
    10.7%
  • PAT
    ₹5.06 Cr
  • PAT Margin
    80%
  • Retail Pre-Ind AS EBITDA Margin
    11.6%

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 Gross ₹100 Cr
    Yes, we have a plan of reducing the debt, but that depends on the cash flow and also the profitability of the business and some extraordinary income. So whatever cash is generated in excess of what is required will be used for reducing the debt. In the last two, three years, we have already reduced the debt from Rs. 125 crores to Rs. 100 crores, and we will be again in the process of reducing the debt.
  • M&A KSR Footwear Ltd. (Distribution Business) Divestment · Closed

    enable sharper focus and better performance across both the retail and distribution segments.

    Distribution segment targeting breakeven in FY26 and profitability in FY27.

    One of the key milestones during the quarter was the successful completion of our demerger process. The scheme of arrangement for transfer of distribution business of Khadim India Limited into KSR Footwear Limited has been approved by the Honorable National Company Law Tribunal, Kolkata Bench, by its order dated 27th March, 2025. The said scheme has been effective from 1st May, 2025 and in terms of the said scheme, all the assets and liabilities as demarcated pertaining to the distribution business of Khadim India Limited stands vested with KSR Footwear Ltd with effect from the appointed date which is 1st April, 2025.

Guidance & targets

Store Expansion

  • New Retail Stores Opened Store Expansion · FY26 · High confidence 50 stores
    In retail, we are planning to open around 50 stores combining of COCO and franchisee in the FY '26.

    — Indrajit Chaudhuri

  • New COCO Stores Opened Store Expansion · FY26 · High confidence 7-8 stores
    Around seven to eight COCO, and balance franchisee.

    — Indrajit Chaudhuri

Distribution Segment Profitability

  • Breakeven Distribution Segment Profitability · FY26 · High confidence Breakeven
    We are targeting breakeven in the distribution segment by FY '26, with a renewed focus on cost reduction and sales growth.

    — Rittick Roy Burman

  • EBITDA Positive Distribution Segment Profitability · FY26 · High confidence EBITDA positive
    FY '26 we will definitely be in the EBITDA positive, but it's dependent on other factors also, the volume and the prices. But definitely in FY '27, with the lowering of cost reduction initiatives that will be taken this year, we will be profitable in KSR in FY '27.

    — Indrajit Chaudhuri

  • Profitable Distribution Segment Profitability · FY27 · High confidence Profitable

    — Indrajit Chaudhuri

Retail Segment Margins

  • Gross Margin Trend Retail Segment Margins · FY26 · Medium confidence Bottom out
    So, I think the margin has not come down, but in FY '26 it will come to a level playing field, means in FY '26 margin will be the margin that we will be sustaining for the next years. However, as our MD told that in some sub-brands there are some products where we are increasing the margin seeing its demand and the acceptability. So, with that also we will try to improve some margin, but in FY '26 we will bottom out in terms of the margin.

    — Indrajit Chaudhuri

Volume Growth

  • Overall Volume Growth Volume Growth · Coming quarters · Medium confidence Volume growth
    We expect volume growth from that in the coming quarters.

    — Rittick Roy Burman

Sales Growth

  • Same Store Growth (SSG) Sales Growth · Medium confidence SSG growth
    SSG growth, see SSG growth will come only if the volume increases, because since we are slightly decreasing the ASP. So, if the volume increases then only SSG growth will come. And with the macroeconomic scenario not so good, so we think that the lowering of the prices in the Khadim brand will improve the volume, and that will bring the SSG growth in our store.

    — Indrajit Chaudhuri

Receivables

  • Punjab Government Dues Recovery Receivables · This financial year · High confidence Recovered
    One of the bidder has already got the payment and we think that we will definitely get it within this financial year.

    — Indrajit Chaudhuri

Footfall

  • Pairage Footfall · Medium confidence 1 crore and beyond
    Footfall guidance we want to grow our pairage. We used to be 1 crore pair few years back, so we want to reach there as fast as possible and then grow beyond that. That would be the footfall guidance.

