Ladies and gentlemen, good day and welcome to the Sai Silks (Kalamandir) Limited Earnings Call for quarter and year ended March 31, 2026. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as on the date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded.
Today on the call we have with us Mr. Bharadwaj Rachamadugu, CEO, and Mr. K.V.L.N. Sarma, CFO. I would now like to hand the conference over to Mr. Bharadwaj Rachamadugu, CEO of the company. Thank you and over to you, sir.
Thank you, Ikra. Good morning, everyone, and thank you for joining us today for the Quarter Four and Full Year FY 2025/2026 Earnings Conference Call of Sai Silks (Kalamandir) Limited. On behalf of the management team, I extend a warm welcome to all of our investors, analysts, shareholders, stakeholders who are joining on the call today. I hope all of you had an opportunity to review our financial results, presentation and investor material shared with the stock exchanges and are available on our website as well. Joining me today on a call is our Chief Financial Officer, K.V.L.N. Sarma. FY 2026 has been an important and transformational year for Sai Silks (Kalamandir) Limited. Despite mixed discretionary demand environment and increased competitive industry intensity, we still delivered strong double-digit revenue growth, significant profitability improvement, sustained margin expansion, and also focused on our retail expansion.
Before I move into our business performance, I would also like to briefly touch upon the broader industry environment and evolving consumption trends that are shaping the women's ethnic Indian market. The Indian ethnic wear and occasion-led market continues to remain structurally strong, which is supported by the wedding economy, the rising disposable income, premiumization, and also the shift towards the organized retail from unorganized. One of the biggest structural drivers continues to be the wedding ecosystem. India's wedding-led consumption remains highly resilient, and wedding as well as the festive purchases continue to drive a significant portion of spending across retail categories. At the same time, organized retail also continue to gain market share across India.
Consumers are more aware today, increasingly are preferring brands and are trusting retailers due to the transparency that is available, better customer service, the omni-channel convenience, and the larger group of retail store network that they have. We're also seeing a strong growth coming from Tier 2 and Tier 3 cities, where rising aspirations, infrastructure development and brand awareness is creating meaningful long-term opportunities for organized ethnic retailers. From a region standpoint, South India continues to remain one of the strongest ethnic wear markets in the country, particularly in categories such as sarees and women's ethnic wear, which aligns well with our core positioning and brand strengths. However, the industry is also witnessing heightened competitive intensity, faster fashion cycles, increasing digital influence, which has an impact on the purchase behavior. Overall, we remain very optimistic about the medium and long-term opportunity in the Indian ethnic retail market.
The structural demand drivers for the category remain firmly intact, and we believe organized players with strong brands, deep regional understanding and disciplined execution are well-positioned to benefit from this opportunity over the coming years. Coming to our operational performance, I will first discuss the quarter four performance, followed by the full year 26 highlights. During quarter four, from a retail expansion perspective, we added approximately 24,000 sq f t of retail during the quarter. We delivered a revenue of about INR 419 crore, representing a growth of 5.1% YoY, despite a relatively mixed consumption environment across certain mature markets. Our gross margin stood at 42.08 compared to 41.71 last year, an increase of 37 basis points.
Our PAT for the quarter stood at INR 32.65 crores compared to INR 13.51 crores last year, an increase of about 140% YoY. Coming to the full year FY 2026 performance. FY 2026 again was a significant year in terms of expansion, operational strengthening and profitability. During the year, we have added 13 new stores and one extension store, taking our total network of our store from 68 stores to 81 stores across five states. We added close to 78,600 sq ft of retail space with a net retail addition of about 69,000 sq ft, taking our overall retail area to about 785,000 sq ft across five South Indian states.
For the full year, our revenue grew by 13.1% to INR 1,654 crore compared to INR 1,462 crore last year, while the same store sales growth stood at +3%. Varam ahalakshmi Silks and Valli formats led the growth majorly this year. For the full year FY 2026, our EBITDA grew by 128 basis points to 15.76% compared to 14.48% last year. Despite the changing market environment, we continue to maintain healthy gross margins at 42.07%, reflecting an improvement of 30 basis points over last year. Our PAT for the year grew significantly to INR 141 crore, compared to INR 85 crore in the previous year, representing a very strong growth of nearly 65%.
Even after considering the one-time tax impact in the previous year, our operational PAT last year was around INR 105 crore. Against this INR 141 crore PAT that is achieved this year, a substantial improvement of about more than 30% of PAT improvement demonstrated a strong operational efficiencies, disciplined co-cost management, and overall profitability across the business. Additionally, few other metrics, such as the ROE has improved from 7.78% to 11.78%, while the ROCE improved from 13.7% to 16.7%, reflecting stronger profitability and improved capital efficiency. Overall, FY 2026 was a year where we successfully balanced expansion, profitability, operational discipline, and strategic investments for our future growth.
