Summary
Iris Clothings Limited - Q3 FY 2026 Earnings Call Summary Tuesday, February 03, 2026 10:00 AM
Event Participants
Executives 2 Harshvardhan Sarda (Business Head), Niraj Agarwal (Chief Financial Officer)
Analysts 4 Deepak Karwa (Individual Investor), Disha (Sapphire Capital), Kunjal Agarwal (Arihant Capital), Nish Shah (Stellar AMC)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Total Income | ₹48.7 crores | +46% YoY; Driven by product enhancements, distribution expansion, and a strong winter season. |
| EBITDA | ₹6.05 crores | Reported at ~12.4% margin; Lowered by one-time dealer conference costs and outsourcing of new product lines. |
| Profit After Tax (PAT) | ₹3.01 crores | +27% YoY; Sustained growth despite margin pressure from expansionary expenses. |
| PAT Margin | 6% | -100 bps YoY from 7% in the nine-month period; impacted by higher “other expenses.” |
| Distributor Count | 208 units | +8 units QoQ; Reflects growing market presence and trust in the DOREME brand. |
| Production Capacity | 40,000 pieces/day | Planned expansion to support organic demand and new product categories. |
| Capacity Utilization | 28,000 pieces/day | Management expects utilization to rise to 32,000–34,000 pieces/day in Q4 FY26. |
Geographic & Segment Commentary
- B2B Distribution: The core segment saw the addition of eight new distributors, bringing the total to 208. Performance was bolstered by a strong winter range and favorable weather conditions compared to previous years.
- EBO & Retail: Seven existing Exclusive Brand Outlets (EBOs) are now stable and profitable. The company plans to move beyond its stronghold in East India to enter South and West India clusters.
- New Product Segments: Infant wear currently contributes 12% of revenue with a target of 20% in two years. Niche segments like swimwear and innerwear are expected to stabilize at 5% of the total mix.
Company-Specific & Strategic Commentary
- Backward Integration: Set up a state-of-the-art embroidery unit to enhance infant wear value-add and become a fully integrated garment manufacturing facility.
- New Product Launches: Introducing newborn gift sets, woven nightwear, and corsets to diversify the portfolio; woven products are currently outsourced, impacting short-term margins.
- Digital & D2C Transformation: Re-enhancing the e-commerce website and social media presence to target 1,000 orders per day and a 10% revenue contribution from online channels in FY2027.
- Export Readiness: Management is exploring long-term manufacturing opportunities arising from the new EU-FTA and India-US trade deals.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Revenue Growth | 40% - 45% for FY 2027 | Driven by capacity expansion, new product categories, and retail footprint growth. |
| EBITDA Margin | 18% - 19% for Q4 FY26 | Management expects immediate recovery as one-off conference costs subside. |
| EBO Expansion | 15 - 20 stores in FY 2027 | Focus on cluster-based approach in Hyderabad, Bangalore, Chennai, and Mumbai. |
| Online Revenue | 10% contribution in FY 2027 | Shift toward brand-building via own website and marketplaces. |
Risks & Constraints
| Risk | Context |
|---|---|
| Margin Dilution | Outsourcing new product lines (woven nightwear/corsets) and aggressive D2C ad spends may pressure margins until scale is achieved. |
| Execution Delay | EBO expansion previously guided for Q4 FY26 is delayed by one quarter to ensure team readiness for new geographies. |
| Competition | The kids’ wear segment remains highly competitive; Iris relies on its in-house manufacturing “moat” to maintain price-value leadership. |
Q&A Highlights
Margin Contraction & Recovery
- Question: Why have margins dropped to ~12% and when will they recover? (Nish Shah)
- Answer: Impact was due to one-time costs for a large dealer/sales conference and lower margins on outsourced woven products. Management expects a bounce back to 18-19% in Q4 FY26 (Harshvardhan Sarda).
EBO Strategy
- Question: What is the CAPEX and timeline for new retail stores? (Disha)
- Answer: CAPEX is ~₹2,500 per sq. ft. (~₹25 lakhs per store). Stores typically take 12-15 months to mature and 15-16 months to breakeven (Harshvardhan Sarda).
Manufacturing & Capacity
- Question: How will the new embroidery unit and capacity expansion impact the business? (Nish Shah/Kunjal Agarwal)
- Answer: Embroidery completes the “value-add puzzle” for infant wear. Capacity is moving to 40,000 pieces/day to meet Spring-Summer demand (Harshvardhan Sarda).
Future Growth Mix
- Question: What is the outlook for infant and innerwear? (Deepak Karwa)
- Answer: Infant wear is projected to grow from 12% to 20% of revenue. Swimwear and innerwear will remain niche at ~5% but offer higher margins (Harshvardhan Sarda).
Key Takeaway
Iris Clothings delivered a strong Q3 FY2026 with 46% revenue growth to ₹48.7 crores, bucking the historical trend of a weak third quarter through a robust winter portfolio and distributor expansion. While EBITDA margins saw a temporary dip to ~12% due to one-off dealer conference expenses and the outsourcing of new woven product lines, management anticipates a swift recovery to 18-19% in Q4 FY2026. Strategically, the company is transitioning into a multi-channel brand by scaling its EBO footprint in South India and targeting a 10% online revenue contribution by FY2027. With capacity increasing to 40,000 pieces per day and a fully integrated manufacturing setup including a new embroidery unit, the company remains positioned for 40-45% revenue growth in the coming fiscal year. Investors should monitor the successful maturation of new EBO clusters and the stabilization of margins as outsourced products are potentially brought in-house.
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