Iris Clothings Ltd (NSE:IRISDOREME) Q4 FY23 Earnings Concall dated May. 05, 2023.
Corporate Participants:
Sonia Keswani — Investor Relations
Harshvardhan Sharda — Business Head
Niraj Agarwal — Chief Financial Officer
Analysts:
Sahil Shah — SS Investcorp — Analyst
Harmeet Desai — — Analyst
Karan — — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to Iris Clothings limited Q4 and FY ’23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Ms. Sonia Keswani from EY Investor Relations. Thank you and over to you, Ms. Sonia.
Sonia Keswani — Investor Relations
Thanks, Irene, and good evening, everyone. On behalf of Iris Clothings Limited, I welcome all of you to the company’s Q4 and FY ’23 earnings conference call. You would have already received the Q4 and FY ’23 results and investor presentation, which is also available in our filings with the NSE. To discuss the company’s business performance during the year and outlook, we have with us today Mr. Santosh Ladha, the Managing Director; Mr. Harshvardhan Sharda [Phonetic], Business Head; and Niraj Agarwal, the Chief Financial Officer of Iris Clothings.
Before we proceed with the call, a disclaimer, please do note that anything said on this call during the course of the interaction and in our collateral reflect the outlook towards the future or it should be construed as a certain forward-looking statement must be viewed in conjunction with the risks the company faces and may not be updated from time to time. More details are provided at the end of the presentation and other filings that can be found on our website www.iris.clothings.in. Should you have any queries or need any further information at the end of this call, you can reach out to us at the email addresses mentioned in the company collateral.
With that, I would now like to hand over the call to Harsh. Over to you, sir.
Harshvardhan Sharda — Business Head
Thank you, Sonia. Good evening, everyone. This is Harshvardhan Sharda, the Business Head of Iris Clothings. Thank you for taking the time out to participate in our Q4 FY ’23 earnings call. Now before we dive into discussing our comments on the market [Phonetic], I would like to take a moment to talk about our company, Iris. Iris is a fast-growing kids apparel company that is engaged in designing, manufacturing, branding and selling garments. Our products are sold under the brand DOREME, which was launched within a year of starting the business [Indecipherable]. When started its sales through the distributor, retailer network based out of Mumbai that was our first point of start.
Since then, the brand has been steadily gaining from popularity from [Indecipherable] publicity. It has also gained acceptance in the retail stores given the high-quality and stylish range of collection and our ability to continuously launch new products in different times. DOREME offers a wide range of apparels starting from infants, toddlers, junior boys and junior goals that suit both their indoor and outdoor requirements. The primary product categories that we deal with are tops, T-shirts, sweatshirts, shorts, trousers, joggers, infant wear, nightwear, all these products. Our brand has very good presence in 26 states across the country with Maharashtra, Rajasthan, Gujrat and Punjab being our key markets.
We have one 150 plus distributors right now who are selling our garments and this network is expanding as we speak. While most of our sale happens through this distribution network, we also have an online presence through e-commerce channels like FirstCry and our own direct-to-consumer platform, DOREME.in. Our company has attained its good recall and growth through online channels and believe online could be an important channel for future growth. Overall, we keep participating in various industry exhibitions across [Indecipherable] to increase our visibility among our trade partners. We currently operate out of four key manufacturing sites built out of Howrah in West Bengal.
The entire process of garment manufacturing is completed in-house, including design development, cutting, printing, stitching, finishing, quality check and more. Therefore, our manufacturing infrastructure that is strongly backward integrated enables us to have better control over quality and also makes us cost efficient. [Indecipherable] done in FY ’23 led to an increase in our installed capacity of 60,000 pieces to 33,000 pieces manufactured per day. With this additional capacity, we aim to manufacture somewhere around 27,000 to 30,000 pieces per day by FY ’24 from the current level of 24,000 pieces per day.
Now moving to our business update in FY ’23. I am very pleased to announce that we have been expanding on all fronts and have left no stone unturned to explore opportunities across. The lining has always been one of our core strengths and I’m extremely happy to share that we have signed a licensing agreement with Disney or the UTV Software Communications Private Limited, the company in India during the year. Now this license will allow us to launch apparels designed with Disney and Marvel characters and all the characters under the Disney universe under our brand DOREME. These characters have tremendous popularity among kids and will be sold under our premium category.