    — Rittick Roy Burman

Taxation

  • Effective Tax Rate (Retail) Taxation · FY26 and FY27 · High confidence 25.2%
    The effective tax rate will be 25.2% because the losses that were there in the FY '20 and '21 has already been adjusted with the profit for the last three years. So now whatever taxes that come will have to be paid.

    — Indrajit Chaudhuri

Athleisure Expansion

  • Athleisure Stores Athleisure Expansion · Medium confidence 50-75 stores
    Now we are expanding it to many more stores. In the beginning it was limited to around 20 stores, now we are increasing it to around 50 to 75 stores. So, we will slowly expand it in all stores.

    — Indrajit Chaudhuri

  • Company-Owned Athleisure Stores Athleisure Expansion · End of this year · High confidence All company-owned stores
    We have an aim to at least complete our entire company owned stores by end of this year.

    — Indrajit Chaudhuri

What to watch in Q1 FY26

KSR Footwear Listing

Within a month
Current Pending MCA transfer, record date announcement expected soon
Target Listing completed or record date announced

Why it matters

Completion of the demerger and listing of KSR Footwear is a key strategic milestone for the company's future structure and valuation.

So once that thing is done, which will be done within this week, we will be announcing the record date and the listing process will also start.

Risks & concerns

  • Macroeconomic Headwinds and Muted Demand

    medium

    The global macroeconomic environment remained challenging with shifts in consumer spending behavior, leading to a muted demand.

    Management acknowledged

  • Inflationary Pressures

    medium

    Inflationary pressures remain, impacting consumer purchasing power and necessitating strategic price reductions.

    Management acknowledged

  • Gross Margin Compression in Retail

    medium

    Gross margins in the Khadim brand are expected to be lower in early FY26 due to strategic MRP reductions aimed at driving volume growth.

    Management acknowledged

  • Competition in Athleisure Segment

    low

    There is a lot of competition in the athleisure segment, requiring value-based product offerings to ensure volume uptake.

    Management acknowledged

Q&A highlights

8 direct
Retail Store Expansion and Profitability for FY26 Direct
In retail, we are planning to open around 50 stores combining of COCO and franchisee in the FY '26. ... there will be some margin reduction in that. So for that maybe in the first quarter and in the second quarter there will be some gross margin reduction. However, we think that it will be combined with the value growth.

Provides specific targets for retail expansion and clarifies the expected initial impact on margins due to pricing strategy.

Asked by Arnav Sakhuja

KSR Footwear Listing Timeline Direct
We are already in that timeline zone, but what has happened is that in the NCLT order there is a transfer of authorized capital from Khadim India to KSR, which is pending in the MCA. So once that thing is done, which will be done within this week, we will be announcing the record date and the listing process will also start.

Gives a clear update on the critical demerger completion and listing process for the new entity.

Asked by Bhargav

Debt Reduction Plan for Retail Business Direct
Yes, we have a plan of reducing the debt, but that depends on the cash flow and also the profitability of the business and some extraordinary income. So whatever cash is generated in excess of what is required will be used for reducing the debt. In the last two, three years, we have already reduced the debt from Rs. 125 crores to Rs. 100 crores, and we will be again in the process of reducing the debt.

Addresses the company's strategy for managing and reducing the existing debt in the retail segment.

Asked by Bhargav

Impact of Demerger on Fixed Costs Direct
Yes, in some cases like the audit fees and all these things, there will be. But we are maintaining the two departments, so the costs are totally different. And may be some common expenses like the NSE, BSE fees and all these, that we will be incurring in both the companies, that is not a very big amount but there will be some duplication.

Clarifies the potential for increased operational costs post-demerger due to shared services and regulatory requirements.

Asked by Bhargav

Athleisure Segment Margins and Expansion Strategy Direct
Athleisure margin will be more or less same as the footwear. We have kept value based product, so that the more volume uptake is there. ... Now we are expanding it to many more stores. In the beginning it was limited to around 20 stores, now we are increasing it to around 50 to 75 stores. So, we will slowly expand it in all stores.

