Khadim India Limited (NSE: KHADIM) Q3 2025 Earnings Call dated Feb. 14, 2025
Corporate Participants:
Rittick Roy Burman — Whole-time Director
Indrajit Chaudhuri — Chief Financial Officer
Analysts:
Masoom Rateria — Analyst
Arnav Sakhuja — Analyst
Unidentified Participant
Chirag Shah — Analyst
Abhishek Getam — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Q3 9M FY ’25 Earnings Conference Call of Khadim India Limited hosted by Orient Capital. 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 touchstone phone.
Masoom Rateria — Analyst
I now hand the conference over to Ms Masoon Rateria from Orient Capital. Thank you and over to you, ma’am. Thank you very much. Good evening, everyone, and welcome to the Q3 nine months FY ’25 earnings con Call of India Lindeed to discuss the results we have with us from the management, Mr Ritik Roy Bulman, the Whole-Time Director; Mr, the Group CFO. They will take you through the results and business performance, after which we can begin the Q&A session.
Before we begin the conference, I would like to mention that this conference contains certain forward-looking statements about the company, which are based on beliefs, opinions and expectations of the company as on-date of this call. The actual results may differ materially. These statements are not guaranteeing the future performance of the company and involve risks and uncertainties that are difficult to predict.
I now hand over the conference to Mr Ritik Sao. Over to you, sir.
Rittick Roy Burman — Whole-time Director
Yeah. Thank you. Good evening, everyone. On behalf of Kadim India Limited, I’m pleased to welcome you all to today’s conference call, where we will discuss our Q3 and Nine-Month FY ’25 results. We sincerely appreciate your time and interest in our company’s performance and we hope you have had the chance to review the financial results and investor presentation available on the stock exchange.
We achieved steady revenue growth with Q3 revenues increased by 2.5% year-over-year, while our gross margins declined by 110 basis-points this quarter. Sales saw an upward trend supported by festive and wedding season demand. In Q3 FY ’25, our retail segment contributed 66.1% of total revenue, while for the nine-month period, it stood at 63%. As of Nine-Month FY ’25, our total retail store count reached 890 with 61 new-store openings during the period. Baking this down by model, our CEO store count stood at 222 stores, while our franchise network expanded to 668 stores. Our distribution business contributed 31.2% of revenues in Q3 and 32.2% over the nine months. Additionally, we onboarded 50 new distributors during the quarter, bringing the total to 776 as of Nine-Month FY ’25.
Looking ahead, we are excited to introduce our new athleisure segment in the upcoming spring/summer season. This price-sensitive range all along with other higher-margin products is expected to enhance our gross margin in the coming quarters. Now moving to our financial performance. For the quarter, we reported revenue from operations of INR160.2 crores, reflecting a 2.5% year-on-year growth.
Our gross margin for the quarter stood at 44.6%, down by 110 basis-points as compared to same-period last year. EBITDA for the quarter stood at INR14.8 crores, which degrew by 18.7% year-on-year. EBITDA margins for the quarter stood at 9.2%. Our profit-after-tax for the quarter reached INR1.2 crores, a degrowth of 36% year-on-year margin for the quarter’s PAT margin for the quarter was 0.7%.
For the nine-month period, our revenue totaled to INR474.6 crores, up by 0.7%. Gross margin for the period stood at 46.7%. EBITDA for Nine-Month FY ’25 was INR51.5 crores, reflecting a 4.8% year-on-year degrowth with margins at 10.9%. Profit-after-tax for nine months was INR4.2 crores, showing a 20.5% decline year-on-year with margins at 0.9%.
Looking ahead, we remain confident in our strategy and proactive approach. We are committed to building on our strong brand, expanding our retail footprint and innovating to meet evolving consumer demands. We believe that these efforts will yield positive in the coming quarters and we are excited about the opportunities ahead.
I conclude my update and I’m happy to open the floor for questions.
Questions and Answers:
Operator
Thank you. Hello thank you very much, sir. We will now begin with the question-and-answer session. Anyone who wishes to ask a question may press star N1 on the stone telephone. If you wish to remove yourself from the question queue you may press star N2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Thank you. We take the first question from the line of Arnav Sakurja from Ambit. Please go-ahead.
Arnav Sakhuja
Hi, taking my question. I just wanted to know what is the progress on our demoger?
Rittick Roy Burman
It is pending with the NCLP for final hearing.
Arnav Sakhuja
So any specific timeline as to when the hearing will be am I audible?
Rittick Roy Burman
Yes, yes, tell me
Arnav Sakhuja
Yes so I just wanted to ask is there any approximate timeline as to when this NCLT hearing might be complete
Rittick Roy Burman
Within the — within this financial year
Arnav Sakhuja
Within this financial year, okay. And once the NCLT hearing is complete and how much time after that will it take for the demerger to get implemented?
Rittick Roy Burman
Within — I mean, whenever the NCLT orders comes, the first day of the next month, the demerger will be effective.
Arnav Sakhuja
Okay. Thank you.
Operator
Thank you. The next question is from the line of Ashika Madan, an SMN Investor. Please go-ahead.
Unidentified Participant
Hi, sir. Thank you for the opportunity. Could you please provide me more details on this new product range and what are your expectations in terms of consumer response and its impact on both top-line growth and margin improvement?
Rittick Roy Burman
You are asking about new product range.
Unidentified Participant
Yes, sir. The new product range and your expectations in terms of consumer response and its impact on-top line and margins?
Rittick Roy Burman
Yeah, yeah. Yeah. So new product range, we are working for the spring/summer ’24 season is approaching now, which the spring/summer season will include the Eat festival as well as the summer festival, etc., there’ll be some weddings also in this spring/summer — wedding dates also in the spring/summer collection. So like we have been saying that we are — we have reduced some prices also in the new products as well as existing products in our mother brand. So we think that would give us a good, you know growth in sales. And apart from that, right now, the discount season is also going on, which will be there till around 15th of April. So the discount season is also something that the customer likes. So that also will give a uptrend in sales.
Indrajit Chaudhuri
So what means in the spring/summer ’25, we have come up with product having lower MRP. As we have discussed in the second-quarter con-call that we will be pushing for volume. So that thing we have already introduced the product and we are seeing their acceptance in the market also. In the 3rd-quarter, we have seen that the volume of the retail business from 17 lakh 49,000 pair has gone up to 17 lakh 17,96,000 players. So that is a positive thing that has happened and we are looking-forward that with the spring/summer new collection and also the AW new collection in 2025, we will be able to achieve the volume that we used to sell previously?
Unidentified Participant
Okay, okay, sir. My next question would be what percentage of your total sales currently comes from online channels and how do you plan to increase this contribution in the coming quarters? And are there any specific strategies or partnerships in-place to drive growth on your — in your e-commerce business?
Rittick Roy Burman
Yeah. So percentage of online business, I mean it’s somewhere around 4% to 5%. We would obviously like it to increase. So what we have — I mean, over the past year, we have been researching on this model a lot and while I wouldn’t be able to I, I wouldn’t be. I wouldn’t comment on the how much it would increase, but we are working on this channel we just through our research and talks with different partners, we found out that we need to focus on a selective basket of products.
You know if too many products are not the thing of the online market and we have to also do some digital marketing, not digital marketing, online marketing of these few selective products. So these findings is also important. The team has found these things out, while online is a little bit of a low-margin business, but we have found out these findings of doing online marketing and focusing on selective products and we hope that we would be able to do a in one or two quarters we should be able to do better numbers than what we are doing now.
Unidentified Participant
Okay, sir. Thank you. That’s all from my side.
Operator
Thank you. Thank you. Before we take the next question, a reminder to all the participants, if you wish to join the question queue, you may press star and 1. The next question is from the line of Ankita Tandan from the Central Banks Limited. Please go ahead.
Unidentified Participant
Hello.
Rittick Roy Burman
Hello.
Indrajit Chaudhuri
Hello.
Unidentified Participant
Hello. Am I audible?
Rittick Roy Burman
Yes, yes.
Unidentified Participant
My question was regarding the distribution segment losses which the company has continued to incur in Q3 also, though the losses has declined significantly, but what is the company’s view on the — going-forward the distribution segment losses?
Rittick Roy Burman
See, we have already told that in the distribution segment this year, we are trying to reduce the losses and in the next year, we will try to do breakeven. So we are moving ahead in that direction already. And once the demerger will be done, the new company KSR Footwell Limited will be doing the distribution business and they will try to increase the sale and also reduce the costs wherever necessary so that the distribution becomes profitable.
Last year, the sales has grown by around 15% compared to last year. So that has given additional margin with which the losses has come down. So we’ll try to increase the sales and also reduce some costs so that in FY ’26, the distribution business is breakeven.
Unidentified Participant
Okay. Thank you, sir. And my second question is regarding the same-store sales growth rate. So can you please highlight on something the percentage growth rate which the company is achieving from the same-store.
Rittick Roy Burman
At present our same-stores, there is no-growth. We are — having the problem of same-store growth. We have seen the last two, three years, there is no-growth in same-store for that. We are changing the product profile that in Khadim product, we have reduced the margin and the MRP so that the volume that comes in will have an effect on the SSG growth.
Unidentified Participant
Okay, sir. Okay. And what is the per month store-sales per store-sales for the — if we talk about cocoa division, means the
Indrajit Chaudhuri
Cocoa co have different types of sales means we have Coco having sales in a year of INR1.5 crores. We have Coco having sales of average sales for a coco is around INR24 crore to INR25 crore in a month.
Unidentified Participant
Okay, okay.
Rittick Roy Burman
Franchisee also apart from that.
Unidentified Participant
Yes, except the franchisee.
Indrajit Chaudhuri
Yes, yes. This is our cocoa.
Rittick Roy Burman
This Coco would be 2024 and franchisee would be — if you take their what we call their secondary sale, that would be around another say 18 to 20, something. Secondary sale that is not the
Indrajit Chaudhuri
Primary sale.
Rittick Roy Burman
Not the primary sale. Primary sale is what we sell to them. That is our sale, but I’m talking about the — their sale, what they sell to the customer.
Unidentified Participant
Okay, sir. Thank you, sir. This is — that’s it from my side. Thank you.
Operator
Thank you. The next question is from the line of Chirag Shah from White Pine Investment Management Private Limited. Please go-ahead.,
Chirag Shah
Thanks for the opportunity. Sir, two questions. So first, if you can just talk about the demand trends that we are seeing now because we were expecting November-December to be to be good month, but it doesn’t seem to be the case. There were any planned out as much as expected.
Indrajit Chaudhuri
So we are seeing in December there was a trend — good demand trend was there in December. But since this time, Puja was shifted little bit on the second-quarter. So we have not seen the sales growth in — during this period. But December from last year, we have done around 15% growth for the December month.
Rittick Roy Burman
Yeah. December month because of the reversal of the wedding season and the other things like EOSS and everything. So — and also price reduction and everything, some little bit of price reduction, all of it is not yet into play. There was December month was better.
Chirag Shah
And how do we look at going ahead, how should we look at the demand?
Indrajit Chaudhuri
So this year means last year in the first-quarter, the demand was very muted because of the
Chirag Shah
Election wedding season,
Indrajit Chaudhuri
No wedding season, but this year we have seen that the wedding season will be — is there from January to June. So that will obviously increase the demand. And also
Rittick Roy Burman
Need in March,
Indrajit Chaudhuri
It in March. So this will have a good impact for the demand thing and with no election and nothing. So we expect — and with our new product range, with the new MRP, lesser MRP, we’ll have good demand in volumes.
Chirag Shah
Okay. So basically for full-year 9% to 10% volume growth is largely driven by the base effect of Q1. The right way to look at it?
Indrajit Chaudhuri
Come back once again.
Chirag Shah
For next year F ’26, full-year growth of 9%, 10% is largely driven by the base effect of Q1 because of low demand we and all that?
Indrajit Chaudhuri
Yes, yes. Because in Q1, we’re down means compared to last year Q1. But now if you see the sales we have achieved means nine months, we are more than compared to last year nine months. So the growth mainly has come in the second and 3rd-quarter.
Chirag Shah
And secondly, the price reduction that we did, as of now, it appears it is not really benefiting at aggregate level because there seems to be a drop-in gross margin, which was expected, but commensurate increase in revenue and hence EBITDA, absolute EBITDA, absolute gross profit is not visible. So
Indrajit Chaudhuri
The price reduction has — has been done in SS ’25 only. So we have reduced the price from January ’25.
Rittick Roy Burman
Yeah, it will take you sometime, sometime for the — right now the price reduced product will come. There will be some product with increased price also, which will be there. So you would — you should be able to see the effect from March and April like that. So right now is just too early for
Chirag Shah
So sir, what explains this sequential 400 bps of gross margin that anything specific you would like to call-out?
Indrajit Chaudhuri
No, one is that discount, we have introduced the USS. So that is the reason for the margin to drop.
Rittick Roy Burman
Yeah. A little bit discount this year and given more options.
Indrajit Chaudhuri
Also, there is a — EBO or EBOs have has been given product to sell-through and all so as to reduce the high-priced stock that we have. So because the new stock that will be coming in Khadim brand will be at a lower-price. So we are liquidating the higher price stock from our system.
Chirag Shah
So sir, if I can just ask — so versus last year, so if you take F ’24 versus F ’25, per unit discount or as a percentage of realization, what is the discount level and how should we think it — what is the normal level going ahead?
Rittick Roy Burman
See, the discounting started from I think in the month of December. So last means in the year 2024, FY ’24, the discount sales as a percentage of total sales was around 20% to 22%. But here what we have seen that the discount percent has increased to 30% to 32% because the flow of discounted item is completely higher than what was there in the last financial year because since we are shifting from one price packet to another price bracket, so we have introduced more design-in the discount
Chirag Shah
Okay. On — as a percentage of revenue, how does this discount have gone by 2%, 3% for
Indrajit Chaudhuri
The discount I have told you, around 20% was the discount sale and now it is around 30%.
Chirag Shah
So I’m trying to understand its impact on margins, how should I
Indrajit Chaudhuri
It’s impacted in a CEO, it has impacted around 7% to 8% margins.
Chirag Shah
In that in that — on an annual or a Nine-Month basis, how do I look at it? Is it — because
Indrajit Chaudhuri
Right now, we cannot tell because the discount thing will continue till March, only that time we can tell what is the comparison because the flow of discounted item has increased in the month of December. So right now you cannot compare.
Chirag Shah
No, no, for nine months, I’m trying to see Nine-Month basis is what it is as a percentage of sales.
Indrajit Chaudhuri
So nine months or
Chirag Shah
Not the percentage of sales, not how much product is discounted, the impact of discount on margins from nine months versus last year. So there is a gross margin now say 400 bps on a Nine-Month basis, it is 150 bps. Okay. So how much of this is because of discount?
Indrajit Chaudhuri
Around — means out-of-the 4% 4%, around 2% to 2.5% would be up for discount because this year also we have given discount in August and July also because that time the past quarter the product — I mean, it was a dry season. So we started the US as.
Chirag Shah
Okay. And sir, all the entire discounts come is reduced from or because of the nature of discount, something comes in other expense also?
Indrajit Chaudhuri
No,
Chirag Shah
But accounting discount is in sales, right?
Indrajit Chaudhuri
Yes, yes, sales.
Chirag Shah
Okay. Yeah. So because at times above-the-line, below-the-line, the accounting requirement is different.
Rittick Roy Burman
What we do is we — means that from MRPs, the sale is reduced. We booked a discounted sale only.
Chirag Shah
Okay. Okay. Thank you for clarification. And sir, last question, if I can just squeeze in. So see the question is you have been putting in a.
Operator
Sorry to interrupt you. MR. Chirag, may we request you to join the question queue, sir. We have other participants waiting for their turn.Thank you. The next question is from the line of Abhishek from Alpha Invesco. Please go-ahead.
Abhishek Getam
Hello. Thank you for the opportunity, sir. Sir, I wanted to know our strategy on. So if you could give just broad numbers where are we present, which is which part of the country we are targeting price points and for FY ’26, how much contribution are we looking for this segment?
Indrajit Chaudhuri
See, as we told that we were — means piloting a project in Appalachia and we have seen that it has successfully done. So now we are going-in the — I mean in this model, in this category, we will be introducing product with MRP of 500 to 750. And in the first instance, we will be — we will be giving it to 50 stores in eastern part of the country and in the southern part of the country. So we’ll again see how it works because last-time the stock was less, it is totally exhausted. So this time we are going with a greater volume and we expect that in this year, it will — the sales would be around 1% or 2% of our total sales
Abhishek Getam
For FY ’26
Indrajit Chaudhuri
Or FY ’26.
Abhishek Getam
Okay. So it will be a smaller business.
Indrajit Chaudhuri
But again, if it is again successful, then we’ll again increase. We are taking small steps here because there are also the product has to be brought and since it is a new type of product for us, so we are taking a closed look and then only invest in more products.
Rittick Roy Burman
The initial stocks that we got, that all got extinguished. Now another set of stocks have been ordered, they will come and we will sell that also plus winters was a bit tight, if I can say winters was a bit not as good as summertime, but regarding athleisure. And then — so we are learning all these things and we will be investing accordingly.
Abhishek Getam
Okay. And are we targeting any age group or main specifically what is the target market here?
Indrajit Chaudhuri
No, our product would be for both means the young and the middle East.
Abhishek Getam
Yeah. Okay. And across and.
Indrajit Chaudhuri
Yes.
Abhishek Getam
Okay. And what SKUs do we expect to keep in FY ’20 number of SKUs?
Indrajit Chaudhuri
Around 20,
Abhishek Getam
20
Indrajit Chaudhuri
With color and design?
Abhishek Getam
Okay, thank you. And also a couple of calls back we’ve spoken about getting on quick commerce and partnering with Zepto, I think. So any color on that?
Indrajit Chaudhuri
No, but what we have done is that we are shifting our warehouse of e-commerce from our places to e-card place. So that’s why the Zepto thing has been keep under stoppage. So once it starts, we will start the Zepto thing. All the agreements and everything has been done. So once the place is finalized and operative, then we’ll start that.
Abhishek Getam
Okay. So usually on commerce, there is a — you know, like ad spends and all that. So do we think that their gross margins will get compromised?
Indrajit Chaudhuri
See, in e-commerce, the gross margin is compromised because of all cost of doing the business. So we’ll first try out them if it’s — okay, then only we’ll expand there. Otherwise, we’ll not expect.
Abhishek Getam
Okay. And there we are looking for what’s a pro or British off and how many SKUs? For quick commerce, we are targeting which brands, Pro British offers.
Rittick Roy Burman
No, no, we’ll — for quick commerce, it should be some socks and all should be there, then the EVA products, I don’t think we — it’s more of a product category-wise thing than a brand thing. So there can be some slip on sport shoes, there can be some EVA slippers, okay, because what we feel is that very fancy things, it’s more — more utility-type of product will get sold there. So not like some high fashion ladies slipper or something probably won’t get sold-in quick commerce.
I think what would get sold is a school shoe or a you know clubs type of products, these type of products. And also we are trying to like we — you asked about e-commerce and everything. So we are trying to consolidate our business to — we are putting up special focus on the cost in the e-commerce business also. So we have outsourced the warehousing bit for e-commerce to because they are more specialized in handling the returns and sending the goods and everything. So a part of our own warehouse space would no longer be required because of this e-commerce.
Indrajit Chaudhuri
Mainly we are converting the fixed-cost into variable-cost.
Abhishek Getam
Yes, actually. Understood, sir. Just a bookkeeping question. Can you please give me volumes for last two quarters for retail and distribution and ASPs also
Indrajit Chaudhuri
In just a minute. In retail, we have sold for the nine months, we have sold around 34 lakh pairs and in distribution it is around one crore 70 lac pairs.
Abhishek Getam
Okay and yeah,
Operator
Mr Abhishek, does that answer your question, sir?
Abhishek Getam
Yeah, they are just giving me the number, but yeah,
Operator
Sure
Indrajit Chaudhuri
You in distribution, it is 96 and in retail it is 596.
Abhishek Getam
Understood. Thank you.
Operator
Thank you. Ladies and gentlemen, before we take the next question, a reminder to all the participants, if you wish to ask a question, you may press RN1 on your touchtone telephone. We take the next question from the line of Sahil Vora from MS Associate. Please go-ahead, your line is in the talk mode. Please go-ahead with your question., your line is in the talk mode. Please go-ahead with your question.
Unidentified Participant
Hello.
Operator
Please go-ahead with your question, sir, your line is
Unidentified Participant
Sorry, sorry, my hum. So I was just broadly looking at the peers and our company and I’ve noticed that usually for other peers, Q3 seems to be a peak quarter for a couple of them even Q1 the back-to-school phase and I think that is also a good quarter for them. However, when I look at our business since December ’21, it’s — a lot of the quarters are usually — so there is no seasonality as well. So can you just walk me through in where — in what is it that I’m missing with the business?
Indrajit Chaudhuri
See our quarter because we are primarily in the eastern part of the country. So our peak comes during the Puja thing. So this year since the Puja was in the second-quarter because we sell to our franchisee also and Puja was in the month of — in October —
Rittick Roy Burman
Early October.
Indrajit Chaudhuri
So the maximum sale has happened in the second-quarter. But if you see the first — second-quarter number and third — this quarter number, the number seems to be same because the distribution business in 3rd-quarter has done more compared to the second-quarter. So the retail business has done more in second-quarter. So that’s why the seasonality you cannot see because we are having both the wholesale and the retail in the same year. But our seasonality mainly depends on Puja. If the Puja is in the early part of the October, then it is — the peak happens in second-quarter. And if the Puja is in the later part of October, then we have more sales in the 3rd-quarter of the year.
Unidentified Participant
Okay, understood, sir. And sir, my second question would be that I’ve seen the presentation mentioning that you’ve also added retail stores and distributors also. But I think over the nine months, it does not reflect on the revenue. So I just wanted to understand because you also mentioned earlier in the call, you had to take some pricing discounts also. So I think that may offset the volume and value growth there. But largely to understand when you set-up a new-store in a Tier-2, Tier-3 city, how long does it take until your throughput increases your desired level and payback happens. So if you can just help me with your store economics and stuff.
Indrajit Chaudhuri
Yeah. In case — in our case for the — in the eastern part of the country, our store breakeven in a year. And while in Southern it takes around two years. So mainly we are opening a store in the eastern part of the country, but the sales volume — volume has not increased because there is no-growth in the SSG. And also during this year, we have closed store — Coco store, which was making losses. So these impacts the total sales value-wise sales because the volume has also come down a little bit and also we have taken some discounts. So all of them together has reduced the sale value.
Unidentified Participant
Okay. I understood, sir. That was very helpful. My final question is that you’ve — you mentioned on that you also increasing store count and we — earlier in the call, we also heard you talk about optimizing product mix and introducing new kinds of products. So broadly, if you could help us summarize where does your revenue growth come for the next year? I understand that nine months have already gone through for this financial year, but FY ’26, ’27, what are some of the levers at your disposal wherein we can see growth revenue growth coming in for your business?
Indrajit Chaudhuri
Mainly, since we are reducing the price, we are focusing on the volume growth in retail. And also in — we are some per new-store will be will be launched. From there, we’ll get some volume growth. And also we are trying to increase the SSG of the existing stores. So these three levers are there for retail business.
Rittick Roy Burman
And one more thing which we are doing in the retail business now is this we are basically some of the franchisees — retail consists of both franchisee and company-owned outlets. So some of the franchisee, we are a very old franchising brand. So franchisees have — in the eastern region itself has become very like — they are not up to the mark. So we are convert — we are taking them over and going on a sales on commission basis with them.
So in that — in that way, what will happen is our sales — revenue could increase there as well. Because they are — they have — they are not — some of the franchisees which are not performing up to the mark, they are not billing the goods from us as much as they require because of their own issues. So what we are doing is we are going them, we are telling them, okay, you don’t have to buy the product from us.
We’ll take-over the operations, we’ll send you the stock and we’ll give you a percentage on-sales. So that way we have done a few stores around 30 odd stores and we are seeing a good response from that. So that is also one of the levers to increase our sales for ’27 and
Unidentified Participant
FY ’26,
Rittick Roy Burman
Yeah, ’26.
Unidentified Participant
Okay, sir. And at athleisure, I was hoping to hear something on it. You feel that becomes a material part of your business two, three years down the line.
Rittick Roy Burman
Athleisure is there, then athleisure will become, let’s say, accessories is also there plus 4%, 5% at leisure will become and then accessories around 10% accessory is doing well. So that also has a lot of scope and we are also trying to see some of the products which are not doing well and we’ll eliminate those and we’ll instead keep those products which are doing well now in the store. So these kind of actions are being taken by the team. Clogs is doing well, we are going to put more of clogs. And if we say like some old type of are not doing well, we’ll try to take that out. So these kind of initiatives we are taking in the stores. So all of these things would ensure growth.
Unidentified Participant
Got it. That was really helpful. Thank you for the detailed response and all the best to you and the team. Thank you.
Operator
Thank you. We take the next question from the line of Ankit Agarwal from MNV Capital. Please go-ahead.
Unidentified Participant
Thank you. Thank you for this opportunity. So despite, we can see that there has been a 2.5% of year-on-year growth in revenue in Q3. But profitability seems to be impacted. So just could you just provide more details on the key drivers behind the revenue growth and why profitability is not keeping the same pace?
Indrajit Chaudhuri
See, the 2.5% growth that we are telling is on total nine months in the — this quarter, two-quarter highest quarter, but the thing is that the growth has mainly come in the distribution business where the margin is less. And in retail, we have — in this quarter — this quarter to earlier quarter because earlier quarter the Puja was late in the October. So the margin was high. And this quarter in retail in December, we have introduced more discounted stock. So that has impacted the margin. And once the margin has impacted and the cost, there is an inflationary pressure on cost, the cost has increased compared to last year — last year this quarter. So both of them taken together has reduced the profit?
Unidentified Participant
Okay. Thank you, sir. And also as we look-ahead to the next quarter and FY ’26, so could you just give me some kind of guidance in terms of revenue growth and margin — margin expectations? And also like what key factors do you believe will drive performance and how confident are you in achieving those targets given the current market conditions?
Indrajit Chaudhuri
See the current market condition is not good. The macro condition is not good, but still we are trying to increase the sale through various modes. This year we have taken a fundamental call on reducing the MRP of our mother brand Khadim. So we are expecting some volume growth and with the volume growth, we will expect the value sales growth there. We are taking initiative to reduce the cost wherever possible. So with the increased sale and reduced costs, we’ll try to achieve more profit. And the drivers are — one is volume, one is the new-store addition, one is the — we are also introducing this
Rittick Roy Burman
Commission and sales-based on type of stores
Indrajit Chaudhuri
In our franchisee —
Rittick Roy Burman
In our franchisee.
Indrajit Chaudhuri
So these type of activities are taken to increase the sales value. Margin will slightly go down because we are introducing new product with a lower-margin. But with the volume increase and we have seen that the product is successful in the retail and we expect that FY ’26 will be better compared to FY ’25.
Rittick Roy Burman
Yeah, we are more confident because we see some hope — we see good hope because you know that the discount season is going on where again products are available at a lesser price to the customers. So there is traction, you see. And also one more aspect is that especially our franchise business, which is mainly in the Tier-2, Tier-3 interiors of the country, there because of the past three years, the prices were continuously increased. Now when the prices will be reduced, which will take effect from end of March and with the stocks will come in.
What will happen is these franchisees, etc., will also will be taking up more products than what they used to. Like one of our — we have this BO — BO classification of store called branded outlets, which is mainly in the Tier four cities. There we have — we have recovered quite well because they were given many low-value products over the last one year. So there we have recovered well. So pricing is one factor. Then second factor is underperforming stores, we are taking over and doing this commission on-sales sort of a model, that is another factor.
Then there is again apart from that, we have — we are focusing on all the trending products like clogs or open — in open ladies footwear, we are we have these sub-brands called Cleo and where the prices had increased a bit too much now in the Cleo you know fashion type of ladies when we be available in the price range that is affordable by the consumer, it will be a — it will be a good thing for the consumer, they’ll be able to buy from us more than what it used to before. For the last three years what they used to.
Unidentified Participant
Fair enough, thank you. Thank you for answering my question. All the best, sir.
Operator
Thank you. Ladies and gentlemen, in the interest of time, we will take the last question from the line of Ankit Shah, an Individual Investor. Please go-ahead.
Unidentified Participant
Yeah. Hi. So one was on the demerger. So what is the status by when do we expect the order to be received?
Indrajit Chaudhuri
Demerger is pending before the NCLT at the final orders. So the dates are been within — I think within February, we will get — the dates will be on 21st February. But what is happening, the NCLT is tied-up with so much pressure that the thing is not coming up in when it was hearing is going on. So — but we expect that within February, we’ll get the order and by next financial year for 1st April, the demerger will be effecting
Unidentified Participant
And the trading will start for the new business distribution.
Indrajit Chaudhuri
It will take another two months time through the product to the shares of the demerged entity to be listed.
Unidentified Participant
No. So as the — as the court reserved the order, they have not yet reserved the order.
Indrajit Chaudhuri
No, they have not reserved. Once the order is reserved, then suppose we get the order in March, then the demerger will be effective from 1st April. So it will take around 14 days for the order to come from reserve to getting the order in-hand.
Unidentified Participant
Okay. And you’re expecting the reserve of order happening in Feb itself?
Indrajit Chaudhuri
Yes.
Unidentified Participant
And the other question was when I compare the margins of your retail business, which is roughly 16.5% for the nine months, it is very low as compared to say a metro, which is at 30% 32% and a BATA, which is at 20% 23%. So what is the key reason for that?,
Indrajit Chaudhuri
Our margin comprised of our EBO margin, which is lower compared to the Coco margin because they are in metro and here the franchisee business is comparatively lower than us and they operate in a higher gross margin than us. So that to — these two factors will reduces our EBITDA margin. Another is the economies of scale. They are operating at a INR3,000 crores sales. So their economies of scale will be higher compared to us.
Unidentified Participant
So what’s the large EBITDA margin?
Indrajit Chaudhuri
Because Coco EBITDA margin is around 22% to 25%.
Rittick Roy Burman
I mean, because of dropping sales have reduced a bit, that’s why the EBITDA margins have also dropped a bit. Apart from that also some other unknown areas where Khadim is not that well-known like just Hajasthan or something like that. So those kind of places, we were having shops, but all they were doing is contributing to the EBITDA losses, okay. So we have started taking some calls on such kind of stores. So you know, we are trying to improve the EBITDA margin. It might have dropped for some time,
Indrajit Chaudhuri
But that will not be in the level of metro because metro
Rittick Roy Burman
It will be at the level of
Indrajit Chaudhuri
Having a gross margin of around 70%.
Unidentified Participant
Yeah. No, but so your EBO, the way your accounting works is you build them at a — at MRRP discount, which is how much on an average
Indrajit Chaudhuri
Around 30%
Unidentified Participant
Ohh, so you lose that 30% straight there, whereas your rent is only so that’s where you get impacted because rent comes below EBITDA for your COCO.
Indrajit Chaudhuri
Yes.
Unidentified Participant
Okay. And distribution, what is the PBT loss for the nine months?
Indrajit Chaudhuri
It has been provided in our —
Chirag Shah
That is at an EBITDA level. I’m saying PBT depreciation and
Indrajit Chaudhuri
PBT level means we doesn’t because the finance cost and the depreciation as a combined thing. So
Unidentified Participant
Understood. Okay. Yeah. No, thank you. That’s it from my side.
Operator
Thank you. Thank you. As there are no further questions from the participants, I now hand the conference over to Ms Materia from Orient Capital for closing comments.
Masoom Rateria
Thank you. Thank you, everyone, for joining us on the call today. I would also like to thank the management for sparing time and addressing the questions today. We are Orient Capital, the Investor Relation to India Limited. For any queries, please feel free-to reach-out to us. Thank you.
Indrajit Chaudhuri
Thank you.
Rittick Roy Burman
Thank you so much to all. Thank you.
Operator
Thank you, members of the management on behalf of India Limited. That concludes this conference. Thank you for joining us and you may now disconnect your lines