PDS Limited (NSE: PDSL) Q3 2025 Earnings Call dated Jan. 29, 2025
Corporate Participants:
Diwakar Pingle — Partner, Ernst & Young LLP
Sanjay Jain — Group Chief Executive Officer
Rahul Ahuja — Group Chief Financial Officer
Pallak Seth — Executive Vice Chairman
Analysts:
Dhwanil Desai — Analyst
Ankit Gupta — Analyst
Shrinjana Mittal — Analyst
Navin Vijay — Analyst
Bharat Shah — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Q3 FY ’25 Earnings Conference Call for PDS Limited. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the call, please signal an operator by pressing star then zero on your touchstone phone. Please note that this conference is being recorded.
I now hand the conference over to Mr Diwakar Pingre from EY. Thank you, and over to you, sir.
Diwakar Pingle — Partner, Ernst & Young LLP
Thank you, Rio. A warm welcome to all the participants to the PVS Limited Q3 and Nine-Month FY ’25 earnings call. Our investor presentation and financial results are available on the company’s website and the stock exchanges.
Please note that anything said on this call, which reflects our outlook for the future or which could be considered statements must be viewed in conjunction with the company basis. This conference call is being recorded and the transcript along with audio of the same is made available investor of the company as well as exchanges. Please also note the value of the conference call is copyrighted middle of previews and cannot be copied being broadcasted directly press and media without specific and written concern with the company.
To give a brief business update and take you through the results the management meeting, we have Mr, Executive Vice-Chairman; Mr Sanje Jain, Group CEO; Mr Al, Group CFO; and Ms Josef, Group CFO.
I would now request Mr Sanjay Jain to provide you with a brief update of the quarter. Over to you, Sanjay.
Sanjay Jain — Group Chief Executive Officer
Thank you, Diwat. A very good morning, afternoon and evening to everyone. Thank you for joining us today. I’m pleased to share that PDS has sustained its growth momentum, delivering a 26% year-on-year increase in the revenue for the nine months period ended December ’24 and reaching a revenue of INR9,052 crores. This performance underscores our ability to navigate an evolving global landscape and seize the emerging opportunities and reinforce our leadership in the industry.
Rahul Auja will soon give you a deep-dive into the performance but I would like to take this opportunity to highlight our key themes in-line with our overall strategy. In June last year, we had set forth an aspiration of 55 that in five years, starting from June last year, we would aspire to do a 5 billion GMV, which would approximately mean a 3.5 billion turnover and at that level in a 5% PAT. So 55 was the ambitious target. We feel positive that we are heading in the right direction.
And as a step-in that direction, as an interim milestone, we believe we should be touching L3 which what this means is that in about two years from now, we already one year into our journey when we started with 55 in about two years from now, we should have an order book in-hand of about $3 billion. And at that level, we should do a turnover of close to $2.2 billion US dollar and generate 3% PAT of the company. So this is not an introduction of any new aspiration or anything deviating from 55.
This is to ourself a check that, yes, we should be on-track on 55 and as an interim milestone, let’s aim to get to 3 in about two years from now. And this aspiration, this milestone, we believe would be largely a combination of the organic growth. As you know, we’ve grown this year 26% and as we are very close to entering the next year, we’re also feeling positive about growth next year as well. So carefully you know, growing on what we have built. But there would be an element of some strategic acquisition opportunities that we shall be very, very carefully pursuing.
So combination of these makes us feel confident to cross this interim milestone. To reach this, we are driving deepening of relationship with the existing customers. For example, with our largest customer, Primark, our growth in the nine months has been 52%. So there has been a growth double of that of PDS with our single largest customer. And also build the new customers across geographies to capitalize on the growth opportunities. And that’s somewhere when we are investing into US, we have witnessed a 70% growth in North-America sales.
We also want to diversify into high-value categories and enhanced service offerings to meet ever-evolving customer demands. And our investments into general merchandise, our investment into home categories have all started firing and giving results. And therefore, that gives us the confidence that this also would be a key building block to our future. While these two are going to be instrumental in driving the top-line, we believe what we have built right now, if I take the nine months sales and if we just extrapolate that is about INR18,000 crore of top-line.
And at this level, once we have got such a meaningful engagement with our customer, there is a lot of scope to now optimize on the operational efficiency to improve the profitability of the business. And as a result, the fourth lever is the strategic cost initiatives. That’s where we have engaged with BCG to drive margin improvements and support the long-term sustainability. So the combination of these two factors should give us top-line as well as margin improvement.
Before I discuss further on growth, I want to highlight the major cost transformation initiatives we have kick-started with BCG. This 10-month engagement focuses on three of our key verticals, Gem, done out of UK, simple approach run-out of Hong-Kong and techno design run-out of of Germany. And these three are almost about 50% to 55% of total cost base of the company. And here, BCG is working on levers such as fabric, trims, materials, employees, sampling,, just a few of these initiatives. And I think through operating efficiencies, synergies, cost optimization. We believe from the scale that we have built-up, there is potential to get synergies on a high side of 3% to 4%, but surely about 1% to 2% savings from this cost base are surely achievable. And the engagement with BCG actually is on a success fee basis, they feel very confident that they should be able to realize it and then only walk away with the fee.
On the growth side, as I mentioned, we will continue our journey of deepening relationship with existing customers and also capitalizing on the growth and wherein I mentioned about 70% growth in North-America. And currently, we have an order book of about INR425 million from North-America, so which I believe should keep looking well. And sorry, INR425 million on an overall order book basis. While the order book has a growth of 16% overall, but what is important is that in design-led sourcing, which is our main business contributing to more than 87% of revenue, the growth is actually 25% over the same-period last year.
