PDS Ltd Management Discussions.


1.1 Global Outlook

Year 2020 was an unprecedented year. It commenced with a full-blown public health crisis caused by the COVID, a global shutdown and a pandemic that continued throughout the year and spilled into 2021. During the year 2020, the global economy is estimated to have contracted by 3.3%, but it is projected to grow at 6.0% in 2021, and 4.4% in 2022. However, new mutations and fresh waves of the virus have cast a spell of uncertainty on growth forecasts across the world. Nevertheless, an aggressive vaccination drive and policy spend by advanced economies are expected to be the silver lining for accelerating economic recovery. Reopening of economies have enabled bringing back consumer confidence.

Advanced economies, which are estimated to have contracted by 4.7% during 2020, are projected to witness 5.1% growth in 2021 and 3.6% in 2022. Governments in these countries supported households and businesses with various initiatives ranging from far-reaching tax and spending measures to equity injections, loans and guarantees. Central banks played a key role through asset purchase programmes, funding-for-lending facilities, and interest rate cuts, all of which proved to be major enablers for the global economy. While the government support measures were similar in nature, actual economic recovery varied widely across different economies. For example, while the United States is projected to recover its 2019 growth levels by the first half of 2021, Japan is expected to reach its 2019 growth levels only by the end of 2021. Both the countries have announced sizable fiscal support for 2021. The Biden administrations new fiscal package for $1.9 trillion is expected to strongly boost growth in the United States in 2021 and extend the growth to trading partners. The European Union (EU) has also agreed to start distributing the next generation EU funds. The Euro area GDP is forecasted to grow by 4.4% in 2021 and 3.8% in

2022. The United Kingdom GDP is forecasted to grow by 5.3% in 2021 and 5.1% in 2022 respectively.

The emerging and developing economies are believed to have contracted by 2.2% during 2020. They are projected to grow by 6.7% and 5.0% in 2021 and 2022 respectively.

Proportion of total population vaccinated

Region % of total population vaccinated as on May 15, 2021
World 9.03
United States 46.71
North America 32.73
Europe 26.71
Asia 4.91
India 10.23

The global economic recovery is picking up steam on the success of vaccination drives. These vaccination drives have helped to reduce infection rates and deaths. Different economies have reacted differently to the ef_cacy of the vaccines. Variations in response to the infection, flexibility and adaptability of economic activity to low mobility, pre-existing trends and structural rigidities are some of the reasons behind the differences.


1. All GDP Data as per World Economic Outlook, IMF, April 2021

2. Vaccination data from ourworldindata.org

1.2Domestic outlook

FY 2020-21 was an exceptional year that started with a nationwide lockdown that continued till June 2020. While this helped control the pandemic, it led the economy into a temporary recession. However, by Q2 FY 2020-21, with the relaxation of lockdown restrictions in a phased manner, businesses had started to regain lost ground. The year 2021 began with the rollout of vaccination raising hopes for a quicker economic recovery. As per the Monetary Policy Report by the Reserve Bank of India (RBI) pegs Indias GDP growth rate for FY 2021-22 at 10.5%, indicating a strong rebound from an estimated contraction of 8.0% in FY 2020-21.

The rebound was the result of numerous policy initiatives undertaken by the government and the RBI, including a stimulus package that amounted to 10% of the GDP, liquidity boosting measures, aggressive policy rate cuts, loan moratorium and time-bound resolution for specified sectors. The government accelerated these efforts with inclusive budgetary initiatives such as production-linked incentives, ‘Vocal for Local schemes, including the Atmanirbhar Bharat Abhiyan, higher investments in infrastructure, tax reforms, labour and land reforms, and amendment of the insolvency and bankruptcy code to promote entrepreneurship and availability of credit. Indicators such as collections from the Goods and Services Tax (GST), Index for Industrial Production (IIP), Purchasing Managers Index (PMI), steel and energy demand and auto sales suggest that Indias economic activity is fast reaching pre-COVID-19 levels. A second wave of infection may temporarily dampen recovery, but it is unlikely to destroy the momentum altogether.


2.1 Fashion industry

For the global fashion industry, valued at US$2.5 trillion, 2020 was one of the worst years on record.

During 2020, global fashion sales are estimated to have plummeted between 15-30% in comparison to 2019. There is variation in the pattern in different regional markets, but on the whole, Europe was the worst hit with a sale contraction ranging from 22-35%. US fashion sales are estimated to have declined by 17-32%, while China registered a moderate decline by 7-20% due to limited impact of the pandemic.

The pandemic brought a shift to conscious consumerism, which started prior to the COVID and got accelerated as peoples purchases got more value and need driven, than want and trend driven. Even though the buying capacity was affected due to the challenging times, people were still buying clothes, though more mindfully than before. This included loungewear, athleisure and timeless clothing that would go well even after pandemic is over and when they get back to work.

The year 2021 will act as a bridge between an extreme situation and an extended recovery period for the global fashion industry. The year ahead is expected to be a difficult one for some fashion industry participants, while some others are likely to reap benefits from the opportunities presented by the market disruption. The European fashion market is expected to recover by Q2 2022, while the US, with a slower recovery pace, is expected to normalise by Q1 2023, as travel and tourism re-opens. The Chinese fashion scene was expected to return to pre-COVID-19 levels as early as Q4 2020 or latest by Q1 2021. The speed of recovery will also differ across various fashion categories. Value segments and a few geographical markets are expected to witness growth despite the challenges. Comfort, sustainability, and most importantly, highly individual choices as opposed to impersonal, ubiquitous industry trends will be the major driving factors for demand. Fashion players focused on niche offerings, the Asian market and luxury segment may have a competitive edge.

2.2 Apparel industry

The value of the global apparel industry was US$1.5 trillion+ in 2020. The Asia-Pacific region leads the market in demand, with 38% market share, followed by Europe at 26%, North America at 22% and others at 14%. It is estimated that by 2025, the market would grow to US$2.25 trillion.

Source: h t t p s: // w w w. s t a t i s t a .c o m / t o p i c s / 5 0 91/a p p a r e l market-worldwide/

One prominent trend observed during the year, is that the big luxury groups have recovered quickly from COVID-19, while some of the leading luxury brands have remained financially immune or even profited.

As economies open up, apparel industry is expected to showcase a significant growth with a swoosh shaped recovery for the overall markets. Online retail has been thriving since the beginning of the lockdown, which is expected to pave way for established brands and retailers providing a distinct experience to the consumers.

2.3 Growth drivers

Rise of e-commerce and digitalisation

Digital adoption skyrocketed during the pandemic, with many new fashion brands announcing their online presence and customers picking up fast through facilities like livestreaming, online customer service video chat, as well as social shopping. Global online fashion sales nearly doubled from 16% to 29% of total fashion sales within a period of eight months (after pandemic struck). The increasing trend towards online shopping is expected to help the apparel market recover and grow. In India, e-commerce portals have boosted the sales of traditional garments, giving larger exposure to producers who were con_ned to the local market.

Globally, brands expect their online businesses to grow by 20% or more in 2021. As customers look for more refined digital experiences, market players will have to invest in latest technologies including artificial intelligence, data analytics and virtual reality, to attract and retain more customers.

Rebalancing market share

The pandemic led to a long list of fashion bankruptcies, some of which were big names. This has led to a strong expectation of a market share redistribution soon. Some fashion houses have kept themselves afloat on government subsidies, so there is a ripe opportunity for mergers and acquisitions as companies scour the market to seize market share, unlock new opportunities and expand capabilities. With every crisis, new opportunities emerge for investors.

Recovery from the pandemic will lead to the strong pent-up demand. This will augur well for a significant growth in the apparel market and the industry in general.

Investing in partnerships

Strong partnerships in the supply chain are expected to be one of the major trends in 2021.The pandemic has exposed the existing vulnerabilities of procurement relationships and contracts. To mitigate the risk, fashion players will try to move away from transactional relationships in favour of deeper partnerships, that bring greater agility and accountability.

Rewriting the fashion calendar

Seasonless fashion is gaining ground, as brands and designers appeal for the fashion calendar to be redone. Brands are required to reduce complexity and their inventory levels by taking a demand-focused approach while boosting flexible in-season reactivity for both new products and replenishment.

Rising popularity for new categories of clothing

Newer categories of apparel such as active wear, athleisure, protective gear and size-inclusive or plus-size fashion are boosting business growth. A new breed of health-conscious customers are driving the market. The athleisure market is estimated to have grown by 9% in 2019 to US$414 billion and by 2023, it is expected to reach US$570 billion*. Plus-size garments are also a growing category, as fashion becomes more accepting.

*Source: marketwatch.com

2.4 Industry challenges COVID-19 related risks

The pandemic remains one of biggest challenges till majority of the worlds population is vaccinated. It will continue to disrupt international trade, travel, consumer behaviour and economies. To manage the uncertainties, market players will have to recalibrate their business models to balance agility and change with financial discipline.

Global supply chains have been disrupted due to the pandemic. Apparel industry in particular relies on sourcing products manufactured at low-cost countries and ensuring timely availability of the selected merchandise. Manufacturers and suppliers will have to build more sustainable supply chains. The logistics costs have also gone up, due to various factors such as shortage/ unavailability of containers.

Rising consumer preference for sustainable fashion

Consumers are increasingly preferring sustainable fashion. Growing awareness about the lack of equality in the manufacturing process and the value chain is raising demand for equitably manufactured products. Garment workers, sales assistants and other low-paid workers were the worst impacted during the pandemic. Campaigns have been gathering momentum to provide more dignity, security, and justice to workers. Companies which are found faltering may lose out customers.

Subdued travel

As per State of Fashion, 2021 report by Business of Fashion (BoF), in association with McKinsey & Company, travel retail sales are likely to take at least two to three years to reach their earlier growth levels. With international tourism remaining subdued and travel disrupted, destination shopping was majorly impacted during the year. Focus on local consumers and their preferences will be key in unlocking new opportunities.

The pandemic has resulted in drastic disruptions for the global economy; however it has also created new opportunities like faster pace digitisation, growth of few categories etc. The market players surviving the consolidation and these challenging times will emerge stronger, as they brace themselves for the new opportunities.


PDS Multinational Fashions Limited (PDS) is a design-led sourcing, manufacturing and supply chain platform with a unique business model. With a presence across 22 countries through 50 offices and served by a strong team of 3,000+ employees and 5,000+ associates and factory workers, PDS caters to 190+ leading global brands and retailers with c.1mn garments being shipped daily. Backed by around 130 production lines spread across Bangladesh, Sri Lanka, and India with an annual production capacity of ~36 million. Our focus on sustainable sourcing and manufacturing, led by strong design capabilities help us provide the right product to the right market from the right factory.

3.1 History and evolution

Our genesis dates back to 1999, when the promoter family established its flagship companies – Norwest Industries Limited in Hong Kong and Poeticgem Limited in the UK. We gradually expanded operations, leveraging the hub and spoke model and onboarding entrepreneurs and their teams on a pre-defined criteria of product specialisation, geographical advantage or customer base. Instead of acquiring companies, we partnered with them, ensuring mutual growth. We then graduated to a platform model, where existing setups were made part of the PDS group in a plug and play format. The entrepreneur team got the opportunity to work for some of the biggest names in the fashion industry and learn industry best practices while we expanded our capabilities and added to our business edge. We now operate through a collaborative model, where we provide a solution-based approach to meet customer requirements with the help of the best team available and use inter- business unit collaborations to leverage our strengths and economies of scale.

3.2 Business verticals

We have three distinct business verticals:

1. Sourcing

2. Manufacturing

3. PDS Venture Tech Investments

3.2.1 Sourcing

As part of our sourcing business, we have the capabilities to manage the entire supply chain for our customers, who are leading retailers and marquee brands looking for reliable partners. We provide them market know-how, and assist them through in-house product development, design, sampling and technical expertise. Our designers are located across London, Hong Kong, New York, Barcelona, Dusseldorf, New Delhi, Shanghai, Colombo, Santiago, and Brussels. The business is structured to be inherently risk averse with respect to inventories, works with a target of 100% pre-sold goods. This makes the sourcing business to be extremely asset light.

3.2.2 Manufacturing

We have manufacturing units spread over three countries, where we deploy ~6,000 machines across 130 production lines to generate an annual capacity of 36 million pieces. Our factories are LEED Platinum and Gold certified, testifying to our commitment to sustainability.

Our manufacturing facilities are summarised as below:

1. Progress Apparel, Bangladesh

• Planned capacity of 2,500 machines

• World-class manufacturing facility, compliant with ACORD (Association for Cooperative Operations Research and Development) standards

• Focused on bottom wear

• Major customers: Next, C&A and Express

2. Green Smart Shirts, Bangladesh

• Manufacturing facility with planned capacity of 2,000 machines

• Formal and casual shirts/blouses for ladies, men, and kids

• Major customers: Next, Primark and Bestseller

3. Nor Lanka, Sri Lanka

• Manufacturing facility with 320 machines

• Specialises in knitted kids wear

• Major customers: ASDA George, Next, Primark

4. Parc Designs, India (held through minority stake)

• Planned capacity of 1,000 machines

• Specialises in womens wear

• Major customers: Bestseller and Matalan

3.2.3 PDS Venture Tech Investments

Our venture investments are ESG-focused. With a clearly defined investment criteria, we primarily invest to promote circular economy, carbon neutrality, giving back to the nature, elimination of waste and making the planet greener.

We prefer funding ventures in the seed stage, which have less than US$1 million in revenue or pre-series/early stage ventures, where revenues range between US$1-5 million. Sustainability, technology including Artificial Intelligence (AI)/Machine Learning (ML), online marketplace, digital, retail services, fashion companies are the core investment areas, which enable us to enhance our value proposition for our customers, with sustainable, tech-backed solutions.

3.3 Business performance

3.3.1 Highlights

• Successful moderation of the COVID-19 impact with income from operations of Rs6,213 crores, maintaining gross margins at 16.5%. Additionally, achieved 13% y-o-y reduction in operating expenses and effective working capital management resulted in reduction in net working capital days to 5 days in March 2021 from 10 days in March 2020.

• Resulting in gross debt reduction by Rs257 crores in FY 2020-21

• Business leaders onboarded to expand into new categories and make deeper inroads into markets such as US, South Africa, and Australia

• Focus on turning around manufacturing operations in Bangladesh

• Onboarded Group CEO along with a value creation team

• ESOP scheme launched

3.3.2 Consolidated financial review

(Rs in crores, unless mentioned otherwise)

Particulars FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21
Income from operations 4,616 4,924 6,486 6,648 6,213
Other income 14 24 16 27 37
Total income 4,630 4,948 6,502 6,675 6,250
EBITDA 57 38 112 186 230
EBITDA Margin (%) 1.2 0.8 1.7 2.8 3.7
Profit before tax 45 24 69 91 170
Profit after tax 38 20 69 81 148
Profit after tax margin (%) 0.8 0.4 1.1 1.2 2.4
Earnings per share (Rs) 5.50 (3.01) 16.83 17.67 32.37
Cash flow from operations 121 58 213 281 379
Return on net worth (%) 7.1% 3.6% 13.8% 13.3% 22.0%*

*After adjusting dividend

Income from operations increased to Rs6,213 crores in FY 2020-21 vs Rs6,648 crores in FY 2019-20.

Total income of Rs6,250 crores in FY 2020-21 as compared to Rs6,675 crores in FY 2019-20

EBITDA margin increased from 2.8% in FY 2019-20 to 3.7% in FY 2020-21, on account of cost optimisation.

Profit before tax increased by 88% from Rs91 crores in FY 2019-20 to Rs170 crores in FY 2020-21. Profit after tax increased by 83% from Rs81 crores in FY 2019-20 to Rs148 crores in FY 2020-21. Net profit margin improved to 2.4% in FY 2020-21 from 1.2% in FY 2019-20.

Cash flows from operations stood at Rs379 crores in FY 2020-21 against Rs281 crores in FY 2019-20.

Basic earnings per share stood at Rs32.37 in FY 2020-21 as against Rs17.67 in FY 2019-20.

Key financial ratios

Sr No. Particulars FY 2019-20 FY 2020-21 Change
1 Interest coverage ratioa 2.71x 6.30x 3.59x
2 Current ratio 1.08x 1.12x 0.04x
3 Debt equity ratiob 1.22x 0.68x -0.54x
4 Operating profit margin (%)c 2.0% 2.6% 0.6%
5 Net profit margin (%)d 1.2% 2.4% 1.2%
6 Return on net worth (%) 13.3% 22.0% 8.7%
7 Debtors turnover ratio 7.99x 6.83x -1.16x
8 Inventory turnover ratio 36.32x 31.52x -4.81x
9 Return on capital employed (%)e 15.6% 22.1% 6.5%

a Interest coverage ratio is calculated as profit before interest, tax and exceptional item over interest b Debt equity ratio is calculated as total borrowings over total equity of the Company. The change is attributable to decrease in total debt and increase in total equity due to higher net profit. c Operating profit margin is calculated as profit before interest and tax over revenue from operations of the Company d Net profit margin is computed as profit of the year over revenue from operations e The return on capital employed improved during the year because of increase in operating profit and reduction in total borrowing. FY 2020-21 is adjusted for dividend


The fashion and apparel industry, being heavily dependent on discretionary spends and physical stores, was one of the worst affected by the lockdowns and other disruptions caused by COVID-19 during FY 2020-21. At PDS, taking care of the health and well-being of our employees was a top priority. In compliance with local/ regional regulations and government guidelines, our offices across India, the UK, Europe, the Middle East and Asia were temporarily shut, and we ran our business in ‘work from home mode. We gradually opened our offices in compliance with local regulations and we continue to adhere to regulatory guidelines such as daily temperature checks, sanitisation, social distancing, use of masks and so on. We not only put in place stringent review mechanisms to safeguard the businesses from any lasting disruptions but also created a new revenue stream through PPE business. With a quick time to market, PDS successfully launched PPE kits across leading retailers which resulted in a new source of revenue.

We continue to closely monitor the COVID-19 situation on a regular basis and will continue to take all necessary precautions as mandated by the authorities for the safety of our employees, business partners, communities, and all stakeholders concerned. We are confident to emerge stronger from the current crisis and create long-term value for all our stakeholders.


We maintain a cautious outlook and believe that the COVID-19 disruption and the uncertainties related to the same will phase out once a significant portion of the population gets vaccinated. We also believe that getting the fashion industry back on the growth track would depend on the pace of digital adoption and agility of brands. At PDS, we always look for opportunities and are confident that this crisis will also provide tremendous opportunities in the form of learnings, market consolidation and other developments. Going forward, we will focus on geographic expansion and have already identified target markets and have our strategy in place. The US, being one of the top global apparel markets, is an important strategic market for us. We will be strengthening our team in the US through our Group network for servicing customers. We are also looking to expand in Australia, New Zealand and the Scandinavian countries with new experience and professional teams, which will be focused on succeeding in these geographies. We have a strong presence in the apparel market and are deepening our engagement with our existing customers to expand into newer categories such as home fashion and active wear across all our geographies. We are collaborating with retailers to focus on developing in-house brands, which is also margin-accretive. Our experience with the successful launch of in-house brands such as Adapt and Wiseprotec makes us confident about the development of more such in-house brands. In late FY 2019-20, we have also acquired brands such as UK based Lilly & Sid and Turtledove London which is focussed on kids wear has been showing good traction.

Our ESG compliant manufacturing facilities are at the cusp of turning around. We continue to monitor and optimise costs through various cost optimisation measures. Our continuity of the asset light model, expansion in margins and turnaround of manufacturing will enable us to generate higher returns on capital employed. Our focus on investing in sustainable and tech-enabled businesses is expected to also generate higher returns than our cost of capital and is expected to create long-term value for our shareholders.


Our experienced technology team keeps our information technology infrastructure running and has enabled our teams to work from home without any disruptions or security compromise. During FY 2020-21, we incorporated Dizbi Private Limited as our our IT arm, which will serve as a consulting arm for the existing platform and cater to a wider industry. We intend to implement cutting-edge technologies in our business to stay ahead of the curve.


We have a well-defined risk management framework.

Please refer to page 24 to read more on our risks and various mitigation measures.


We deeply value our people and cherish their dedication and relentless efforts to steer the business ahead and help us get closer to our goals.

Please refer to page 32 to read more on our human resources.


We have a robust system of internal controls, designed to ensure the reliability of financial and other information and records for preparing financial statements and other data, and for maintaining accountability of assets. This internal control system is supplemented by a comprehensive programme of internal audits, reviews by senior management and documented policies, guidelines, and procedures. The internal audit findings provide vital inputs for risk identification and assessment. Further, periodic assessment of business risks is carried out to identify significant risks to the achievement of our business objectives.


Statements in this management discussion and analysis describing the Companys objectives, projections, estimates and expectations are categorised as ‘forward looking statements within the meaning of applicable laws and regulations. Actual results may differ substantially or materially from those expressed or implied. Important developments that could affect the Companys operations include competition, employee cost and significant changes in the political and economic environment in India, environmental standards, tax laws, litigation and labour relations amongst other factors.