Details the margin strategy and aggressive expansion plans for the new athleisure product category.

Asked by Arnav Sakhuja

Distribution Business Profitability Outlook Direct
FY '26 we will definitely be in the EBITDA positive, but it's dependent on other factors also, the volume and the prices. But definitely in FY '27, with the lowering of cost reduction initiatives that will be taken this year, we will be profitable in KSR in FY '27.

Provides a clear timeline for the profitability trajectory of the newly demerged distribution business.

Asked by Akhil Parekh

Retail Gross Margin Stabilization Outlook Direct
So, I think the margin has not come down, but in FY '26 it will come to a level playing field, means in FY '26 margin will be the margin that we will be sustaining for the next years. ... but in FY '26 we will bottom out in terms of the margin.

Addresses analyst concerns about declining gross margins and provides a forward-looking view on stabilization.

Asked by Akhil Parekh

Punjab Government Dues Recovery Direct
It is pending before the High Court. Already we have got a date and I think that has been done on 19th of this month. And the next date would be in the month of July. One of the bidder has already got the payment and we think that we will definitely get it within this financial year.

Gives an update on the recovery of significant outstanding dues, which could impact liquidity.

Asked by Anupam Jain

2 min read 6 chapters

Detailed narrative

Q4 & FY25 Performance Overview

Khadim India reported Q4 FY25 revenue of ₹149.1 crores, marking a 3.8% year-on-year increase, driven by volume growth and better cost control. The gross margin for the quarter improved by 62 basis points to 46.9%. For the full fiscal year 2025, revenue increased by 1.4% to ₹623.7 crores, with the gross profit margin expanding by 130 basis points to 46.7%. Despite these improvements, Q4 FY25 Profit After Tax (PAT) declined by 10.1% year-on-year to ₹0.92 crores, reflecting a challenging macroeconomic environment and muted consumer demand.

Strategic Demerger and Future Outlook

A significant milestone was the successful completion of the demerger process, transferring the distribution business into KSR Footwear Ltd., effective May 1, 2025. This strategic move aims to enable a sharper focus on both the retail and distribution segments, with KSR Footwear targeting breakeven in FY26 and profitability in FY27. The retail business will continue to drive performance through value-focused pricing under the Khadim brand and premiumization of sub-brands.

Retail Expansion and Athleisure Launch

The company plans to open approximately 50 new retail stores in FY26, including 7-8 company-owned (COCO) and the remainder as franchisee stores, primarily in Eastern, Northeastern, and Southern India. As of FY25, the retail network stood at 886 stores. Khadim is also launching a new athleisure segment in the upcoming spring/summer season, which will expand to 50-75 stores and eventually all company-owned stores by the end of the year, aiming to increase value sales without significant fixed cost increases.

Margin Management and Volume Growth Initiatives

While gross margins for the retail segment are anticipated to be slightly lower in the first two quarters of FY26 due to strategic MRP reductions in the Khadim brand, management expects margins to 'bottom out' during FY26. The primary objective of these price adjustments is to stimulate volume growth, which saw its degrowth arrested in FY25. The company is optimistic for overall volume growth and Same Store Growth (SSG) in the coming quarters, supported by new product introductions and store renovations.

Operational Efficiency and Debt Position

Khadim India has implemented cost efficiency measures, including shifting e-commerce warehouse operations to Ekart Logistics, which is expected to reduce costs by 20% by converting fixed overheads to variable costs. The company is also upgrading its warehouse management system to Microsoft D365 WMS for improved stock management. The retail business currently carries approximately ₹100 crores in debt, which management plans to reduce based on cash flow generation and profitability.

Receivables and Tax Guidance

The company is actively pursuing the recovery of approximately ₹32 crores from the Punjab Government, with the matter currently before the High Court and expected to be realized within the current financial year. All dues from the UP Government have already been received. For the retail operations, the effective tax rate is projected to be 25.2% for FY26 and FY27, as past losses from FY20 and FY21 have been fully adjusted.

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