Pearl Global Industries Ltd Management Discussions

OUTLOOK

Looking ahead to CY 2025, global GDP growth is projected to be moderate, akin to its 2019 performance, but slightly surpassing the anticipated 3.0% increase in 2023. This growth is expected to be mixed, with advanced economies experiencing modest growth of around 1.3%, while emerging markets maintain moderate momentum of 3.8%. Several factors are likely to hinder growth in CY 2024. These include sluggish employment expansion, consistently high prices and wages, elevated interest rates, tighter credit conditions, and fiscal tightening across most major economies, except China. Consequently, as supply chain constraints ease, final demand moderates, labour markets rebalance, and rents decrease, global disinflation is anticipated to persist in 2024.

(Source: https://www.ey.com/en_us/insights/strategy/global-economic-outlook#:~:text=In%202024%2C%20we%20anticipate%20 moderate,about%203.8%25%20across%20emerging%20markets.)

INDIAN ECONOMY OVERVIEW

India is positioned as a bright star within the global economic landscape, propelled by its rapid rise and indomitable commitment to scaling greater heights. With its rich cultural heritage and a population exceeding 1.4 Billion, the nation today stands as an economic powerhouse, consistently demonstrating its prowess on the global stage. The CY 2023 marked a major moment in Indias boisterous journey, as the nations GDP surged, further solidifying its leading position in the global economic arena. Additionally, real GDP recorded a remarkable growth of 7.6% in 2023-24, fuelled by robust demand in the residential sector, culminating in a double-digit growth in the construction industry. Furthermore, the Government statistics highlights that Indias GDP growth rate surpasses that of major economies, such as Russia, the US, China, and Japan, firmly establishing the nations economic dominance.

India witnessed major structural reforms since 2014, leading to transformative growth across sectors. The outcome of these focussed endeavours is evidenced in the positioning of the country as the fastest-growing economy among G20 nations, with estimated growth rates of 7.3% in 2023-24, 7.2% in 2022-23 and 9.1% in 2021-22. To keep the momentum going, India continues to make strides in innovation, ranking as the 48^th most innovative country globally and securing the 40^th position out of 132 economies in the Global Innovation Index 2023. Additionally, the nation ranks 3^rd in the global number of scientific publications. Merchandise exports soared in March 2024, reaching USD 41.68 Billion, contributing to total merchandise exports of USD 437.06 Billion for the period spanning April 2023 to March 2024. As of April 12, 2024, Indias foreign exchange reserves stood at USD 643.162 Billion, indicating a strong financial position for the country.

The Governments economic policy agenda is laser-focussed on revitalising and amplifying Indias growth potential. This comprehensive strategy includes efforts to rejuvenate the financial sector, streamline business conditions, and enhance both physical and digital infrastructure to boost connectivity and augment manufacturing competitiveness. Furthermore, ongoing economic reforms are geared towards fostering a more conducive business ecosystem, improving quality of life, and fortifying governance systems to align with this overarching vision.

OUTLOOK

Indias ambition to become a USD 7 Trillion economy by CY 2030 is reflected in its confident stride towards the milestone of attaining the status of a USD 5 Trillion economy within the next three years. This reinforces its stature as the worlds third-largest economy. Furthermore, the Government is strategising effectively to reach its ambitious target of transforming India into a developed nation by CY 2047. With a foundation of stable and robust domestic demand, increasing private consumption and investments, and an ongoing push towards structural reforms, the nation is poised to maintain its upward growth trajectory in the foreseeable future.

(Source: https://www.livemint.com/economy/india-to-be-a-usd-7-trillion-economy-by-2030-finance-ministry-nirmala-sitharaman-11706525095022.html)

INDUSTRY OVERVIEW

Global Textile and Apparel Industry

The global textile market stood at USD 1,695 Billion in 2023. Moreover, it is projected to register an annual growth rate of 7.7% and reach USD 3,041 Billion by 2030. A multitude of factors, including a surge in population, growing pace of urbanisation, higher disposable incomes, the rise of online shopping, and a growing interest in eco-friendly textile are driving this growth. Digital technology is also making a big impact to bolster the growth potential of the textile market. Thriving on digital traction, the consumers can now interact directly with brands online, facilitating greater customisation and convenience. This trend, combined with a focus on sustainability and quality, is helping the industry to flourish, with China and India leading the way as the top producers and exporters of textile. Notably, the US occupies a prominent position in the market, both as a producer of raw cotton and as a big importer of textile.

The apparel industry, being labour intensive, plays a pivotal role too, particularly in developing economies by bolstering revenue generation and stimulating employment creation. Several factors contribute to the industrys upward trajectory, including the prevalence of favourable demographics, shifting consumer preferences, and growing per capita and disposable incomes. Another factor strongly supporting the growth momentum of the apparel industry is the increasing number of working women, which in turn, is boosting household disposable income and fuelling demand for womenswear. Furthermore, a growing inclination towards branded and luxury wear, along with evolving fashion trends, is further propelling growth. The proliferation of online shopping and e-commerce platforms emerges as a significant enabler, providing apparel manufacturers with greater exposure, while enabling them to reach international buyers beyond domestic markets.

