The September quarter results represent a significant inflection point for the Hyderabad-based ethnic wear retailer, with operating metrics improving across the board. The company's ability to capitalise on the festive season whilst maintaining margin discipline has positioned it favourably heading into the crucial wedding season. With promoter holding stable at 60.97% and institutional participation at 15.08%, the stock's recent momentum reflects growing confidence in the company's operational trajectory.
Financial Performance: Festive Season Delivers Robust Growth
Sai Silks (Kalamandir)'s Q2 FY26 performance showcased strong execution during the festive period, with net sales reaching ₹444.33 crores, marking a 17.23% sequential improvement from Q1 FY26's ₹379.02 crores. On a year-on-year basis, revenue growth accelerated to 27.93%, significantly outpacing the previous quarter's 41.80% YoY expansion, indicating sustained demand momentum. The half-yearly revenue for H1 FY26 stood at ₹823.35 crores, representing a robust 33.97% growth compared to the corresponding period last year.
Profitability metrics demonstrated marked improvement across all levels. Operating profit before depreciation, interest, and tax (excluding other income) expanded to ₹72.02 crores from ₹57.12 crores in Q1 FY26, whilst the operating margin improved 114 basis points to 16.21% from 15.07%. This margin expansion, despite inflationary pressures, reflects improved operational efficiency and favourable product mix. Net profit after tax surged 68.63% QoQ to ₹40.08 crores, translating to a PAT margin of 9.02%—the highest level achieved in the past eight quarters.
| Quarter | Net Sales (₹ Cr) | QoQ Growth | Net Profit (₹ Cr) | QoQ Growth | Operating Margin | PAT Margin |
|---|---|---|---|---|---|---|
| Sep'25 | 444.33 | +17.23% | 40.08 | +33.39% | 16.21% | 9.02% |
| Jun'25 | 379.02 | -4.97% | 30.05 | +122.43% | 15.07% | 7.93% |
| Mar'25 | 398.84 | -11.08% | 13.51 | -70.64% | 14.65% | 3.39% |
| Dec'24 | 448.56 | +29.15% | 46.02 | +93.61% | 17.59% | 10.26% |
| Sep'24 | 347.31 | +29.94% | 23.77 | +1037.32% | 15.94% | 6.84% |
| Jun'24 | 267.29 | -25.68% | 2.09 | -92.73% | 7.08% | 0.78% |
| Mar'24 | 359.64 | — | 28.73 | — | 15.06% | 7.99% |
The quality of earnings improved substantially, with interest costs declining to ₹6.98 crores from ₹8.38 crores in Q1 FY26, reflecting better working capital management and reduced debt burden. The operating profit to interest coverage ratio reached an impressive 10.32 times in Q2 FY26, the highest level in recent quarters, signalling enhanced financial flexibility. Employee costs remained relatively stable at ₹53.61 crores, demonstrating operational leverage as revenue scaled up. The tax rate normalised to 26.34% in Q2 FY26 from the elevated 25.30% in the previous quarter, bringing it closer to the effective tax rate range.
Operational Excellence: Margin Expansion Amidst Growth
The company's operational performance in Q2 FY26 highlighted its ability to drive margin expansion whilst scaling revenues—a rare combination in the competitive retail apparel sector. The operating margin (excluding other income) of 16.21% represents a 114 basis point sequential improvement and marks the second-highest level recorded in the past eight quarters, only trailing the 17.59% achieved in December 2024. This margin resilience, achieved during a period of aggressive revenue growth, underscores effective cost management and improved product mix favouring higher-margin ethnic wear categories.
Return on equity (ROE) dynamics present a mixed picture. The company's average ROE over recent periods stands at 8.52%, which trails the industry benchmark and peer group averages. However, the latest half-yearly ROE improved to 10.02%, and the quarterly ROCE reached 13.24%—the highest level in recent periods. Whilst these returns remain below optimal levels for a retail business, the improving trajectory suggests operational efficiencies are beginning to translate into better capital productivity. The company's return on capital employed (ROCE) of 15.72% on an average basis, whilst reasonable, indicates scope for further improvement as the business matures.