So therefore, the main business sticky business is actually having a healthy 25% order book growth over the same-period last year. The 16% is only because the agency business has been of Ted Baker has shrunk a bit. As part of our growth strategy, we’re also pleased to announce our plans to acquire a 55% stake in it Gallery India Private Limited, a leading Tirupur-based manufacturer and export of apparel specializing in baby wear, children wear, nightwear and innerwear. Knit operates close to 14 manufacturing units along with warehouses and worker hostels and has a production capacity of 40 million pieces per year kicked into customers in Germany, US and UK. Some of the marquee customers are blue-chip names like Ernsting Family, Primark, TJ Max.
So they have a very healthy mix of customer-base. This acquisition is a significant milestone for PDS, reinforcing India’s role as a strategic manufacturing and sourcing hub. It strengthens our expertise in apparel manufacturing in the region, aligns with the Make in India initiative and also in-line with the changing geopolitical dynamics, whether it’s China plus one or disruption in any other part of the world, we believe a very well-diversified manufacturing base and sourcing base should augur very well in terms of our offering to the customer. We will continue to be asset-light.
So therefore, this is one very carefully chosen manufacturing acquisition in India and we believe we are done with it in terms of acquiring any unit in India. This acquisition involves an equity investment of INR41 crores and there are some confirmatory diligences are underway and this investment is payable in tranche over one year. And as part of this transaction, Knit Gallery’s existing business currently happening in a different entity will be transferred to the entity that we are acquiring and there will be a business consideration of INR34 crores payable over three years.
So we have taken care that the consideration for the share purchase is built over one year, so that the earnings are actually spanning and payment is being made along with what we have believed and seen through audit is the earning potential and the deferred consideration for the business is done over three years or so. The combined business generated INR288 crore in revenue in FY ’24 with an EBITDA of INR36 crores and the transaction is expected to close by May 2025.
Additionally, PDS is proud to be the fashion partner for Bharatex for the second consecutive year. And in this event, we will be showcasing our key verticals, Poitik Gem, techno design, DVS Lifestyle, PDS Venture and now Knit Gallery as well. And as part of our effort to synergize on the cost area, we are hosting our first-ever global suppliers meet. This first addition is in Delhi on the 18th of February, wherein we are bringing together domestic and international vendors. So-far, the vendors have been individually dealing with the verticals. Now we are showcasing that you are actually catering to an enterprise who is generating close to INR18,000 crore annual revenue and therefore showcasing business showcasing higher opportunity to our vendors and as a result deriving on synergy benefits.
Looking ahead, the macroeconomic environment presents both opportunities and challenges. So-far this year, we have stayed ahead of the initial 10% guidance. Global trade volumes are expected to rise, yet the geogical — geographical shifts may redefine some trade partners, but we believe our step-in India is in the right direction in terms of as a manufacturing sourcing base. At PDS, we remain focused on agility, resilience and strategic foresight to adapt any changes.
With this, I now hand over the call to our Group CFO for a further deep-dive into our financial performance.
Rahul Ahuja — Group Chief Financial Officer
Thank you, Sanjay. Good day-to everyone. Building on our strong momentum, I’m pleased to report that PDF has delivered another quarter of robust growth. For the nine-month period of FY ’25, we achieved a top-line revenue of INR9,052 crores, reflecting a strong 26% year-on-year growth. Our GMV gross merchandise value grew by 16% year-on-year in Q3. We reported a profit-after-tax of INR43 crores for Q3 FY ’25, which is a 66% Y-o-Y growth and INR167 crores for the nine months period ending December ’24, reflecting a 22% year-over-year increase.
Our normalized PAT after adjusting for new businesses stood at INR78 crores for Q3 FY ’25 and INR289 crores for the nine-month period with margins of 2.6% and 3.4% respectively. Analyzing our segmental performance, the sourcing segment expanded by 26% over the nine-month period, contributed by existing business expanding by 21% and sourcing as a service and the new verticals contributing to the rest. We witnessed a blip of around 40 bps in-sourcing gross margins, which were mainly attributable to loss of Ted Baker Agency business.
Our manufacturing segment achieved a 42% year-over-year growth, generating INR532 crores in revenue. The segment reported an EBIT of 5.6% for the nine months. Acquisition of Mid Gallery will further boost our capabilities in India and enable us to drive best practices and leverage scale. Excluding our new business investments, we clocked a return on capital employed of 25% and net-debt to equity of 0.21 and a net-debt to EBITDA of 0.82. With this continued momentum, we are en route to our 55 strategy and aspiration and we shall get to the goal of 3 in another two years.
We would now open the floor for questions.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask questions may press star and 1 on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. To ask questions, please press star and 1. The first question is from Dhwanil Desai from Turtle Capital. Please go-ahead.
Dhwanil Desai
Hi, good afternoon, everyone, and congratulations for a good set of numbers. Sir, my first question is now the investment in new initiatives, I think there are two items that stand-out are the US and the brand-management side of it. So how should we look at both these items going-forward into FY ’26? And overall investment, I think we will kind of — we have alluded that it will start tapering off from second-half and maybe it will go down significantly next year. So are we on course to that? That’s my first question.
Sanjay Jain
Yes, we have peaked out on the investment in new verticals in Q2. In Q3, they are about 10% lower as compared to Q2. And so we have peaked out. That was one of your question. And in terms of the outlook for next year, we are looking at investing half of what we have done this year. So they should actually come down to about 50% to 60% of what we have done this year.
Dhwanil Desai
Okay. So essentially, so I think probably this year probably we’ll do INR130 crore INR140 crore kind of a number. So next year, we should look at INR70 crore kind of a number. Is that a right number to look at?
Sanjay Jain
Yeah. I think broadly, yes, yes, please.
Dhwanil Desai
Okay. Sir, second question is about this intermediate target that we have set for ourselves. If I look at net of investment, on Nine-Month basis, we are already at 3.4% PAT and we are saying that in three years, we’ll reach a 3% PAT. So — and we are doing a lot of cost management initiatives and investment side also, we are saying that it will taper down. So we are already there in terms of that number broadly. If the investment part is not going to scale-up significantly. So not able to understand whether the operating leverage benefit with scale, you know, why it will not get reflected in that PAT number?
Sanjay Jain
I think your observations are in-place and we have also said that in about two years, which means FY ’27, you should see us at full-year 3% PAT and right now we are at 2%. You know, if I you know, currently we at about 1.5%. If I just talk about the full-year, we should be closer to 2% or so approximately. And then we have to add that 1% extra post our investment. So nothing to be excluded.
So yes, with the initiatives in-hand, with the investments peaking out, with the cost initiatives in-place, we are confident we will get there. Your observation is in-place, but allow me to be a bit conservative, you know, so that we should at least be working towards surpassing this rather than giving a very ambitious number and struggling to meet it. But we believe we are in the striking distance and we are getting there.
Dhwanil Desai
Got it, sir. And one last question, I’ll come back-in the queue. So sir, this INR3 billion intermediate target, you know again, I think if I look at the numbers and even if we continue with the current run-rate of INR3,000 odd crores, probably we will hit the GMV of $2 billion this year. So from two to three, how large the US is going to play a part in that? And where are we in that journey from going from $400 million, $500 million to $1 billion? You know what are the key customers where we are seeing traction scaling up of the business? If you can give some more color on that, that would be very useful.
Sanjay Jain
I think I will take the initial part of the question and we also have Mr Palak, who is dial-in from London. I’ll be soon requesting in on the later part of your question. I believe from a two to three in terms of the extra EUR1 billion, we believe while North-America, you know would keep adding, you will see the exponential impact of US takes time, so from the — in the third, fourth and fifth year, there would be more-and-more meaningful impact of North-America and that should take-up to five.
But for the intermediate aspiration, you know, we believe whatever we have built-in terms of our existing design-led sourcing business, the pace at which we are growing in North-America, the acquisition of that we have done, the fact that my GMV of design-led sourcing is 25% up. We believe we are well in shape on the current business we have built to grow at, say, about 15% next year and therefore be in a comfortable position to get to the 3 billion GMV. The US as it fires exponentially is something that will come on-top of it. For the next two years, we are building in a careful calibration, not building in any kind of exponential expansion from the US business. So that’s the math part of it.
I’m just requesting Mr Palak said, yes, you asked about the customer engagements and which all customers are we engaged with., I request you to chime in, please.
Pallak Seth
Hi, hi. Yeah, good morning, good afternoon, everyone. So I think the fundamental difference between the US and the UK and European businesses in Europe, UK business starts small. It’s engagement at the — our teams with the buyer and the designer level. And from there, orders are coming and trickling down and it takes two years to grow to a sizable number. Whereas the US business takes a longer time to start because it has to be a company-to-company engagement, people below in our team versus the retailers team cannot get the business started. But once those engagement are finalized between the CEO of a large retailer and PDS at the management level, the business flows very quickly and scales up very quickly. So it will take us 10 years to scale with a European retailer of a similar-size and scale.
The same scale could be reaching two to three years with the American retailer because the strategic alignment that PDS is going to have or any supplier is going to have with American retailer on a company-to-company basis. So US is going through a big transformation. There are lot of — I think there are two years or three years behind Europe in restructuring. So in Europe, we have seen a lot of SG&A costs cutting in the European retailers. They’re getting their own overhead down, they’re coming to suppliers for services and asking them to take on more of the cost, but also in return guaranteeing large businesses, a large-volume to work with the supply base.
So in US, that transition is just beginning to happen now in the last six months, 12 months we have seen. So customers like Kohl’s have gone through a big transformation. Even yesterday, we announced 15% to 20% cost cut at the head office level, Children’s Place and other large American retailers started to engage with us and Walmart, Target, fashion over, those conversations are quite strategic and moving in the right direction. And the biggest retailer that we have just started conversation is Tackless Brands, which is the merger of JC Penney along with this brand like, Brooks Brothers, Eddy Bauer and Forever 21.
So I think the good thing is our US investment at the strategic level started almost 18 months ago now. We have made inroads with the senior leadership of all relevant creditworthy American retailers as of now. They have started understanding our business model, they started opening our account and then they’re talking about large business volumes. In the next 12 24 months, we start seeing hockey-stick impact into some of these large accounts as well.
Our investment in people, the people we have invested, they have turned out to be good. They’ve had those relationships. They — with their replication, their network, along with PDS banking and PDS infrastructure seems to be working well and these American are seeing value in what we offer. And I think US could overtake our European business in next two to three years if all these accounts that are talking numbers with us start firing the way they’re supposed to. I hope I’ve answered the question.