We did an album launch of Disney designed apparels during last quarter and we are pleased to share that we started at FY ’24 on a great note as we sent our first batch of orders of T-shirts designed with the Mickey and Mickey friends characters. Going forward, we will be launching product categories with various other Disney characters and Marvel characters in a fluent manner throughout the year. Another noteworthy event that happened this week was that our facility at [Indecipherable] has been licensed by the facility and merchandise authorization of the pharma [Phonetic] authorization company to manufacture and distribute products bearing the intellectual property of Disney. We will share more updates on this in the coming quarters.
ON the product side, we enhanced our infantwear vertical wins by launching the accessories line in the first half of the current fiscal. We also launched our sportswear vertical in December 2022. The infantwear vertical has seen very good traction and is expected to contribute materially in the coming year. We are also planning to launch our undergarment vertical, which will help the market in the coming quarters as well. [Indecipherable] we believe that we have successfully built a comprehensive range of products for kids and are becoming a one stop shop for all their needs.
We also ended our first overseas exhibition in Dubai that saw participation from distributors and large retailers from various Middle East countries. We also did two exhibitions in Mumbai and conducted a conference, a dealer conference this year. On the domestic front, we have added 18 new distributors last year. We onboarded our first distributor in Uttarakhand and are expanding our reach in our stronger markets like Maharashtra, Rajasthan, Tamil Nadu, Delhi and Punjab.
On the export front, we have sent out shipments to countries like Portugal, Zambia, Saudi Arabia and Nepal. With an aim to transform digitally, we also launched our B2B platform for our distributors to improve the working capital cycle. Functionality is like real-time access to our inventory, order tracking, better filtering options to view product categories and being the first ones to get notified when a new article is launched are receiving immense appreciation from our distributors. We also launched our D2C e-commerce platform DOREME.in to tap on to the online D2C [Indecipherable] right now. The platform that we have built both of our complete range of products and we are adopting digital marketing activities to increase traction to our website.
Also for FY 24, our capex target will be around INR3 crores, which will increase our installed capacity to around 35,000 pieces per day. We believe our new product launches and the partnership with Disney coupled with the technology advancements will give us a significant head start and set us for a good growth trajectory as we enter the new financial year. Over the past years, our efforts have been completely dedicated towards three levers: expanding our product portfolio, growing our distribution base and transforming business.
While we talk about our strategy ahead, we’ll be growing our business on four fronts. One, we will continue to engage with the market to keep growing our distribution network and add new markets in both domestic and international locations. While in India we will keep increasing our footprint in Tier 2 and 3 cities, globally, we’ll be targeting newer regions in Middle East, Africa and West Asia. Two, we will be leveraging our large distribution network to cross-sell our new product categories that we have added. Three, would be about on moving more and more distributors on our B2B platform and explore opportunities to grow our online business.
We’ll be focusing on increasing brand visibility and recall through various social media campaigns and engagements across stores, which will ultimately drive traffic to our online platform. I think the opportunities that we are tapping being a whole grown company with a brand in an era that is so brand conscious is huge right now. On top of that, catering to the kids segment in India that does not have a lot of domestic brands makes the opportunity even huge.
I will now handing over the call to Mr. Niraj Agarwal, our Chief Financial Officer, who will walk us through the Q4 and the full year FY ’23 financial numbers. Thank you, everyone, and over to you, Niraj.
Niraj Agarwal — Chief Financial Officer
Thank you, Harsh. Good evening, everyone. [Indecipherable] revenue stood at INR37.6 crores, which is up 14.8% Y-on-Y.
Operator
Excuse me, this is the operator. I would request the current speaker to come closer to the phone instrument. The audio is unclear.
Niraj Agarwal — Chief Financial Officer
Is it audible now?
Operator
Yes sir. Thank you. Please go ahead.
Niraj Agarwal — Chief Financial Officer
Q4 FY ’23, our total revenues stood at INR37.6 crores, which is up by 14.8% year-on year. EBITDA was at INR5.3 crores, up from by 1.6% Y-on-Y and EBITDA margin was 14.1% against 14.9% in the same quarter last year. Pretax stood at INR2.2 crores, which is down by 10.2% year-on year and PAT margins stood at 5.9% against 7.6% in Q4 2022. Now taking full year report, our full year revenue stood at INR113 crores, which grew by 1.2% year-on-year. [Indecipherable] lower sales volumes during the year [Indecipherable]. Our EBITDA stood at INR19.5 crores, down by 9.5%. Although, raw material prices were eased. Inventory levels in our book were up when raw material prices were elevated. [Indecipherable] and tax margin, EBITDA margins were at 17.2%, down 204 basis points. We expect margins to improve on the back of price hike and demand recovery in FY ’24, Opex stood at INR8.3 crores, down 18.6% year-on-year and PAT margin of 7.33%.
