PDS Limited (NSE: PDSL) Q4 2025 Earnings Call dated May. 16, 2025
Corporate Participants:
Reenah Joseph — Deputy CFO
Sanjay Jain — Group CEO
Rahul Ahuja — CFO
Pallak Seth — Executive Non Independent Vice-Chairman
Analysts:
Rishi Mody — Analyst
Shrinjana Mittal — Analyst
Pritesh Chheda — Analyst
Dhwanil Desai — Analyst
Rudraksh Raheja — Analyst
Ankit Gupta — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to PDS Limited Q4 and FY ’25 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 now hand the conference over to Ms Serena Joseph, Deputy Group CFO. Thank you, and over to you, ma’am.
Reenah Joseph — Deputy CFO
Thank you, Amshar. A warm welcome to all participants to the PDS Limited Q4 and FY ’25 earnings call. Our investor presentation and financial results are available on the company website and the stock exchanges. Please note that anything said on this call, which reflects our outlook for the future or which can be construed as forward-looking statements must be viewed in conjunction with the risks that the company faces. This conference call is being recorded and the transcript along with the audio for the same will be available on the website of the company as well as the stock exchanges. Please also note that the audio of the conference call is a copyright material of PDS Limited and cannot be copied, rebroadcasted or redistributed in press or media. Media without specific and written consent by the company. Today, we have with us the management, which includes Mr Palak, Executive Vice-Chairman; Mr Sanjay Jain, Group CEO; Mr Rahul, Group CFO. I now hand over the call to Mr Sanjay Jain to take the discussion ahead.
Sanjay Jain — Group CEO
Thank you, Rena. Good day everyone and thank you for joining us on the quarter-four and FY ’25 earnings call for PDS Limited. FY ’25 was a year of significant progress and resilience for PDS. Despite the persistent macro macroeconomic and geopolitical uncertainties across the key global markets. We could successfully achieve 25% year-on-year growth in gross merchandise value. It touched around INR18,744 crore rupees, which is approximately INR2.2 billion US dollar. This performance is a testament to our integrated global platform, diversified sourcing model and our people who remain at the heart of everything we do. Let me begin with our strategic agenda. Firstly, the UK-India FTA has opened up a significant runway for Indian sourcing. With the recent acquisition of Knit Gallery, we are now well-positioned to scale-up sourcing volumes for our existing marquee UK customers, who already represent near 1 billion in GMV that we currently have in order book from them. And this GMV spans across apparel, general merchandise and home as categories. So we’ve been across these customers gradually also getting a larger share of wallet through different connect points. We continue to strengthen our capabilities in India and we should be well-positioned to cater to the requirements of our customers from India. For many years, we’ve been having small setup of some of our verticals running sourcing teams in and with the focus that we internally had on serving our UK customers from the Indian geography, on one-hand, we went ahead with Knit Gallery acquisition. On the other hand, besides these small operations that have been running, we deployed senior sourcing teams who therefore, in addition to Knit Gallery, similar to what we have done in Bangladesh and Sri Lanka can now also bring onboard factories that cater to our UK customers’ requirement of sourcing from India. Secondly, on the US strategy, we’re very pleased to welcome Michael Yee, Founder of Foundry Group to the PDS platform. Michael comes with a vast experience of working with renowned retailers like MGF, Gap, Kate Spade, and he brings key customer relationships on-board. Michael will now lead the change and drive our North-America strategy with our existing teams reorganized under him. This gives us a consolidated go-to-market with category specialists in inmates and activewear, strong customer relationships and end-to-end capabilities across Asia and Latin-America. If you may recall, as part of the North-America organization that we had built, we had got senior resources in Latin-America and in Africa as part of the global sourcing strategy to cater to our US customers. And this was besides our investment three years back into Vietnam as well in terms of setting up a sourcing office there. As part of our profitability first agenda, we have recalibrated our new vertical portfolio. Each vertical is now under tight review of proactive realignment and business heads have an unambiguous mandate, hit the budget, cut the cost or fund the losses. Somewhere in a partnership model wherein there is an equity being given to the business head, we also now either expect them to hit the budgets, cut the cost or fund the losses. Within this, our North-America blueprint has been reset. The business, as I said, is being reorganized under Michael Ye, who has been an entrepreneur and therefore, we expect the execution to be much more sharpened and the benefits to come in as we had foreseen from our North-America strategy. Simultaneously, we are reorganizing existing verticals to extract growth, efficiency and margins. We are pushing higher profitability in the top performers and pushing through the tail — sorry, pruning to the tail to be taken over by existing verticals of closure. For example, example two of our you know
Operator
Hello sir are you there
Sanjay Jain — Group CEO
In sales we are disintegrating that vertical and merging amongst the other large verticals.
Operator
Sorry to interrupt, but your voice just got dropped in the middle. So I think you’ll have to repeat.
