PDS Limited (NSE: PDSL) Q3 2026 Earnings Call dated Feb. 11, 2026
Corporate Participants:
Shirley Rodrigues — Corporate Finance & Investor Relations
Sanjay Jain — Group Chief Executive Officer
Rahul Ahuja — Chief Financial Officer
Pallak Seth — Executive Vice Chairman
Analysts:
Rudraksh Raheja — Analyst
Kiran Gadge — Analyst
Madhur Rathi — Analyst
Samvit Patel — Analyst
Prakash Diwan — Analyst
Rohit Balakrishnan — Analyst
Kushal Goenka — Analyst
Presentation:
operator
Ladies and gentlemen, good day and welcome to the PDS Limited Q3FY26 earnings conference call. 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 this conference call, please signal an operator by pressing Star then zero on your Touchstone phone. Please note that this conference is being recorded. I would now like to hand the conference over to Ms. Shirley Rodriguez from PDS Ltd. For the opening remarks. Thank you. And over to you, Ma’. Am.
Shirley Rodrigues — Corporate Finance & Investor Relations
A warm welcome to all participants to PDS Limited’s Q3 and 9 months FY26 earnings call. Our presentation and financial results are available on the company’s website and stock exchanges. Please note that anything said on this call which reflects our outlook for the future or which may be construed as forward looking statements must be viewed in conjunction with the risks that the company faces. The conference call is being recorded and the transcript along with the audio will be available on the company website and stock exchanges. Today we have with us the management which includes Mr. Palak Seth, Executive Vice Chairman, Mr.
Sanjay Jain Group CEO and Mr. Rahul Amuja Group CFO. I now hand over the call to Mr. Sanjay Jain to make the opening remarks.
Sanjay Jain — Group Chief Executive Officer
Thank you Shelley. Hi. Hi everyone. Good morning, good afternoon and evening. Across the time zones this quarter reflects a disciplined execution in a market that is continuing to be extremely volatile. But I would also say at the same time structurally constructive for a scaled platform player like pds. The global apparel environment is continuing to be very very restrained and measured. Consumer demand across US and Europe is still value led. In fact in value led as well. Customers are restraining spending for now. Beyond that the discretionary spending is very selective and and at retailers end they continue to operate with shorter order visibility and tight inventory control.
In addition to that, the trade dynamics and the tariff related uncertainties particularly around US policy direction and sourcing shifts are also influencing behavior of the buyer. The order placements for now are calibrated and retailers and brands are also focused increasingly on risk mitigation, speed and compliance. However, beneath this near term caution, the structural shifts are clearly underway and some of them to point out are the vendor consolidation within the given retailer is accelerating. Global brands are reducing supplier basis and partnering with scaled and compliant platforms. This actually enable a retailer to keep their cost structure well under control.
In fact before this even a given market for example UK is almost 43% of where we sell. There is a consolidation happening amongst our retailers as well wherein the existing large players are becoming more large and as a result PDS on one hand is getting an opportunity to have a larger wallet to aim for a larger share. But within a given retailer there are these cost pressures leading to vendor consolidation. The sourcing diversification, that’s the second point is continuing the concentration risk in a given geography are now being actively measured and are trying to be managed by the retailer.
The trade agreements are reshaping competitiveness of a given geography. The India EU trade deal and the UK FTA are strengthening our steps in the right direction and from any India led exports are steps in the right direction and therefore should strengthen the medium term growth visibility. What is important here to add is that while I covered about the challenges and that has led to our nine months growth at about 6% and the quarter three growth at about 1.5% but if for argument’s sake we exclude two impacted vendors like Gary Weber and Matalin, then the growth that PDS on the whole has achieved in the nine months is actually 11.2.
Despite the global challenges that have been existing continuing, the recent tariff developments are structurally very favorable to our platform. The US reciprocal tariff framework has resulted in India’s effective tariff exposure reducing from a peak level of 50 to 18%, materially improving India’s competitiveness in the US market. At the same time, Bangladesh has subsequently benefited now from a recently announced zero reciprocal tariff position, further strengthening its relative advantage in global apparel sourcing. Your company PDS has established and scaled presence in both India and Bangladesh. Therefore we are very well structured, structurally positioned to capture the incremental sourcing flows that are going to come to these geographies arising from the tariff realignments.
Our diversified manufacturing and sourcing footprint enable us to respond dynamically to customer reallocation decisions and we expect these developments to progressively support our order visibility and growth momentum over the medium term, while in the near term we continue to be cautious, but we believe all these changes are augering well for a good recovery and good medium term visibility in one or two quarters from here onwards. In Bangladesh notwithstanding, whatever we all are hearing or reading on ground, reality is that the production in our own two factories and also in our partner factories and beyond production, the movement of goods continue to be almost smooth and on track and therefore on ground we are keeping a close watch, but we are not experiencing any kind of adverse impact to supply chain that is smoothly functioning at present.
Our approach remains calibrated wherein we aim at diversification but without dilution of a given geography from where we source. And of course we need to be completely ready as we all would aim for a recovery to happen in about one or two quarters. Our acquisition and integration of NetGallery has been on track and has meaningfully strengthened India manufacturing presence. The factory is looking to be in a good shape. We have strengthened the founder Vijay with good able management team. There are existing customers focused on UK and EU markets. The factory is also partly catering to us as a customer.
And at present, given the developments that are unfolding on the tariff front, this factory is actually aiming at almost about 40 to 50% growth in terms of its internal planning for next year. And and this kind of growth should be able to come in from the internal operating efficiencies that are embedded into the current Factory locations on NetGallery. And besides this, we have also invested into our sourcing teams who are now in touch with our existing customers and trying to help them in their effort to source more from India. So our own factory as a showcase, our own factory as a standalone viable factory, plus our sourcing teams on ground, similar to what we have been doing in Bangladesh, China and Sri Lanka.
In Turkey we also have strengthened on ground teams and therefore are well placed to make the most of it. Our manufacturing business, if I shift to this segment, has transitioned from a standalone asset to an integrated, strategically aligned model. We started this business sometime around 2017. The path to profitability has been longer. You know, it takes about two years, three years for getting into a PBT breakeven. Then we were hit by Covid. But now after all these efforts, the business is profitable making closer to 3 and a half to 4% margin and we believe there is potential to scale up to next level.
And it is with this context that we strengthen the leadership with Abhishek Namani as CEO of manufacturing business who will be supported by our CFO Mansi Agarwal for the manufacturing business. Both of them are internal innovations and Abhishek Navani had earlier work with leading retailer Gap and also worked with one of the leading manufacturing companies in Indonesia called Busana. So he brings a mixed experience of both manufacturing and working with retail. And Mansi has been in the system for two years and prior to that he was with ey. We believe this team should be able to bring results in terms of three priorities.
Deeper customer program alignment. We need to move up the value chain, you know, to have fewer customers but more value added customer in terms of earning per minute. We believe there is potential now to do cost synergies. These three factories have been pretty much running independent PL units without disturbing the operational independence. There is a room to synergize and also as a third and important that as we aim for growth, try and extract as much operational use as possible from the existing factories. We believe this evolution enhances long term partnership relevance off of a factory with customers rather than a transactional interface to try and fill factories more fewer customers were more important Strategic Relationship throughout the year our focus at TDS has been consistent around enhancing profitability.
We are beginning to see impact in gross margins, therefore beginning to see impact in EBITDA margin. We have been immensely focused during these turbulent times on cash generation trying to bring a working capital from 17 days to down to 7 days and have a strong operating cash flow position and while we are keeping a watch on the global ecosystem. But we are not refraining from selectively investing into digital AI and cost transformation. We believe PDS with this customer connect have got a lot of meaningful role to play in terms of its investment in AI related to designs, related to emerging trends designs and further into the supply chain.
We have a very selective program which is being taken ahead. We are transiting from cost stabilization to structural efficiency improvement. Our enterprise wide cost transformation and digital backbone initiatives, some of them that I just touched upon are as I said are already beginning to add into margin expansion and therefore as the recovery happens in a quarter or two, we believe we should start seeing a meaningful benefit of stronger operating leverage. We have experienced close to 40% decline in the first half. We are bringing it down to about 14 15% in quarter three and we believe we are now heading towards a quarter wherein we should arrest any decline and thereafter look at profitability augmentation.
Lastly, as you have seen in our communication, Mr. Rahul Lahauja who has been a Group CFO for over three years is now transiting into the role of a strategic advisor. Rahul has immensely added value to PDS profitability and processes systems and therefore we want to continue benefit from his strategic inputs and at the same time as part of an internal transition management and successfully executing that. Mr. Sadiq Sunasara who has been last two years as head of Banking and Treasury operation based in Hong Kong was earlier Special Projects and M and A would now be relocating to Mumbai from Hong Kong and is being elevated to a group CFO role.
We believe this change of strategic input from Rahul and Sadiq as a group CFO should further strengthen our credit risk framework, our liquidity management our working capital efficiencies and our successfully managing counterparty exposure and therefore enabling PDS to pop profitably grow at the same time ably manage his balance sheet. With this I now hand over to Rahul to make you walk through the financial performance in more details. Thank you Raul
Rahul Ahuja — Chief Financial Officer
Thank you Sanjay. Good evening everyone. Let me take you through the key business and financial highlights for the quarter and the nine month period. For the nine month period GMV reached 14760 crores reflecting a 7% year on year growth and revenue grew 6% to 9591 crores. Top line growth was largely impacted by Matalan and Gary Weber business excluding which the growth as Sanjay mentioned is around 11.2% demonstrating steady throughput across our platform. Our plans for curtailing our losses in new verticals is on track and are expected to achieve our target. Our manufacturing segment is showing strong growth momentum supported by the integration of Knit Gallery and operational improvements across our manufacturing platform.
On the profitability front we continue to see gradual improvement driven by procurement efficiencies, operating discipline and better mix. Gross margin expanded 236 basis points year over year in Q3 and 45 basis points in the nine month period. This is driven by procurement efficiencies mix and cost discipline. This translated Into EBITDA for Q3 increasing 11% year over year with margin expansion of 28 basis point PAT for the quarter stood at 37 crores which was a decline of 18% year over year. From a cost perspective, employee expenses increased by 9% year over year in Q3 FY26 which include impact of Knit Gallery acquisition.