With this, I think we can now open the floor for our questions. Thank you.
Questions and Answers:
Operator
[Operator Instructions] We have the first question from the line of Sahil Shah from SS Invescop [Phonetic]. Please go ahead.
Sahil Shah — SS Investcorp — Analyst
Thanks for the opportunity. So basically have some questions with regards to the contribution of the infantwear in the coming financial year. If you can just highlight that?
Niraj Agarwal — Chief Financial Officer
Infantwear is 7% of our revenue. It will go up by 5% in this year. It will be around 12% in current year.
Sahil Shah — SS Investcorp — Analyst
Okay. And how much would be coming in — how much of the same will be coming from the online platforms?
Niraj Agarwal — Chief Financial Officer
Online platform, we have started by November ’22. So at present, we have no data of online to come. It will generally grow and we can give you data after the six months.
Sahil Shah — SS Investcorp — Analyst
Okay. And sir, we are in our capex phase, like what is the amount that you are dedicating to the capex for FY ’24 specifically and next year?
Niraj Agarwal — Chief Financial Officer
This year, we’re spending around INR3 crores. Every year, we spend INR3 in our capex in stitching and finishing.
Sahil Shah — SS Investcorp — Analyst
Okay.
Niraj Agarwal — Chief Financial Officer
This year also, we will spend INR3 crores.
Sahil Shah — SS Investcorp — Analyst
Okay. I’ll just ask the last question and I’ll be coming back in the queue. So this year we have seen some margins being impacted. So what channel — can you guide us on how will be the margins looking in the coming FY ’24?
Niraj Agarwal — Chief Financial Officer
You’re asking about the EBITDA margin?
Sahil Shah — SS Investcorp — Analyst
EBITDA margin, yes.
Niraj Agarwal — Chief Financial Officer
EBITDA margin will be around 20%.
Sahil Shah — SS Investcorp — Analyst
Okay. Thanks. I’ll be back in the queue. Thanks a lot.
Operator
[Operator Instructions] We take the next question from the line of Harmeet Desai. Please go ahead.
Harmeet Desai — — Analyst
Thank you for the opportunity. Sir I would like one question on the strategy. So how are we planning to grow our online business going forward?
Niraj Agarwal — Chief Financial Officer
Online business, [Foreign Speech].
Harmeet Desai — — Analyst
Okay. And sir, how is the opportunity which you see in online like on the current business what we’re doing traditionally?
Niraj Agarwal — Chief Financial Officer
[Foreign Speech] last year was INR9 crore from FirstCry that is totally online.
Harmeet Desai — — Analyst
Okay.
Niraj Agarwal — Chief Financial Officer
[Foreign Speech] [Indecipherable] is one of our hot selling product with online. [Foreign Speech]. It’s really tough and the fixed ones we can talk about them.
Harmeet Desai — — Analyst
Okay. Sure, sir. And sir, just related to online which is I wanted to ask is how are you standing to market through online, like are we doing for the performance marketing or how are we planning to do that?
Niraj Agarwal — Chief Financial Officer
[Foreign Speech].
Harshvardhan Sharda — Business Head
Yeah. So what we are doing for performance marketing, performance marketing is one of the angles that we’re using to promote our website. The bigger opportunity that we have here is the big offline market that we already have. So what we are doing is we’re doing a lot of packaging activities where we are trying to convert our customers to buy our products offline and convert them directly. That is one big opportunity that we have started on and performance marketing is [Indecipherable] is of course an active aspect we’re looking very strong. It will be two, three primary platforms for marketing our website.
Harmeet Desai — — Analyst
Okay. Thank you. And also I had one question on the financial part. If you can give me a number like are we seeing any improvement in our working capital days after we have launched our B2C platform?
Niraj Agarwal — Chief Financial Officer
[Foreign Speech] will be less.
Harmeet Desai — — Analyst
[Foreign Speech] if you can share?
Niraj Agarwal — Chief Financial Officer
Working capital days is around 180 days.
Harmeet Desai — — Analyst
180 days. And sir, brand power is down the line or three years down the line, how we should look at this number or what is your target?
Niraj Agarwal — Chief Financial Officer
My target is around 1 times.
Harmeet Desai — — Analyst
1 times, sure sir. And sir, as we see that the raw material prices have been increasing, so are we passing through any price hikes to the customers for the same?
Niraj Agarwal — Chief Financial Officer
Already we have our call hike, but now the material has been — I think has been gone down. But we are not seeing any hike in future. I think almost around six months material we have prepared. In the last year — mostly last year.
Harmeet Desai — — Analyst
Okay. And sir, last question on offline. So sir, are we planning to go with our own retail stores or brick-and-mortar kind of a thing? Is there anything under planning?
Niraj Agarwal — Chief Financial Officer
Yeah. It’s in planning. We want to own stores in the name of DOREME. It’s just our plan now. It is next quarter or maybe after that quarter. We can say the numbers also.
Harmeet Desai — — Analyst
Sure, sir. Sir, if I have further questions, I’ll join the queue.
Operator
Thank you, sir. [Operator Instructions] We take the next question from the line of Mr. Sahil Shah from SS Investcorp. Please go ahead, sir.
Sahil Shah — SS Investcorp — Analyst
Thanks for the opportunity again. In the opening remarks, we mentioned about the tie up with Disney. So I’ll be happy to learn more about that. How is the arrangement like? Would you be making your own product design along with collaborating with Disney? Would it through FANA [Phonetic] license and is there any royalty or some kind of thing involved with that?
Niraj Agarwal — Chief Financial Officer
[Foreign Speech] It is the main brand and Disney is like a co-brand.
Sahil Shah — SS Investcorp — Analyst
Okay. [Foreign Speech]
Niraj Agarwal — Chief Financial Officer
Royalty is around 12% to 14%.
Sahil Shah — SS Investcorp — Analyst
Thank you. Okay.
Operator
Thank you, sir. [Operator Instructions] We take the next question from the line of Mr. Karan [Indecipherable]. Please go ahead, sir. Sir, you’re audible. Please go ahead with your question.
Karan — — Analyst
[Indecipherable]
Niraj Agarwal — Chief Financial Officer
Sorry, I can’t hear.
Karan — — Analyst
Am I audible now?
Niraj Agarwal — Chief Financial Officer
It’s audible, but not clear.
Karan — — Analyst
Hello?
Operator
Mr. Karan…
Karan — — Analyst
Yeah. Am I audible right now?
Operator
Yes, sir.
Karan — — Analyst
So I wanted to understand whether spend on Disney and marketing for the current year of FY ’23 as compared to the last year FY ’22?
Niraj Agarwal — Chief Financial Officer
Wanted to know about the advertisement and [Indecipherable].
Karan — — Analyst
Yeah.
Niraj Agarwal — Chief Financial Officer
Last year it has been around INR0.75 crores. This year it can be INR2 crores.
Karan — — Analyst
Okay. And you mentioned about the EBITDA margin expectation for the next year. [Indecipherable]
Niraj Agarwal — Chief Financial Officer
Sorry, I can’t hear. Can you repeat it?
Karan — — Analyst
I wanted to understand what are your EBITDA margin and PAT margin expectations for the next year?
Niraj Agarwal — Chief Financial Officer
This year, EBITDA margin will be around 20%, maybe 20.5% and the net margin will be maybe 10% plus.
Karan — — Analyst
Okay. And we also have experienced an increase in inventories. According to your last call was it due to increases in winter wear, there was [Indecipherable] last year?
Niraj Agarwal — Chief Financial Officer
Inventory from last quarter we had decreased our inventory. Not now increasing trend, it’s a decreasing trend in inventory.
Karan — — Analyst
Okay. As compared to the last quarter, it has decreased.
Niraj Agarwal — Chief Financial Officer
Yes. Because it decreased by around 15% to 20%.
Karan — — Analyst
Got it. And what would be the expected timeline for undergarments launch? Would it be done in the next quarter or would it be done in the quarter two?
Niraj Agarwal — Chief Financial Officer
Next quarter only.
Karan — — Analyst
As a the last question, sir, you mentioned about the capex guidance for the next year. So would that increase our capacity to around 35,000 pieces a day for the next year FY ’24?
Niraj Agarwal — Chief Financial Officer
Yes, 35,000 per day.
Karan — — Analyst
Okay. Thank you so much.
Operator
Thank you, sir. [Operator Instructions] Ladies and gentlemen, that was the last question for the day. I would now like to hand the conference over to the management for closing comments.
Niraj Agarwal — Chief Financial Officer
Thank you, everybody. You give me enhanced pride on what we are building and the scale we are going at. We would like to thank you for joining into the call today and hope I was able to address your questions in the best way possible. In case you have any other queries post this call or anything remained on our side, you may contact our IR team post event. Thank you once again.
Operator
[Operator Closing Remarks]