Dhwanil Desai
Yeah, that’s fantastic. And thanks for the detailed explanation and wish you all the best. Thank you.
Operator
Thank you. Before we take the next question, a reminder to participants that you may press star and one to join the question queue. The next question is from Ankit Gupta from Bamboo Capital. Please go-ahead.
Ankit Gupta
Thanks for the opportunity and congratulations for a good set of numbers. So my question was on the brand-management side. The way how things have shaped up on the Ted Beaker side, how important is this piece of business for us to achieve 3 billion and finally 5 billion GMV that we are targeting over the next three to five years, three and five years.
Pallak Seth
Let me start by taking this. Yeah. So I think one thing we all need to be clear that for PDS, we are a license — license the brand owner is a company in the US called ABG Authentic Brand Group, which is continuing to grow, continue to expand. We just acquired Champion, they’re talking about taking more brands as well. So PDS is a license of Ted Baker. So we run the global design group servicing all the global franchisees. And then we also run the UK, European wholesale business.
So some of the negative press we saw around Ted Baker last 12 months was predominantly the retail partners ABG had selected in US and Europe, which financially could not handle the working capital requirements and went out of business. So as a result of that, the Ket Baker stores do not exist. But if anyone wants a Ket brand, they have to come to PBS today for the wholesale. So if you want to buy a earlier, you could go to a shop, but because the shop is not there, e-commerce side is now up and running, but only wholesale channel the brand is available. So as a result of which, PDS business has actually benefited from the demise of the retail shops, which is happening across-the-board in the whole thing. And our wholesale business has stabilized and continuing to grow because the product is right.
Second, the company we have in UK is called New Lobster, which is basically having Ted as one of the brands. You must-have seen the press announcement few months ago, we signed Draper James, which is the Spoons brand as well to use the same team and infrastructure to add other licenses to distribute in the market. So I think, yeah, so Ted Baker, you know, the whole situation restructuring actually benefited PDF because the wholesale business started growing.
Any concessions were converted to pre-sold inventory, which also many should know the concession existing in Europe and UK, which we don’t want to take any inventory risk. So we call those customers. If you want to buy the breaker product, you have to buy it outright from PDS, we will not give you on a sale or return or consignment basis. So hope that answers your question. And that business will continue to grow and flattish. I think we are seeing a large — much larger growth momentum than the overall PDS growth into that new lobster company because of growth next year, but also some of the other brands onboarding, utilizing the same team to design, develop and market other brands in the same similar mid-market segment.
Ankit Gupta
Sure. But, in our ambition to reach 5 billion GMV in by FY ’29, how important is this piece of business for us? Like as in our Investor Day, we did highlight that this is expected to become a big — this is expected to do.
Pallak Seth
It’s very important, very important. Like I said, we are having — the industry is changing. The New York IP companies between ABG, WSP, Marquee, BlueStar iconic. There are five big players. They have reached around 50 billion in retail, which has been closed down and become IP. That 50 bill is going to become 100 billion next three to four years. As soon as that demise of independent brands happens in the West, like I mean, as just heard, doctors was on-sale, Versace is on-sale. So it’s unbelievable.
The amount of standalone fashion brands cannot survive individual businesses are all being acquired by New York IT companies. So more that happened, the more these New York IT companies require people to operate those businesses and pay them a royalty. So for, the opportunities are almost unbound. The reason we have a little bit slowed down the signing of new brands is because we are just trying to make sure that the whole Ted Baker model we had acquired because the disruption in retail last 12 months is stabilizing.
So we are seeing positive, definitely positive outshoots in our ’24, ’25, ’26 budgets what the CEO of the company has given us. So once we start seeing the profitability increasing and emerging to the level we require, we will then take on some of the other licenses because there is no upfront investment required. It’s all variables. You take the brand right, you distribute, you utilize the entire existing resources like to help respect your current asset of people and then offer your customers another brand rather than just one brand as a offering.
So I mean, the good thing is because of the PDF structure, you all saw that we acquired a manufacturing unit because that was the required that we should have one manufacturing, right, as a base like in Bangladesh, we have 100 million owned manufacturing, we do over $1 billion outsourcing. Similar India, if we have one manufacturing, we can do digital outsourcing.
So in all the four segment periods operates, manufacturing, designless sourcing, sourcing service and brands, there are opportunities emerging. And with the very clear financial KPIs, we are evaluating what to do, what to restructure, what to invest in and take the whole thing forward. Yeah. So all four segments are important, right? As long as there is no inventory risk, no credit risk, there is a scalable business within two to three years, which is profitable, carefully we’re evaluating and seeing.
Ankit Gupta
Okay. So next year, can we expect some more brand engagements on this segment front, let’s say, and not just from the European business, but even on the US side as well?
Pallak Seth
Yes. As I said, there are lot of American brands that are being acquired by the New York IV company. They come to PDS to operate, lot of them keep getting offered to us for India, for Middle-East, for Southeast Asia, so around the world. But we have to be very careful, whether it’s evaluating the working capital requirements with evaluating the structure. We don’t want to get into physical shops, we just want to maintain wholesale, maybe some small e-commerce.
So the opportunities are — I mean, the good thing is there’s no other company like PDS in at least Europe and some of the bigger markets we operate UK where there are other operators who can give the — these New York IP guys the services they require. So they all end-up coming to us and almost fighting for attention that can do it for them. So we have to pick and choose the right partners and also the right opportunity. And next year next year for PDS about consolidation, making sure that all the investments we did last 12, 18 months start working, whatever not work, we start cutting our costs and making sure that we focus the3 3 journey and from that it was a 55 journey.