Other expenses increased by 21% year over year in Q3 primarily due to Knit Gallery and increase in license fees from our brand business across our verticals. Like Ted Baker and Poetic Gem, finance costs were higher year on year due to factoring and net calories related borrowing. However, on a sequential basis interest cost has reduced by about 15% reflecting improving working capital efficiency. Our balance sheet continues to strengthen. Net debt reduced sharply to around 70 crores as of December from 374 crores in March 25. Despite the addition of debt of 98 crores from mid gallery acquisition, net working capital remains tightly managed at around 7 days supporting strong operating cash flow generation of 644 crores for the 9 month period.
Leverage ratios of the company remain comfortable with net debt to EBITDA at around 0.2 and normalized return on capital employed at approximately 28% reflecting improving capital efficiency. Overall, our financial performance reflects disciplined execution, steady growth, improving margins, strong cash flow generation and significantly deleveraged balance sheet. We remain focused on enhancing profitability, maintaining tight working capital control and ensuring prudent capital allocation as we move forward. With that, we can now open the floor to questions. Thank you.
Questions and Answers:
operator
Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one 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 a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Our first question comes from the line of Rudraksh Raheja from I thought financial consulting. Please go ahead.
Rudraksh Raheja
Yeah, thank you for the opportunity. Sir, my question, first question is regarding the gross margins. This is the highest quarterly number that we have seen in like ever. So could you help us understand how did we get here? What are the levers that did we pull and how sustainable is this going forward?
Rahul Ahuja
So, you know, you’re right. Our gross margins are one of the highest in the recent many quarters. And like Sanjay mentioned, you know, the, you know, one of the few reasons for this increase of this levels are that, you know, given the disruption in the market, you know, every disruption presents an opportunity. About three to four of our top verticals, you know, had better gross margins largely because the factories across the world are, you know, facing the challenge of the headwinds in the industry, which meant that they are not operating at any rate close to the desired capacity, which is an opportunity for a player like PDS which has marquee customers and a robust order book.
And it helps us negotiate better with our factories when we give them business in such times. So this was one of the main reasons why we posted better gross margins. Also in the current quarter there is the results of Knit Gallery as well. Knit Gallery as you know, is a manufacturing operation where the gross margins are much higher than our traditional sourcing. So these two reasons put together largely constitute expansion in our gross margin.
Sanjay Jain
Plus We’ve been last 912 months working on structurally augmenting our procurement processes. I think they’re beginning to show results. So combination of 1, 2, 3 things is what has resulted into this high margin. I think you also asked in terms of the sustainability of it. I think what is quarter by quarter may not be the best indicator. But what is important is that in a nine months period we have a 45 basis point improvement in gross margin. I think that is what we would aim to target that can be year over year through efficiencies, through better mix of our offerings to customers, you know, we can actually aim at half 50 basis points.
So to that, to answer your point, that’s something more sustainable in terms of year over year improvement.
Rudraksh Raheja
Understood, sir, that helps answer on the operational cost front, what I mean by that is employee cost and other expenses. We were expecting that H2 would witness some impact of the cost saving measure that we have talked about in last six to nine months. But sequentially, if I see employee costs have risen considerably and OPEX while it has been flat. But since the revenue quarter on quarter has decreased, the impact of that seems a bit high on our P and L. So could you help us understand why this has taken place?
Rahul Ahuja
So if you talk about sequentially, yes, our employee costs have gone up, but there are two or three very clear reasons for these. One is, as I had earlier mentioned, Niche Gallery does not appear. Sorry, I was talking year over year. So as far as sequentially is concerned, it’s largely on account of the variable payout that has happened in Q3. Largely this is more of a timing thing than anything else which has been I guess the biggest contributor as far as the sequential movement is concerned. Also there are some ESOP expenses which adequate disclosures have been made which have hit us in the Q3.
So these two put together account for almost 90% of the increase that you see in our employee cost sequentially.
Rudraksh Raheja
But we want to add that what we have mentioned in previous calls about initiatives being taken, I think they have been implemented. It takes on an average three to six months notice period. You know, some of these employees are in jurisdiction like UK etc. Wherein there are severance related aspects at stupid. But whatever we had planned at the platform level has all been acted upon. The design ARC vertical which was handling Matlin as a client, we are merging that vertical with Portic GEM and that merger is underway. It’s an internal merger, operational merger internally that would lead to, you know, kind of optimization of manpower.
Some of our large verticals have assessed a reallocation of resources between high cost location in the front end versus more skilled and low cost in eastern part of the world. To summarize what we have mentioned, initiatives are under implementation. You should clearly, barring the one or two fluctuations of ESOP or bonus payouts in quarter four and thereafter, you should clearly see the benefit of this coming in.
Rudraksh Raheja
Got it, sir. Just to double check, these numbers does reflect the savings measure that we were planning for H2. I think that was around 25 crores that we were expecting. Does that saving is being reflected in these numbers as of now or is it still to come?
Sanjay Jain
Sid, as I said, savings is the net number that we were expecting for full year post the severance or redundancy cost, etc. So therefore the full benefit of savings is not yet captured here. The benefit would be more visible in coming quarter. We can offline also try and our teams can help you break up that. Out of 25, how much has got captured in quarter three? And how much would you see in Q4 and Q1 next year? We’d be very happy to provide that clarity.
Rudraksh Raheja
Sure, sure. We can take it back offline. The next question is about the PNL investment. I’m sorry to interrupt.
operator
I would request you to rejoin the queue. Thank you. The next question comes from the line of Kiran Gade from Nightstone Capital Management llp. Please go ahead.
Kiran Gadge
Hi, good evening. What percent of total sourcing is from Bangladesh and are we trying to dilute it?
Sanjay Jain
Sorry, could you repeat the question again?
Kiran Gadge
What percentage of our total sourcing is from Bangladesh and are we trying to dilute it?
Sanjay Jain
It’s closer to 55 to 60% of the overall sourcing that comes from Bangladesh. No, we are not trying to dilute. As I said in my opening remarks, we’re adding more jurisdictions to serve our customers, but not at the expense of dilution. I think as I said, Bangladesh to us appears to be very stable. And India we are adding more in terms of our capability to serve customers. Egypt we are adding more. Turkey, we have seen more flow of business but nothing is at the expense of business moving away from Bangladesh at all.
Kiran Gadge
Okay. And secondly, if you could provide revenue split geographically for this quarter.
Sanjay Jain
Sure. I think there was an inadvertent error that the slide got missed out. Subsequently we did, our team did a corrigendum and added that slide. And I will just request Raul to read through the numbers. They are very much now part of the investor deck disclosure that has been made. Maybe I’ll only tell you it is handy. We had 43% of our revenue came in from UK in terms of the nine months this year as compared to 37% last year. There’s a 24% growth in absolute terms and the share going up from 37 to 43.
Europe it came down from 38 to 31 in terms of share, a 12% decline. Gary Weber is one case that is there. But in general we believe EU has been far more hit by the subdued customer sentiment. Germany has been a key market for us. So that also got impacted. So that’s why the sales in EU have a 12% decline. Sales to America are at about 20% of the overall revenue. This was 18% last year. Nine months. There’s a growth of about 20% in Americas and Asia and Middle east are at about 7% in line with what they were last year.
Kiran Gadge
Okay, thank you.
operator
Thank you. Participants, please restrict yourselves to two questions. If you have any more questions, kindly rejoin the queue. The next question comes from the line of Madhur Rati from Countercycle Investments. Please go ahead.
Madhur Rathi
Thank you for the opportunity. Sir, I wanted to understand regarding this. Growth slowdown because when I understand that. Sir, we as a platform business we. Constantly keep on adding new customers and. This growth slowdown shouldn’t affect us in an industry which is much huge than our current gmv. So I’m just trying to understand where. Are we lacking, Are we lacking on. The customization front or increasing our wallet. Share with the existing customers? Because on one end you say that. There is a vendor consolidation happening. So if you could just help us understand.
Sanjay Jain
Yeah, I think what we all are witnessing last nine months of this year, especially the last three, four months is absolutely unprecedented. You know, the geopolitical disturbances, customer sentiment were already there. Then on top of that came the tariff situation. So as I said in the opening remarks, the customer has also become extremely cautious. So these are some overall factors. But coming specific to us, we mentioned that yes, we are absolutely doing new initiatives. And out of the 9,000 crore Sarca turnover in the first nine months, the business from new vertical is close to 700 crores and it is almost a 45% growth over the same period last year.
The manufacturing business is 35% growth over the same period last year. So where did it got impacted? It actually got impacted in our largest mature verticals because of two reasons. One, Gary Weber and Maitland situation. But even in very established, mature, credit worthy, financially stable customers, there has been a request towards the end of last quarter to hold sales and shipment for some time. The customers as we said are being cautious and not wanting to be in a situation wherein they are sitting on inventory. You know that otherwise they don’t want to hold their risk appetite.
With respect to this is also kind of. They can be in a situation of inventory out but don’t want to hold it. The orders are well intact. The orders are well intact. It is just this request for deferment. In fact in our top 10 large verticals, if I have to broadly recall approximately $15 million that’s almost like 140, 150 crore of sales that got pushed out. Had those sales happened in this quarter one would have seen the impact of that through gross margin flowing to bottom line. So therefore we believe everything is in place, the environment is leading to what it is.
And Mr. Palak Seth is also on the call and I’ll also request him to share his inputs especially on the customer addition point that you mentioned.
Pallak Seth
Hi Tanjir. Hi everyone. I think you know with the US tariffs what we’ve been speaking to the customers, there has been a 5 to 10% price increase in the market which has led to some reduction in quantity and demand. You know what they are buying. So because of tariff increase definitely price, retail price have gone up and it’s causing reduction in demand in number of units being sold in the US market. Saying that PDS has added a lot of new customers in the last six months. Some of them in our new verticals and some in existing verticals.
So customers like Walmart, Target, pvs, TJ Maxx, some of the largest retailers in the US have now onboarded TDS as a vendor. Today to get a vendor account from these established players is almost next to impossible. So saying that if the vendor account is open it’s a cycle because first six months use two product development, you get your factories onboarded and then the orders are flowing in two year cycle. By the time the volumes are reaching substantial scale some of the new additional customers we have done and on the existing customers, you know where we are seeing already consolidation happening in the vendor base there we are continuing to, you know, gain more market share from their side.
The only risk we face in the system, not only us but every company in our industry faces the credit worthiness of the customers, certain customers. So Gary Weber, if you look at unfortunately the retailer went bankrupt, you know we didn’t have any direct hit on our margin because end of the day you know we were secured on our payments. But obviously the gross margin that was there linked to that business doesn’t continue into the future. So that issue happened. And also similarly maclen, you know they’re going through restructuring that at one time was one of our largest customers.
Today they are almost meaningless to our system right after us de risking them with some of the other companies we have grown within the UK and like Mr. Sanjay mentioned also we merged design arc with cohesion that is also helping us to mitigate some of the costs we were carrying in the design arc vertical to manage the Maclean account. So it’s a cycle, you Know, existing customer consolidating where we gain market share. A lot of new accounts we have opened, which is great. But if the customers, some of the customers are going bankrupt in this environment due to tariffs or due to macroeconomic challenges, as long as PDA doesn’t have a credit hit or a direct hit on financials, but we have to replace that turnover which we are doing within this financial year.
We feel very confident about the used pipeline of customers that have been onboard in the last 12 months and the potential of growth we are seeing them in the next couple of years. So that answers your question.
Madhur Rathi
Yes, sir. And just a sub question would be sir, on our sourcing as a service. Business segment, how are we seeing it. Scaling up with this tariffs and differential. Tariffs with differential countries. So maybe home textiles from India could. Be supply themselves potential?
Pallak Seth
Yeah, 75% of our business apparel, 25% other categories, three, four years ago, other categories, almost zero. So you know, we are very fortunately have added, you know, based on certain kind of customer like ASDA giving their home business and few others, we’ve now benchmarked and we’ve basically positioned PDS as a sourcing company not only for apparel, for other categories as well. So there are three or four very large contracts for which we have put in the pitch decks. And the good news is that there are only two or three companies globally now which detailers can go to whenever these sourcing and service opportunities come up.
So it’s PDS again, Lian Fung against, you know, maybe New Times, Autos, Gucci, other companies. But the final two players left in the industry is PDS and Lian Fung. And lian Fung is 125-year-old company. PDS is a 25 year old company. So there’s a huge gap between where they are positioned, where we are positioned. But today our scale and size is almost similar. They’ve had a huge contraction based on their business model last few years. So PDS and Leon firms scale and size is almost similar. And there are two players left pitching for the sourcing and service deals.
When these opportunities come up, the only thing we have to strengthen is, you know, having the ecosystem and network between the consultants, you know, like the likes of BCG, Bain, McKinsey, they are the one who bring in these opportunities. And all of them know Lianfeng quite well. That’s where PDS has to do a bit more lobbying in the future that, you know, with all the global restructuring and consulting firms, when they work with the retailers to bring in sourcing efficiency Opportunities. PDS has also pitched against Lian Feng in those. So wherever we are pitching against Lian Feng, 9, I would say 7 out of 10, we are winning.
Right. Which is great, you know, for a newcomer to disrupt a global industry player. But if you’re not known and heard in the industry by certain players, then obviously Lian Fund has a clean run. We are trying to now address that also going forward that more and more we are pitched on these opportunities. But a very large contract in France, we are working on one last contract in the US and one in the uk. So EC between them have, you know, almost a billion dollar potential that we put in a bid for running sourcing. So no working capital employed.
Day one profitability, customer paying the cost, you know, and our margins are secured by the cost plus model we’ve implemented. Covid disrupted industry. You know, PDS came with cost plus before that was a six agency. So obviously existing sourcing agents don’t like it because you know, they used to be able to charge a fixed margin and be opaque about it. But PDS being radically transparent in our business model, you know, the customers really like that and the existing incumbent competitors can’t really compete because they already have a very high cost base when they are working on the sourcing and service model.
Whereas we are going from a low base cost plus model. So once they are done, we make some announcement. But we need one or two months more, you know, to finalize. The discussion started pre Christmas.
Madhur Rathi
Thank you.
Pallak Seth
Yeah.
operator
The next question comes from the line of Samvit Patel from DT Partners. Please go ahead.
Samvit Patel
Yeah, hi. Am I audible?
operator
Yes, you are.
Sanjay Jain
Yeah.
Pallak Seth
Yes.
Samvit Patel
Thanks for my question. I just have one, you know, going on the same line within our top 10 customers, I think Galley Web and Matlam over there. How much longer do you think do we have to suffer because of these two accounts? Because as you mentioned this quarter also we had a bump.
Pallak Seth
I would say, you know, like there are two things, right? One, this Gary Weber went out of business. We didn’t have any hit on our payments. So we got 100% payments through our risk management framework. We got 100% payment from those customers. The only thing that we have to now replace the gross margin against the revenue we were doing with these customers. So within 12 months the company Techno, which was handling this customer has been largely able to replace that through some cost cutting because the margin some has gone to cost cutting and other through revenue growth and focus on other client relationships.
So I would say probably techno with Gary Weber by next financial year they’ll be recouping at least 60, 70% of the profit they have lost from this customer within 26, 27 financial year. And as far as Maclean is concerned, you know, we have taken the decision to merge two of our large businesses, Design Art with Poetic Gem. They were both possible businesses in their own right, but with maclan situation being there, you know, we decided to merge them. So there’s a lot of cost saving between the merger as well and then will onboard another 50, 60 million Maxian account onto their books.
So as two merge entities, with the Matlan turnover flowing into one entity instead of being handled by exclusive entity, hopefully we’ll be able to get back to the profit we required as well. So combination of cost cutting and combination of replacing that turnover with focus on new client relationships.
Samvit Patel
Understood, Understood. And just one more thing. Within our top 10 customers, we used to disclose the growth in terms of how much we’ve expanded our wallet share. Any sense on that in these coming quarters? As you said, consolidation.
Sanjay Jain
Yeah. So firstly, we disclosed everything. Yeah. So Palak, we have practice of sharing it every six months in H2, H1. We did so by March. We will do that as well. But we can answer it right now in terms of broadly and very happy to take it offline with specific numbers. But I mentioned that if I take Gary Weber and Metal in account, there is, as Raoul said, 11.2% growth in the first nine months of this year. And that’s largely a growth being visible across the key clients of Primark, Tesco next Sainsbury in terms of accounts for one, was hoping to have much more growth.
But while we were benefiting from the vendor consolidation, they initiated the benefit coming away. But dampened demand towards the end of December led to some partial, as I said, deferment of sales. So on the whole we have done well in all key accounts, grown up our share of wallet and I think that should continue. In fact, Primark, which is our single largest customer, you know, this is a recent discussion that we were internally having our vertical, simple, simple approach, which is largely focused on serving them, you know, continues to be conservative, continues to be cautious when it comes to managing working capital and OPEC’s, but clearly seeing a visibility of growth between 10 to 15% with this customer next year.
And they feel that the customer is doing a consolidation, you know, and that’s on one hand, you know, that he should get a larger share. He’s an important one of the top three strategic vendors. Secondly, Primark is also focused on sourcing more from India and We have positioned our factory and our sourcing teams very well. So this is one case in example that as the current uncertainties go behind us, a 10 to 15% growth in the number one account of the company is what we are aiming at next year.
operator
Thank you. The next question comes from the line of Prakash Diwan from Matterhorn Investment Advisors. Please go ahead.
Prakash Diwan
Thank you. Thank you for the opportunity and congratulations to the team for doggedly getting to manage growth even in this tough environment. My question is two parts. The first one is related to manufacturing and more specifically on the we have invested a significant amount of capital in manufacturing. Now it’s almost 32% and that’s one of the reasons why of course manufacturing we understand is a capital hungry, front ended kind of a function and vertical. But by what time do you feel apart from Bangladesh becoming profitable, would the Net Gallery ventures start showing a lot of traction where the ROCs could start moving up beyond this 6% which currently, I guess because it’s fairly new and recent.
But what’s the timeline that you are seeing for that? Because it’s got 40 million pieces of capacity and in terms of space also it’s combined with Bangladesh. I mean if you look at both the units in Bangladesh, it’s almost as big as that. So it’s a significant asset. And given the eu, uk, FTA that we are all very excited about, where do you see this happening in terms of timeline?
Sanjay Jain
Yeah, thank you for your question. I think on the larger manufacturing segment, yes, it is closer to $90 million of capital employed in this business and there is a P and L debit balance of about 55 or so, which has been the past losses that we funded. And in fact it is a well established practice that as and when the business turns profitable, you know, one could even think of a capital reduction wherein this is just nothing but a P and L debit. But on the residual, you know, $35 million of capital that has gone into Fitch assets of working capital.
We believe we are now in a state wherein we should keep augmenting our profitability and return on this real capital employed in the business. On the specific, that’s why we mentioned in the opening remarks the initiatives taken off strengthening the management team and the focus areas given to them. On your question specific to Net Gallery, we are looking at, you know, current year somewhere around, you know, 250 crore plus of sales from Net Gallery this year and the profit at this juncture about 4 to 5% of EBITDA margin from this factory. But from the current position given what is happening on the FTA with India, given the factory’s own design strengths, that as post nine months into the acquisition we have observed we are looking at a 50% growth next year in this sector.
We believe that is pretty much and one really does not need to do any, you know, significant capex. You know, there is inherent potential built in. By bringing in PDS established process systems for Bangladesh factories into Knit Gallery we should be able to scale up. So therefore a 40, 50% growth next year and commensurate improvement in the margins of Net Gallery.
Prakash Diwan
Excellent. My follow up question on this Sanjeev was in case the manufacturing things, you know, it started to get profitable in Bangladesh and so Net Gallery will also start contributing significantly. Do you see this to be a foot in the door kind of an initiative to also start sourcing from other factories, which we don’t know from India so much? In terms of sourcing from India, we may not necessarily need to own manufacturing setups. Right. I mean we’ve never had sourcing in a significant way. But does this change, does this UK fta, EU FTA change the environment to make that possible?
Sanjay Jain
Absolutely. That’s the model with which we work our two factories in Bangladesh. On an average the annualized turnover is about $100 million, about 900 crore. But what we source from Bangladesh from partner factories is eight to ten times of that. So that’s our Net Gallery is doing about As I said, 250 and potential to scale up to 300 crore next year. Even in fact 40 to 50% means it actually becomes 375 crore or so next year. Clearly given our track record of how we leverage one or two factories that we invest into and through partnership factories, should we multiply Net Gallery eight to ten times in terms of being able to source from third party factories? The answer is big.
Yes. In fact in the opening remarks I mentioned netgallery on its own plus the investment into our own sourcing teams, the way we did in Bangladesh, in Sri Lanka, in China, in Turkey, we’ve already invested into that. In fact, as part of our disclosure in terms of new business initiatives, we have mentioned the amount that is right now getting debited to pnn. But all this is investment and therefore it may take a 3, 4 years to get to that level of the number dimension. But clearly we feel positive that what we could successfully execute in other geographies, we should be able to do that in India.
And thank you. I have to thank government for the FTA that have got signed it only hastens the process.
operator
Thank you. The next question comes from the line of Rohit from I thought pms. Please go ahead.
Rohit Balakrishnan
Hello.
operator
Yes please.
Rohit Balakrishnan
Am I audible? Yeah. Good afternoon everybody. So just a few questions actually. First of a couple of clarifications. So Knit Gallery, we have only included in this quarter or I thought we had started including from the beginning of this year. So if you can just clarify that. First.
Sanjay Jain
I think it was sometime in mid maybe that we did the closing. So therefore to answer your point, sometime from mid May it is getting consolidated.
Rohit Balakrishnan
Got it. So. So it’s not like this quarter only. We have Gallery has been around for at least two quarters now hopefully. Right.
Sanjay Jain
Yeah.
Rohit Balakrishnan
Okay. So. So in terms of the US business, so I think the direct business that we had there, we were planning to sort of get to a break even this year. So any update on that? That would be useful. So that was the first question.
Sanjay Jain
Yeah. So yes, we are you know, looking at, hopefully fingers crossed, making money first time in a US business in quarter four, the business internally is targeting a million dollar plus of profit. So cumulatively for the entire year we would still be into a loss. But I think this quarter four which is underway, we are I think somewhere middle of the quarter feeling very positive that the business should make money this quarter. Yes. So one or two quarters of lag but clearly this quarter onwards us should make money.
Rohit Balakrishnan
Got it. And so just on the growth bit. So of course like both you and Palak also mentioned that a lot of work has been done in the last couple of years, especially in the US market. And in general our positioning, especially in a time like this would be ideal to get growth. So you mentioned like about $15 million worth of sale got deferred. So one part was that is it like a missed opportunity? I mean the sale will not happen or is it like will get deferred or. Because I’m assuming these are specific to seasons.
Right. So I mean if this goes, if you, if you miss the season, then don’t miss. It’s like a miss sale or is it like a deferred sale? That was one second is, I mean you mentioned that the order book is very good which is sort of going back to that earlier question that I’ve just asked that. So if the order book is good, you can’t sort of hold on to inventory for a very long period of time. Right. And the even for your customers. So just wanted to understand like is it like a, you said a quarter or two.
So does the order book stay that I Think because the orders will then go away and you’ll get newer orders or how is it? If you can just maybe explain that.
Sanjay Jain
Sure. It is not a missed sale, it is not a lost opportunity. It is sales deferred. That’s number one. Yes, you are right. There is an element of seasonality. But at the same time we largely operate in value segment and there is a large part which is core, which is pretty much an assortment which stays in for 12 months. And it is in these kind of assortments that the customers are now trying to feel that, okay, let me not fill up inventories, you know, I can. We said in the opening remarks that customers are taking deciding on orders at a much shorter span.
They are expecting more agility from the vendor ecosystem. So we don’t see that there is going to be any pile up of inventory, you know, because of this deferment that has happened. But having said that, on the order book, what was in the mid of the year a 14, 15% growth in the order book. It actually right now a 6, 7% growth in the order book. So therefore at this juncture the order book 6, 7% is the visibility ahead. But this is on one hand numerically looking at it. But in terms of our engagement with the customer, as we said, they are cautious, we are engaged.
Accounts have been opened up. I gave you Primark as an example. So we will hold on to where we are in terms of 6, 7% order book. But we are positive, as I said, that all goes fine. In terms of our engagement with the customers. There is a 10, 15% clear growth visibility for next year. But whatever has happened to the sector in the last few months continue to keep us cautious. Two days back, everybody felt it is hora India’s way. Yesterday Bangladesh announcement happened. Of course somebody like PDS is well placed to make the most of it.
But things are changing. To summarize, 6, 7% order book growth, but the individual dialogue with customers is looking at a double digit growth for next year.
operator
Thank you. The next question comes from the line of Khushal Goenka from Mangal Keshav Financials llp. Please go ahead.
Kushal Goenka
Hi, thank you so much for being in this opportunity. My first question is. I would love to answer that. So. Hello.
Pallak Seth
Sorry, can you. Yeah, please can you repeat the question?
Kushal Goenka
Yeah, so I think the world has inherently become volatile and random mainly due to the geopolitical issues. However, in such a chaotic world, we had carved out the plan for the 333 and 545 stories category. But slowly we did realize that and gradually we started to drop it out from a presentation for the 3 and then FY5 also. Since the apparel industry is highly cyclical one it should be very unlikely to predict when foreseen. My question is now that is time here today. Is there a plan to make a company more robust and less cyclical in nature or it’s just the nature of the business and with the growth in the apparel industry and with your single digitization order book growth, we cannot see any positive and huge upside in growth.
And the growth would be in tandem with the industry. Yeah, that’s my first question.
Pallak Seth
Yeah, I think, you know internally we are still very much looking at triple three and 55, you know. But it’s just that we want to make sure that we don’t take any decisions because last 12 months there’s been so much changes in volatility especially leg from the US side where Trump carped in the whole world order. We want to make sure that we don’t take any short term hard decision. Again learning from the lessons of Li and Fung, they used to declare the three year plans and they used to go all out to achieve everything no matter what those three year plan.
But after two or three cycles of those three year plans because of the wrong decision they ended up making just to hit the plans, they collapsed as a business. So we want to make sure that pds, we’re building this company for the long term and taking the decisions, keeping everything in mind in terms of geopolitics and customer sentiment. And the good thing is that a lot of investments we had made in the last two, three years through our P and L, many of them have worked out to a large extent, especially the sourcing service we invented that that’s worked out well.
Designer sourcing businesses are doing reasonably well. Some of the brands initiative we took, we are actually taking a decision except barring one or two which we see a turnaround to basically shut them down into next financial year and cut our cost and not carry on any further losses. So we feel very positive based on customer traction, the sound bites we have from our customers about wanting to partner with TDS and the new customer account that we are opening, we have opened the last 12 months. The quality of management team which have joined us in the last 24 months.
I think we are probably the strongest company in the industry positioned in a way that we continue to gain the volatility coming up. And on the other side we are a highly diversified business. We have no customer dependency, we have People dependency, we have no bank dependency, we don’t have any long term debt. So we are in a very financially strong position and we enjoy strong reputation with all stakeholders. So I don’t see any reason not to hit the triple three, triple five, maybe six months, you know, because of what?
operator
Ladies and gentlemen, the line for the management has dropped. Would request you to stay online while I get them reconnected. Thank you. Sa. Sam. Ladies and gentlemen, the management has been reconnected. Please go ahead sir.
Pallak Seth
Yeah, I think we all got disconnected. Yeah. So I think I made the point. If any further clarification required, let us know.
Kushal Goenka
Actually my question is specifically like as we stand here today, so what incremental steps are we taking to make it more robust and less cyclical so that we can in future fight these kind of challenges. And since our order book growth has been I guess in a low single digit. So do we see like, do we see any positive surprises on the upside going forward?
Pallak Seth
As I said, you know we have given a lot of large sourcing and service contracts that under negotiation as we speak in the next like one month, two months, we have the outcome. So customers are contacting us, engaging with us to talk strategically how they plan their own future on sourcing and you know, design. All the positive discussion is happening. Only thing we don’t have control if customers start going bankrupt. But in our kitty of customers, I would say 90% of customers are financially secure and having insurance from all the top insurance providers and are able to refactor those invoices.
The insurance companies pre warn us, well six to six months in advance at least. So we don’t have any of those warnings in existing customer base. So I know big reason for big, you know like Jerry Weber probably was one of the largest ones TBS had ever experienced. You know in terms of volume being grown and then the turnover coming down. But there’s predictability in terms of new opportunities. Converting some of the new verticals we had set up last two years now becoming more mature and starting to give positive results in the next financial year.
And existing customers, you know, still engaging with us in a very, very strategic manner so that we can predict at this stage. And 333, 555 is still on the horizon. Right. It’s more timing issue in terms of how suddenly there was so much disruption someday India has tariff, other day, you know, Bangladesh got tariffs, you know, there’s a lot of volatility there. But in spite of that many new supplier customers being able to open like Walmart, Target TVH TJ Maxx. Some of the largest American retailers have opened a PBS supplier account, which is great.
operator
Thank you. Ladies and gentlemen, in the interest of time, we would take that as the last question. I would now like to hand the conference over to the management for their closing remarks.
Sanjay Jain
Thank you so much everyone for taking the time out to participate in our con call. The management team members are available to meet you and offer any further clarification that you may need with respect to our results. Thank you everyone and have a good day ahead. Good evening. Ahead. Thank you.
operator
Thank you, sir. Ladies and gentlemen, on behalf of PDS Limited, that concludes this conference call. Thank you for joining us. And you may now disconnect your lines.