While looking ahead in 2027, one of the key priorities for us will be to be able to focus on walk-ins across underperforming catchments. We have identified potential stores where the trends have softened and targeted hyperlocal marketing initiatives along with localized digital and on-ground campaigns. This will help us improve customer acquisition and engagement. From a merchandising standpoint as well, we are undertaking detailed assortment correction initiatives to improve alignment between stock mix as well as the consumer demand patterns. Thank you. I now wish to open the forum for questions and answers.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Rahul Jain from Credence Wealth. Please go ahead.
Thanks for the opportunity. Am I audible?
Yes, you are.
Yes, Mr. Rahul, you are audible.
Yeah. Sure.
Yes. Yes, Mr. Rahul. Please go ahead.
Thanks for the opportunity. Sir, a couple of questions my side. First of all, how do we look at growth for the next year in terms of net square foot addition and also SSG, given in the previous call we had mentioned that we have a strong wedding season right up to 1 more quarter. Somewhere this quarter also the wedding season looks have been good till now. What to understand, how do we look at the next square foot addition and overall SSG, thereby what kind of revenue growth we are looking for FY 2027? That is my first question.
Sure. See, in terms of revenue addition, I think, last year we have added close to 75,000-78,000, close to about 10% of retail addition is what we have added. This year we tend to actually plan a little bit more aggressive store expansion. We have identified potential locations, and the pipeline is more streamlined and solid this year. We should be able to expect at least 20% more than last year's square addition easily. However, I think, probably after H1, if there's something else and additional stores might come up, I'll keep you posted. At least for now, we should be able to expect at least 20% more than last year's square foot addition. With that in mind, I think, Yes. Sorry.
No, no. Sorry. This was net addition, right?
Yeah. See, generally we don't Our net addition and the overall addition is same. Just in this fiscal, this quarter, we have reduced the capacity. We did not close down any stores. We have reduced the capacity in one of our stores, and therefore that - 9,000 sq ft is there. That's the first time I'm actually talking about the net retail addition. Otherwise, it's always the same thing. We don't have any store closures that we anticipate in this year. Again, overall, to answer your question in short, yes, the net square feet addition in this year will be in the range of 100,000. On the SSSG front, the way we look at is we generally look at the wedding calendar. The wedding calendar is positioned comfortably this year.
There could be a small shift between quarter, overall the number of wedding dates wise, seem to be healthy. This is again spread between four quarters of Q1 and Q2, Q3, Q4. We do anticipate a similar to a little bit better SSG numbers than we've achieved this year. That's with respect to our SSG front. To your third question on the revenue guidance, I don't think, with the proper stores that we are going to open, it'll be difficult for me to give you a revenue guidance right now. I, as I did tell you, we are aiming at 100,000, there could be chances where we might end up opening a little bit more as well.
Keeping that in mind, our revenue targets will not have a right number if I can give you a number right now. broadly, if I have to give you, it should be more than the guidance that we have, more than what we've achieved last year, 2025, 20 26.
Sure. Sir, with regards to the productivity at existing stores, typically, we were targeting because Tamil Nadu has all the Varam ahalakshmi stores, and we understand Varam ahalakshmi is one of our best formats in terms of the growth. If we look at Tamil Nadu, today, the average square feet for the entire year is roughly around 32,300. How do we look at this number for the coming quarters? Because last two, three quarters it has somewhere been in the region of INR 95 crore-INR 98 crore.
I mean, see overall Tamil Nadu averages are slowly picking up. See the point here is, Tier 1, Tier 2, Tier 3, Tier 4 . Tamil Nadu is one state that have split between all four tiers of stores. It definitely will improve, but, it will not be a significant improvement. I think YoY you should be able to see about 5% to 10% kind of an improvement, slowly. However, I think these mature stores, when they come into maturity levels, I think this will ignite the process a little bit sooner.
Okay. Last question.
Does that answer your question?
Yeah, sure. The last question. Gross margins we have done reasonably quite well. We have been able to maintain somewhere near 42% gross margins. Just this quarter, your EBITDA margin, in spite of having 42%+ kind of gross margins, our EBITDA margins have been around 15% only, or it's around 14.6, primarily due to the increase in employee cost and the other expenses. Within those two buckets, anything to read in terms of some kind of one-offs or other? Going forward, do we look at a similar kind of quarterly run rate for these expenses?
See, on the gross margin side, I think I have to give you this year we have taken it as a very serious note. One of the top, high priority KPIs for us is to maintain the gross margin irrespective of the fact we're coming with the newer formats and lesser gross margin stores. We have done a lot of activity around the improvisation in terms of gross margins, in terms of vendor discounts, and therefore we were able to maintain the gross margins at this level despite all these changing economics, right? When you talk about the EBITDA percentages, in quarter four, there are broadly two heads where our expenditure head, the other expenditure majorly driven by advertisement costs. Advertisement costs, we have been reducing the advertisement cost and we have been split that between last year and this year.
If you look at YoY, our advertisement cost reduced by almost like INR 10 crore. This is a effective cost exercise that we have done, and some of the expenditures fell into Q4. Secondly, one more thing is the employee cost. I think on the employee cost side, if you look at our store opening profile, majority of the stores, even in the 78,000 sq ft, almost close to 50%-55% of our stores opened between December 15th and March 15th. Therefore, a significant employee cost added to this. That's number one.
On the employee cost front also, there are other factors such as there's bonuses as well as the labor code impact to a certain extent. All of this is where the EBITDA actually took a beating in the quarter four. Otherwise, we should be able to expect an EBITDA, decent EBITDA of about the full year EBITDA plus at least 50 basis points in the next year.
If I may add, Rahul, here, that Q3 and Q4 will have a slight increase in respect of personnel costs on account of issue of a bonus. In one area we will give in Q3, and one area we will give in Q4. Labor code commitment is a continuing process, so that will be there in the same lines as it is today. Q1, Q2, we will not have that bonus thing, bonus expenditure that will be there. If we are working out any variation to the extent of bonus will be lesser personal costs on account of bonus should be there in Q1 and Q2.
Sure. Thank you so much, sir. Quite helpful. Wish you all the best. Look forward to the 100,000+ sq ft addition going on.
Thank you, Rahul.
Thank you. Next question is from the line of Bala Murali Krishna from Oman Investment Advisors. Please go ahead.
Hi, good morning. First of all, regarding this taxation issue, recently you updated that the Income Tax Department waived off its taxation demand from the promoter. That is about an INR 50 crore sum. But when it comes to company taxation issue, there is an INR 21 crore demand and you immediately paid that. Why would have not appealed that company side? How they agreed to waive off this INR 51 crore taxation from the promoter side? Could you please explain that?
The contention on which they have raised a demand was wrong. I mean, we cannot go into nitty-gritty of what all had happened, but they have taken a contention which was not tenable at that point of time. We went for an appeal, and the appeal was allowed. Finally, the liability on the promoter came to around INR 50 lakhs plus or minus. The other thing was dropped because the contention of the original assessing officer itself was wrong.
Sir, why we haven't appealed for this company tax demand?
Company's aspect is, in fact, a closed chapter last year itself. I having came to this I mean, I have extensively explained about the company's taxation, where we have agreed. We have given advances to the employees during the COVID period, and then we waived it off initially keeping them as advances. The Income Tax people have taken that it is to be re-added back, and we have agreed for that. In respect of in liability of the promoter, it's entirely a different issue involving some personal inter-se transaction between the promoter group. They have taken a wrong contention and gave the demand, on which the promoter group have gone in for an appeal, and it was allowed. Both sides, it was reasonably ended as of now, and the matters are fully closed by now.
I think the company side, I think last year, Q4 itself, the matter ended, and therefore the tax provisions have been made. That's like Q4 of 2024, 2025.
Yeah. You know, that one, already provisions are made and paid. The question.
Yeah. Correct.
of the investor community is, arising concern about how this INR 50 crore is negotiated and how the INR 20 crore is paid immediately. That is the concern. That's why I ask.
See, as I did mention, the whole point was transactions between the promoter group and family members. I think we did explain again, but probably if at all you need a detailed explanation on this, I can probably give you separately. Broadly, the case here is there has been some transactions during the family trust creation from the promoter group side. Right now, all the shares currently that you see from the promoter group majorly are parked under the family trust. During this entire transaction process, there has been some assets that have been moved between the promoters, and therefore the Income Tax Department have highlighted that, and have marked against a demand notice.
All of that, we had a proper representation made to the government, I mean, made to the department. Therefore, they have waived it off and they've kept a nominal notice of about INR 25 lakhs-INR 50 lakhs. That is what's supposed to be paid. That has been taken care of.
Waiver [Non-English content]. It is our contention is accepted and the demand dropped.
Yeah.
There is no waiver.
Is that clear?
Okay. Okay. Yeah, yeah. Fine. Fine. Secondly, on this, the slowdown in the growth rate in Q4, and it's almost flattish about Q3. Usually Q3 would be higher because of festival, but this time it's not much like that. Is it the more Valli store addition in the last two quarters, is it that contributing for this slowdown? Because the ASP of Valli is low, any other factors?
Not necessarily. If you look at in terms of our revenue contribution between H1 and H2, we are still, ideally it is between 45-55, in that range it moves. If you look at this year, number 25, 26, it moved between 51 and 49, which looks like as if having a decent growth that we had. Nothing particular with respect to Valli Silks. It's just that the factors, the overall factors, which is geopolitical factors could be, the consumption factors could be. In the month of late January to February, there has been some slowdowns in the overall consumption pattern, that's what has caused us to this kind of a +5%.
Otherwise, one more reason why we had a little bit of a less of a growth here is because our store additions, again, even in Q4, the two stores, the 25,000 sq ft, again came between March 10th and 15th. If at all we would have gotten a chance to open in maybe January or February, a significant revenue contribution would have been added overall. It is just that the alignment of the store opening date happened to be at the late of the quarter four, and therefore that particular store opening revenue didn't actually contribute to the overall top line.
Okay. Understood. Regarding this new store opening, for suppose 85,000 sq ft or 90,000 sq ft, what could be the split between the formats? Could you give some rough number? How many Varam ahalakshmi, how many Valli, that kind.
See, at this point of time, giving an exact number on the formats could be difficult. Again, Varam ahalakshmi, Kalamandir, Valli are the formats that will lead the expansion for us. We still don't plan to add any KLM stores. It's just gonna be Varam ahalakshmi, Kalamandir, and Valli stores that will lead the overall expansion that we anticipate in this financial year.
Thank you.
I mean, we hopefully plan to pivot into new state this financial year.
Thank you. Next question is from the line of Ankit Gupta from Bamboo Capital. Please go ahead.
Thanks for the opportunity. Sir, can you give us the, you know, format-wise breakup of sales for FY 2026 and 2025 as well?
Normally, format-wise sales are something that dissemination of the information is detrimental to the interest of the company. Broadly, Varamahalakshmi did around.
50% of the overall.
50% of the overall thing. The component of Varamahalakshmi is increasing in the overall pie.
How much did you say for VML? How much at percentage of sales?
It's about 52%.
Okay, okay. KLM, if you can talk about. Like KLM, how much decline have we seen in this financial year?
KLM, I think, the decline has been around low single-digit, around about 3% or so, with the overall decline for KLM format. The action plan we are working on the action plan as well. One of the store reductions that we have done from this net retail addition, I think 9,000 sq ft of KLM reduction, we have done to be able to like, you know, have improved margin and improve profitability from that store. These are the factors why KLM has shown a decline. Otherwise, the plan for us this year again will be able to like, you know, continuously change this product mix and still be able to achieve a positive SSSG growth on KLM front.
Sure, sure. On, you know, on the state-wide sales, if you look at it, you know, our two major states, you know, Telangana, Andhra, you know, haven't seen growth. In fact, Telangana FY 2023, we did INR 600 crore of sales. In FY 2026 we are at INR 500 crore. Andhra INR 443.4 crore, and we are ending this year with INR 474 crore. Of course, there would have been an impact of KLM on this sales. You know, broadly, these two states have been significantly underperforming for us. One of the states which was doing well for us because of the new addition of stores was Tamil Nadu. Tamil Nadu also in last two quarters, we have started seeing a bit of flattening out as well as, you know, decline in sales in Q4.
We are saying Tamil Nadu, we should not be expecting, you know, more than 5%-10% of over growth for FY 2027 also without any store addition. You know, what are we doing to, you know, at least increase the scale, the sales from Telangana, Andhra? There is one thing on addition of net sq uare feet, but our SSSG has to increase significantly for us to improve our profitability as well as, you know, see higher growth rates.
See, I do agree that, you know, Telangana has been a slower growth, and this is majorly on account of KLM. All the other formats seem to add growth. I think even if you look at AP, it's grew by almost 15%. Karnataka grew by 27%. This growth is driven by majorly square foot addition. On the SSSG fronts, particularly, I think because of the KLM format, we have been seeing some dip because majority, I think more than 60% of our, 60%-65% of our stores of KLM is located in Telangana. That's the impact of that.
I think, we are having plans on the KLM front to be able to revive that, to still be able to deliver a positive SSSG. Apart from just the KLM front, all the other formats are continuing to deliver a positive growth, both on the SSSG front as well as on the store retail addition front. The reason why you're not seeing a significant jump is all the new stores that are coming up are not based out of in Telangana, majorly are getting added in outside of Telangana, those are the ones that are contributing to the overall revenue. Again, in this year, we did add like a few stores in AP and Telangana, those stores have not had a full run of operations, once they run, probably they will also start adding. These are only format stores.
Sure, sure. Sir, if you can give me, you know, for Telangana and Andhra particularly, what would be the Varamahalakshmi SSSG in these states, Telangana and Andhra?
It is I think it should be in the high single digit number.
Okay. At least VML continues to see decent SSSG in Telangana and Andhra.
Yeah, yeah. Definitely, yes. High single digit number overall is what is there, and I think similar trends will be in AP, Telangana as well. Yes, you're right on that.
Sure. Just on the new, you know, new square feet addition of 100,000. Of course, you are saying, you know, we'll be expanding in VML only and Kalamandir. If you can give us, you know, where, in which states will this expansion come? You know, which new state, I think we had talked about entering Mumbai and Maharashtra particularly.
Yeah.
If you can broadly give where will this new addition come and how will that have an impact on our margins even? Now we are entering the new states, there'll be some higher, advertising expenses, store opening expenses and other things which will come as we'll enter new states.
So far with the stores that we have in pipeline, majority of our stores are coming in Karnataka. Our Kalamandir format in Karnataka is the one which is leading this expansion front. However, there is a new format that are going to come up, which is Varamahalakshmi Silks in Andhra and in Tamil Nadu as well, we have a few stores which are lined up with Varamahalakshmi Silks as well. On the margin profile, it will not have much of an impact. Vara mahalakshmi and Kalamandir do have a little bit of a margin profile difference, but overall still the goal for us is to be able to maintain similar margins without having an impact overall. Gross margin side.
Okay.
I think there could be some more additions of the stores coming in, which I could probably be able to comment probably at H1 ending, to give you a little bit more clarity in terms of the newer square feet that comes up. At this point of time, it will be Kalamandir. The state that will lead the expansion is Karnataka. To your question of Maharashtra and other zones, yes, we are in advanced stages. I think probably this year you should be able to see at least one store outside of our core markets.
Got it. Sir, last question on, you know, our H1 outlook for this year. If you look at last year, Q1 and Q2 were pretty heavy. You know, we saw some Q1 because of Q1 FY 2025 having a low base. We had a very good Q1, and Q2 also because of early Diwali and Dussehra this year, we had a very good Q2. Given the high base of, you know, first half in this in last financial year, how should we look at the growth for this financial year?
Will we be able to grow at least 10%, 15%, 10%, 12% or, you know, we'll have higher sales in the second half compared to H1 as we had seen in last year?
I think this year, I think H2 should lead than H1. There are a couple of reasons why. The first is, I think Dussehra is now moved back to Q3 instead of Q2. And two, there's some in Q1, there's some slowage in terms of the Adhik Maas that is gonna kick in, which is gonna start in probably like about four, five days, and it'll last till mid-June. The point here is when you look at the wedding date calendar, right, I think the dates more or less are spread out. What I'm trying to say is like it still does have a evenly spread out calendar.
Keeping all of that in mind, whatever is maybe the slowage that we can see in probably 1 month here should probably be moved to Q2. This is the kind of movement that could happen. Overall, the growth should be evenly spread out between H1 and H2. This year, I'm expecting that H2 should be better than H1.
Okay. In, in April, how much growth have we seen, you know, compared to last year?
If you're talking about April, I think April was about low single digit positive overall growth.
Okay. Okay. Okay. Thank you, Racham. Yeah.
Thank you, Ankit.
Thank you. Thank you. Next question is from the line of Nitin Jain from Fair Value Equity Advisory. Please go ahead.
Thank you for the opportunity. My first question is on the depreciation expense. It has gone down meaningfully this quarter. Are we looking at smaller formats lately or with some asset light expansion, if you could clarify on that?
No, the depreciation includes the, I mean, 116, Ind AS 116 workings. Because some of the, some of the leases will expire, long-term leases will expire and some new ones with a small store format will come with an extended lease period than that. It is mainly on account of the leases, Ind AS 116 workings that it has come down slightly. Two of the major leases have expired. Obviously when the lease period is extended, we have an extended lease period, and then one lease period expires and the other kicks in, the calculations depending on the calculations, there will be a change in that.
Right. How do we see it in FY 2027? Should it go back to normal or?
No, it will be the same for this period. During the year, we will be contracting for further stores, no? When we contract for the further stores, the right-of-use assets and thereby the depreciation thereon will be kicking in in that.
Right.
It's not a owned.
Go ahead. Go ahead.
Yeah. No, no, it's not a owned premises, no. Everything goes by the lease rentals, lease periods and then the workings thereon. Obviously, when we are targeting INR 1 lakh sq ft further in during the year FY 2027, there should be an increase in the depreciation part.
Right. Regarding the margins, you mentioned that there was an impact of the bonus payout in Q3 and Q4. Would it be possible to quantify the impact, the bonus impact?
It ranges. I think Q4 we seem to disburse about INR 4 crores bonus. We spread it over the year, some in Q3, some in Q4, and the impact during the quarter was to the extent of about INR 4 crores.
Right. No, in terms of, basis points, how much would it be?
basis points
Nitin, does that answer your question?
No, I have a few more questions.
Yeah, go ahead.
Hello. Yeah, yeah.
In terms of the wedding calendar, you mentioned that the dates are spread out evenly. What about the absolute number of wedding dates throughout the year? Are they the same or is there any difference?
Okay. To answer your wedding dates calendar, I think in terms of the absolute number, we have around extra days than compared to last year. Yes, I think more than 5%-10% of extra dates is what we have compared to last year.
Great. Regarding the revenue outlook for FY 2027, you mentioned that it will be better than FY 2026. If you could clarify, like FY 2026 we have done 13% or so, revenue growth, so should we be between 15%-20% or 20%-25%?
The reason why I'm unable to give you a number is on the SSSG front, we should be able to similar to a little bit better than last year, which is more than 3%. On the revenue growth front, from the way we stand, it's all coming down to the net, I mean, total retail square feet addition that we are able to do. At this point of time, we seem to have a healthy square feet opening, openings, which is spread between Q1, Q2, Q3, Q4. Keeping that in mind is why I said that we will have a better number compared to the last year kind of a number.
The reason why I'm not able to give you a number is because I should still plan for exactly how much square feet, and that is why I said I'll probably give you, be able to give you this number at the end of H1, where I'll have a visibility for the number of stores that I will be able to open till March. Overall, we should I mean, broadly if you look at, we should be able to do much better than this year's 30 number. Something in the ranges that you mentioned of.
Right. Right. Gold has become more expensive, like, more so with the duty hike today. As a result of that, should we see some part of the wedding budget that was, you know, earlier earmarked for jewelry now moving to apparel like sarees, et cetera?
Two things. I think gold is directly and indirectly also in the same range, right? Like, you know, our raw materials also do have gold pricing. I mean, gold embedded into our products. Like in all the zari that we use in the products is all made from silver and gold. Metal price do have an impact overall. When this sort of a phenomena happens and generally what happens is like the product ASP also start shooting up. Just in the last six months to seven months, we have seen some increase in the overall pricing and that has caused the change in the consumer behaviors. If you look at that, generally it should yield into positive trend because gold is becoming too expensive.
The silver, the alternative for golds right now are picking up with respect to such as silver jewelry and other similar categories. Again, in terms of sarees also, it's the same thing. I think the budgets now have like, you know, moved beyond like about which was about INR 1 lakh kind of a purchase, today stands about like, you know, INR 60,000 or INR 70,000 on that front. The bill values are also decreasing into that extent. Yeah. That's that.
On a lighter note, sarees and these ethnic wear has no foreign exchange involved. We are expecting that some of the money that was disbursed to be spent on gold might come to apparel and particularly sarees in the wedding season. We are hopeful that we should have a better uptake by getting the money diverted.
Yeah. That's very clear. Just my last question. You mentioned that you would want to venture in at least one new state this year. Would that lead to significant marketing expenses as you would like to establish your brand in a new state? Thank you, and that's all from me.
See, yes, it is possible, we have budget on the advertisement sides to be still be able to run the 4% kind of a number only. Which is a similar number compared to this year. We will reposition that at whenever required. Yes, when we go to a new state, it does require some noise to be made, and we'll definitely go all in when we go to a new state, get the local influencers or celebrities to be able to influence and be able to showcase that, you know, we are now present in that brand. Most of our store formats also when we open, I mean, apart from a certain formats like Varamahalakshmi Silks, most of the formats, whenever we open stores, we make a loud bang.
Not just during the opening, even post that also, we do that for us to be able to get the eyeballs that we could get. That's something that we do for every store. This year, particularly on the advertisement and marketing front, irrespective of the global, I mean, the BTL activity, we started focusing on the ATL activities as well, and focusing more on digital marketing and hyper-local marketing campaigns. That is something that we will continue to do next year as well in few of our weaker performing stores in terms of the walk-ins. To answer your question broadly, the advertisement expenditure should be in a similar range compare in the same as how this year ended up in terms of percentage points.
Right. Thank you, and all the best.
Thank you.
Thank you. Next question is from the line of Ankit Babel from Subhkam Ventures. Please go ahead.
Good afternoon, sir.
Hello, Ankit sir. How are you?
I'm fine, sir. Sir, a couple of questions. Considering the store addition plans, you mentioned about adding INR 1 lakh sq ft and a better SSG, you know, compared to FY 2026. What kind of EBITDA margins we can look at in FY 2027?
EBITDA margins, since the Varamahalakshmi component is continuously growing within the entire pie, we should surely see an improvement in the EBITDA margin this year also, because broadly, I would say there is a potential of improving to the extent of another 4,000 sq ft-5,000 sq ft in Varamahalakshmi format in Tamil Nadu. Mostly that will add to the improvement in the margin profile as such. Also another thing is, of course, that is not directly related, but since the company is totally debt-free and the company has enough resources for completing the entire expansion with the internal generations.
There will not be any further borrowings, and we expect that the company will not have borrowings for the next two, three years. All these, the square foot additions and improved activities should improve on a total, leave out the EBITDA margins. EBITDA margins is one point, and subsequent to EBITDA, there is no interest cost, no major interest cost will be there. The difference between EBITDA margins and the PAT margins will also shrink. Thereby, the PAT margins, you will be able to see a much better improvement than it was earlier.
Okay, because a few quarters back, you had guided for around 200 basis points EBITDA improvement every year. You know, we were targeting some 19% margins by FY 2027 at EBITDA level.
Yeah.
What are the new estimates? Where do you see? Because we have not seen much improvement in FY, you know, 2026.
The target would be the same. The target, I think this year we have reached about 16 point odd. Our target, with the plan of action on Varamahalakshmi, I think we should be able to reach at least 18. We have already reached there.
Yes.
16 we have already reached. It should be possible that we should at least be in the 17.5-18 guaranteed.
17.5- 18 guaranteed. Okay. Okay. Sir, just wanted to understand that, you know, since you mentioned that, you have enough financial resources to expand your retail network.
Yeah
Just wanted to understand why you are constraining you to just INR 1 lakh sq ft and not adding 1.5 or more lakh square feet. Is there any execution challenge or you don't see that kind of a demand in the industry, or you feel that the balance sheet doesn't allow this?
No, no.
Why only INR 1 lakh and not INR 1.5 Lakh?
That is the target we have put in for the current year, but surely we will make an effort to improve the square footage. It's not as though we try to locate a place and put up a store and do it. There is a lot of work, preliminary work that goes into locate a store. Currently, we have a visibility of approximately INR 1 lakh sq ft on which we have closed the entire process of identification of the stores and then the other modalities of it. That is how Mr. Bharadwaj was mentioning that at the end of the H1, towards the H2, we will be able to give. Perhaps we can give an indication that the store addition would be slightly better than this INR 1 lakh also.
It's not about the resources, but consider that we have never closed the stores on account of operational issues. There is a lot of work, preliminary work that goes on while locating these stores. Once that is located, obviously we will have enough resources to put up the stores, and we should surely make an effort to go well beyond INR 1 lakh sq ft this year.
Adding to this, I would want to mention that it is always not about adding too much square feet. It's also about retaining and maintaining the margin profile, maintaining the EBITDA profile, maintaining the profitability profile aspect of it. I think it is fair to say at this point of time that in our industry, we command one of the highest, most margins. I mean, again, I'm talking about a saree retailer here. We are commanding the highest EBITDA margins and PAT margins. The challenge is not opening retail stores and be able to like, you know, be okay with reduced margins. The challenge is to be able to identify carefully, handpick carefully, and be able to handhold these stores.
Majorly, I think we have seen many in the cases in the market that too aggressive expansion also can cause consolidation of stores. Our goal is not about like opening the stores for the sake of like, you know, just because there is a healthy funds in the cash system, and then be able to look at a system where we had to consolidate the stores. I think the careful approach that we have been taking and slowly start incrementing this process and continuously delivering that growth year-on-year is our prime focus. I think during our older conversations also, I think I mentioned the same thing.
While we do have the balance sheet support to open more, I think here it all comes down to the strategy piece, where it is all about being able to maintain the similar kind of productivity levels, efficiencies, while still focusing on the growth. When you try to balance this, I think it has to go with the balanced approach, and neither one can take precedence and one cannot take. That's the approach overall. Overall, if you look at YoY, we are continuously improving the retail square feet addition YoY.
Okay. sir, mathematically since, even if I take a 15% kind of a top line growth for next year, I mean this FY 2027, and you did mention about 17.5% EBITDA plus no increase, no increase in interest costs, at least a 200 basis point improvement in net margins. This gives me a PAT of around INR 200 crore for FY 2027. Are you guys also targeting that level?
We will discuss this, I mean, May is too premature to discuss, the finer aspects of this, but surely we will make an effort to improve our turnovers vis-à-vis profitabilities continuously. The specific mathematics we'll discuss in the Q2 call.
No problem. Sir, my last question is: Where do you see your inventory days in FY 2027 and your debt levels? We have seen slight improvement in inventory days in FY. Yeah.
Even in this, even in this year, you would have seen despite adding 70,000 sq ft, the increase in inventory was only INR 34 crores. There is a concerted effort, constant visual on that and to improve the inventory days. If you are following us, you would have remembered that, I think, second half of 2023, year 2023 or 2024, FY 2024, when we put a KPI on the inventory part, there was a huge reduction in the turnover during that quarter. We are broadly balancing between the inventory optimization and the sales achievement. Accordingly, we will be taking a call on that. Surely there is an effort to continuously improve the inventory turnover.
Any targets, sir, for this year? 180 days was the last year's inventory days, which is still too high. Any targets here?
It's a continuous thing. See, if I convey a KPI on this within the system, then, it is taking a negative toll on the inventory part. Sorry, the sales part. We will make an effort to continuously improve that.
One more thing.
If I have to broadly give you an indication.
Yeah
from the year FY 2024 to this date, if you see our balance sheet, we have improved, we have reduced the inventory per square feet by around INR 1,000. What was around INR 11,533 has come down to INR 10,480 or so. That's a concerted effort, but we have to get an equilibrium between the inventory days and the sale achievement that we'll continuously monitor.
On the overall other side to this is, I think the format that we open. I think Kalamandir has a different inventory requirement. KLM has a different, I mean, Varamahalakshmi has a different inventory requirement. The store opening dates also does have an impact, right, at the end of the year. I think, again, talking about the inventory piece, again, coming to this decision after H1 could be a better way to look at it.
No problem, sir. Okay. All the best. Thank you so much.
Thank you.
Thank you. Next question is from the line of Nilesh Doshi from Prospero Tree AMC. Please go ahead.
Thanks for the opportunity. Sir, many questions were asked by the earlier analyst. My question in connection to the earlier analyst that how the future expansion and the maintenance of the margin. Within how many days once the new store is open, will match the EBITDA margin of the matured store? And within how many days they achieve the breakeven? Or at what revenue level they will achieve the breakeven?
Depending on the format. Varamahalakshmi format will give a payback within, say eight to nine months. Whereas, to reach the EBITDA margins to get the store matured, it will be approximately one and a half years to two years. The maturity part we consider is that we leave out the year in which the store was established, and we leave one more year for the store to see the three cycles of wedding dates and other things, and then go on to the base figure. Obviously, for the stores to store to mature and get established to the average EBITDA margins of the company, it will be anywhere between one and a half years to two years. In respect of formats like Kalamandir, et cetera, it will be slightly higher.
Okay, sir. Sir, we are operating the different format stores and, but our blended, GP margin is around 40% +, and EBITDA is around 12%-13%, sir. Which format is generating the higher GP and higher EBITDA compared to the other format? Are we expanding in particularly in that format or we are expanding the all formats?
See, they are location based. Say, Tamil Nadu, Varamahalakshmi format is the best format which gives higher gross margins and higher EBITDA margins. Whereas we have seen Kalamandir format has a good brand value in Karnataka, particularly Bangalore and other places. When we have expanded in Tamil Nadu, we expanded on Varamahalakshmi format. Now that we are expanding in Karnataka, particularly Bangalore, with Kalamandir format. Each format will have a different metrics depending on the location where its brand value is there. Currently, Kalamandir, see, we have reached some kind of a reasonable size in Tamil Nadu, where the stores are in the process of maturity and improving the productivity. Now we see a potential in Karnataka, particularly Bangalore, where the Kalamandir format has a brand equity.
Obviously current expansion will include Kalamandir format and also on a need-based Varamahalakshmi formats. Broadly, I think, it should be about 40-60.
Yes, sir. VML and Kalamandir.
This year we should implement approximately in the range of 60-40 between Kalamandir and Varamahalakshmi formats.
Okay. ultimately all format are generating the near to equal margin, EBITDA margin, or, it generate the difference between the one format to another format?
No, no. See, Varamahalakshmi format, it will definitely give better EBITDA margins, but it cannot be put everywhere. It cannot be unlimitedly expanded. Wherever there is a potential for that, we will be placing Varamahalakshmi format. The other places, though Kalamandir format, in Bangalore might give a lesser EBITDA margin, but it has a potential to give higher turnovers. By volume, we will be able to achieve the absolute number of absolute amount of the EBITDA there. We make a decision between, we make an analysis of these two between the volumes and the margins, et cetera, then we take a call on that. That's how we. This year, Kalamandir in Bangalore also is a focus area along with Varamahalakshmi in general.
Okay. Sir, my last question is related to inventory. How do you identify the slow-moving item? Particularly there are n number of sarees kept in the store, so there must be some slow-moving items. How do you clear that inventory, and how do you value the inventory at the end of the year?
Inventory valuation is the same principle. It is the cost or market value, whichever is lower. Valuation part, it is very much predefined. With regard to the saree, we have one advantage is that it fits all sizes. It fits everyone, and then size is not a constraint. It can be stored depending on the product like cotton saree or a silk saree or a georgette, et cetera. The shelf life is much longer there.
That is secondly, we have some, many number of stores, we keep moving this stock from one place to other. Depending on the suggestions that comes from out of our AI and machine tool suggestions, we have an elaborate packages built-in within the company, where they will be continuously monitoring and the data analytics give which area, which place the these kind of sarees are getting sold, and accordingly we move the product. There will not be any issue on that with regard to the aging of the sarees and keeping the sarees marketable above the cost price. Only if it comes to below the cost price only we need to be providing anything for that.
In respect of sarees, we also have the provision of converting them into half sarees or baby frocks, et cetera. Since we have other formats like Kalamandir and KLM where these products can be put, we will be putting these things there and then. We ensure that each product is fully sold in whatever form, and then the expected margin out of those product is realized.
Thank you. Thank you. That's all from my side. Thank you, sir.
Thank you.
Thank you. Ladies and gentlemen, we will take that as the last question for today. I now hand the conference back to Mr. Bharadwaj Rachamadugu for closing comments. Over to you, sir.
Thank you, sir. Thank you again for joining today. I think we had a good year 2025, 2026, and we look forward to having a healthy year 2026, 2027. Looking forward to connecting you back at our Q1 results. Thank you, everybody, for taking time and joining today. Thank you so much. Thank you.
Thank you very much. On behalf of Sai Silks (Kalamandir) Limited, that concludes this conference. Thank you all for joining us today, and you may now disconnect your lines.