Key Operational Strength: Interest Coverage at Multi-Quarter High
The operating profit to interest coverage ratio of 10.32 times in Q2 FY26 represents the strongest debt servicing capability in recent quarters, providing substantial financial flexibility for expansion initiatives. With interest costs declining to ₹6.98 crores despite revenue growth, the company demonstrates prudent financial management and improving working capital efficiency.
Balance sheet metrics reveal a company in transition. Total shareholder funds stood at ₹1,131.77 crores as of March 2025, with long-term debt reduced to ₹17.64 crores from ₹22.62 crores in the previous year. The debt-to-EBITDA ratio of 2.23 times, whilst moderate, has scope for improvement. Net debt to equity remains low at 0.10, providing adequate cushion for growth investments. Current assets of ₹1,125.09 crores as of March 2025, though slightly lower than the previous year's ₹1,175.08 crores, remain healthy relative to current liabilities of ₹251.32 crores, ensuring robust liquidity.
Working Capital Dynamics: A Point of Vigilance
Whilst profitability metrics have shown improvement, working capital management presents an area requiring attention. The debtors turnover ratio declined to 49.28 times in H1 FY26, marking the lowest level in recent periods. This suggests a lengthening of the receivables cycle, which could tie up capital and impact cash generation. The cash flow statement for FY25 revealed cash flow from operations of ₹106.00 crores, a significant recovery from the negative ₹21.00 crores in FY24, though this improvement was partly offset by changes in working capital that consumed ₹86.00 crores during the year.
Inventory management remains critical for a seasonal retail business like Sai Silks. With current assets comprising a substantial portion of the balance sheet, efficient inventory turnover becomes paramount to maintaining healthy return ratios. The company's ability to navigate seasonal demand fluctuations whilst avoiding excess inventory build-up will be crucial for sustaining margin improvements and cash generation in subsequent quarters.
| Company | P/E (TTM) | P/BV | Div Yield | Debt/Equity |
|---|---|---|---|---|
| Sai Silks (Kalamandir) | 26.47x | 2.65x | 0.51% | 0.10x |
| Bombay Dyeing | 101.18x | 1.47x | 0.71% | -0.27x |
| Siyaram Silk | 17.38x | 2.58x | 1.65% | 0.04x |
| Kewal Kiran Clothing | 24.78x | 0.36x | 0.38% | -0.21x |
| Ganesha Ecosphere | 35.61x | 2.83x | 0.36% | 0.36x |
| Filatex India | 18.58x | 2.00x | — | -0.06x |
In the context of peer comparison, Sai Silks trades at a P/E multiple of 26.47 times, positioned between the sector's lower end (Siyaram Silk at 17.38x) and the premium end (Bombay Dyeing at 101.18x). The company's price-to-book ratio of 2.65 times reflects a moderate premium, though this appears justified given the improving operational trajectory. However, the ROE of 8.52% lags behind peers like Siyaram Silk (16.19%) and Kewal Kiran Clothing (15.67%), suggesting the valuation premium is pricing in expected improvements rather than current performance. The company's conservative leverage profile (debt-to-equity of 0.10x) compares favourably to most peers, providing financial stability.
Valuation Analysis: Attractive Entry Point for Patient Investors
At the current market price of ₹195.89, Sai Silks (Kalamandir) trades at a P/E ratio of 26.47 times trailing twelve-month earnings, representing a significant discount to the industry average P/E of 94 times. The stock's price-to-book value of 2.65 times appears reasonable given the improving ROE trajectory, though it trades at a premium to historical averages. The EV/EBITDA multiple of 12.45 times and EV/Sales ratio of 1.98 times suggest the market is assigning moderate growth expectations to the business.
The company's valuation grade has oscillated between "Attractive" and "Very Attractive" over the past year, currently settling at "Attractive" as of the latest assessment. This classification reflects the balance between improved operational performance and moderate return ratios. With a PEG ratio of 0.84, the stock appears reasonably valued relative to its growth profile, particularly considering the 9.36% five-year sales CAGR and 11.08% EBIT CAGR. The dividend yield of 0.51%, whilst modest, is backed by a conservative payout ratio of 14.61%, leaving ample room for reinvestment in growth initiatives.
Valuation Dashboard
The stock's technical positioning reinforces the positive fundamental narrative. Trading just 2.83% below its 52-week high of ₹201.59 and 73.35% above its 52-week low of ₹113.00, the stock demonstrates strong momentum. The recent upgrade to "Bullish" technical trend on October 24, 2025, coupled with the stock trading above all key moving averages (5-day, 20-day, 50-day, 100-day, and 200-day), suggests sustained buying interest. However, the high beta of 1.35 indicates above-average volatility, requiring investors to maintain appropriate risk management.
Shareholding Pattern: Stable Promoter Base, Shifting Institutional Mix
The shareholding structure of Sai Silks (Kalamandir) reveals a stable promoter base with subtle shifts in institutional participation. Promoter holding remained unchanged at 60.97% in Q2 FY26, maintaining continuity from Q1 FY26 but showing marginal increases from 60.87% in March 2025 and 60.80% in December 2024. The absence of any pledged shares (0.0%) underscores promoter confidence and financial stability, a positive signal for minority shareholders.
| Shareholder Category | Sep'25 | Jun'25 | Mar'25 | QoQ Change |
|---|---|---|---|---|
| Promoter | 60.97% | 60.97% | 60.87% | Stable |
| FII | 3.85% | 3.45% | 3.17% | +0.40% |
| Mutual Funds | 10.16% | 11.83% | 13.18% | -1.67% |
| Other DII | 1.07% | 0.55% | 2.56% | +0.52% |
| Non-Institutional | 23.95% | 23.21% | 20.23% | +0.74% |
Institutional shareholding dynamics present a mixed picture. Foreign institutional investors (FIIs) increased their stake to 3.85% in Q2 FY26 from 3.45% in the previous quarter, indicating growing international interest. However, mutual fund holdings declined 167 basis points to 10.16% from 11.83%, marking the third consecutive quarter of reduction from the peak of 13.53% in September 2024. This sustained reduction in mutual fund exposure warrants attention, though it may reflect portfolio rebalancing rather than fundamental concerns. Other domestic institutional investors (DIIs) increased participation to 1.07% from 0.55%, partially offsetting the mutual fund decline.
The non-institutional shareholding category, comprising retail and high-net-worth individuals, expanded to 23.95% from 23.21% quarter-on-quarter, suggesting growing retail interest following the strong Q2 results. With 13 FIIs and six mutual funds holding positions in the stock, institutional coverage remains moderate, leaving scope for increased participation as the company scales and demonstrates consistent performance. The overall institutional holding of 15.08% remains relatively low for a listed company of this market capitalisation, presenting both opportunity and risk—opportunity for increased institutional buying if performance sustains, and risk from potential liquidity constraints during market stress.
Stock Performance: Strong Recent Momentum After Prolonged Consolidation
Sai Silks (Kalamandir)'s stock performance narrative is one of recent resurgence following an extended period of consolidation. The stock has delivered a one-year return of 20.49%, outperforming the Sensex's 6.77% gain by a substantial margin of 13.72 percentage points. However, this performance must be contextualised against the two-year return of -19.04%, during which the Sensex advanced 32.92%, resulting in a significant underperformance of 51.96 percentage points. This divergence highlights the stock's volatility and the importance of entry timing for investors.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Day | +4.54% | +0.67% | +3.87% |
| 1 Week | +7.99% | +0.49% | +7.50% |
| 1 Month | +28.85% | +5.41% | +23.44% |
| 3 Months | +5.80% | +4.07% | +1.73% |
| 6 Months | +60.61% | +7.03% | +53.58% |
| YTD | +15.71% | +8.50% | +7.21% |
| 1 Year | +20.49% | +6.77% | +13.72% |
| 2 Years | -19.04% | +32.92% | -51.96% |
The most striking aspect of recent performance is the six-month return of 60.61%, generating alpha of 53.58 percentage points versus the Sensex. This surge, beginning around April 2025, coincides with improving quarterly results and margin expansion. The one-month return of 28.85% (alpha of 23.44%) reflects the market's positive reception to the Q2 FY26 results and growing optimism about the upcoming wedding season. Short-term momentum remains robust, with the stock gaining 7.99% over the past week and 4.54% on the day following results.
Relative to its sector, Sai Silks has significantly outperformed, delivering 20.49% returns over the past year compared to the Garments & Apparels sector's 4.04%, representing outperformance of 16.45 percentage points. This sector-relative strength suggests company-specific factors—improved execution, margin expansion, and festive demand capitalisation—are driving returns rather than broader sectoral tailwinds. The stock's high beta of 1.35 and volatility of 46.54% classify it as a "High Risk High Return" investment, requiring investors to maintain conviction through inevitable near-term fluctuations.
Investment Thesis: Improving Fundamentals Meet Attractive Valuation
The investment case for Sai Silks (Kalamandir) rests on four key pillars, each presenting a mixed but improving picture. First, near-term operational momentum appears positive, with the quarterly financial trend classified as "Positive" and technical indicators turning "Bullish". The company's ability to deliver 33.97% revenue growth in H1 FY26 whilst expanding margins demonstrates operational leverage and execution capability during the critical festive period.
Mojo 4 Dots Analysis
1. Near Term Drivers: POSITIVE ✓ (Quarterly trend positive, technicals bullish)
2. Quality Assessment: AVERAGE (Grade: Average, ROE of 8.52% improving)
3. Valuation: ATTRACTIVE ✓ (P/E 26x vs industry 94x, PEG 0.84x)
4. Overall Score: 71/100 (BUY rating)
Second, quality metrics present a more nuanced picture. The company's quality grade stands at "Average", reflecting moderate return ratios (ROE of 8.52%, ROCE of 15.72%) and moderate debt levels (debt-to-EBITDA of 2.23 times). Whilst these metrics trail best-in-class peers, the improving trajectory—particularly the latest quarterly ROCE of 13.24% and improving interest coverage—suggests the company is transitioning towards higher quality. The absence of promoter pledging and healthy five-year growth rates (9.36% sales CAGR, 11.08% EBIT CAGR) provide foundational stability.
Third, valuation appears attractive at current levels. With a P/E ratio of 26.47 times versus the industry average of 94 times, and a PEG ratio of 0.84, the stock offers reasonable value for investors willing to look beyond near-term volatility. The price-to-book ratio of 2.65 times, whilst at a premium to book value, appears justified given the improving ROE trajectory and operational momentum. The stock's proximity to its 52-week high (just 2.83% below) reflects growing market recognition of the improving fundamentals.
Fourth, technical positioning supports the fundamental narrative. The stock's upgrade to "Bullish" trend, trading above all key moving averages, and strong delivery volume growth (190.08% increase over one month) indicate sustained buying interest. However, the high beta of 1.35 and significant two-year underperformance (-19.04%) serve as reminders of the stock's volatility and the importance of a medium-to-long-term investment horizon.
"With operating margins at 16.21% and interest coverage at 10.32 times, Sai Silks demonstrates the operational leverage and financial flexibility needed to capitalise on India's growing ethnic wear market."
Key Strengths & Risk Factors
KEY STRENGTHS ✓
- Strong Revenue Momentum: 27.93% YoY growth in Q2 FY26, with H1 FY26 revenues up 33.97%, demonstrating robust demand for ethnic wear offerings
- Margin Expansion: Operating margin improved to 16.21% from 15.07% QoQ, with PAT margin reaching 9.02%—highest in eight quarters
- Exceptional Interest Coverage: Operating profit to interest ratio of 10.32 times provides substantial financial flexibility for growth investments
- Improving Return Metrics: Latest half-yearly ROCE at 13.24% (highest level) and ROE improving to 10.02% from historical averages
- Conservative Leverage: Net debt-to-equity of 0.10 and declining absolute debt levels provide balance sheet stability
- Zero Promoter Pledging: Stable promoter holding of 60.97% with no pledged shares signals confidence and financial prudence
- Attractive Valuation: P/E of 26x vs industry 94x, PEG ratio of 0.84, offering reasonable entry point for growth potential
KEY CONCERNS ⚠
- Below-Par Return Ratios: Average ROE of 8.52% and ROCE of 15.72% lag peer group and optimal levels for retail business
- Working Capital Pressure: Debtors turnover ratio declined to 49.28 times (lowest level), indicating lengthening receivables cycle
- Declining Mutual Fund Interest: MF holdings dropped to 10.16% from 13.53% over past year, reflecting sustained institutional selling
- High Volatility Profile: Beta of 1.35 and volatility of 46.54% classify stock as high risk, with two-year returns of -19.04%
- Seasonal Business Model: Heavy dependence on festive and wedding seasons creates quarterly earnings volatility and working capital challenges
- Moderate Institutional Coverage: Only 15.08% institutional holding with limited analyst coverage may impact liquidity during stress
- Execution Risk: Sustaining margin improvements whilst scaling operations remains uncertain given competitive retail landscape
Outlook: What to Watch in Coming Quarters
The trajectory for Sai Silks (Kalamandir) over the next 12-18 months will be determined by its ability to sustain the operational momentum demonstrated in Q2 FY26 whilst addressing the structural concerns around return ratios and working capital management. The upcoming wedding season (November 2025 through February 2026) represents a critical test of the company's execution capabilities and demand sustainability. Investors should monitor several key indicators to assess whether the recent improvements represent a sustainable inflection point or a temporary cyclical upturn.
POSITIVE CATALYSTS ▲
- Sustained Margin Expansion: Operating margins holding above 16% for consecutive quarters would validate operational improvements
- Working Capital Efficiency: Improvement in debtors turnover ratio and positive cash flow from operations in H2 FY26
- ROE Trajectory: Quarterly ROE consistently above 10% would support premium valuation and attract institutional interest
- Store Expansion Success: New store additions contributing to revenue growth without margin dilution
- Market Share Gains: Outperformance versus garments sector peers in revenue growth and profitability metrics
RED FLAGS ▼
- Margin Compression: Operating margins falling below 15% would signal competitive pressures or execution challenges
- Working Capital Deterioration: Further decline in debtors turnover or inventory build-up impacting cash flows
- Institutional Exodus: Continued decline in mutual fund holdings below 8-9% levels would raise governance concerns
- Debt Increase: Rise in debt levels to fund expansion without corresponding improvement in return ratios
- Seasonal Disappointment: Weak Q3 FY26 performance during peak wedding season would question demand sustainability
The broader context for India's ethnic wear retail sector remains constructive, with rising disposable incomes, premiumisation trends, and increasing preference for branded offerings supporting long-term growth. However, intense competition from both organised players and e-commerce platforms requires continuous innovation in product offerings, customer experience, and omnichannel capabilities. Sai Silks' ability to differentiate through its traditional silk and ethnic wear positioning whilst adapting to evolving consumer preferences will determine its competitive sustainability.
The Verdict: Attractive Entry for Patient Investors
Overall Score: 71/100
For Fresh Investors: Current levels present an attractive entry point for investors with a 12-18 month horizon. The combination of improving operational metrics, attractive valuation (P/E 26x vs industry 94x), and positive momentum justifies accumulation in tranches. However, the high volatility profile (beta 1.35) necessitates position sizing appropriate to risk tolerance. Consider building positions gradually, targeting entry below ₹200 levels with a view towards ₹240-260 over the next 12-15 months.
For Existing Holders: Maintain holdings with conviction. The Q2 FY26 results validate the improving operational trajectory, and the upcoming wedding season provides near-term catalysts. Existing investors who entered at lower levels may consider booking partial profits above ₹210-215 to manage volatility, whilst retaining core positions for medium-term wealth creation. Monitor quarterly results closely for sustained margin performance and working capital trends.
Fair Value Estimate: ₹245-255 (25-30% upside potential over 12-15 months), based on 28-30x forward earnings and sustained margin performance at 15-16% levels
The investment case rests on the company's ability to sustain operational improvements demonstrated in Q2 FY26 whilst addressing structural concerns around return ratios. With improving fundamentals meeting attractive valuation, the risk-reward appears favourable for patient investors willing to navigate near-term volatility. The key differentiator will be execution consistency over the next 2-3 quarters, particularly during the crucial wedding season.