So there’s no lack of opportunity which is which is the — and there’s no competition of other people pitching for those opportunities, right? So if you don’t take it, they’ll be still level in six months’ time. That’s the good thing. There’s no other five PBS around the world, which have been created based on our platform entrepreneurial structure, which any of these guys can go and pitch towards.
So we have that unfair advantage in our industry. Unfortunately, there is no other scaled-up platform that is able to work with these changes and dynamics in the industry to give the services to either the retailers or the brands or the New York IT companies, the way the industry has evolved. So there’s no scale — there is no scale company. I mean the other biggest competitor we have is now one-third our size.
Ankit Gupta
Sure, sure. And my second question was on our intermediate target of 333 and if we look at our long-term target of around 55. So there is a huge jump-in the PAT margin that we are expecting as well as the sales in the later half of, let’s say, the fourth year and the fifth year from $3 billion to $5 billion over the next two years, like in FY ’28 and ’29 and our PAT margin improving from 3% to 5%. So does it mean that a lot of the investment that we are doing currently and the effort that we are putting up? A large part of that the fortification of that will come in the fourth and fifth year.
Pallak Seth
So I think first is 33, Sanjee, you want to answer, please?
Sanjay Jain
Yeah. Yeah, yeah. So just to put things in perspective, when we talk about a 3 billion, that should give us a — on a 70% conversion ratio, about $2.1 billion of US revenue. And if I — on an it’s approximately INR18,000 crore of revenue. We are — if I just extrapolate the first-nine month performance, we are at INR13,000 crore this year. Our GMV overall is up 16%. Our GMV in design less sourcing business is up 25%. So therefore, company it just grows at 15% next year and thereafter, it should clearly enable us surpass the INR18,000 crore top-line and approximately 3 billion GMV. So we are — it’s a realistic number that we believe is achievable in about two years from now.
And as I mentioned earlier that we are, you know, taking our North-America aspiration ahead, the teams are in-place, the business has started clocking in good growth and one should see the exponential impact of that you know in the 4th and year as well. So therefore, what we have set-out as our ambition, I just did the math for the next two years. We believe we are getting there. The order book in-hand is well in-place and the initiatives on the synergies, cost optimization side also gives us positivity and confidence to touch the 3% PAT.
Ankit Gupta
Thank you so much and wish you all the best.
Operator
Thank you. The next question is from Mittal from Ratnatriya Capital. Please go-ahead.
Shrinjana Mittal
Hi, and thank you for the opportunity. I have two questions. So first is, if you can give some numbers on the peaker sales and what is the sourcing as a service portion of the revenue?
Sanjay Jain
Yes. Rahul, do you want to add that?
Rahul Ahuja
So at Baker, in the nine months period ended December, we did about INR355 crores of revenue. And in-sourcing as a service in the nine months period, we did approximately INR13 million into INR87, approximately INR113 crores we clocked in. So tech breakup was flat if I talk about the same-period of nine months last year. As Mr explained, while we lost the agency business because of the stores shutting down, but we got a act together on the wholesale business and the wholesale has got good traction.
So our top-line is flat in Ted Baker as compared to last year, which I said is approximately 355. And in terms of the sourcing as a service business, there we have actually experienced a healthy growth in terms of over the same-period last year, our growth is about 54% in terms of the top-line growth. We were at 13 million last year and we are — sorry, this year and 8.5 million last year. So 50% growth in-sourcing as a service business and Ted Baker flat, the wholesale business overcompensating the decline of the agency business.
Shrinjana Mittal
Understood. That’s very helpful. One more — one more question that I had was, so I was trying to understand the movement in the net-debt. So if I just look at last quarter versus this quarter, the net-debt has increased by 200 — INR250 odd crores. And if we look at the sales number, the sales is almost similar, right, compared to the last quarter. So that would suggest that we have not made any operating cash. In fact, the operating cash would be on the negative side. So what would be the reason for that? Like I — is it largely working capital if yes, like which part of the working capital is contributing to this? Thank you.
Sanjay Jain
So if you see our balance sheet for December ’24 versus December ’23 of the corresponding quarter period. You’re right, our — we have seen expansion in our balance sheet, particularly around — if I were to talk about core working capital, which is inventory trade receivables and our payables, you know that the net increase has been around INR338 crores. And if we were to just talk about trade receivables versus trade payables, the increase has been around INR230 crores. So we did this to ensure that the growth that we were driving is achieved and we let our balance sheet expand.
However, that said, we have very clearly now identified from this quarter onwards, how are we going to contract the same of when I say contract the same, reduce our total outstanding debt. For example, in Primark, which is our largest customer, we grew our business over the same-period last year-by almost INR550 crores. Now in Primark, we went to our bankers and they have increased with effect from 1st of January. The factoring that we do from 80% earlier to 90% now. So it’s the invoice of INR100, they used to give us 80, now they will give us 90. This will lead to a release of about $3 million, $3.5 million of working capital.
We have also introduced vendor supply-chain lines in our businesses through two large businesses, particularly Nord Lanka. We have got a $10 million line, which has already started getting utilized, which means our vendors will get paid upfront, obviously, where there’s the interest and this goes off our debt and appears in the account payables. So that will release close to INR80 crores to INR90 crores in this quarter, given is a large business for us.
