PDS Ltd Management Discussions

Economic overview

Global economic overview¹

The global economy demonstrated resilience in CY2023 with a growth rate of 3.2%, which is expected to maintain its course into CY2024 and CY2025. This steady trajectory is underpinned by balanced risks to growth, amidst a backdrop of declining inflation and consistent economic expansion. The economic rebound has shown remarkable resilience, despite challenges such as Russias invasion of Ukraine and the widespread cost- of-living crisis. Inflation rates have decreased more rapidly than anticipated from their peak in CY2022, mitigating the anticipated negative impacts on employment and economic activity. This decline in inflation is attributed to favourable supply-side dynamics and the monetary tightening policies implemented by central banks.

Prolonged geopolitical conflicts and supply chain disruptions in shipping routes, for instance in the Red Sea have delayed global trade and affected economies worldwide. However, countries acting as major manufacturing hubs, such as Bangladesh are expected to witness an upswing in economic activity due to strong demand and increasing exports.

Outlook

With inflation gradually receding and central banks implementing fiscal policies and undertaking structural reforms to promote sustainable growth, the global economic outlook remains optimistic. The likelihood for interest rate reductions is expected to encourage economic activity.

Economic upswings and increasing domestic demand are propelling the growth of economies in Europe and Asia. On the other hand, modest economic growth is projected for advanced economies, such as the United Kingdom. With governments in major economies withdrawing fiscal policy support more slowly than necessary, higher-than-projected global growth is anticipated in the near term.

Indian economy

Global headwinds notwithstanding, the Indian economy continues to exhibit promising indicators, with the countrys real Gross Domestic Product (GDP) which grew by 8.2% in FY2024.² Growing domestic consumption and the Governments continued focus on capital expenditure remain the key drivers fuelling this growth. The domestic economy is bolstered by increased public sector investment and a resilient financial sector. Additionally, declining inflation and greater credit demand underpin the inherent optimism in the economy.

The Remission of Duties and Taxes on Exported Products (RoDTEP) Scheme is yet another cornerstone initiative implemented by the Government of India which aims to strengthen the countrys export sector. The current financial year witnessed a substantial budget allocation of H15,070crs for the RoDTEP scheme, with a 10% increase slated for FY2024-25.³ This is expected to boost exports and enhance Indias global competitiveness.

During the first half of FY2024, the industrial and services sectors substantially contributed to the growth on the supply side. Notably, the manufacturing sector grew faster than the services sector. Moreover, the Reserve Bank of Indias (RBI) proactive monetary policy actions and strong commitment to price stability boded well for economic growth.

Key schemes and programmes

The Ministry of Textiles has undertaken several initiatives to strengthen Indias textile industry and position it as a key player in the global market.

Bharat Tex 2024⁴

Bharat Tex 2024 was Indias largest-ever global textile mega event. It showcased Indias commitment to sustainability, innovation and circularity. It had a retail high street, to demonstrate the prospects for the fashion retail business in India.

With strong participation from over 3,000 buyers from 111 countries, Bharat Tex 2024 is proposed to become an annual affair. The event covered the entire value chain with a cohesive farm-to-fashion theme. The launch of initiatives like Kasturi Cotton and the signing of over 50 Memorandum of Understanding (MoUs), at the event augmented Indias position as a sustainable sourcing hub for global fashion brands.

Kasturi Cotton Bharat programme

Kasturi Cotton Bharat is an initiative led by the Government of India, in collaboration with textile trade bodies and industry stakeholders, to create premium value for cotton grown in India. The Ministry of Textiles is operating this initiative in a mission-oriented approach, allocating budgetary support in alignment with H15crs contribution from Trade and Industry Bodies.

This initiative aims to brand, trace and certify Indian cotton under benchmarked specifications, enabling India to outperform its peers in the global market. Through partnerships with entities like the Cotton Corporation of India (CCI) and the Cotton Textiles Export Promotion Council (TEXPROCIL), Kasturi Cotton Bharat seeks to promote Indian cottons rich heritage, quality standards and commitment to best practices, positioning it strategically on the global stage for its unique qualities and cultural significance.

PM-Mega Integrated Textiles and Apparel Park (PM MITRA)⁵

The PM Mega Integrated Textile Regions and Apparel (PM MITRA) Parks will facilitate the development of a large- scale, contemporary and integrated textile value chain at one location, enhancing the stature of Indias textile industry globally. This would also help in attracting large investments, including FDI. Seven PM MITRA Parks have been established by the Indian government for the textile sector. Each park is expected to generate 2,00,000 direct jobs and 2,00,000 indirect jobs upon completion. Additionally, an estimated H10,000crs will be invested in each PM MITRA park.

