This article first appeared on GuruFocus .
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Total Income:INR 466 crores in Q1 FY27, up 16.4% year-over-year from INR 400 crores in Q1 FY26.
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Revenue Mix:Fabrics 71%, garments 19%, and yarn and others 10%.
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EBITDA:INR 34 crores in Q1 FY27, up 22.3% year-over-year from INR 33 crores in Q1 FY26.
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EBITDA Margin:8.6% for the quarter.
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Profit After Tax (PAT):INR 11 crores in Q1 FY27, up 144.4% year-over-year from INR 5 crores in Q1 FY26.
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PAT Margin:2.4% for the quarter.
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Debt-to-Equity:0.24% as of June 30, 2026.
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Store Expansion:Added 3 Zcode stores and 2 Devo stores during the quarter, bringing total store counts to 30 and 19, respectively.
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Store Expansion Plan:Targeting approximately 70 total stores across both brands in FY27.
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Release Date: July 31, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Total income grew 16.4% YoY to INR 466 crores in Q1 FY27, driven by strong operational performance.
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Profit after tax surged 144.4% YoY to INR 11 crores, aided by operating leverage.
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Retail expansion is on track with 5 new stores added in Q1, targeting 70 stores by FY27 end.
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The company maintains a strong balance sheet with a low debt-to-equity ratio of 0.24%.
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Management reiterated its FY27 guidance of ~12% revenue growth and 14% EBITDA margin, expressing confidence in achieving it.
Negative Points
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Consumer spending remained value-conscious, with inflationary pressures on input costs impacting purchasing decisions.
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Wedding and occasion-led consumption moderated due to the Adhik Maas period, leading to postponed discretionary purchases.
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The retail business (Zcode and Devo) is still in its early stages, with stores not yet mature and expected to drag EBITDA by ~150 basis points annually.
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Raw material costs have been volatile, and the company can only pass on cost increases gradually, potentially squeezing margins.
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The company has not yet disclosed detailed financials for its retail segment, citing small sample size, which limits transparency for investors.
Q & A Highlights
Q: What is the revenue expectation from the retail business (Zcode and Devo) for FY27, and what will be the impact on profitability? A: Gaurav Poddar, CEO, stated that the retail business generated approximately INR 30 crores in Q1 FY27, with a full-year expectation of around INR 160 crores, nearly doubling from the INR 80 crores achieved last year. He reiterated that the company has guided for an annual EBITDA drop of approximately 150 basis points due to the retail business's initial losses, which is included in the overall guidance.
Q: Can you provide details on the performance and profitability of the Zcode and Devo stores, and when will they reach breakeven? A: Gaurav Poddar, CEO, explained that the stores are still in their early stages (about 18 months into the business) and typically require 1.5 to 2 years to mature. While some Zcode stores have already turned EBITDA positive, the sample size is too small to draw broad conclusions. He noted that Devo, being an ethnic wear business, is highly seasonal and will be better assessed after the festive season. The company will only consider disclosing detailed numbers once the network reaches 100-125 stores with at least a year of operating history.
Q: What is the company's capital allocation strategy, particularly regarding investments in the retail business and shareholder returns? A: Gaurav Poddar, CEO, stated that the company remains prudent with its free cash flows. The planned capital expenditure for FY27 is around INR 100 crores, with INR 40-50 crores allocated to the retail project. He emphasized that the company will continue to generate a positive surplus of cash flow even after CapEx and shareholder payouts. The expansion of the retail network will be gradual, focusing on building a robust business model before accelerating store growth.
Q: How is the company managing input cost inflation, and what is the impact on margins? A: Gaurav Poddar, CEO, acknowledged that raw material costs have been volatile due to global factors. The company has managed by balancing older and newer raw material inventories and has passed on some cost increases to customers gradually. He reaffirmed confidence in maintaining the EBITDA margin guidance of approximately 14% (excluding the retail business impact) for the full year.
Q: What is the status of the real estate project, and how is the INR 24.6 crore expense treated in the financials? A: Gaurav Poddar, CEO, and Surendra Shetty, CFO, clarified that the INR 24.6 crore is a land development expense that has been routed through the P&L as per accounting standards, with a net nil effect on margins as it was previously in inventory. No revenue has been booked from the residential project yet. The company has received approvals, started the tendering process, and expects construction to begin this quarter with a 24-month completion timeline.
Q: What factors determine the choice of new store locations for Zcode and Devo, and how has this strategy evolved? A: Gaurav Poddar, CEO, explained that the company initially adopted a cluster-based approach, focusing on Karnataka and Bangalore for Zcode due to the strong Gen Z consumer base. They use AI tools and research to identify locations with existing footfall. A key evolution has been the shift from smaller 4,000 sq ft high-street stores to larger format stores averaging 7,000 sq ft, which have shown better results in terms of product display and consumer experience.
Q: How is the company's working capital trending, and what is the impact of the retail expansion on inventory? A: Gaurav Poddar, CEO, stated that the company is currently building inventory for the upcoming festive and wedding seasons, which is a normal seasonal pattern. He advised looking at March-to-March numbers for a clearer picture. While the retail business adds to the balance sheet inventory as stores increase, the core business working capital days remain similar to last year.
Q: What is the company's guidance for revenue growth and EBITDA margin for FY27? A: Gaurav Poddar, CEO, reiterated the guidance provided in the previous quarter: approximately 12% revenue growth for the full year, with an EBITDA margin of around 14%, including the 150 basis point drop attributable to the retail business. He expressed confidence in achieving this guidance despite the seasonal challenges.
Q: How will the bonus issue of cumulative non-convertible redeemable preference shares be treated for taxation purposes? A: Surendra Shetty, CFO, clarified that the redemption amount of the preference shares will be treated as dividend income in the hands of investors, which is fully taxable. If investors sell the shares before redemption, the tax treatment would be as capital gains, which they would need to evaluate separately.
Q: What is the company's strategy for the franchisee model in the retail business? A: Gaurav Poddar, CEO, stated that while the franchisee model is established in both fast fashion and ethnic wear, the company has not considered it yet. Currently, they are focused on operational efficiency and using internal capital to build stores. Franchising remains an option for the future once the business model is proven and can offer a viable return to potential franchisees.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