Similarly, for Baker, we have a $10 million line in-place for factoring their receivables. Currently, our bankers have approved about 11 customers of Ted Baker, which we expect that in this quarter, about $4 million to $5 million of factory will take place. Already that number is at about $1 million as we receive and ship more and receive the documents, the banks will — we expect about $4 million to $5 million, which is around INR35 crore to INR40 crores of factoring upfront, which again releases my working capital.
Similarly, to your question, you would see an expansion in our inventory as well. You know, both our factories in Bangladesh are running a tad over-capacity in this quarter and close to $4.5 million to $5 million of goods which were appearing in December balance sheet have already been shipped. So to that extent, my working capital consumption will also come down, I will realize those inventory getting converted into receivables and actual cash. So if you put all of these together, we expect that in this current quarter, we should reduce or contract our balance sheet close to about INR160 crores to INR175 crores and the corresponding impact on working capital as well.
Shrinjana Mittal
Understood. That’s very clear. Thank you so much and all the best.
Operator
Thank you. The next question is from Naveen Vijay from NS Capital. Please go-ahead.
Navin Vijay
Good evening, everyone. Congrats on the recent acquisition of Net Gallery. I have a few questions on those. What would be the total consideration? You mentioned equity portion is INR41 crores. What would be the net-debt that we have to take on our books?
Sanjay Jain
It is INR96 crores of debt that we are going to take on a balance sheet and it is primarily working capital and one more thing to be seen when we talk about this working capital debt. The profile of the customers is blue-chip. I mentioned about Ernsting Family, Primark, TJ Max, and these are creditable customers wherein non-recourse factoring is available. So in due course of time, PDS would be bringing in its best practices here. But to answer your question, it is INR96 crores and almost 85% of that is working capital.
Navin Vijay
Got it, got it. Also in the filing, you mentioned part of gallery business will be transferred from existing firm. So what portion would that be? So there is a partnership firm and there is a private limited company. Is all of the partnership firm getting transferred into the private limited home? And then in the combined entity, we are taking 55%. Is my understanding correct?
Sanjay Jain
Yes, you have summarized it well. They have been conducting business across two entities from the partnership firm under the business transfer arrangement. The entire business is moving into the company where we are acquiring INR55, there would not be any single rupee business of net calorie related to garment that would be done outside the new entity where we are getting the economic sticks.
Navin Vijay
Great, great, great. Just want to get a feel of the net margin profile of the combined entity, sir. You mentioned EBITDA is INR36 crores. I just wanted to see if there is any net operating losses and if we can have any tax advantages out of it on the EV side, on the enterprise value side.
Sanjay Jain
So I think what we have acquired is a profitable company. So there have not been any loss carry-forward. But having said that, at present, we are net income margin, the PAT margin are better than that of our own manufacturing business. They are at about EBITDA margin is 13% for FY ’24, PAT margin is about 6%. Our own business that we have been running in Bangladesh companies is a 7% EBITDA and 1% PAT. We believe there is room for adoption of best practices and the combined turnover of both these companies, knit Gallery and PDS Bangladesh entities is about INR900 crores. So we see that let us adopt a path that form a combined 3% PAT, 7% gallery, 1% PDS from a 3%.
The next intermediate goal is 5%. So in about 1.5 year from now, we feel very, very positive. We are also getting a senior industry-leader, you know to — because there is two factories in Bangladesh. There is now one factory in India. There is one factory in Sri Lanka, Nobles where we have a 26% stake and we have an opportunity to step-up to 50. Now all this put together is approximately a business about INR1,200 crore and a senior person should be able to showcase the manufacturing progress to the customers. So these are some synergies that we are going to realize in due course of time.
Navin Vijay
Wonderful, wonderful. That’s great to hear. You have mentioned 14 factory buildings. What portion of this — how many members are owned and then how many are rented at least just to get an asset profile of the target entity hello.
Sanjay Jain
So all of this would be rented and the rental cost is kind of netted off from the EBITDA and that’s how we arrived at normalized and that’s how the consideration got settled. So all of this is rented premises. In fact, we’ve been very careful in response to one of the previous questions. I mentioned that almost 80% to 90% of our debt is actually working capital. So therefore — and for that the inventory receivables all belong to the business.
Navin Vijay
Excellent. Thank you for your detailed answers, Sandhi, sir, and all the best. Thank you.
Operator
Thank you. Next question is from Bharat Shah from ASK Investment Managers. Please go-ahead.
Bharat Shah
Yeah, hi, Sanjay in Pradat. First thing, we have taken upon our sales a very elegant business model of simplifying the pain points of our clients, be it manufacturing, be it sourcing, be it design and now even kind of branding and marketing services. But in the process, our own business model has become somewhat complicated given multiple clients, multiple brands, multiple manufacturing, our own efforts in that direction plus branding. So how far in the journey of simplifying our own business model we have reached, while we have sought to simplify the business models of our client — our clients.
Sanjay Jain
Baraby, thank you for your question. This is Sanjay Jain here and I think we have chosen clearly four segments to pursue our growth the design-led sourcing, the largest piece, then we added sourcing as a service, then band management and manufacturing. We are into these four segments and for the foreseeable future, we will continue to be in these four segments. In fact, the India manufacturing that we have done has been a very carefully curated thought process that we have spelt out even one year back as well that in the retail headquarters of any of our customers, when they look at global sourcing strategy, India is definitely a destination from where they want to increase more sourcing.