Financial support for Greenfield projects up to H800crs and Brownfield projects up to H500crs for each park would be offered by the Ministry of Textiles. In terms of the governments objective of making India a major hub for textile exports and manufacturing, this is a significant step forward. These parks will streamline textile production by integrating the entire value chain under one roof, potentially reducing the industrys carbon footprint.

SAMARTH⁶

The Ministry of Textiles is implementing Samarth, a Scheme for Capacity Building in the Textile Sector (SCBTS), with the objective-

i. To provide demand driven, placement oriented National Skills Qualifications Framework (NSQF) compliant skilling programmes to incentivise and supplement the efforts of the industry in creating jobs in the organized textile and related sectors, covering the entire value chain of textile, excluding Spinning and Weaving.

ii. To promote skilling and skill upgradation in the traditional sectors of handlooms, handicrafts, sericulture and jute.

iii. To enable provision of sustainable livelihood either by wage or self-employment to all sections of the society across the country.

The Scheme aims to train 1 million people (0.9 million in organised & 0.1 million in traditional sector)

Production Linked Incentive (PLI) Scheme

The PLI Scheme encourages the production of technical textiles and apparel made from manmade fibres (MMF) in India. The scheme aims to expand the textile industrys size and scope, increase its competitiveness abroad and spur employment opportunities for the citizens. Launched in September 2021, the H10,683 crs PLI scheme for the textiles sector is expected to lead to a cumulative turnover of over H3 lakhs crs. The gestation period for textiles PLI ended in March 2024. The fiscal year 2024-25 will be the first performance year wherein evaluation will be done.⁷

Industry overview

Global fashion industry

The global fashion industry is expected to witness growth of 2%-4% in 2024, with variations at regional and country levels. Weakening consumer confidence and dwindling household savings are likely to curb spending, weighing on demand for apparel and prompting consumers to opt for more affordable options across various categories. Global macroeconomic disruptions have significantly impacted the fashion industrys supply chain. These disruptions such as economic downturns, geopolitical events have led to production delays and logistical challenges. As a result, fashion companies are increasingly focusing on supply chain diversification and risk management strategies to mitigate these risks and ensure business continuity.

Despite these challenges, certain geographic regions stand out as potential growth markets. Emerging Asia, particularly India, exhibits promising growth prospects due to increased investment activity, burgeoning domestic demand, infrastructural development and support from the government.

The outlook for the fashion industry remains optimistic amidst fluctuations in the economy. Innovative marketing methods, customer-centric approaches and multichannel optimisation will encourage long-term growth of the brands. Notwithstanding the present global challenges, the industrys perseverance and commitment to constructive development present a future brimming with opportunities.⁸

Slower but normalised growth is anticipated across regions in 2024

Retail sales year-on-year growth by region and segment, %

Note: Growth forecasts reflective of inflation, growth rates calculated on actuals expressed in local currencies

Global apparel market

In recent years, the global apparel market has witnessed substantial expansion. Further, it is expected to grow at a compound annual growth rate (CAGR) of 7.2%, totalling $656 billion in CY2024, up from $655.7 billion in CY2023. Strong economic growth in emerging nations, a surge in foreign direct investments, greater demand for synthetic fibres and technological advancements are all catalysts to this growth.⁹

The global textiles and apparel trade is projected to reach $1,284 billion in CY2028, up from $942 billion in CY2022, clocking a growth rate (CAGR) of 5.5%. Emerging economies, including Vietnam and Bangladesh, are projected to record robust CAGRs of 4.2% and 7.7% from CY2023 to CY2028, respectively, reflecting their increasing significance in the global apparel market.

Customers today increasingly use online platforms to purchase apparel and fashion items, leading to a spike in online apparel sales. The rapid proliferation of e-commerce is also expected to enable the future expansion of the apparel manufacturing market.

The increasing popularity of social media and the rising demand for performance and sportswear are yet another growth driver for the apparel market. Leveraging technology to create a reliable supply chain and deploying artificial intelligence (AI) to forecast trends in colours, styles and patterns are two of the key trends expected to continue in the years ahead.

The global ready-made garment industry is propelled by the fashion and clothing sectors. By 2030, the ready-made market in Europe is expected to rank second globally, while North America is expected to register the fastest growth rate in this sector. The ready-made garment market offers a plethora of options due to the growing popularity of fast fashion and consumer demand for unique and customised apparel.

Global apparel sourcing

Global apparel sourcing refers to the process of procuring materials, components and finished garments from suppliers located around the world. It involves identifying and selecting the most suitable vendors, negotiating terms, managing logistics and ensuring compliance with relevant regulations and standards.

One of the primary advantages of global sourcing is its ability to leverage lower labour costs and production expenses in developing countries.

Certain countries have developed specialised expertise in apparel manufacturing, attracting global brands to source from these locations. For instance, Bangladesh has a large pool of skilled garment workers, which makes it an attractive sourcing destination.

Global sourcing enables brands to shift their focus and efforts towards crafting new collections and enhancing their brand image instead of overseeing manufacturing. By entrusting proficient sourcing service providers with the intricacies of production, brands can thrive in designing fashionable clothing and accessories.

Trends in the apparel market

The rise of nearshoring and friendshoring

Apparel manufacturing market is observing a resurgence in nearshoring and friendshoring strategies. Companies relocating production units closer to consumer markets or back to their home countries are reducing lead times, transportation costs and enhancing supply chain transparency. Also, the emerging trade practices in countries which are political and economic allies to reduce geopolitical risks is also gaining importance. These trends emphasise flexibility and adaptability in modern manufacturing, fuelling growth in the apparel market.

Transparent supply chains and traceability

The increasing demand for adopting ethical practices to ensure sustainability has encouraged businesses to embrace transparent supply chains and traceability. Technologies like blockchain and traceability systems provide end-to-end visibility, ensuring ethical sourcing and responsible production practices and help in building consumer trust. Blockchain offers immutable records while traceability systems track raw materials and products, offering transparency to the consumers.

Shortened lead time

Shortened lead times have emerged as a prominent trend in the apparel industry, reflecting a shift towards faster and more responsive supply chains. This trend is largely driven by the see now, buy now mentality among consumers, who seek immediate gratification and want to wear the latest styles. As a result, apparel companies are prioritising fast fashion and just-in-time manufacturing to accelerate their product development cycles and ensure timely delivery to market.

Data-driven decision-making

Apparel companies are increasingly integrating technology into their operations and using data analytics for informed decision-making; thereby achieving improved efficiency and data-driven consumer insights. Analysing consumer data is helping forecast demand and manage inventory while also enabling real-time tracking of products in transit.

Automation and robotics

Automation and robotics are now revolutionising the apparel industry to assemble, pack and ship orders at production, distribution and warehousing facilities. It can increase production efficiency, reduce the incidence of errors and reduce the overall costs of production.

Supplier consolidation

The apparel industry is witnessing a major trend towards supplier consolidation, where brands are reducing their supplier base and focusing on building deeper strategic partnerships with a few key suppliers. This shift is driven by several factors such as the desire for greater control, speed and flexibility in the supply chain. Also, the pursuit of cost efficiencies through economies of scale and reduced complexity and supply chain risk mitigation will help in having a more concentrated supplier network.

By consolidating volumes with fewer but larger suppliers apparel companies aim to foster stronger collaborations, enable demand-driven models, improve quality control and visibility and drive faster response times to market demands and trends.

Growth enablers¹²

Higher demand for man-made fibres

An increasing preference for synthetic blend fabrics and man-made fibres is being observed among consumers This is primarily because artificial fibres are produced from materials derived from crude oil and are almost 30-40% cheaper than cotton. Owing to their ability to fill the gap in cotton supply and demand and their impressive versatility, synthetic fibres now account for over 70% of blended textiles.

Growth of emerging markets

Owing to robust economic growth in developing nations, consumers in countries, including India, Brazil, Indonesia, Mexico and others are observing a gain in purchasing power. An increased demand for various goods and services, especially apparel and accessories, has contributed to the growth of the market in these countries.

The inclination of brands towards outsourcing

The number of fashion brands embracing outsourcing is increasing. This is because outsourcing to diverse regions with competitive production costs and efficient practices enables brands to maintain cost-effectiveness. It helps mitigate risks while providing easy access to new production capabilities and resources. Outsourcing to agile partners also empowers brands to swiftly adapt to evolving trends and consumer preferences, thereby reducing inventory surplus and waste. By outsourcing, brands can compete by delivering comparable value propositions without compromising quality or brand identity. As more brands continue to shift towards outsourcing, this trend is set to contribute to substantial growth of the industry.

Greater preference for customised clothes

Consumers prefer clothes that reflect their unique personalities. This presents a lucrative opportunity for industry players to develop their business to satiate the growing demand for customised fashion products. In the competitive fashion industry, businesses that understand consumer preferences and customise their goods and services accordingly are poised to grow.

Preference for sustainable clothing

Brands that employ innovative designs and environment- friendly practices tend to attract eco-conscious consumers. By employing cutting-edge marketing strategies and strong influencer alliances, companies may foster long-lasting brand loyalty and deep connections with their target customers. Projects such as circular fashion initiatives, transparent supplier chains and carbon neutrality pledges offer compelling stories that build customer confidence in brands and position them as industry leaders, igniting positive change in the fashion industry.

Adopting automation

In an environment where maximising margins is crucial, investing in automation tools for manufacturing can yield substantial benefits. By integrating automation into the supply chain, companies can save costs through reduced labour expenses while simultaneously improving efficiency, precision and productivity across various stages of the production process. This strategic adoption of technology not only optimises operations but also augments the position of fashion businesses in a dynamic and evolving market landscape. Leveraging automation will ensure agility and resilience in the face of industry challenges.

Sustainability in sourcing and manufacturing

With the rising consumer demand for sustainable fashion, there is a significant opportunity for companies to prioritise sustainability throughout their supply chains. This involves sourcing materials from eco-friendly suppliers, adopting sustainable manufacturing practices, such as energy-efficient processes and waste reduction, and ensuring ethical labour standards in production facilities. These practices will enable companies to meet consumer expectations while contributing positively to environmental and social concerns.

Vertical integration

Vertical integration enables sourcing and manufacturing companies to control multiple stages of the production process. This method presents a lucrative opportunity for companies to improve efficiency, quality control and cost- effectiveness. The companies can explore opportunities to vertically integrate their operations by expanding into fabric production, garment manufacturing or retail distribution, allowing them to capture more value within the supply chain.

Global expansion

The growth of e-commerce and the increasing demand for fashion in emerging markets have facilitated fashion manufacturing companies to expand their global presence. Entering new markets, establishing partnerships with local retailers and distributors or leveraging digital platforms will aid companies to reach international consumers directly.

Diversification of product offerings

Diversifying product portfolio beyond traditional clothing and accessories can enable sourcing and manufacturing companies to expand their market reach and cater to evolving consumer demands.

Challenges

Persisting uncertainty in the global Industry

Amid conflicts in Europe and the Middle East, geopolitics remains the major concern for fashion industry players, followed by economic volatility and inflation. Consumer confidence is anticipated to be adversely impacted by new and ongoing financial challenges and geopolitical conflicts. Fashion markets in the US, Europe and China are facing a variety of difficulties that require suppliers, brands and retailers to devise robust backup plans and take prompt action to overcome these challenges.

The dominance of fast fashion

Fast fashion places a premium on economy and speed and often sacrifices ethical labour practices and environmental sustainability. This, in turn, raises ethical and environmental concerns, leading to waste generation and worker exploitation in developing nations.

Navigating sustainability regulations

It is necessary to adhere to the new sustainability rules. These guidelines, however, can pose challenges for the fashion industry, especially for manufacturers seeking to revamp their business models. It is essential for companies to proactively address these changes to stay ahead of the competition and meet the growing demand for sustainable fashion.

Volatile interest rates¹³

Interest rate fluctuations impact both the cost of borrowing and the financing associated with inventory control. These variations could continue to affect foreign trade dynamics and currency exchange rates, thereby hindering investment plans globally.

Trends in the interest rates of major economies

	US Federal Reserve	UK Bank of England
	CY2023	CY2024P	CY2023	CY2024P
Q1	4.6%	5.4%	4.3%	6.0%
Q2	5.0%	5.4%	5.1%	5.9%
Q3	5.3%	5.3%	5.6%	5.7%
Q4	5.4%	5.0%	5.9%	5.5%

Business overview

PDS is a global fashion infrastructure Company, that serves as a sourcing, manufacturing and fashion value chain platform for leading brands and retailers worldwide. Over the years, the Company has established a worldwide presence in over 90+ offices in 22 countries. PDS provides integrated and customised end-to-end solutions to more than 250 global fashion brands and retailers.

PDS maintains an extensive network of 600+ partner factories that is capable of shipping nearly one million garments daily on a global scale. The Company continues to prioritise sustainability and leverages its extensive industry experience, which enables it to cater to the fast-evolving global fashion industry while addressing changing consumer preferences.

Sourcing

Design-led Sourcing

PDS, with its global design-led sourcing platform, serves major fashion brands and retailers worldwide. This platform enables the Company to expand its customers design portfolios and source products across the value. The Company leverages a global ecosystem of over 250 designers located across major fashion hubs, such as London, Hong Kong, New York, Barcelona and New Delhi, to introduce new concepts by combining creative inputs from market intelligence and trends.

The Companys services include design, product development based on requirements, order management, supplier management, compliance assurance and access to a vast global supplier base. This comprehensive offering enables the Company to provide its customers with quality designs, competitive sourcing, rapid speed-to-market and ESG- compliant sourcing solutions.

Sourcing as a Service

The Company offers an exclusive and independent setup that acts as the sourcing arm for the specific retailer and brand in specified territories. It involves joint budgeting, decision-making processes and a cost-plus pricing structure with transparency on pricing and operational expenses. The sourcing as a Service model, enables PDS to leverage its expertise in mitigating infrastructure setup risks for retailers and brands.

PDS brings deep familiarity and local expertise in key sourcing and manufacturing locations such as Turkey, Bangladesh and India. These attributes enable the Company to facilitate long-term collaboration with its customers. PDS also provides support functions, including HR, IT, legal, finance, accounting, ESG and risk management, through its centralised platform.

Brand management

PDS has expanded its service offerings to include brand management, which offers end-to-end brand conceptualisation, management and marketing solutions. The Company leverages its global design and supply platform to provide services across the entire brand lifecycle, from design and product development to sourcing, manufacturing, marketing, licensing and distribution.

The Company closely collaborates with brand IP owners to craft tailored partnerships and ensures that brand integrity is preserved and strengthened in every step. For instance, PDS has made a strategic partnership with the Authentic Brands Group to establish the Ted Baker Design Group. PDS is currently serving as the global hub for Ted Bakers design, merchandising and innovation functions while also becoming a core licensee and operating partner for the brand. The brand management expertise of PDS, combined with its integrated platform spanning from design to distribution, makes it well- positioned to revitalise brands and drive growth through new market entries and brand extensions—all while offering a comprehensive suite of solutions tailored to meet the unique needs of brands.

The segment contributes 97% to the Companys total revenue (unadjusted for intersegment eliminations). The Companys sourcing segment registered an EBIT of H327 crs with in an EBIT margin of 3.2%, the Return on Capital Employed (ROCE) stood at a 26%.

Manufacturing

The in-house manufacturing segment of PDS complements its Sourcing segment. The Company operates three specialty- focused manufacturing facilities strategically located in Bangladesh and Sri Lanka to better serve clients that require in-house manufacturing capabilities from their suppliers. The Company maintains control over the manufacturing process and improves its credibility among clients.

PDS Bangladesh facility Progress Apparel also has a state of the art wash plant which manages 90% of that facilities wash requirement in house. The facilities adhere to stringent ESG compliance standards and certifications to meet the sustainability requirements of PDSs global clientele.

The segment contributes 6% to the Companys total revenue (unadjusted for intersegment eliminations). The manufacturing segment achieved an EBIT of H24 crs prior to interco adjustements, demonstrating its ability to generate profit while effectively managing operational expenses.

PDS Ventures and others

PDS has a dedicated venture capital (VC) arm called PDS Ventures that focuses on investing in innovative solutions across the apparel, sustainability and circularity domains, spanning the entire value chain from design to consumer. PDS Ventures operates as a VC fund, making direct investments in startups focused on innovation, sustainability, technology and direct-to-consumer digital brands. The investment strategy is aligned with PDSs overall vision of providing cutting-edge solutions for defining the future of the fashion industry.

PDS Ventures maintains an active portfolio of companies, including notable investments in Materra, Atterley and Zwift. By investing in pioneering businesses, PDS Ventures aims to support young entrepreneurs and accelerate their missions to drive positive impact within the fashion ecosystem. The venture arm leverages the broader PDS platform to facilitate strategic collaborations and enable portfolio companies to effectively scale their solutions. By investing in emerging enterprises, PDS not only enriches the value proposition for customers and vendor partners but also fortifies its foundation for long-term growth.

Business performance

Operational highlights

• The Company ventured into the brand management space by signing a 10-year partnership with Authentic Brands Group (ABG) to manage the Ted Baker brand end-to-end.

• The Company acquired a 26% stake in Sri Lankan manufacturer Nobleswear Private Limited through Norlanka Manufacturing Ltd. (a Hong Kong-based subsidiary). This has enhanced its capabilities in the childrens wear segment.

• The Company onboarded major US retailers like Target and strengthened relationships with existing clients, such as Walmart, JCPenney and Kohls.

• The Company signed a Sourcing-as-a-Service contract with Myntra to enable them to source garments from outside India.

• The Company strengthened its strategic alliances in the fashion industry. The Company partnered with the Indian government as the official Fashion Partner for the prestigious BharatTex 2024 exhibition, showcasing its commitment to promoting Indian textiles and fashion on a global platform.

• The Company has expanded service offering to George@ ASDA by acquiring its sourcing operations in Turkey and further catering to the home category.

Consolidated financial revenue

Summary of key P&L items

(figures in crs, unless mentioned other wise)

Particulars	FY2023-24	FY2022-23
Revenue from operations	10,373	10,577
Other income	34	52
Total income	10,407	10,629
COGS	8,262	8,806
Employee Expenses	980	761
Other Expenses	739	551
EBITDA	392	459
EBITDA Margin (%)	3.8%	4.3%
Finance Cost	107	74
Profit after tax	203	327
Profit after tax margin (%)	2.0	3.1
Basic EPS (H)	10.98	20.30

Consolidated financial performance Revenues

The Companys revenue from operations stood at H10,373crs in FY24 as compared to H10,577crs in FY23. Despite headwinds faced by the industry, the Company arrested decline in topline at a mere 2% while clocking improved gross margins of 20.4%, an expansion of 360 basis points compared to last year. The Gross Merchandise Value handled by the Company increased year over year by 25% to H15,048crs. EBITDA stood at H393crs with EBITDA margin of 3.8%. It is to be noted that this includes the impact of investments in new initiatives amounting to H100 crs. Other income decreased from H52crs in FY23 to H34crs in FY24 primarily from a one time gain from sale of real estate last year.

Expenses

Cost of goods sold stood at H8,262crs in FY24 as compared to H8,806crs last year, the reduction was mainly due to better cost negotiations with the supplier. Employee expenses increased by 29% mainly due to onboarding employees in new verticals and induction of new business teams including Ted Baker Design Group & Gerry Webber. The Company also strategically invested in talent at the senior level and onboarded industry veterans to enable their growth journey. Finance cost increased from H74crs in FY23 to H107crs in FY24 on account of increase in base lending rates. Increase in other expenses pertains to the newly onboarded verticals and business like Ted Baker Design Group and Gerry Webber.

Segmental performance

The Companys operations predominantly relate to providing end-to-end business solutions across the fashion value chain. Business segments of the Company primarily comprise of sourcing, manufacturing and others (PDS Ventures, etc).

(figures in Hcrs, unless mentioned other wise)

Particulars (unadjusted for intersegment eliminations)	Sourcing		Manufacturing		Others
	FY2023-24	FY2022-23	FY2023-24	FY2022-23	FY2023-24	FY2022-23
Revenue	10,080	10,105	597	703	6	4
% to Total	97.2%	95.5%	5.8%	6.6%	0%	0%
EBIT	327	366	24	30	-10	31
Margin	3.2%	3.6%	4.0%	4.2%	-	-

Sourcing continues to remain the dominant contributors to the Groups overall revenue, accounting for approximately 97% and 95% of the total revenues for FY24 and FY23, respectively. Sourcing segment comprises of services like Design-Led Sourcing, Sourcing as a Service and Brand Management. Despite the overall top line facing headwinds from the sluggishness in the industry, the increase in the gross merchandise value indicates growth coming from expansion into new services which is expected to continue its growth trajectory. The manufacturing segment turned profitable last year and has continued on its profitability journey.

Summarised Balance sheet

(figures in Hcrs, unless mentioned other wise)

Particulars	As on 31-03-2024	As on 31-03-2023
Non-Current Assets	1,111	886
Current Assets	2,951	2,223
Inventories	329	256
Trade Receivables	1,677	978
Cash and Cash equivalents	461	511
Other Bank Balances	223	218
Other Current Assets	261	260
Total Assets	4,062	3,109
Total Equity	1,246	1,113
Non-Current Liabilities	152	105
Borrowings	45	2
Other Non-Current Liabilities	107	103
Current Liabilities	2,664	1,892
Borrowings	897	599
Trade Payables	1,504	1,125
Other Current Liabilities	263	168
Total Equity & Liabilities	4,062	3,109

Non-Current Assets

Non-current assets as of March 31, 2024, stood at H1,111crs, reflecting an increase from H886crs in the previous year. Non- current investments have increased as The Company invested H95crs through its UK subsidiary in a new office premise in London for housing its vertical Poeticgems operations. The Company also invested in bonds, equity shares and other instruments amounting to H29crs coupled with the impact of fair valuation of investments of H36crs.

The Company has also incurred expenditure on leasehold improvements for PDS Tower in Gurgaon and Mumbai office. The Companys subsidiary Norwest Industries Limited has invested H8crs, acquiring 26% stake in Nobleswear Private Limited, a Sri Lanka based Company expanding its apparel manufacturing footprint. Goodwill has increased by H27crs due to new investments in the brands portfolio.

Current Assets

Inventories

Inventory increased to H329crs from H256crs last year mainly due to Ted Baker Design Group (New Lobster Ltd) business which was acquired in June 2023. However, since the orders are largely on presold basis, the inventory risk minimises.

Trade receivables

Trade receivables for have increased significantly to H1,677crs in FY2024 from H978crs in FY2023. This increase in comes largely from to receivable balances of Ted Baker Design Group which was consolidated this year and on boarding of

new customers. Despite the increase in trade receivables, the Company has managed its working capital efficiently, with net working capital days of seven days.

Cash and Bank Balances

Cash and bank balance stood at H684crs as compared to H729crs last year. Around H223crs of the cash & bank balances is maintained as margin money with banks for securing trade & credit lines.

Total Equity

Total equity increased to H1,246crs as of March 31, 2024, from H1,113crs in the previous year, reflecting a growth of around 12%. This increase in total equity demonstrates the Companys ability to generate profits and retain earnings, further strengthening its capital base.

Debt

Debt as of March 31, 2024, stood at H943crs. During the year, the Company availed a long term loan from Bajaj Finance amounting to H50crs. Working capital borrowings rose to H897crs from H599crs in the previous year as the Company has utilised more short-term debt to manage its working capital needs and support its operational activities.

Trade Payables

Trade payables increased to H1,504crs as of March 31, 2024, from H1,125crs in the previous year. The increase is largely in line with the increase in trade receivables.

Key financial ratios

Sr. No. Particulars	FY2023-24	FY2022-23	Change
1 Interest Coverage Ratio	3.1	5.8	-2.7x
2 Current Ratio	1.1	1.2	-0.1x
3 Debt Equity Ratio	0.8	0.5	0.2x
4 Operating Profit Margin (%)	3.2%	4.1%	-0.9%
5 Net Profit Margin (%)	2.0%	3.1%	-1.1%
6 Return on Networth (%)	16.3%	29.4%	-13.1%
7 Debtors Turnover Ratio	6.2	10.8	-4.6x
8 Inventory Turnover Ratio	25.1	34.4	-9.3x
9 Return on Capital Employed (%)	22.1%	43.7%	-21.6%

a) Interest Coverage Ratio is calculated as Earnings Before Interest, and Tax (including other income) over Interest. The change is attributable to decrease in Earnings Before Interest, and Tax vs. 45% increase in Interest expense mainly due to increase in interest rate and debt utilisation.

b) Debt Equity Ratio is calculated as Total Borrowings over Total Equity (including non-controlling Interest) of the Company. The change is attributable to an overall increase in Total Equity due to profit accumulation.

c) Return on Net Worth is calculated as Profit After Tax (before Minority Interest) over Total Equity (including Non-Controlling Interest). The ratio has decreased during the year as there was a 2% decline in revenue and increase in overall costs which impacted profitability.

d) Debtors Turnover Ratio is calculated as Income from Operations over Trade Receivables. The change is attributable mainly due to a increase in Trade receivables owing to new businesses onboarded for which factoring lines are under process.

e) Inventory turnover ratio is calculated as Cost of Goods Sold (COGS) over inventory. The change is attributable to the increase in inventory levels mainly due to Ted Baker wholesale business onboarded during the year.

f) Return on Capital Employed is calculated as Earnings Before Interest and Tax (EBIT) over Total Equity plus Net Debt. Capital Employed increased due to investment made in Ted Baker Design Group, New UK property & others.

Outlook

The Company is positioned to capitalise on multiple growth opportunities in the coming years. The Company aims to increase its wallet share with existing customers while also focusing on new customer acquisition. Expansion into new categories beyond apparel, such as homeware, footwear, accessories, sportswear, athleisure, and beauty, is a key part of the growth strategy. In terms of geography, while Europe remains a strong market, significant potential is identified in the US and India, prompting strategic engagement and onboarding of talent in these regions. The Company plans to expand its service offerings, including Sourcing as a Service (SaaS) and Brand Management, to cater to the evolving needs of retailers and brands.

To enhance its manufacturing capabilities, PDS is pursuing brownfield expansions beyond Bangladesh and Sri Lanka. This strategic move is expected to unlock substantial new sourcing opportunities. PDS is also engaging with leading retailers and brands to capitalise on strategic opportunities, including managing design and wholesale operations. Furthermore, PDS is broadening its supply side by exploring new regions such as Central America, Egypt, and Africa, while also expanding its presence in India.

Human resource management

The Company continues to prioritise investing in its people and human resources and fostering an organisational culture that drives consistent improvement. In FY2023-24, the Company implemented several key initiatives to attract, develop and retain top talent across its global operations. Some of the Companys efforts include expanding digital learning and development programmes, promoting career growth opportunities through internal job rotations and mentorship programmes and enhancing employee engagement through improved communication channels and feedback mechanisms.

These human capital initiatives are expected to further strengthen PDSs objectives of nurturing a high-performing, future-ready workforce capable of driving sustainable growth and innovation across its diversified business verticals.

PDS has a competent talent pool comprising 4,200+ employees and 6,000+ factory associates spread across its global production facilities and offices. The Companys growth over the years has been significantly driven by the talent of its employees across various geographies and its entrepreneurial model.

For further details, refer to page number 26 of the Annual Report.

Technology and infrastructure

The Company is recognises the importance of robust IT infrastructure to enable seamless operations and collaboration across its global network. The Company is investing in upgrading its legacy systems, migrating to cloud-based solutions and enhancing network capabilities to support real-time data exchange and remote working models. Also, the Company is prioritising cybersecurity by hiring dedicated personnel, implementing risk management protocols and deploying advanced security software to safeguard its digital assets and ensure compliance with industry standards.

The Company is further exploring the adoption of emerging technologies, such as blockchain, to improve supply chain transparency and traceability across its sourcing and manufacturing operations. The Company is implementing advanced modelling and simulation tools to optimise design and product development processes for existing and emerging technologies. PDS is also expanding its digital learning and development programmes to upskill its workforce and promote career growth opportunities.

For further details, refer to page number 30 of the Annual Report.

Risk management framework

The Company has implemented a well-defined risk management framework to identify risks, assess threats, and devise appropriate mitigation measures to shield against both internal and external risks. To ensure the frameworks successful implementation, senior management individuals are designated to lead the risk management committee, thus integrating risk management seamlessly into the Companys processes. This active involvement of senior management enables thorough review and continous monitoring of risks in a constructive manner, fostering a culture of proactive risk management throughout the entire organisation.

Internal audit and controls

The Company has a strong system of internal controls in place to ensure the dependability of financial and other information and records used in the preparation of financial statements and other data, as well as asset accountability.

A comprehensive programme of internal audits, senior management evaluations and documented rules, standards and procedures complement this internal control structure. The results of internal audits are essential sources of information for identifying and evaluating risks. In order to identify major risks to the accomplishment of our Company objectives, business risks are also evaluated on a regular basis.

Organizational Structure

The Company follows an entrepreneurial business model where business heads manage their respective P&Ls with full autonomy and operate across various geographies. Additionally, some of our customers, especially those for SaaS, require independent entities to ensure full transparency. Consequently, the Company consists of 137 legal entities, including 127 subsidiaries, 5 joint ventures, and 5 associate companies. This structure facilitates the Company to provide complete transparency and autonomy to business heads and customers, ensuring clear visibility into performance metrics. However, the Company recognizes opportunities to optimize its organizational footprint. After a thorough review of the organizational structure, the Company has identified approximately 17 entities that are being assessed for closure and would take required actions.

Disclaimer

Statements in this management discussion and analysis that describe the Companys objectives, projections, estimates and expectations are considered forward-looking statements under applicable laws and regulations. Actual results may differ significantly or materially from those stated or implied. Important developments that could have an impact on the Companys operations include, among other things, competition, employee costs and significant changes in Indias political and economic environment, environmental standards, tax laws, litigation and labour relations.