Sanjay Jain — Group CEO
Yeah. Okay. Sorry, but I just learned that there was a drop, so I will repeat the last paragraph that I was speaking about. As part of our profitability first agenda, we have recalibrated our new vertical portfolio. Each vertical is now under a tight review or a proactive restructuring and business heads have been given a clear mandate, hit the budget, cut the cost or as an entrepreneur, as a shareholder, fund the losses. Within this, our North-America blueprint has been reset. The business has been reorganized under another entrepreneur, Michael Ye to sharpen execution. Simultaneously, even amongst our existing large verticals, there is a far more focus to get more operating efficiency benefit and more-and-more focus on profitability. In fact, in our tail, if we have identified, for example, two verticals who have struggled to scale-up, we are merging them amongst the top-10 vertical. One of our top-10 vertical, which has witnessed decline in sales over the last two years is also now been disintegrated so that it can be absorbed among the remaining verticals. On one-hand, there is a cost optimization and on the other hand, using the skill-set built-up to cater to the customers. Another important priority in terms of profitability focus has been New Lobster. This business started on a very promising note for us, but had to foresee retail bankruptcies. The franchisees that were appointed by Authentic Brad in UK and US went through an administration process. And as a result, almost half of the agency sales, half of the sales were agency sales, they got impacted. But we have been trying to get our act together, which we believe has largely been done. Our wholesale relationships are well intact. In fact, they have been strengthened. So therefore, this business would now primarily work on B2B relationships. The cost structures have been realigned as well in-line with the B2B strategy. And as a result, while the last year happened to be losses in this transition process, but we believe we are now at a point wherein we can fulfill our two objectives number-one, to make the business self-sufficient on cash basis; and secondly, to actually cut-down the losses and as a first motive, bring it to a profit breakeven situation and then, of course drive it towards enhancement of profitability. Finally, we are acting on several group-wide levers. We have initiated cost optimization program with BCG across three key verticals. Even at the platform, even at the half-point of the implementation of the BCG program, we have identified savings that we believe will start flowing through in the coming quarters. This has been a kind of change management program wherein with BCG’s analysis, the process system augmentation that they are doing, we believe the benefit are tangible and surely going to be visible in H2. Furthermore, in this transition, when overall basis, there is a lot of focus on profitability, we have become cautious with respect to our further investments, whether they are in new verticals or if they are across venture techs. We also realize that in our corporate setup in our platform, there is the second-line of leadership that we have been carefully curating and we believe they are all set now to take charge and this may also help us in terms of optimizing cost, achieve the same objectives with more agile and younger number twos who have been trained over the last couple of years and we see this changing happening soon as well. So therefore, the platform level cost realignments should also start giving us benefits in the second-half of the year. The first-quarter may have kind of the restructuring underway, but we believe the Q2 should start giving us benefit with the full benefits of that becoming visible in H2. Given our growth over the last three years and execution in brands, DDP, LDP, change in business mix and also the trading term shifts, we have seen our net working capital crept up. We are also focusing on squeezing it back to low single-digit levels so that on one-hand, as the working capital goes down, we also have cash-flow release happening and therefore, its eventual impact on the interest cost. We have identified the root causes somewhere they were embedded into the growth and they were embedded into the geopolitical disturbances, but we believe step-by-step, in the coming few months, one should see the benefit of this coming in. Lastly, before I hand over to our Group CFO, Rao Laoja, in our 55 journey as a commitment to scale-up to 5 billion GMV with a 5% PAT, as you recall, a 5 billion GMV is almost equivalent to INR3.5 billion revenue and at that level, a 5% PAT. This is what we had aspired for and today, we are almost two years into it. We are at a GMV of 2.2%, somewhere we have traveled almost 45%, close to halfway on GMV in about two years. And now the focus is that how do we accelerate profitability. As we step into FY ’26, we will focus on augmentation of profitability of top verticals, optimizing capital allocations, strengthening our supply-chain agility with a sharper focus on India, Vietnam, Egypt and LatAm. To summarize, we have built the foundations for a leaner, more agile and future-ready PDS with global tailwinds from creative realignments, whether it is US or UK and our continued commitment to innovation, compliance and sustainability, we are confident of building on this momentum. With this, I’ll now hand over to Mr Raul Laoja to walk us through the financial performance.
Rahul Ahuja — CFO
Thank you, Sanjay, and good evening, everyone. Let me walk you through our performance for Q4 and financial year ’25. We closed the year with revenue of
Operator
Sir, your voice dropped again.
Rahul Ahuja — CFO
One of our key markets clocked 6% growth. This is mainly due to —
Operator
But your voice dropped again.
Rahul Ahuja — CFO
Okay. I’ll repeat the parallel. We closed the year with a revenue of INR12,578 crore, up 21% year-on-year. Growth has been observed across geographies that we currently operate in. UK, which is one of our key markets claw a growth of 6%. This is mainly due to one of our customers, UK UK-based, that the revenue to reduced from $134 million in FY ’24 to $89 million in FY ’25. This particular customer is served by Design Arc, which is one of our large verticals. We have decided to cautiously scale-down this relationship because of the credit risk involved where we thought that it’s prudent that we do business very selectively with them. Further, it is important to note that if we include the GMV of sourcing as a service business that we are handling, UK has actually increased by 26% as far as overall business for us is concerned. Gross profit for us increased by 20% year-over-year in FY ’25, while the margins witnessed some pressure and declined by about 23 basis-points in FY ’25, it is mainly due to the impact of decline in our agency business, which also includes Ted Baker Agency business, which was impacted by the retail bankrupt EBITDA of INR457 crores
Operator
Sorry to interrupt sir but your voice dropped again after Ted Baker
Rahul Ahuja — CFO
Okay I will repeat again I’ll repeat the full paraph for everybody’s benefit. So I was talking about the gross profit, which increased by 20% year-over-year in FY ’25, while the margins witnessed some pressure and declined by 23 basis-points in FY ’25. This was mainly on account of impact and decline of our agency business, which also includes the Ted Baker Agency business, which was impacted by
Retail bankruptcy. Excluding agency business, our gross margin has improved by 45 basis-points. We reported an EBITDA of INR457 crore with a margin of 3.6%. However, if we were to adjust this for our investments made in new verticals, we clocked EBITDA margins of 5.2% versus 4.9% in the last year. These investments span in strategic areas like design-led sourcing, our geographical expansion in North-America, brands and for growth initiatives. We are now driving sharper governance across these in with the increase in debt utilization, the company’s PAT was at INR241 crores, which was up 19% year-on-year. Our return on capital employed stood at 19% and when adjusted for new vertical investments, it was at a healthy 27%. Net-debt to EBITDA was at 0.8 times and net working capital days increased to 17. Largely — and this was largely on account of changes in business mix in terms of trade. We are working on and are pretty confident that we should be able to contain and reduce our working capital days in fiscal ’26. Another area of progress has been cash management, while operating cash-flow was temporarily negative due to the working capital buildup, we ended FY ’25 with over INR435 crore in cash-and-cash equivalents. With the INR430 crore raised from our recent QIP, we have already deployed INR278 crores towards debt repayment. And in May, we further deployed INR24 crores towards the Knit Gallery acquisition and the remaining funds earmarked for strategic growth and general corporate purposes. Lastly, I’m pleased to share that we have proposed a dividend payout of INR3.35 per share, of which INR1.65 per share was paid as interim dividend amounting to 30% of financial year ’25 PAT, maintaining our capital return track-record. We now open the session for queries from all the participants. Thank you you very much.