In fact, a bit of disruption has happened in Bangladesh has further reinforced. While Bangladesh has stabilized, but from a risk management perspective, customers want to diversify our India as a base as well. So therefore, to demonstrate that PDS very well understands what it takes to manufacture in Bangladesh, I had two factories. What it takes to manufacture in Sri Lanka had one factory and now to demonstrate, every country has its own nuance of labor and managing the local nuances. So is the base. So therefore, we went ahead and carefully done an acquisition with blue-chip customer. And I also mentioned earlier, we’re done with it. So I guess we are very well remaining.
Ted Baker, we have been very positive. Yes, it went into a bump with the retail stores, but we have quickly — it is power of PDS that through our existing B2B relationship businesses, we could get the wholesale business into TED Baker and have stabilize it. And as said, many opportunities are knocking my door to pursue in the brand-management direction, but we are going slow. We want to make sure that the Ted Baker experiment should be fully successful, we’re almost there.
And lastly and very importantly, in fact, in our own investor presentation on Slide 20, we have also verbalized our thought process that on a Y-axis, we have talked about how we would pursue our growth through the carefully created strategy market services. But very importantly, on the X-axis, for everything in terms of cost synergies, people practices, technology, we have said one PDS. I think I need your attention to appreciate the fact that what we have built is about INR13,000 crore to INR14,000 crore top-line company looking very well on-track to INR18,000 crore.
We have built that kind of engagement with the customer. We’ve built that kind of relationship with the customer. The time has come also to start synergizing and reap the benefit of that. That’s why we have taken-up these cost transformation projects. I believe very humbly, we are restricting ourselves to the four segments that we have chosen and we have taken the task now onto ourselves. Yes, meaningful engagement has been done, meaningful size and we built, let us also synergize and augment our profitability.
Pallak Seth
Yeah. MR. Bhat, I just want to add few points what Mr Jain said. I think the reality of the global industry is maybe India is going through a growth phase because of what’s happening in the capital markets, the dilution for retailers is giving a lot of value to retail businesses. In the West, there is a huge consolidation. If there were 1,000 brands that were operating 15 years ago, today that number is maybe 40 or 50 global retailers who are credit-worthy and able to survive. But there are 20,000 suppliers out there who will chase these 50 retailers for business.
So how do you differentiate yourself from just being another supplier, just being another factory in the middle of Asia, will there be another agent or just being another design-led company, the way PDS has structured itself, based on the professionals of management, the college of people we have got and ability to provide them the services, understand their pain points and making us become closer to them. So they are saying, we have to deal with 100 other people or 200 other companies. If PDS has got the right caliber management, right capital structure, right governance standards, right global infrastructure, then PDS on a transplant basis is willing to work with us, then we do more with PDS.
So the unfair advantage we have over those 20,000 SMEs in our industry is what these big 50 retailers will become bigger and bigger because the industry is not shrinking. The industry is not shrinking, the clothing industry grow, we’re still 1% or 2% plus-minus every year. India maybe having 10%, 15% growth the rest 1% growth is happening. Then keep your hands. So everywhere we meaningfully engage, we are able to then get traction and do the business.
So the investment we have done to move from a product company to services business by offering these four services, Mr has mentioned is bringing us closer to our customers and forecasting the larger opportunities and the business stickiness. They can’t replace us. They can replace the factory, they can replace a manufacturing group, but they cannot replace PDAs that easily today from their network and their service providers. So hope that answers your question please.
Bharat Shah
And when we when we talk about brand clutter, which happened in Europe and America over-time and now it is disintegrating and consolidating, when these brands are acquired by PE firms and they come to us, how exactly we are in a position to help them. I mean if the PE firms are owning the brands, how do we ensure that these brands actually reach retail stores because somebody therein needs to be helping in the brand and all that. So how exactly this happens at your end?
Pallak Seth
So the good thing, many of these PE firms are actually not retail specialist operators. They don’t understand sourcing, they don’t understand design, they don’t understand digital. So we rely on experts in the industry to provide them the services. So as I said, very few companies have a global reach, global presence to be able to offer them that service on their doorship around the world. So they come to us, they lean on our expertise as a group, they lean on the quality of people we have hired in our company to be able to provide them those services. For one, they cannot hire those people.
The reason PBS is able to hire the best R&D is because we provide equity on the subsidiary we create. So everyone in our industry today, be it a sourcing director or a buying director of a retailer or a manufacturing person says we rather join PDS because there’s no bureaucracy, no projects, no power center with equal offering, there is mutual respect. Our culture is good. We have this ability to bring people, give them ownership of businesses. So from being employed, they become owners of companies with us to become that platform.
So the EE firms realize they cannot hire the people that PDS can hire because of the way we are structured, our culture and our incentive structure. Plus also the deep expertise we have where we can share knowledge across 50 other customers we are working, the PD trying to be more-and-more closer to us. The amount of engagement we get now is much more than be a retail summit or global retail, any global retail summit they want to represent and talk about our business model today.
Bharat Shah
So essentially, these PE firms consolidate many brands under their house, put some skeletal staff which will exactly in reaching those brands to the stores and you do the rest.
Pallak Seth
So yeah, we do the rest. So IP company acquires a brand, then they find global partners who run the brand. So typically for UK, Europe business, they come to PDS. They are coming to us increasingly for India opportunities that you want to take-in India, the brand you can do as well. And then they go to someone else in the US, someone else in China. So there may be 10 global partners they try to work with for running the brand and paying them a royalty.
Bharat Shah
Also on the business model, yeah, we have built our business by partnering with many local entrepreneurs in different geographies in different arenas, be it manufacturing or brands or whatever the idea being it keeps. It keeps organization high on entrepreneurial talent and the individual entrepreneur solves the issues and problems and brings the value on the table. Now that we are moving towards system-level, technology level, sourcing label, consolidation, do you think there is some stress at margin in running more kind of a model that we ran to little bit more centralized model now we are sitting to run.
And we were in the process of centralizing albeit not everything, but some of the core operations, but still when we seek to do it across many different partners in different geographies, it has potential to produce its own stress. Do you think this is more a positive energy or we still are kind of trying to work-through the situation.
Pallak Seth
The good thing is our model is proven has been going on for 25 years. It’s not that was came up in the last one or two years. So it’s a proven model. Other good things, global talent in the industry is every customer of today comes and tells us, if opportunity comes, you will be honored to come join me and set-up a business, right? So they respect these global directors of sourcing or brand or buying directors, there are customers today. They come and say we want to become part of the Group because we’ve seen our colleagues who have joined you who have succeeded in the right culture and right incentive framework. So that is a huge positive and respect the global industry has for PDS today based on the culture and the recent structure we have created. So that is on one-side, the positive. The ability to attract the talent, ability to let the talent get on with the job without power centers. That’s the beauty of our model.
On the consolidation side, what PDS wants to control centrally is risk and cash, right? There are the two things that are the most important. We manage treasury central, we run risk management central, credits management, we run compliance centrally, finance, IT, legal, HR. So all the common functions which are back-office or company running function that runs centrally, which is running and running along with them for growth initiatives. And then the entrepreneurs who are running the businesses, they focus on the client needs, they focus on-sales, order execution.
So we consolidate areas that are not required to be consolidated, but we let our business partners do the areas where they can get on with the job without having too much bureaucracy or projects or power just created within large organizations right? So we created a procurement cell now which is every entrepreneur within PDS can leverage for doing synergies and procurement that is reaching big scale, it’s growing quite fast. You create a centric design cell that some of the newer company, they don’t have to invest in their own design, they can use that design sell. But when they reach a scale, they can do their own design.
So we are trying to consolidate areas that are having a sense to consolidate that can bring cost-saving. And the biggest benefit our entrepreneurs see in our model is sharing of knowledge and best practices. So every two months, the top 15 20 business has come together, sit in a room for two or three days, share best practices and ideas, share new business models, share the learnings and they take that back and implement in their businesses.
G used to do that very effectively. They used to bring all the cop CEOs around the world and share ideas at one-time. So we are trying to do the same and that is the biggest value some of these people see from being part of the platform. They don’t have to run — worry about cash-flow, they don’t have to worry about risk management, they don’t have to worry about all the back-end function. They have the leverage of scale of PDS to procurement plus they have the best share practice idea sharing between each other.
Bharat Shah
Sure. Thank you. One last bit hospite the way trend in India is succeeded in apparel retailing and fashion retailing it it is kind of shown that brands are be it overrated, the loyalty of the customers to the brands is somewhat more frequental and less enduring than it used to be in the past. And the younger people really don’t have the same notions of loyalty to a brand perhaps people at different age brackets older people may think. And it has shown that how the store itself can become a strong brand by running the business model effectively and ensuring that refreshed portfolio of fast-moving products are provided to the customers where the store becomes a brand and becomes a source of energy of consumption and growth. In that context, disintegration of the brands in Europe and America is not very surprising. And given the fact that many of them may just have been idiosyncratic names and somehow acquired brand status at a point of time, but are not able to leave up to the underlying quality and other connotations, which are brand symbolizes. So what are your thoughts in that in running your more complex global operation?
Pallak Seth
I mean, our customers are the kind of stores you’re talking about, right? Zara is not a brand, it’s a store which is vertical. H&M is not a brand store, which is vertical, right? JC. So I mean, all our customers, Tesco,, Primark, they’re all verticals and they have their own sub-brands. So with our design that sourcing, they still have a DNA. If you go into a studio, they’ve got 10 brands within their own, which is their own created brand, men’s, women, dairies, kids and some of those brands have their own DNA, own handwriting. So the person who will buy 16 to 20-year-old person will not want to buy the same brand as a 50 to 60-year-old brand buy, right? So within Gara or H&M, they have sub-brands, so period design teams designed into those sub-brands.
And you’re right, today, the young customers have no loyalty towards any platform, any retail, any website. They want the best quality design and product. So as long as the product is good, price is right, the trend is right, they will buy the government, right? So that is how PDS with this 300 designers globally are constantly looking where the new trend is coming and offering that to our customers. That’s how the customers keep coming to us and buying more things. So yeah, so I think the whole — unless you’re a very well-known brand like Tommy or Calvin people see value, otherwise, lot of the small, medium-sized brands don’t really have a — I mean they have a customer, but yeah, the loyalties can be questioned for sure.
Operator
Thank you very much. We’ll have to take that as the last question. I would now like to hand the conference back to the management team for closing comments.
Sanjay Jain
Thank you so much, everyone, for taking the time-out to join our conference call. We shall be in touch with you and look-forward to interaction with you at the end-of-quarter four earnings and extending our warm wishes to everyone. Please stay safe and take care. Thank you so much and thank you, EY team for your assistance in organizing today. Thank you.
Operator
Thank you very much. On behalf of PDS Limited, that concludes the conference. Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines.