Summary
Monte Carlo Fashions Limited - Q3 FY 2026 Earnings Call Summary Thursday, January 29, 2026, 11:00 AM
Event Participants
Executives Ankur Gauba (Company Secretary), R.K. Sharma (CFO), Rishabh Oswal (Executive Director), Sandeep Jain (Executive Director)
Analysts Amar Ahir (Raedan Capital), Diwakar Rana (Prudent Equity), Jigar Nathwani (Individual Investor), Kapil Jagasia (Carnelian Asset Management), Madhur Rathi (Counter Cyclical Investments), Manan Shah (Moneybee), Sheetal Shah (Individual Investor), Subrata (Mount Intra)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Revenue | ₹608 crores | +11% YoY; driven by strong rebound across categories and higher sell-throughs. |
| EBITDA | ₹166 crores | +7% YoY; EBITDA margin at 27.24% for the quarter. |
| Net Profit (PAT) | ₹107 crores | +11% YoY for Q3; 9M FY26 PAT grew 17% YoY to ₹107 crores. |
| 9M Revenue | ₹996 crores | +11% YoY; management expects to end the year at the higher end of 10-15% guidance. |
| EBITDA Margin (9M) | 20.23% | +100 to 150 bps YoY improvement expected for the full year FY26. |
| Inventory | ₹529 crores | Increased from ₹503 crores YoY; reflects preparations for a strong Q4 and summer trade show. |
| Sales Returns | 17% (9M) | Higher than 13% in 9M FY25; however, management expects significantly lower returns in Q4. |
| Cash Balance | ~₹300 crores | Cash-adjusted ROE is approximately 15% vs. nominal 10%. |
Geographic & Segment Commentary
- Cotton & Summer Wear: The segment grew 22.13% in 9M FY26, significantly outperforming the 13.9% growth in winter wear. Cotton now contributes 46% of the total mix as the company transitions toward a year-round apparel model.
- Emerging Brands & Footwear: Footwear sales more than doubled compared to 9M FY25. Other internal brands like “Rock.it” and “Cloak & Decker” (22 EBOs) continue to show consistent, high-growth performance.
- Digital & E-commerce: E-commerce contributed 12% to 9M revenue, growing 50% YoY. The company launched on overseas platforms like zoom.com and styleshop.com and partnered with Blinkit, Swiggy, and Zepto for 30-minute express deliveries.
Company-Specific & Strategic Commentary
- Retail Footprint Expansion: The company is committed to opening 40-45 EBOs annually, with a focus on Western and Southern India to balance its North-heavy presence.
- Solar Power Diversification: Investing in a 49MW PM KUSUM solar project via a separate subsidiary with a 70:30 debt-equity mix. The project has an expected IRR of 18% and acts as a financial investment to deploy surplus cash.
- Operational Efficiency: Strategic collaboration with Salesforce is underway to streamline digital operations and enhance customer loyalty programs.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Revenue Growth (FY26) | ~15% (Full Year) | Confident in hitting the top end of 10-15% range due to strong Q4 summer dispatches. |
| Revenue Growth (FY27) | 15% to 20% | Expected multi-year growth trajectory driven by lower channel inventory and emerging categories. |
| Store Openings | 40 to 45 EBOs | Annual target maintained for FY27 to deepen presence in Southern and Western regions. |
| EBITDA Margin | +100-150 bps YoY | Full-year improvement expected due to better sell-throughs and lower anticipated Q4 returns. |
Risks & Constraints
| Risk | Context |
|---|---|
| Seasonality & Returns | While Q3 was strong, historical Q4 performance is often impacted by inventory returns. Management notes 9M returns were 17%, though they anticipate a “surprise” improvement in Q4. |
| Working Capital | Inventory and debtor days remain high (167 days for inventory). Management plans to reduce debtor days by 5-10% next year but admits inventory will likely track sales growth. |
| Unrelated Diversification | The move into solar power (₹120-150 crore capex) was questioned by analysts regarding core business focus. Management maintains it is a purely financial decision to improve yields on cash. |
Q&A Highlights
Growth Strategy & Seasonality
- Question: Why is growth only 10% despite a harsh winter? (Madhur Rathi)
- Answer: Growth is in line with the 10-15% guidance provided earlier. Management focuses on profitable growth and noted that summer wear is now a major driver, growing faster than winter wear (Sandeep Jain).
Solar Investment
- Question: Why enter solar EPC when the core is apparel? (Madhur Rathi)
- Answer: It is not a business entry into EPC but a financial investment in a subsidiary. The project offers an 18% IRR compared to 9-10% currently earned on cash deposits (Rishabh Oswal).
Margin Compression in Q4
- Question: Historically, Q4 has very slim or negative operating margins. Will this year be different? (Subrata)
- Answer: Q4 FY26 is expected to be better than Q4 FY25 due to higher summer trade show volumes and lower anticipated retail returns because of strong winter sell-throughs (Sandeep Jain).
Working Capital
- Question: What steps are being taken to reduce inventory and debtor days? (Jigar Nathwani)
- Answer: Inventory will remain relatively high due to the shift toward sale-based retail and online channels. However, debtor days are targeted for a 5-10% reduction in FY27 (Sandeep Jain).
Key Takeaway
Monte Carlo Fashions delivered a resilient Q3 FY26 with 11% revenue growth, reaching ₹608 crores, underpinned by a 22% surge in the cotton segment and a doubling of footwear sales. While the company remains North-heavy and winter-dependent, the summer wear segment now accounts for 46% of the mix, signaling a successful strategic pivot toward a year-round brand. Management expressed high confidence in achieving the top end of their 15% revenue guidance for FY26 and projected a 15-20% multi-year growth trajectory. Key strategic moves include the expansion into quick commerce and a ₹120-150 crore diversification into solar power to optimize cash yields. Investors should monitor Q4 margin recovery and the management’s ability to reduce high working capital cycles as they expand the EBO footprint in the West and South.
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