KHADIM - Khadim India Limited Share Price

Management Outlook:
Khadim's management highlighted a challenging macroeconomic environment with muted demand in Q4 FY24, exacerbated by heatwaves and election-related disruptions. However, they remain optimistic about recovery post-elections and festive season uptick. Margins are expected to improve further with softening raw material costs and a favorable product mix (retail now contributes 61% of sales). The demerger process is on track, pending NCLT approval (expected in 3"“4 months).

Key Points:

1. Margins & Costs: Gross margin improved to 46.2% in Q4 (+180 bps YoY) driven by retail focus. Full-year EBITDA margin rose 50 bps to 11.5%. Raw material cost relief is anticipated to bolster margins.
2. Expansion: Added 94 stores (total 868: 223 COCO, 645 franchisees) in FY24; plans to add 25 COCO and 70 franchisee stores in FY25. Distribution network expanded to 753 distributors (+81 YoY).
3. Demand Recovery: Weakness in lower-price segments offset by growth in premium categories (>Rs.1,000). Expect volume recovery post-elections, especially in Tier 3/4 cities, with potential price adjustments in entry-level products to counter unorganized competition.
4. Premiumization & Innovation:
   • Sports/athleisure contributed ~12% of sales; new athleisure apparel (priced Rs.500"“750) to launch in July.
   • Premium brands (e.g., British Walkers) doubled sales in the Rs.2,500"“3,000 range.
5. Regulatory & Strategic: Monitoring BIS norms; liquidating pre-BIS inventory. Retail/store refurbishment (22 stores in FY25) to enhance productivity.
6. FY25 Targets: Aim for 12"“15% retail revenue growth, targeting Rs.650"“700 crore in retail sales with 17"“18% EBITDA margins.

Challenges: Persistent demand softness in low-price segments, election/festival timing impacting near-term sales, and BIS-related adjustments.

Question 1:
"Congratulations for good retail performance. So firstly, my side, so how do we see footwear demand improving for FY '25 on the background of this BIS implementation? We have seen many of the footwear peers also reported a drop in revenue growth. So how do we see demand improving in FY '25?"
Answer:
Demand remains muted due to heatwaves (reducing footfall) and elections. Post-elections and festive seasons may revive demand, though macroeconomic challenges persist. BIS-compliant inventory liquidation via discounts is ongoing.

Question 2:
"Okay. So do we expect the flattish kind of run rate to continue in FY '25 also, even for industry?"
Answer:
Post-election and festive demand may improve, but macroeconomic volatility and consumer spending trends will influence growth.

Question 3:
"Okay. So have we taken any price hike during the quarter?"
Answer:
No price hikes for existing products to avoid volume impact. New products introduced in higher price brackets (festive/AW collections) with stable margins.

Question 4:
"Okay. So what is the kind of number we have seen in COCO and franchisee stores in retail?"
Answer:
Q4 Retail (COCO + franchisee): Rs.93 crores; Distribution: Rs.50 crores. FY24 Retail contribution: 65% (Rs.399 crores).

Question 5:
"Okay. And this drop in Distribution business seems very high. So, have we consciously reduced any product categories or we have concentrated any region specific to improve margins?"
Answer:
Distribution dropped Rs.30 crores YoY due to strategic receivables reduction. New products and demand recovery expected to stabilize FY25 sales.

Question 6:
"We have seen good performance in retail division, and also the bounce back and Distribution margins. Sir, my question is regarding sports and athleisure. So how has -- so are we to understand that there is a 18-20% contribution from the segment? So can you talk more on this how -- build up in Q4? And what are the new designs you are introducing, or the SKUs or anything on casual wear also."
Answer:
Sports/athleisure contributes 18-20%, driven by ladies/kids categories. Plans to launch athleisure apparel under "Pro" (test phase in 40 stores from July 2024, priced Rs.500"“Rs.750).

Question 7:
"Understood, Sir. Can you say how much will be contributed from athleisure wear in FY '25? What type of business are we looking at?"
Answer:
Initial trial in 40 stores (urban-focused). Contribution depends on consumer response; cautious optimism but no specific targets yet.

Question 8:
"Recently we've seen that we've been renovating a lot of stores and a lot of new stores opening also. So, what sort of volume growth do we see in FY '25, or any SSG matrix you can provide going forward for FY '25?"
Answer:
Targeting 6-7% growth via 25 new COCO and 70 franchisee stores. SSG improvements tied to refurbishments (22 stores in FY25) and festive demand.

Question 9:
"And anything on the margin side for FY '25?"
Answer:
Margins to remain stable (~45-46%) as volume recovery offsets no price hikes. New products to maintain margin mix.

Question 10:
"What was your ASPs for FY '24?"
Answer:
ASP for Retail: Rs.539 (vs. Rs.528 in FY23), driven by premiumization.

Question 11:
"Understood. Sir, any updates on the demerger side? Should we expect a completion of demerger in the financial year?"
Answer:
Demerger awaiting NCLT approval; expected in 3-4 months. Listing of demerged entity to follow.

Question 12:
"Sir, first, a very basic question, BIS has been implemented, right? And now that we are into 4-5 months of implementation, I presume the excess inventory, which was people had hoarded on in November, December would have been consumed at industry level. Is it the right assumption to look or there is still inventory lying in the system? Because that could have also affected our performance in Q4, so, April, May how it has been for?"
Answer:
Most pre-BIS inventory liquidated via discounts. Small/micro enterprises granted a 1-year extension, delaying full BIS adoption.

Question 13:
"Sir, that is Rs.5 crores, right? That's small and micro classification is up to Rs.5 crores of annual revenue? Okay. So that was one. So, second, we -- if -- you were very focused on increasing the share of Pro/premium products. If I recollect the memory, it would be around -- it was around 20% for our last year. So, where is that percentage would have gone up this time in the last 1 year?"
Answer:
Sub-brands (incl. Pro) grew to 59% of Retail (vs. 57% in FY23). Premium products (Rs.1,500+) grew 8-9%, offsetting lower-price declines.

Question 14:
"Is there a thought to or cut down the entry points and focus more on so-called premiumization? Because if entry point is not bringing in profitability or maybe making some losses at current level or higher losses than the average performance, doesn't it make sense for you to focus your energy in trying to premiumize yourself?"
Answer:
Lower-price products (~25% of sales) retained to support franchisees and Tier 3/4 markets. Potential price adjustments to regain volume share from unorganized players.

Question 15:
"Sir, just a follow-up on premiumization. Your share on the premium shoes is around 6%. So, any plan to increase the share overall? And how we are going to -- how we are seeing this going forward?"
Answer:
Focus on British Walkers (Rs.3,000+) and urban COCO stores for premium growth. Tier 2/3 cities remain core for mass segments.

Question 16:
"And then just a margin thing in it -- any margin guidance for the athleisure, will it be higher or be the same for that athleisure?"
Answer:
Athleisure margins lower than footwear but positioned as volume driver. Success determines future scaling.

Question 17:
"I noticed that our COCO has been going down and franchise has been going up over the last few years as a proportion of sales. Does this mean that there is going to be if this trend continues, there is going to be upside to margins going forward? As also there will be an improvement in working capital as we move ahead?"
Answer:
COCO-franchisee mix to stabilize at 60:40. Margins and working capital (inventory/debtors) to remain steady with ratio consistency.

Question 18:
"In your opening comments, you said that because the last few years, there has been weak demand. This year, you anticipate sometime in the middle of the year for demand to pick up. Is that simply seasonal? Or there is something that is changing on the ground which you anticipate will give a rise in demand?"
Answer:
Post-election liquidity and festive demand (historically strong) expected to revive sales. Macroeconomic recovery critical.

Question 19:
"Right. If you take a slightly longer-term view of 3 to 5 years, our retail business, I think, is about Rs.500 crores today. Where do you see a retail business being in, 3 to 6 years from now?"
Answer:
Targeting Rs.650"“700 crores Retail revenue in 3 years (12-15% CAGR) with 17-18% EBITDA margins via store expansion and premiumization.

Question 20:
"Okay. And -- the gross margin expansion in the current year, has that been largely due to the mix change, you know what you were just, what you were just suggesting?"
Answer:
Gross margin improvement (350 bps) driven by mix shift to premium (higher ASPs) and retail focus.

Question 21:
"Sir, sticking back to the premiumization trend. So, you indicated you are seeing growth -- now I had a slightly different question. If you do a geographical split of the growth, is it coming across the country or it is coming from certain regions? And if you can just highlight which region you're seeing higher growth because -- yes, that is the question. Then I'll come to the next part."
Answer:
East India (482 distributors) leads growth, but premiumization trends nationwide. Tier 3/4 cities drive volume, urban centers focus on premium.

Question 22:
"Sir, you were looking to deploy the capital raised, in refurbishing the stores. So, if you can highlight where are we in that journey? And how are you looking to deploy over how many years or how much time frame?"
Answer:
Refurbishing 22 stores in FY25 (prioritizing low-performing/older stores). Results expected within 3 months post-renovation. Capital also allocated to 95 new stores (25 COCO, 70 franchisee).