KHADIM - Khadim India Limited Share Price

Management provided a cautious outlook for FY '27, aiming for revenue of approximately INR 400 crores and maintaining an EBITDA margin of 14%. The company anticipates gradual recovery in demand, supported by improving consumption trends and product innovation. Management highlighted several key initiatives, including:

1. Inventory Management: The company successfully reduced inventory levels by about 40% year-on-year, positioning itself for better stock management moving forward. They will maintain inventory prudently to avoid understocking and ensure availability of higher-margin products.

2. Revenue Targets: For FY '27, management expects to achieve revenue around INR 400 crores, similar to FY '26, where revenue was INR 367.1 crores, reflecting a 12% decline from the previous year.

3. Margins: Despite challenges, management is optimistic about achieving gross margins in the range of 48% to 50% and a steady EBITDA margin of 14%. They aimed for a margin recovery, projecting a potential increase of about 50 basis points due to a better product mix later in the year.

4. Premium Products: The TFM portfolio grew 46% year-on-year, and British Walkers saw a 6% increase, indicating strong demand within premium categories. Management plans to continue this trend as part of their premiumization strategy.

5. Store Count and Expansion: As of March 31, 2026, the company operated 851 stores. They plan to strategically open profitable stores while focusing on optimizing franchisee engagement.

6. E-commerce Growth: E-commerce contribution increased to approximately 5%, with expectations to further enhance online sales strategies.

Management emphasized a disciplined approach to cost management, franchisee engagement, and operational efficiencies to navigate the uncertain demand environment in the coming year.

Here are the major questions asked during the Q&A section of the earnings transcript, along with detailed answers provided by management:

1. Question: "How will we maintain the minimum revenue growth required to sustain a 14% EBITDA margin?" Answer: "Over the past two years, we've faced revenue declines primarily due to store closures and reduced primary sales to franchisees. With these closures behind us, I anticipate steady revenue at around INR 400 crores next year, enabling us to sustain an EBITDA margin of 14%."

2. Question: "Why has the blended gross margin declined despite scaling premium brands?" Answer: "The decline in blended gross margin is attributed to price cuts on products priced below INR 500. However, I'm pleased to report that the fourth quarter's margins improved, and with the launch of new seasonal products, we expect the gross margins to stabilize around 49% to 50%."

3. Question: "What is the expected timeline for the premium mix to offset discounting pressure?" Answer: "While certain products will require discounting after 2-3 seasons, the proportion of discounted products in our total inventory has decreased. This year, I expect fewer discounted sales, paving the way for improved margins."

4. Question: "What are the risks of lost sales due to understocking in Q4 FY '26?" Answer: "Our decision to reduce inventory means some sales were missed in Q4 due to lower stock levels. However, we believe this strategic approach allows us to enhance our product mix, enabling better sales and margins moving forward."

5. Question: "When do you plan to transition from inventory correction to inventory-led growth?" Answer: "The inventory correction phase is now complete. We will increase our inventory judiciously this year, ensuring we adequately stock new season products while minimizing discounted items in total inventory."

6. Question: "How much additional revenue drag should we expect in FY '27 from continued store rationalization?" Answer: "In the past two years, we've closed around 60 stores but are now focused on opening strategic new locations that promise profitability. We won't retain unprofitable stores, ensuring we maintain revenue potential."

7. Question: "Are newly opened franchisee stores delivering higher throughput versus legacy COCO stores?" Answer: "Yes, our new TFM/FRM franchisee stores, where we merely invest in stock, are outperforming legacy COCO stores, which demand both capex and stock investment. This model yields better profits for us."

8. Question: "What is your guidance for FY '27 in terms of financial performance?" Answer: "We are aiming for a revenue target of INR 400 crores, with EBITDA margins around 14% and gross margins between 48% and 50%."

9. Question: "What percentage of total revenue currently comes from products priced above INR 1,500?" Answer: "Currently, only about 15% of our total revenue comes from products priced above INR 1,500."

10. Question: "What are the specific initiatives to improve EBITDA margins back to historical levels?"

Answer: "We aim to improve sales by 5%-10%, which coupled with our cost reductions, could enhance our EBITDA by 100-200 basis points. We expect to maintain a 14% EBITDA margin for FY '27."

These questions encapsulate key concerns from stakeholders and the management's strategic responses regarding financial performance and market positioning.