Questions and Answers:
Operator
We’ll 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 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue. The first question is from the line of Rishi Modi from Marcellus Investment Managers. Please go-ahead.
Rishi Mody
Hi guys. Am I audible? Yes, please. Yeah, a few questions from my end. So starting on the cost front, right? So first, Pete, on the cost front, Q3 you had guided for around spend on new verticals for FY ’25, we’ve ended-up spending 162 cr. So this is on the PRL. So just wanted to understand what’s happened here? Second, on the minority interest payout increase, right? And just two pieces on that. We were planning to allocate some of the centralized cost or shared services cost these partners, has that been done or how much of that has been done? Secondly, you mentioned that a lot of these loss-making subsidiaries have been given like some end-of-the rope kind of a structure where they will be either absorbed or shut-down or asked to cut costs. So how much of savings are we or how much of a reduction in loss contribution from these entities are we looking at for the coming year? And finally, on the manufacturing business, what steps are we doing to ramp-up capacity utilization and hence improve profitability? This is a cost front. I will come on to the working capital in North-America, please later
Sanjay Jain
Okay. Okay. So, this is Sanjay here. I think we lost you a little bit in-between, but I have noted four questions, which I’ll be and Raul will and will try and-answer. If we miss out, do point out. Yes, we anticipated that the losses from the new verticals will start tapering off from quarter-four. But unfortunately, you know the — as you — the 162 is actually the net loss that we book in P&L. So there’s not much on the cost front, but the sales that we anticipated to materialize, you know that ramp-up happened slower, whether the geopolitical disturbances of Bangladesh or while the tariffs of US has been a recent phenomenon in the current financial year. But post the change of guards in US, they have been inviting across customers. So slower sales buildup actually, you know, brought us to a situation of INR162 crore. But having said that, while you know, we would be aspiring to bring down this by 40% but but if you ask us a 25.30% reduction in.
Operator
Are we lost long as sorry to interrupt, sir, but your voice dropped again while answering the participants question.
Sanjay Jain
Okay. Firstly, I think I want to apologize to all our participants because of whatever hiccups are happening. So I will summarize. Just reconnect. Sorry, I have to reconnect. Yes, reconnect, ma’am, please. Our apologies for this all of you.
Operator
Ladies and gentlemen, please hold while we reconnect the management Ladies and gentlemen, we have the management back online with us. MR. Rishi, you may proceed.
Rishi Mody
Yeah, Sanjay, if you have the questions, you can discontinue.
Sanjay Jain
I got all your four questions. I think the INR162 crore loss that happened because the sales ramp-up in-quarter four was slower than
Rishi Mody
Is it just me or they’ve dropped off-again?
Operator
No, sir, they have dropped off-again against. Your voice dropped a cancer
Sanjay Jain
Sorry then I think I don’t know some bridge
Reenah Joseph
Is it at your end?
Operator
No ma’am, we are connect properly. The management is dropping again and again
Reenah Joseph
I just send you another number, just match us in on that okay. Yes I’ll hear.
Operator
Ladies and gentlemen please hold while we reconnect the management ladies and gentlemen, we have the management back online with us. Please proceed, sir.
Sanjay Jain
Yes. So we are back, so, to answer your point, I think INR162 crore loss last year, a little higher than what we were expecting Q4 for it to come down. It’s more because of the sales
Ramp-up did not happen as we anticipated. We believe it should get fixed coupled with a stringent control on cost. So at least 25% 30% reduction in this, if not more, we are internally aiming for more, but that’s the kind of reduction we are minimum aiming to bring it. On the cost allocation of the central teams, while that exercise has been constantly underway, but what is more important is that even at the platform level, which is what I mentioned in my opening remarks as well, we are looking at a potential INR25 crore to INR30 crore cost-reduction and measures have already been taken. I mean, it’s something that we reflected in last month and has put it under execution. And I also mentioned that clearly the benefits will start coming in the later part of the year from Q2 onwards. And somewhere as these cost benefits come in, they are actually going out of platform. So to that extent, you know the PAT attributable to public market shareholders will benefit from this central cost-reduction. On the loss-making, you know verticals being merged, if I get your question right, I think somewhere, for example, in the tail two businesses that we — the moment the leadership of those businesses, the top one, top two goes away, it on one-hand saves very significant cost and we merge it into an existing operating vertical, you know, and therefore, there is a leadership already available plus at the back-end, you know, there is some merger possibility in terms of sourcing people who are working — working there. We did this experiment last year — a little before last year, we started with crayons, one of our largest verticals. There was a vertical scope that we merged with it. That vertical was breaking even slightly making losses, niche of business settings could turn it profitable. So we believe there are strength there in these tail verticals. And by merging them, therefore restructuring the cost, we should be able to bring them into profitability. Manufacturing, we have, you know, achieved ramp-up in ’24, ’25, also the profitability enhancement and we are close to 4% profitability in the current businesses. Now to answer your point on ramp-up, on one-hand, the Knit Gallery acquisition that got closed last year, you know, therein the annualized revenue that we could expect from that business is close to INR350 crores. So that business we have added customer-base. There is a 2.5 acre land that is already there under a long-term arrangement in the facility. We have no immediate need for any CapEx. There are about 2,200 machines in it gallery. As the India, UK FTA ramps-up, there is this lever that at a small incremental cost, we can double-up the capacity. In our existing green and progress facilities in Bangladesh, we are almost running full capacity, but there is an effort to ramp-up the — as you know the efficiency levels in-progress, they are closer to mid-60s. We are trying to inch it up to 70%. And in factory, they are 57%, they’re trying to ramp-up to 65%. So without spending any money in terms of capex in Good Earth and progress, we believe closer to 10% to 15% more revenue can be extracted and therefore commensurate profitability. So this is my response to the four questions that you mentioned.
Rishi Mody
All right. So just to put numbers to it. First you said from the new verticals, you can save at least 25% to 30%. So that should be about INR40 crores INR45 crores of savings that should flow directly to the minority investors. Second, INR25 crores to INR30 crores of cost-reduction at centralized level, which should again flow down to the minority investors. So we come up to about INR75 crores. And then beyond that, the tail entity strimming you said could you quantify how much savings are you anticipating or at least reduction in losses, which I think for FY ’25 had around INR200 crores for these entities or is it about 25% 50% that you mentioned earlier?
Sanjay Jain
Okay. So I think the ballpark number that we believe can be optimized is INR15 crore 20 crores from this tail that has been struggling. In fact, I will add it up for you, INR40 crores that you mentioned approximately basis our potential reduction on the losses, cost piece. There is a INR75 crore INR80 crores, crores you know that we are internally gaming for that. I think there can always be some miss as we pursue it, but can we not achieve INR50 crores out of these initiatives all put together, I think we feel positive we should be able to achieve as a aggregate number out of all of these things. Wait a wait.
Rishi Mody
So INR50 crores, you’re saying total savings.
Sanjay Jain
Yeah, not — yeah., I mentioned what potential of each one of them. And I think as we look things ahead, let’s assume that INR50 is what we should be able to achieve this year.
Rishi Mody
Okay, because I’m just trying to tie the numbers here again. Q3 you had mentioned that we would be at INR140 crores of expenses. If you’re assuming a certain revenue ramp-up in USA, we ended-up at INR162. Q3 had guided that next year we should reduce that loss to INR70 crores. So that was a INR70 crore savings just from the new verticals. On-top of that, you’re guiding for INR25 crore INR30 crores. So I’m just trying to understand that from a potential INR100 crores of savings till Q3 the guidance, we’ve come down to INR50 crores of savings of guidance. So is it just that we’ve been overly conservative or is there something which I’m missing here?
Sanjay Jain
So two things I would respond. I think offline, very happy that me and Rahul can engage deeper into your questions. But I think when we start a year ’24-’25, we had anticipated 10% to 15% kind of top-line growth and circa mid-teens or bottom-line growth. And there are few things that you click and few things that you miss, but what is important is that we finished the year with growth better than what we anticipated and profitability almost about 19% growth or so. So as a result for next year as well, we are mentioning about various levers of performance that we are looking at. And one of the levers that you’re touching upon is cost, so we mentioned what we are gunning for, you know, and that’s where I said, okay, while 75, 80 could be potential, 50, let’s assume is something that should be achieved. But as I requested upfront, we are very happy to engage with you deeper into all these aspects. And maybe we can move to the next one to also have our other investors raise questions, please.
Rishi Mody
All right, if you want, I can rejoin I just needed clarity on the working capital days increase and what’s happening at the North-America strategy? You mentioned we are doing some reorganization.
Operator
So, sorry to interrupt, sir, but I may request you to rejoin the question queue for follow-up questions ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to two per participant. The next question is from the line of Shrinjana Mittal from Ratnatraya Capital. Please go-ahead.
Shrinjana Mittal
Hi, thank you for the opportunity. A couple of bookkeeping questions and one broader level question. So on the bookkeeping side, depreciation amount has increased quite a bit in this quarter. So can you just explain what drive would that be?
Rahul Ahuja
What could cause that? So we have we’ve been doing some investments around our costing tool across the organization. There is a vendor portal being developed, a lot of efforts being made to ensure that you know we digitize some of the processes to harness the power of one as far as-is concerned. Also, you know the two properties that we have, one is our PDS Tower in Gurgaon as well as the property we have invested in the UK, there has been some investments done there as well. So all of these put together know, four or five different areas of projects which led to, you know, either developing you know a software or a platform or a tool to you know better the productivity or synergies across the group level or in these two tangible assets that we have, is where it has led to an increase of depreciation year-over-year. So that’s the minimum half, right?
Shrinjana Mittal
Yes. Understood. And the tool development part that would be an actual cash type of expenditure that
Rahul Ahuja
— sorry.
Shrinjana Mittal
The tool development-related to the tool development, whatever spending has been done, that’s also an actual cash expenditure. Apart
Rahul Ahuja
Correct. So these are you capex that we are incurring and hence cash outflow.
Shrinjana Mittal
Understood. Also, could you share the tech beaker and sourcing as a service segment revenue number for this quarter?
Rahul Ahuja
Sorry, could you repeat your question?
Shrinjana Mittal
The sourcing as a service segment and the tech Beaker segment, the revenue number for this quarter.
Rahul Ahuja
So for the full financial year, as far as our sourcing as a service business is concerned, we did a GMV of 7307 — yeah, this is million dollars, $730 million of which translates into a revenue of close to $18 million in this financial year.
Shrinjana Mittal
Understood. Understood. And on the debt side, sorry, what’s your question on vehicle? On the tech other revenue for the full-year.
Rahul Ahuja
So Ted Baker, we — the total revenue that we did was around $50 million — $61 million, including both wholesale and agency business, which was a tad lower than what we did in the last financial year. Last financial year it was $63 million, this year it’s $61 million.
Shrinjana Mittal
Right. And the agency business was largely not there in this year.
Rahul Ahuja
Correct. So agency business, given the disruption and the bankruptcy of our retail — the retail partner, we had agency business coming only for a few months at the start of the year, post which for almost six to seven months, there was no agency — revenue coming from Ted Baker. It’s only towards the end-of-the last quarter when normalcy started returning that we had some revenues coming in from agency.
Shrinjana Mittal
Right. Just one last question.
Operator
Sorry to interrupt ma’am, but I may request you to rejoin the question queue for follow-up questions. Sure. Thanks. Thank you. The next question is from the line of Pritesh Chheda from Lucky Investments. Please go-ahead.
Pritesh Chheda
Yeah, hi. Sir, in the last two years, we see that the ROIC dropped with the margin dropping and the working capital cycle rising. It’s good that you have a continuous revenue growth of about 20% even this year. So how does this all rectify itself in terms of first of all, A, until the last call, you were saying that the margin is lower because of the sourcing profitability being lower. The supply is high in the system and the sourcing profitability is lower. You want to incrementally comment on it and your US business was not relatively lesser profitable. So you want to comment there and you want to comment on our working capital cycle and the ROIC, how does it improve itself. So good to have 20% revenue growth, but then correspondingly, all these matrixes should eventually should move higher, otherwise you know just having revenue growth doesn’t solve the purpose
Sanjay Jain
. Yeah, hi, this is Sanjay here. So hi so the ROCE, of course, as you know, is in terms of numerator, the profitability and then the capital employed, capital employed for us has largely been working capital and the number of days have gone up because of numerous factors, a, the growth that has happened and you know, when these disruptions are happening in Bangladesh as well, you know, as a larger platform, we also had to facilitate the functioning of the factories by more advances — customer advances that has also happened as well. And these things have been temporary in nature and we mentioned in the opening remarks, we should be slowly working towards bringing the working capital from closer to 17 to a single-digit number. So it’s a ramp-up and that has happened. We will bring it down. On the on the profitability, you know, if we take the normalized EBITDA, then the ROCE should look far, far better. But we’ve been into kind of an investment mode in our business, the investments are largely through P&L and we were discussing earlier a INR162 crore that through P&L happened, you know, and as a result, the EBIT of the company going down to that extent. We are working towards the benefit of this investment coming in, you know, and this may take about full two years for the benefit to come in. They should start becoming visible this year. And so therefore, this is the ROC of a company into its investment phase wherein the levers have been identified, bring it back to normalcy. That’s the way. And in fact, on a larger five-year horizon, when we are aspiring for our GMV growth, we have said that we are nearly 45% mark and we are trailing behind in profitability and that’s where we’ve rightfully at our end, taken multiple measures across large verticals, across sales, cross corporate, across processes through BCG that there is now profitability extraction across all. So the combination of these factors, I’m acknowledging the point you’re making and the combination of these factors should see us a gradual ramp-up in ROCE
Pritesh Chheda
This 1.5% of sales, so when I initially mentioned on the question there were other two things profitability on the sourcing business and your focus on US, which is a certain scale. So are those also contributor to the margin and that’s where you reflect this 1.5% because this 1.5% and the profitability on sourcing business, these two will be independent, right?
Sanjay Jain
Sorry, what’s 1.5% that you’re talking about?
Pritesh Chheda
You said you have used INR160 crores as P&L investments. So INR160 crore P&L investment on INR12,000 crore revenue is 1.5%.
Sanjay Jain
Yeah, yeah. Yeah, about 1.6%.
Pritesh Chheda
So this is — this will always be in addition to what’s happening on the sourcing profitability side am I double counting here?.
Sanjay Jain
No, I think we are — we to facilitate our understanding of our performance. In our investor presentation, we have tried to break EBITDA into what is coming in from operations that have been into existence for many years and then the initiatives taken in the last
Pritesh Chheda
You are adjusting it that way. Okay. So you are adjusting in terms of incremental investments that you have taken. So which means it’s the revenue growth only which brings the leverage line or you cut these investments, cut these costs, what will happen?
Sanjay Jain
So the revenue growth, yes, but these investments quantum would actually come down, yes, it would come down in the current year itself in ’25, ’26.
Pritesh Chheda
How much will it come down?
Sanjay Jain
Yes. That’s the one of the earlier questions that we said that we are looking at a, 25% 30% kind of reduction to happen into these investments. We are internally running for more, but that’s the kind of reduction that we are working towards.
Pritesh Chheda
Yeah. Okay. And my last question is to understand. And my last question is, sir, on the revenue growth side, so you’ve been growing last year as a good 20%. FY ’26, do you see a relatively similar year as a business conditions or do you see slightly challenging business conditions.
Sanjay Jain
So I think are walking in with a 14% order book growth in dollar terms, you know over the same-period last year. So mid-teens is what we are walking into it. There are mixed factors. I think the UK FTA you know is a big plus. The US-related tariffs, given our well-diversified sourcing base should also benefit. So there are factors to the upside in terms of whatever is happening. Of course, the geopolitical tensions that keep coming up from time-to-time are some negative. But at this stage, a mid-teens kind of growth you know throughout the year, we feel positive that that’s something that we should achieve.
Pritesh Chheda
And what is the minority interest portion, percentage of profit?
Sanjay Jain
So this question I think was also asked earlier, some of the platform cost reductions and also the new vertical investment
Coming down as we scale-up in North-America, which has been largely through platform investment as we scale-up that as well. In fact, I would also request Mr to chime in because one of the questions earlier was on the North-America strategy as well. So you know as the North-America strategy has been calibrated, all of these have been largely investment from platform. So therefore, when the platform benefits, the minority share kind of relatively comes down. So that’s something that these factors would lead to.
Pallak Seth
Yeah. Hi, good afterl, everyone. So just on the North-America strategy, Sanjay, earlier in the call mentioned about Michael joining us to overall lead the US strategy for our designless sourcing and sourcing and service businesses. And I’ve known Michael for a few years. He comes with a tremendous background and network, not only with the US customers, but also now strong vendors in Far East emerging out of Cambodia, now Indonesia, which is some of the biggest trading partners for US even in the post tariff world. Yeah. So just on the North-America side, the business was going-in a very strong direction, but with the tariffs suddenly coming in, most of the retailers have the buying back, we saw the impact in the Q4 order book as well. So one of the factors our losses in Q4 were there and not reducing is because the North-America business that was supposed to come in for shipping in Jan, Feb, March and even beginning part of this quarter has now been postponed to a little bit in the future months. So like June, July, August, you’re seeing a big uptake in the order book and business starts slowing back again because a lot of doors have opened. In the last six months, we’ve opened major accounts like Walmart, Target, American Eagle,. So some of the biggest US retailers who are almost impossible and not looking to add any new vendors in their matrix have opened PDS account. So because of the tariffs, everyone was taking a pause, waiting and watching what will happen, resetting their business and we feel that we are in an extremely strong position to be able to get started with them on a proper business with large-volume commitments coming in the next year and peers coming down from there. Even TJ Max, which is one of the most successful US retailers has recently opened PDS account to start trading with us on various opportunities. And because we have such a huge geographical spread, especially offering Central America and Africa sourcing, this is highly-attractive to many of the US retailers. So once we offer our product proposition with a global sourcing base, it becomes very, very attractive for them to be able to engage with us and open our vendor account. So I mean the good thing is that wherever we have pitched, our account gets opened. And I would say generally today, are in a consolidation mode, they’re not really looking at opening new suppliers, bringing new suppliers on-board, but looking at the perio’s track-record, the quality of our management, our product capabilities and geographical spread, we end-up opening nine out of 10 accounts we pitch to from the company side.
Rahul Ahuja
Okay, I’ll take this offline.
Pallak Seth
Yeah. Yeah, yeah.
Rahul Ahuja
Yeah, go-ahead, sir, if you want to finish.
Pallak Seth
No, no, it’s fine. I think the only last point I want to mention that Fashion over joint-venture, some of you must-have known, we had set-up with our business to supply this US retailer Fashionova, which was supposed to scale-up to large-volume levels. So there also with Sheen now being almost banned from the US and team who have been banned from the US, that business also is now on the upward trajectory. And the main purpose of setting up the JV with Fashnow was to help them diversify sourcing out of China. So we’ve taken steps to now introduce them to vendors from other geographies. So that business also is now beginning to take-off in the next six months. So all the investments we made are going-in the right direction, but it takes time. That’s the only thing. And PDS, as long as it sees investment being made with creditworthy customers who have large potential, we will continue to just remain patient and slowly build our business with hope to scaling up in the next few months.
Pritesh Chheda
Okay. Thank you very much. Thank you.
Operator
Thank you. The next question is from the line of Dhwanil Desai from Turtle Capital. Please go-ahead.
Dhwanil Desai
Hi, good afternoon, everyone. So my first question is that on a nine-month basis, we had given a breakup of investments being made. And out of INR13 odd millions, I think almost INR10 million went to two heads the US and plant management. So is the proposed proportionately the ratio same for Q4 also? And going into FY ’26, as you said, will cut-down investment by 25%, 30% somewhere. So where-is the going — saving going to come from is the brand-management breaking even or losses getting reduced is what we are kind of trying to get more or less investment in that some color on that?
Rahul Ahuja
Yeah. So your understanding is right. These were the two — while there are five or six areas where, you know the total investment can be segregated in two, but these two-brand management in US, the trajectory would be pretty similar of what you noticed in Q3, pretty similar in Q4 as well. As far as the second part of your question of where the reduction will come from, as Sanjay explained, this is about ramping-up our revenues in this — in these initiatives, this will lead to absorption of cost and hence reduction of loss or eventually converting them into profitability. Now as far as brand-management is concerned, we have some new businesses which are there and basis this year’s annual planning that we have done, these businesses could perform, you know, ramp-up better than what they did last year and hence, they will be — some of them would be breaking even, some of them would be reducing their losses. Similarly, North-America, we’ve — but the growth has been a bit slow — slower than what we expected on account of reasons which Sanjay covered, whatever is happening in the Western world, the economies, the geopolitical, the whole situation in the US but we are very hopeful that as well, the good news is that we’ve signed-up a lot of large customers, the likes of Target,, ramping-up with Walmart, Cole’s, etc. So as business ramps-up, there will be better absorption of cost and hence reduction. So it will be — while these two are large areas of our investment through P&L and the maximum benefit will come out of these, but it will be spread across others as well.
Dhwanil Desai
Got it. And second question, I think in the previous participant’s question, Palak mentioned that we have almost landed with most — most of the accounts that we had paid-for. But we are still talking about reorganization in US. I think we are bringing in newer leadership there. I’m not sure whether Mark — Mark, Mr Green is still with us or not. But so what is it that according to us was not going as per plan? And what is the recalibration that we are doing in US, you know, or what is the next strategic game plan to kind of do — do and achieve what we kind of set-out ourselves for?
Rahul Ahuja
So we would ask Palak to, you know, tell you about our whole strategy around North-America and then we will fill-in as well.
Pallak Seth
Yeah. Yeah. So as Sanjay mentioned earlier in the call, the only change we were planning to make or ended-up making was Mark Green, who we had bought in to help us drive some business was replaced or is in the pressure being replaced by Michael, who come with a, we feel a more proactive background. So Mark has been helpful and instrumental in opening a few doors, but the order conversion, especially with giving the cost sings and the proactiveness of getting that converted was being a bit slow. So in Michael, we for saw more of an operator, someone who is actively being able to engage with the customer, get the closed and then get the business booked. So Mark will continue with us in a small shape or form, maybe managing customer relationship one or two customers where he has deeper relationships, but Michael will take on overall charge and lead the North-America strategy along with me to be able to help take the business forward. But the teams below that we have set-up are all going to reporting to Michael to be able to have one streamlined approach rather than us having Mark and Michael separately competing for the US business with probably similar customers.
Dhwanil Desai
Okay, got it. Just one question, a data point rather. I just need one data point in Q4. Yeah. I just need one data point, okay. So we — because there is some reconciliation not happening on US percentage growth. So if you can give absolute US GMV for FY ’24 and FY ’25?
Rahul Ahuja
Yeah. I think allow us to proceed with the next question. But in the meanwhile, our team is taking out that number and during the call itself, we’ll client give you the number, please.
Operator
Okay. Thank you.
Sorry to interrupt, sir, but we may — we have lost the line of Mr Seth. Please hold while we rejoin Mister hi, ladies and gentlemen, we have the management back online with us. The next question comes from the line of Rudraksh Raheja from iThought PMS. Please go-ahead.
Rudraksh Raheja
Thanks for the opportunity, sir. So could you help us understand how long does it take to set-up a new sourcing base in a country and commercializing it properly? And where are we in that journey across Egypt, Latum and even India since UK FTA opens door for more business, but India, I think we have limited sourcing capacity as of now.
Pallak Seth
I can take that totally. Yeah. So yeah, so to set-up a new sourcing base, I think that’s not a big challenge for a company like PDS because of our ability to attract the best global talent to come and join us, be it Latin-America or be it Africa or even India, because some of the best people who are in the industry who have the capability of dealing with the customers, bringing the vendors along with them because their past track-record, so hiring the best people who have worked with them in the past in the large jobs, joining us to be able to service our customers. So that is probably a three to six months timeframe by the time the office key team members and core team members are in-place. It’s basically the customer side, which is when they start — they start visiting when we set-up a new geographical sourcing location, you start visiting, they’ll start experiencing the factory, we showcase them. But that’s a 12 to 24-month journey. So setting up teams and offices for PDS is our strength. The ability to attract the best challenge in our strength. It’s just that when the customer start visiting, it takes 12, 24 months for business to become sizable and from where it becomes profitable?
Rudraksh Raheja
Okay. So if I’m understanding it correctly, it will take like another 12 to 18 months-to become profitable for these geographies, the new geographies highlighted in our presentation, Egypt, Latin-America. Am I right?
Pallak Seth
Yeah. So 12 months — yeah, 12 months it will take to be able to start becoming profitable because further customer critical mass has to happen. So example, in Latin-America, we have people like Walmart, Target, visiting us in the next couple of months and then at least the vendor account gets open and they start placing orders. And one reason we are able to open our large American retailers is to be able to offer them diversified geographical sourcing base. Today, just being a factory in Middle of Asia almost has zero value for a retailer because there are 10,000, 20,000 factories around the world that keep approaching them and they don’t even get appointment. But based on the PDF structure, the quality of people we put forward, it the details of opening our account and getting started with us to be able to build the business. Understood. In terms of loss funding, once we set-up a new office, like it’s $0.5 million cost a year. So not talking about like when you set-up a new factory, you’re investing millions of dollars, you’re losing millions of dollars till the time efficiency starts happening. In our case, a new office in Africa or in Central America will cost $500,000 to $700,000 a year as our cost and expense. So it’s relatively small to the size and scale of our operation. So it’s like at least we soar seed, we bring the customers in and the seed of the person who joins us is what’s attracting the customers. Like in Africa, the guy who ran Lien operation for last 15 years, running almost a $400 million business, he came and joined us run the Africa region. Once we showcase that to Target US, they’re like, great excellent person there and we’ll be able to now start working within that geography. So the question when a customer that how much business you do in a geography, even if you say we don’t do any business currently, but the team we have put in-place is the expert in that region, we start getting a chance and we start getting business going-in different geographies based on our — the talent we bring into these places on a relatively very low investment considering we don’t have to set a factory to attract customers, but bringing the right caliber management to be able to work with the customers. The new geographies we end-up opening?
Rudraksh Raheja
Okay. Sir, since you have talked about establishing
Operator
To, sir, but I may request you to rejoin the question queue for follow-up questions. It’s only for my second question. Okay. The next question is from the line of Ankit Gupta from Bamboo Capital. Please go-ahead.
Ankit Gupta
Yeah. Thanks for the opportunity. So before I start my question, one request to the management is to in presentation, it will be great if you maintain the consistency of some of the points like the breakup of investments has been missing in this quarter’s presentation and what was given in Q3 presentation. Even the — you have given the top-10 of top-10 companies numbers, but they have — they are also — we have excluded the investments in the new — the new ventures that we are doing or the business we are building up. So maybe if you want to exclude that, give a presentation, which has one including that and one maybe including — excluding the investment that we are doing. So that is one request from my end before I start my question. Thank you. Yeah. So my question was on the — our target for 3 billion GMV in three years and 3% PAT margin. Given how things are currently our investments that we are doing in both brand-management and in the US geography, do you think 3% kind of PAT margins in FY ’28 seems — seems or sorry in FY ’27 seems a bit far-fetched currently and will take some more time to reach those kind of margins?
Sanjay Jain
So firstly on that disclosure that you mentioned on — we have given across two buckets 71% or 162% and the remaining. But it was becoming too busy to give those manual breakups. That was the only reason. I think the Investor Relations team kept at 71. We are very happy to continue doing that. That was the only reason the slide was becoming busy. That’s it. I think we are very happy to offline to all our stakeholders who are on the call share this information in terms of breakup. And on the 3% PAT in about two years, I think we are working towards that. We just had about 2% and you know, we have been in this call talking about levers of a mid-teens growth coupled with the investments in new verticals expected on one-hand to become in the journey of profitability, also lesser incremental investment, loss of cost austerity measures as well. So one — no one can save in certainty that will we get to three, but I think the measures, the levers are underway to see that in the next eight quarters, the two years that you’ve mentioned, we should see a gradual ramp-up in that direction. We are working towards that
Ankit Gupta
Do you think given where we are currently, it seems — it seems to be a bit of a steep task to get to that kind of our margins in next two years.
Sanjay Jain
So what’s important is that are there levers? The answer is big, yes, including the BCE lever as well. So you know, so it’s all about making them happen and the only reason one is a bit conservative is because there are so many geopolitical developments that keep happening across the world, Bangladesh and then the war around India and then US tariffs, etc. So we just are keeping a bit of margin around that. But as management team, we’ve been able to build-up a lot of levers to help us get there. So it’s not a steep task to achieve you should see us if not achieve at least closer to that, we have levers in-hand.
Ankit Gupta
Got it. My second question was on the other comprehensive loss of around INR43 crores that we have incurred in this quarter and even for the full-year, there is a loss of around INR71.5 crores. So if you can throw some light on that and
Last year we had spent around INR70 crore kind of profit, but this year almost INR71 crore kind of loss is there on the other comprehensive items. If you can just give some — shed some light on that.
Sanjay Jain
So, you’re talking about the INR48 crores and INR23 crores?
Ankit Gupta
Yeah. Yeah, INR43 crores, it’s the sum of 18.75 plus 24.58, which is there.
Sanjay Jain
See in the OCI the INR48 crores is largely two things. One is in Banglade the retirement age was increased by the government from 58 to 60 years. So if you — we got the actual valuation calculation done, that has an impact of about INR9 to INR10 crores on — which is part of INR48. And the — we will — we have the CDS sensors portfolio, which we get a revaluation or a valuation done twice a year. It’s a comprehensive valuation is done for the year end. And depending on which investment or company how they are faring or funds that they have raised, you know we will take that as a benchmark because these are all young companies in various stages of these A, BC kind of investment. So there has been a reduction in valuation of close to INR35 crores across about 7, eight of our investment companies, which has led to almost 45 out of this INR48 crores that you have mentioned. On the other item, which is INR23-odd crores under OCI, a negative of INR23 crores, we saw a INR32 crore positive last year. This is largely the FX of the depreciation of the Bangladesh currency by almost 12% this year vis-a-vis the dollar and if you, you know, put that on my balance sheet in Bangladesh, it translates to about out of this INR23, almost INR2021 crores is on account of the FX depreciation or appreciation of the dollar against the Bangladesh. These are the three prime reasons for the swings that you see in these two items.
Ankit Gupta
Sure. And on the North American, i
Operator
Nterim, sir, we will take that as the last question thank you. Ladies and gentlemen, in interest of time, this would be our last question. I would now like to hand the conference over to Mr Sanjay Jain, Group CEO, for closing comments.
Sanjay Jain
Thank you so much, everyone, EY team and also our various stakeholders. We apologize for the hiccups that happened during the call. We will look into it and see that the recurrence does not happen. And for any questions that we may not have been able to answer because of paucity of time due to these disconnections. Please feel free-to reach-out to our Investor Relations team and the management team is also available to take-up your questions. Thank you so much and have a good weekend all of you.
Operator
Thank you. Thank you. On behalf of PDS Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines