Kewal Kiran Clothing Concall: Expansion Plans, Sales Growth & Future Strategy

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Kewal Kiran Clothing Concall Summary – February 2025

Kewal Kiran Clothing Concall Summary – February 2025

Financial Performance

Kewal Kiran Clothing Ltd reported a strong 28% year-on-year growth in consolidated sales, reaching ₹255 crores. The key drivers behind this growth were a rise in apparel volumes and the consolidation of the Kraus brand. Both standalone and consolidated apparel segments showed a positive increase, reflecting strong consumer demand.

Production and Inventory Management

The company transitioned to a just-in-time production approach but faced challenges with supply chain delays of 3 to 4 months, affecting the first two quarters of FY’25. However, by Q2 FY’25, production timelines were restored. Inventory levels rose to ₹153 crores from ₹82 crores in March 2024, signaling a recovery strategy aimed at optimal stock levels within 6 to 9 months.

Brand Strategy

As part of its repositioning, Kewal Kiran Clothing discontinued the Lawman brand in the MBO channel, shifting focus towards a youth-centric fast fashion model. To strengthen its retail presence, the company opened 61 exclusive brand outlets (EBOs) for Lawman, with plans for 40-50 more stores in the upcoming year. By Q3 FY’25, the total EBO count reached 591, including 404 Killer EBOs, 10 Kraus stores, and 116 K-Lounge and other brand outlets.

Kraus Brand Expansion

Kraus generated approximately ₹175 crores in FY’24, with Q3 FY’25 sales at ₹53 crores, reflecting steady growth. Initially, most Kraus sales came from large-format stores (LFS), but the company has now expanded into exports and retail, launching 10 standalone stores. Moving forward, Kewal Kiran Clothing plans to leverage its vast distribution network to grow Kraus in the MBO and EBO segments.

Capital Expenditure (Capex) Plans

The company has planned a capex investment of ₹30-35 crores over the next two years, primarily for manufacturing expansion and retail growth. With its current manufacturing capacity fully utilized, this investment will support further business expansion and demand fulfillment.

Market and Demand Trends

Government policies, including direct tax reductions, are expected to boost consumer spending. Management remains optimistic about double-digit growth in Q4 FY’25, driven by improved production processes and strong sales momentum.

Profit Margins and Pricing Strategy

The company expects EBITDA margins to remain in the 18%-20% range. However, gross margins faced some pressure due to increased discounting and an inability to implement price hikes. This strategy is aimed at maintaining competitive pricing while sustaining sales volumes.

Additional Insights

Production Model: 80% of production is in-house, while 20% is outsourced, mainly for winter wear and accessories.
Retail Performance: The retail segment follows a 60% fresh sell-through model, with 40% of annual sales coming from discounted stock.
New Segments: The company is actively expanding in the kidswear and athleisure categories. While initial response has been positive, it is too early to determine long-term performance.

Challenges and Future Strategy

Kewal Kiran Clothing faced sales losses due to inventory and production delays. The company is adapting its inventory strategy to align better with demand and avoid future supply disruptions. Despite these challenges, management remains confident in future growth, driven by strategic brand positioning, expanded production, and favorable market conditions.