Indian Textile and Apparel Industry

The Indian textile and apparel industry is expected to clock in a 10% CAGR from 2019-20 to reach USD 190 Billion by 2025-26, according to the Government. India currently holds a 4% share of the global trade in textile and apparel. The nation ranks as the worlds third-largest exporter in this sector, leading in the exports of several textile categories. Forecasts suggest that by 2025-26, exports from India are anticipated to reach USD 65 Billion. The key export destinations for Indian textile and apparel include the US, EU27, and the UK, collectively accounting for approximately 50% of Indias exports in this sector.

The textile industrys significance lies in its close ties with agriculture, particularly for raw materials such as cotton. Moreover, the sector imparts a deep-rooted influence in the cultural and traditional landscape of India. Boasting a diverse range of products suitable for various domestic and international markets, the textile industry stands out for its unique positioning. Moreover, with the aim of accelerating growth of this industry and generate fresh employment opportunities, the Government unveiled a host of schemes. For instance, the Scheme for Integrated Textile Parks (SITP), Technology Upgradation Fund Scheme (TUFS), and Mega Integrated Textile Region and Apparel (MITRA) Park scheme, seek to propel a holistic growth of the industry, emphasising on attracting private equity investments and fostering industry development.

The textile and apparel industry holds significant importance in Indias economy. Its critical positioning is reflected through its contribution of approximately 2.3% to the countrys GDP, 13% to industrial production, and 12% to exports, as reported by Invest India. Moreover, it is the second-largest employer in the country, providing jobs to 45 Million people directly and supporting another 100 Million in allied industries.

Textile and apparel exports experienced a rebound with a 6.91% year-on-year growth in March 2024. However, the overall trend reveals a contraction of 3.24% in exports during 2023-24, compared to the previous year. This decline is attributed to adverse economic conditions intensified by the Red Sea crisis, affecting the export of textile products, particularly ready-made garments, to foreign markets. On the contrary, the segment covering cotton yarn, fabrics, made-ups, and handloom products within the textile sector saw a notable year-on-year increase in exports by USD 740 Million in 2023-24 compared to the previous year, driven by a surge in cotton yarn exports.

(Source: https://www.imarcgroup.com/ indian-textiles-apparel-market https://indiantextilejournal.com/industry-trends-for-2024/ https://economictimes.indiatimes.com/small-biz/ sme-sector/interim-budget-2024-textile-and-apparel-industry-seeks-tax-incentives-infra-boost-for-growth/articleshow/107281018.cms?from=mdr

GROWTH DRIVERS OF INDIAN TEXTILE INDUSTRY

The Indian textile industry benefits from a host of favourable factors. Among them are adept Government schemes, a robust push for exports, the growing prevalence of digital technology, a thriving self-employment landscape, and a rising trend of women employment.

Government Schemes

The Indian Governments initiative to establish seven mega textile parks across India is aimed at catalysing employment opportunities and bolstering the MSME sector. These state-of-the-art parks feature advanced infrastructure and extend tax incentives and other benefits to textile companies. Additionally, the Government offers a varied range of strategic impetus to propel growth. For instance, the implementation of labour-friendly policies, such as the EPF scheme, ensure 12% coverage of the garment industry employers contribution to the EPF for new employees earning less than _ 15,000 per month for the first three years. Furthermore, various policies and initiatives, including the Duty Drawback Scheme, Technology Upgradation Fund Scheme, Export Promotion Capital Goods Scheme, and Invest India Scheme, aim to promote industry growth.

(Source: https://www.impriindia.com/insights/pm-mitra-parks-indias-textile-sector/#:~:text=As%20 per%20the%20scheme%2C%207,%2C%20Uttar%20 Pradesh%2C%20and%20Maharashtra.)

Exports Enhancement

The textile and apparel industry in India spans the entire nation. The country ranks as the worlds second-largest exporter of textile and clothing. Apparel stands out as the leading contributor to exports, with home textile and fabric also playing significant roles. In terms of export destinations, the US is the largest market for Indian textile, commanding an astounding 27% share, followed by the EU at 18%, Bangladesh at 12%, and the UAE at 6%.

(Source: https://pib.gov.in/PressReleasePage. aspx?PRID=1829802)

Sustainable Fashion

Sustainable fashion is revolutionising the textile industry, driven by consumer demand for eco-conscious clothing. This shift is fostering innovation, with companies investing in eco-friendly materials and production processes. Brands embracing sustainability are enhancing their reputations, attracting environmentally conscious consumers. Governments are also promoting sustainability through regulations. The concept of a circular economy, where products are recycled or biodegraded, is gaining traction, reducing the industrys environmental footprint. Collaboration across the supply chain is increasing, driving further sustainable practices.

(Source: https://www.globalpsa.com/conscious-consumption-rethinking-our-fashion-choices/)

Digital Technology

In recent years, digital textile technologies witnessed rapid advancements. New-age endeavours, including innovations in digital printing, fabric weaving, and associated areas resulted in the production of a wide range of fabrics with unparalleled precision, consistency, and cost-e_ectiveness. Furthermore, inkjet printing significantly accelerated fabric printing processes, with digital printing offering greater colour accuracy and vibrancy on textile. According to the announcement made by the Union Minister for Textile, India is currently ranked as the fifth-largest producer of technical textile globally, signifying its critical positioning in the industry.

(Source: https://www.investindia.gov.in/sector/textiles-apparel)

Increasing Consumer Preferences

Changes in consumer lifestyles, such as a growing emphasis on fitness, heightened brand consciousness, rapid shifts in fashion trends, increasing female participation in workforce, and greater awareness of hygiene, are influencing trends in end products. These shifts ripple through the textile value chain, leading to increased demand for fibres that can meet these evolving requirements at an affordable price.

Availability of Raw Materials and Manpower

Indias unique strengths, including abundant raw material resources and a vast pool of skilled labour, position it as a leading player in the global textile and apparel value chain. With the capacity to capture more than 15% of global trade, India holds the potential to create between 40-50 Lakh jobs, thereby greatly fortifying the countrys economy.

(Source: https://economictimes.indiatimes.com/ small-biz/sme-sector/india-can-emerge-as-leading-destination-for-global-textile-apparel-value-chain-minister/articleshow/106008913.cms?from=mdr)

Free Trade Association

The textile industry welcomes the signing of the Trade and Economic Partnership Agreement with the European Free Trade Association, recognising its immense potential for advancing technology adoption and product development. This agreement poised to benefit the textile industry by opening up new markets and reducing trade barriers. By eliminating or reducing tariffs, quotas, and other trade barriers, textile companies can access a larger pool of consumers, leading to increased exports and higher revenues.

(Source: https://www.thehindu.com/news/cities/Coimbatore/ textile-industry-welcomes-economic-pact/article67936158.ece)

Self-Employment

The textile business presents abundant opportunities for self-employment, catering to a diverse range of interests. From crafting unique apparel designs to creating personalised blankets and furnishings, the industry offers everyone something to specialise in. With technological advancements, the sector is poised to explore new and untapped markets, enhancing its growth prospects further. Individuals with a creative flair and entrepreneurial mindset are well-positioned to thrive in this industry. Moreover, the proliferation of internet opens boundless opportunities for growth across various platforms, that can be leveraged to showcase and market an individuals creations to potential customers. Additionally, a plethora of tools and resources are available to aspiring entrepreneurs to kickstart their journey into textile entrepreneurship.

Women Employment

Womens involvement in the textile sector not only fosters creativity but also enhances diversity of perspectives and ideas. Their receptiveness to innovative concepts and methods often propels them to leadership roles, driving significant contributions to economic advancement. Ensuring greater access to opportunities for women in the textile sector is crucial for fostering a fairer and more prosperous industry. Statistics reveal that women constitute 60-70% of the workforce in the textile and garment industry. In India alone, approximately 27 Million women are employed in the textile and clothing sectors.

(Source: https://www.impriindia.com/insights/ policy-update/pm-mitra-pli-ftas/ )

GOVERNMENT INITIATIVES

PM MITRA

The Government introduced the PM Mega Integrated Textile Region and Apparel (PM MITRA) Parks Scheme. This initiative, with an allocation of Rs. 4,445 Crores until 2027-28, aims to develop top-notch infrastructure, including plug-and-play facilities. Inspired by the 5F vision of the Honourable Prime Minister—Farm to Fibre to Factory to Fashion to Foreign, these parks are anticipated to attract nearly Rs. 70,000 Crores in investment and generate 20 Lakh jobs. In addition, they are set to serve as a platform to establish an integrated textile value chain encompassing spinning, weaving, processing/dyeing, printing, and garment manufacturing at a single location.

PLI Scheme

The Government sanctioned the Production Linked Incentive (PLI) Scheme for Textile, aimed at fostering the production of MMF Apparel, MMF Fabrics, and Technical Textile products within the country. This initiative, with an allocation of Rs. 10,683 Crores over a period of five years, 2020-21 to 2024-25 is envisioned to propel the textile sector towards achieving greater size, scale, and competitiveness. The scheme consists of two parts; while the Part-1 mandates a minimum investment of

Rs. 300 Crores and a minimum turnover of Rs. 600 Crores per company, the Part-2 necessitates a minimum investment of Rs. 100 Crores and a minimum turnover of

Rs. 200 Crores per company. A gestation period of two years (2022-23 and 2023-2024) is incorporated into the scheme. Incentives are slated to be disbursed to companies upon meeting the investment and turnover thresholds, followed by incremental turnover targets.

Kasturi Cotton Bharat

The Kasturi Cotton Bharat programme, spearheaded by the Ministry of Textiles, represents a pioneering endeavour to promote Indian Cotton. This initiative encompasses branding, traceability, and certification of Indian Cotton, conducted collaboratively by the Government of India, trade bodies, and industry stakeholders. This initiative extensively engages with stakeholders across the supply chain, including farmers, ginning units, spinning mills, processing houses, weaving units, garmenting units, home textile manufacturers, retailers, and brands. The objective is to orchestrate a concerted effort to elevate the profile and value of Indian Cotton in both domestic and international markets.

National Technical Textile Mission (NTTM)

The Government launched the National Technical Textile Mission (NTTM) with a budget of Rs. 1,480 Crores. Anchored on key pillars including ‘Research Innovation & Development, ‘Promotion and Market Development, ‘Education, Training, and Skilling, and ‘Export Promotion, the mission is geared towards expanding the application of technical textile across various flagship programmes and strategic sectors in the country. Recently, NTTM received an extension until March 31, 2026, with a subsequent sunset clause in effect until March 31, 2028, marking a major move towards supporting the growth of the technical textile in India.

Samarth Scheme

The Government devised the Samarth Scheme as part of a comprehensive skilling policy framework to enhance the capabilities of workforce in the textile sector. The scheme primarily aims to offer opportunities for sustainable livelihoods. With an implementation period until March 2024, Samarths target is to deliver demand-driven, placement-oriented skilling programmes, compliant with the National Skill Qualification Framework (NSQF).

Bharat Tex 2024

Bharat Tex 2024, a global textile mega-event, is jointly organised by a consortium of 11 Textile Export Promotion Councils, with the backing of the Ministry of Textiles. Convened on February 29, 2024, in New Delhi, this event blended tradition and technology, while emphasising sustainability and resilient supply chains. It promised to attract top talent and industry leaders from around the world. Furthermore, the event featured dedicated pavilions on Sustainability and Recycling, alongside thematic discussions on bolstering global supply chains and embracing digitalisation.

Rebate of State and Central Taxes and Levies (RoSCTL)

The Union Cabinet approved the extension of the Scheme for Rebate of State and Central Taxes and Levies (RoSCTL) for the export of apparel/ garments and made-ups until March 31, 2026. Extending the scheme for a duration of two years is set to facilitate the establishment of a stable policy framework, crucial for long-term trade planning. This strategic initiation is of particular significance for the textile sector where orders are often placed well in advance for extended delivery periods.

(Source: https://pib.gov.in/PressReleasePage. aspx?PRID=1989149#:~:text=The%20Government%20with%20 a%20view,scheme%20is%20upto%20March%202024.)

OUTLOOK

Looking forward, the industry is on the brink of a transformative journey towards sustainability and circularity, transitioning from a mere ‘nice-to-have aspiration to an indispensable imperative. Furthermore, women-led enterprises are emerging as pivotal forces within the sector. Globally, women play a pivotal role in setting trends and market dynamics in apparel, as they account for 85% of graduates from premier fashion schools. With over 27 Million women employed in the sector, particularly in unorganised segments like handlooms, handicrafts, and sericulture, the presence is felt far and wide.

Moreover, emerging sectors such as technical textile and Government initiatives like the Production Linked Incentive Scheme are slated to generate additional avenues for employment generation for women. Notably, technical textile is projected to spearhead sectoral growth, with an anticipated Compound Annual Growth Rate (CAGR) of 15%. Encouraging the adoption of digital technologies, regular upgrades, and the implementation of blockchain-based supply chain traceability are crucial for the industry to advance. Moreover, collaborations with e-commerce platforms, including ONDC, are expected to drive industry objectives forward, ensuring a promising future for the sector.

(Source: https://www.indianretailer.com/article/retail-business/trends/textile-industry-targets-5-pc-gdp-share-2030-doubling-current)

COMPANY OVERVIEW

Pearl Global Industries Limited (also referred to as ‘Pearl Global or ‘the Company), stands as a distinguished force in global fashion and lifestyle, specialising in the design, manufacturing, and distribution of apparel. The Company offers an extensive product range spanning denims, casual and formal wear, knits, woven garments, and bottoms for men, women, and children. With a reputation of being a preferred, long-term vendor for leading global brands, the Company is known for its comprehensive supply chain solutions. Pearl Global boasts a diversified and risk-mitigated manufacturing presence across India, Indonesia, Bangladesh, Vietnam and Guatemala with a marketing and Design offices in the US, Spain, Hong Kong, and the UK. Catering to a diverse clientele, from high-end fashion labels to mass-market retailers, Pearl Global maintains a total manufacturing capacity of approximately 83.9 Million garments annually.

With an aim to become the preferred vendor for top global apparel brands and for being recognised as one of the worlds premier garment manufacturers renowned for quality, service excellence, and customer satisfaction, the Company has strategic partnerships with key customers such as GAP, Kohls, Inditex, PVH, Macys, Ralph Lauren, Old Navy, Muji, and Talbots, among others.

The Company upholds a commitment to ethical and sustainable practices across its operations, manifesting through various sustainability initiatives like making significant investments to reduce water consumption in denim washes, resulting in an 85% reduction in water usage, reflecting Pearl Globals dedication to environmental responsibility and social accountability. The Company has implemented a QR code tracking system for every garment they manufacture, ensuring comprehensive traceability from fabric sourcing to the manufacturing stages and quality control. This system guarantees 100% traceability, inventory control, and quality assurance, particularly valued by customers, notably in the US market. Additionally, the Company has integrated 3D software and artificial intelligence to modernise its factories

COMPANY OUTLOOK

Revenue Growth

For the future, Pearl Global anticipates revenue growth driven by its customer expansion strategy, an increase in wallet share, capacity expansion, and enhanced plant efficiency. The Company expects that volume expansion will allow better leverage of infrastructure, combined with their global setup, resulting in sustainable margin improvements. Additionally, consistent revenue growth and margin enhancement are projected to lead to a sustainably improved RoCE. The Company aims at achieving a ~ 12-14% CAGR of revenue over the next 3 to 4 years driven by volume growth between 12-14% and strives to maintain a double-digit EBITDA over the coming years.

Capacity Expansion

Pearl Global forecasts capital expenditure for capacity expansion from 2023-24 to 2027-28 to amount to Rs. 450-550 Crore. This expansion will be funded through a mix of internal accruals, debt, and growth capital. In India, the Company is undertaking expansion in Indore through a subsidiary Company and exploring additional locations and states. Overseas, Pearl Global has executed a joint venture in Guatemala with factory expansion completed and is also considering the potential acquisition of factories in other countries.

Growth Potential Post Expansion

Expansion of Customer Base and Product Range: Pearl Global remains committed to expanding its customer base while diversifying its product range.

Focus on Technology and Sustainability: Embracing technology and sustainability are core pillars of Pearl Globals strategy. Investments in modernisation, digitalisation, and sustainable practices will not only improve operational efficiency but also enhance the brands reputation as an environmentally responsible entity.

Global Expansion and Risk Mitigation: Despite economic uncertainties and supply chain disruptions, Pearl Globals diversified geographical presence and robust risk management framework will help mitigate potential challenges. Strategic partnerships and investments in innovation will further strengthen its competitive position in key markets.

Capacity Expansion and Process Optimisation: Plans for capacity expansion and internal process optimisation underscore Pearl Globals commitment to meeting growing demand efficiently. By enhancing production capabilities and streamlining operations, the Company aims to capitilise on emerging opportunities effectively.

Commitment to Sustainability and Customer Satisfaction: With a focus on sustainability and customer satisfaction, Pearl Global is well-positioned to meet evolving consumer preferences and regulatory requirements. By aligning its business practices with environmental stewardship and customer-centricity, the Company reinforces its brand value and ensures long-term viability.

OUR PRESENCE

South Asia
India	Bangladesh
Within India, the Company is significantly expanding its capacity coupled with the implementation of automation in machinery and maintenance infrastructure. The automation and maintenance CAPEX have already been accounted for, while capacity expansion in Chennai factory is completed. In the coming year, the Company plans to expand in Madhya Pradesh, Bihar and other states in India through its Indian subsidiaries. Land acquisition/ discussion is nearly at completion stage. Majority of capex in these states will be incurred in 2024-25. State administrations are actively encouraging us to establish factories within their jurisdictions. Collectively, these factors create a conducive environment for the Companys expansion efforts in India.	Pearl Bangladesh takes pride in manufacturing and exporting the top three apparel categories: trousers, t-shirts, and knitted shirts, along with denim and other segments within the denim category. These products are shipped to various countries including the US, Germany, the UK, Spain, and France. Pearl Bangladesh is poised to introduce new products and technologies, enhancing our position as a key player in rapid market penetration. The Companys turnaround time for workers absenteeism averages less than 4%, demonstrating our commitment to e_ciency, fostering a culture of pride and ownership among the team members. Looking ahead, the Company is eager to expand our footprint and increase impact. In essence, as a part of the Pearl Global Group, Pearl Bangladesh is primed to elevate its operations to the next level.
South-East Asia
Vietnam	Indonesia
Pearl Globals manufacturing facilities in Vietnam have seen a significant uptick in productivity, propelled by a more advantageous product assortment and an expanded array of choices for customers. The Company has observed increased returns and substantial enhancements in operational effectiveness.	Pearl Globals successful expansion into Indonesia includes the construction of a new facility on land acquired in 2021. This cutting-edge site has boosted the Companys Indonesian capacity by 35%, thereby augmenting revenues due to capacity expansion, facilitating the handling of more intricate processes and the provision of value-added products to clients.
The growth of Pearl Vietnam can be attributed to a shift in management strategy. The Company has effectively capitalised on partnership model to maximise return on investment. With the infusion of new talent and diverse strategic approaches, the Company has cultivated a comprehensive understanding of the industry. This holistic perspective allows the Company to cater to the needs of buyers, excel in manufacturing, and deliver exceptional value to our customers.

Near Shore

In 2023, the Company extended its operations into Guatemala, now establishing a presence in three out of four major supply chains. In Guatemala, a joint venture has been executed and the expansion of a factory has been completed. This strategic move is geared towards enhancing the Companys growth by diversifying manufacturing capabilities and extending its geographic footprint. The confidence exhibited by customers in conducting business presents a promising opportunity for Pearl Global to capitalise on.

Location	No. of Units	Annual Capacity	Specialisation
	7	24.5	Woven and knit tops, dresses, shirts, womens fashion wear, kids wear, sleepwear and woven
India		Million pieces p.a	and knits bottoms
Bangladesh	9	45.0 Million pieces p.a	Woven, knits, denim, sleepwear and loungewear, active wear & athleisure, tops and bottoms for men, women and kids
		6.5	Outerwear and jackets including down jackets, woollen jackets and coats, seam-sealed jackets,
Vietnam	5	Million pieces p.a	pu_ers, parkas, blazers, anoraks, swimming trunks, and synthetic bottoms
Indonesia	2	4.0 Million pieces p.a	Womens professional wear, performance wear, woven tops and dresses, sleepwear, and loungewear
Guatemala	1	2.0 Million pieces p.a	Polos, heavy weight knits, light weight knits, bottoms, and denims

BUSINESS PERFORMANCE

Pearl Global has a strong financial framework along with a robust cash flow management. The Companys long-term credit rating stood at A- (Stable). Consolidated revenue from operations during the year was Rs. 3,436.15 Crores, compared to

Rs. 3,158.41 Crores in previous financial year. The Net Profit before Tax stood at Rs. 192.05 Crores, compared to Rs. 175.84 Crores in the previous financial year.

Financial Highlights (Consolidated)

Particulars (Rs. in Crores unless stated otherwise)	2023-24	2022-23	2021-22	2020-21	2019-20
Revenue from Operations	3,436.15	3,158.4	2,713.5	1,490.9	1,685.1
EBITDA	307.8	255.5	140.6	60.6	66.9
EBITDA Margin (%)	8.96	8.1	5.2	4.1	4.0
Other Income	32.4	22.8	33.5	23.5	49.1
Profit before Tax	192.05	175.8	85.8	11.4	31.2
Profit after Tax	169.12	153	70.1	17.5	21.7
Profit after Tax Margin (%)	4.9%	4.8	2.6	1.2	1.3
Earnings per Share (Rs.)	40.26 *	34.45 *	31.5	8	9.9

* EPS adjusted post-split of shares from face value of Rs. 10/- to Rs. 5/- each

During the year, the Revenue from Operations stood at Rs. 3,436.15 Crores, registering a growth of 8%, as compared to Rs. 3,158.4 Crores in 2022-23. This growth can be attributed to the Overseas revenue increase by 21% led by growth in sales in the Bangladesh & Vietnam facilities. Further, enhancements in operational efficiency contributed to increased revenue from overseas, leading to economies of scale and consequently improving the EBITDA margin from international operations.

FINANCIAL RATIOS

Particulars	2023-24	2022-23	% Change	Reason for Change	Formula Used
				Improvement in ratio is because of higher profitability on account of higher realisation
Interest Coverage Ratio (x)	3.31	3.49	(5.04)	and significant improvement in operational efficiency across geographies, while keeping the debt under optimisation level	EBIT/Interest
Current Ratio (x)	1.45	1.42	1.89	The improvement in conversion cycle of working capital while keeping the liabilities in line with the acceptable limits Improvement in ratio is on account of keeping the debt at	Current Assets/ Current Liabilities Total
Gross Debt-Equity Ratio (x)	0.54	0.60	(9.81)	an optimised level and significant improvement in cash conversion cycle, resulting in healthy cash and bank balance Improvement in ratio is on account of keeping the debt at	Borrowings/ Total Equity
Net Debt-Equity Ratio (x)	0.10	0.21	(53.61)	an optimised level and significant improvement in cash conversion cycle, resulting in healthy cash and bank balance Improvement in ratio is because of higher profitability on account of higher realisation	Net Debt/Total Equity EBIT/
Operating Profit Margin (%)	8.04	7.21	11.53	and significant improvement in	Revenue from
				operational efficiency across geographies, while keeping the debt under optimisation level	Operations
Particulars	2023-24	2022-23	% Change	Reason for Change		Formula Used
Net Profit Margin (%)	4.93	4.84	1.74	Improvement in ratio is because of higher profitability on account of higher realisation and significant improvement in operational efficiency across geographies, while keeping the debt under optimisation level		PAT/ Revenue from Operations PAT/
Return on Net Worth (%)	21.11	21.18	(0.31)	On account of Increase in reserves		Shareholders
Debtors Turnover Ratio (x)	12.95	15.08	(14.15)	Debtor turnover has remained healthy within 30 days		Equity Revenue from Operations/
Inventory Turnover Ratio (x)	6.83	6.15	11.08	Improvement in efficiency and mixing of manufacturing with partnership factories Improvement in ratio is because of: Higher profitability on account of higher realisation and significant improvement in operational efficiency across geographies.		Receivables Revenue from Operations/ Inventory EBIT/(Total
Return on Capital Employed (%)	28.2	24.2	21.40	Significant improvement in working capital cycle time, keeping the debt under optimisation level Significant improvement in cash conversion cycle resulting in healthy cash and bank balance		Equity + Net Debt)

RISK MANAGEMENT

Every organisation faces an array of risks that wield the potential to significantly impact its operations and financial stability. These risks are inherent in the organisations functioning and require persistent vigilance for identification and mitigation. Pearl Global diligently conducts a thorough assessment of the risks looming over its operations. These include risks related to business dynamics, volatilities in market and industry landscapes, instability on the political front, liquidity challenges, credit vulnerabilities, foreign exchange fluctuations, human resources dynamics, and legal matters, in addition to environmental factors, and natural disasters. These risks can arise from both internal factors, such as changes in market conditions, and external factors, including shifts in regulatory environments or unforeseen events. To effectively manage these risks, Pearl Global harnesses a robust risk governance framework and puts in place a detailed action plan for risk mitigation. This proactive approach helps the Company anticipate and address potential challenges, thereby ensuring the continuity and stability of its operations.

Customer

Retention and Growth

Maintaining direct engagementwith every customer.

Undertaking consistent monitoringof market trends pertinent to theirneeds.

Payment Security

Conducting credit assessmentbefore onboarding a newcustomer.

Obtaining pre-shipment & post- shipment coverage.

Non-recourse factoringarrangements.

Product

Quality

Ensuring quality systems andpractices are tailored to matchcustomer expectations.

Maintaining regular engagementwith customer representatives to

continually enhance processes.Appointing customer-certified

Pearl associates to overseeproduct certification to streamlinethe process.

Raw Material

Prices and Supply Chain

Anticipating and reserving rawmaterials proactively ahead oftime.

Fostering strategic andtransparent partnerships withcrucial suppliers.

Inventory

Aligning production in strictaccordance with confirmed saleorders.

Ensuring regular review orphysical count for maximumutilisation of stock.

Currency

Fluctuation

Benefitting from natural hedgingacross all overseas operations.

Utilising India-export-forwardcover, with minimal import

procurement, creating negligibleimpact.

Social and Ethical

Compliance

Zero-Tolerance Policy

Strict zero-tolerance policyensures a robust internal controland compliance system.

Regular monitoring allows forimmediate corrections.Customers are onboarded onlyafter complete compliancestandards are met.

Cashflow

Debt Repayment and Servicing

Sufficient operational cash flow tocover all near-term debt repayments

and interest payments.Prudent working capitalmanagement.

Resources ensure collection on time.

Supply Chain

Diversification of Suppliers

Maintains relationships withmultiple suppliers for criticalmaterials and components,

reducing dependence on anysingle source.

Strong relationships enable bettercommunication and collaboration,facilitating early identification

and resolution of potential supplychain issues.

Geopolitical

Regulatory Compliance

Closely monitors changes inregulations and trade policiesacross different geographies toensure compliance.

Strategic Partnerships

Building strategic partnershipswith local businesses or

Government agencies in regionsprovides valuable insights andsupport.

Governance

Compliance Assurance

In its trajectory to strengthencompliance, Pearl Global has now

engaged Big Four AccountingFirms as Statutory Auditors for

overseas operations, bringing inbest practices that have helped

in strengthening systems andprocesses.

HUMAN RESOURCE MANAGEMENT

Pearl Global prioritises employee development and acknowledges their crucial role in the Companys success. A dedicated human resource department crafts effective policies and guidelines for employee growth and well-being. The Company ensures safe, hygienic, and sustainable work environments across all locations to attract, nurture, and retain talent. Pearl Global celebrates diversity and individuality, believing in every individuals leadership potential. Practical learning follows the 70-20-10 model, emphasising diverse learning sources: 70% from challenging experiences, 20% from relationships, and 10% from formal training. The Company had 25,708 direct employees as on March 31, 2024.

Pearl Global has also initiated an Employee Stock Option Plan for the well-being of its employees. Pursuant to the plan, 14,54,000 (no. adjusted post stock-split) options have been approved. The Plan follows the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021. As per the plan, vesting period shall commence after a minimum of one (1) year from the grant date and it shall extend up to maximum of four (4) years from the grant date, at the discretion of and in the manner prescribed by the Nomination and Remuneration Committee of the Board.

PEARL GLOBALS EMPLOYEE CENTRIC INITIATIVES

Inclusion-based Programmes

P.A.C.E. (Personal Advancement and Career

Enhancement): The Company offers P.A.C.E., a well-known initiative by GAP Inc., dedicated to empowering women in workplaces. This programme facilitates the professional advancement of female workers at Pearl Global, enabling them to assume leadership positions.

POSH (Prevention of Sexual Harassment): The Company launched gender awareness training in partnership with Corporate Ethos and Shakti Foundation, representing a notable step towards creating a safe and inclusive workplace. This initiative seeks to nurture a culture of respect and inclusivity, guaranteeing that every employee and factory worker feels appreciated and respected.

Innovation-based Programmes

Workplace Cooperation Programme (WCP): The Company continues its Workplace Cooperation Programme in partnership with GAP Inc., with the objective of enhancing relationships and collaboration between factory management and other departments. Focussed on promoting effective communication, role clarity, and risk assessment, this initiative endeavours to build cohesive teams and instil a culture of trust and cooperation.

Supervisors Skill Training (S.S.T): The training is designed to provide supervisors with the necessary professional skills to facilitate more effective communication between workers and management, while also ensuring a fair balance between the organisations interests and those of the workers. Developed by Better Work and implemented in our units in collaboration with our partner brand GAP Inc., this programme aims to enhance workplace relations and promote mutual understanding.

Leadership Conclave/Multipliers: To equip our leaders with the necessary skills and insights, a leadership intervention titled ‘A.I.M- Align, Implement & Multiply was introduced to recognise and harness the unique strengths of our teams, empowering them to maximise their impact. It was a 3-day conclave in association with Tracy Ann, aimed at facilitating the managements growth and development to unlock their full potential. Furthermore, this conclave was designed to discuss our vision and develop a much healthier bottom line in the next 3 years, working towards reaching our USD 1 billion+ goal.

Skills Training: The Company hosts workshops designed to instil an entrepreneurial mindset and broaden employee responsibilities, thereby aiding in their advancement. These sessions encompass various topics such as business communication, team management, basic computer skills, personal finance, interpersonal communication, conflict resolution, language proficiency, and industry-specific technical training for the garment sector.

VISIONARY APPROACH

Pearl Global embraces diversity as a source of strength, recognising that diverse perspectives, approaches, and ideas combine to drive the organisation forward synergistically. Equal opportunities are extended to all individuals to showcase their talents and contribute to the Companys enrichment. With a focus on recruiting the most skilled and suitable candidates, Pearl Global flourishes with a legacy spanning decade, bolstered by a team of experienced professionals.

CARE

HerHealth: Pearl Global takes pride in HerHealth, a specialised initiative focussed on womens health. Its aim is to enhance awareness of well-being within low-income families, emphasising healthy habits in vital areas like lifestyle, nutrition, and sanitation. To connect effectively with the intended audience, HerHealth sessions are routinely held across Pearl Globals factory facilities in India, Indonesia, and Bangladesh.

Fair Trading Practices: At Pearl Global, transparency and proactivity are core principles guiding our operations. We prioritise building strong client relationships and strive to exceed expectations through diligence and dedication.

Awareness Camps: At Pearl Global, educating our workforce about social issues is a top priority to foster societal well-being. To achieve this goal, we regularly organise educational camps and workshops covering a range of relevant topics. These include discussions on gender equality, substance abuse prevention, sexual harassment prevention, ethical conduct standards, womens empowerment, and general health awareness.

INTERNAL CONTROL SYSTEM

Pearl Global boasts robust internal control systems, meticulously overseeing transaction recording, authorisation, and reporting, while safeguarding Company assets. The successful implementation of SAP across its manufacturing units underscores the Companys commitment to ongoing system enhancements. The Company appointed the Big 4 top accounting firm as statutory auditors for overseas companies, bringing in best practices that have helped in strengthening systems and processes. To reinforce adherence to internal control protocols, Ernst & Young (E&Y) serves as the Internal Auditor for India and Bangladesh operations. A regular review of audit findings informs proactive compliance measures.

CAUTIONARY STATEMENT

Investors are cautioned that this discussion contains statements that involve risks and uncertainties. Words like anticipate, believe, estimate, intend, will, expect, and other similar expressions are intended to identify such forward-looking statements. The Company assumes no responsibility to amend, modify, or revise any forward-looking statement, on the basis of any subsequent developments, information, or events. Besides, the Company cannot guarantee that these assumptions and expectations are accurate or will be realised. Actual results, performance, or achievements could differ materially from those projected in any such forward-looking statements.