Pearl Global Industries Limited (NSE: PGIL) Q1 2026 Earnings Call dated Aug. 08, 2025
Corporate Participants:
Unidentified Speaker
Shishir Gahoi — Head of Investor Relations
Pallab Banerjee — Managing Director
Sanjay Gandhi — Group Chief Financial Officer
Analysts:
Unidentified Participant
Bhavya Gandhi — Analyst
Kishore Kumar — Analyst
Riken Ramesh Gopani — Analyst
Dhwanil Shah — Analyst
Chirag Fialoke — Analyst
Pulkit Singhal — Analyst
Prerna Jhunjhunwala — Analyst
Vikram Suryavanshi — Analyst
Presentation:
operator
The conference is now being recorded. SA. Ladies and gentlemen, please stay connected, the call will begin shortly. Foreign. Ladies and gentlemen, good day and welcome to the Pearl Global Industries Limited Q1FY26 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. 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 Mr. Shishir Gahoy, head of Investor Relations of Pearl Global Industries Ltd. Thank you. And over to you sir.
Shishir Gahoi — Head of Investor Relations
Thank you very much. Good morning everyone and I am delighted to welcome you all to this earnings call for Q1FY26. I hope you all had an opportunity to review our press release and the investor presentation which are available under the investor section of our website and the same are uploaded on the BSC and LSC website. To discuss our results, we have with us our managing director Mr. Pallav Banerjee and our group CFO Mr. Sanjal Tandy. They will take you through our results and various performance after which we will proceed for the question and answer session.
Before we start, I want to highlight that this call may include forward looking statements based on the company’s current views and expectations. Actual results could be different as future performance is uncertain and involve risks that are hard to predict.
I will now hand over the call to our manufacturer, Mr. Pallav Banerjee. Over to you Falam.
Pallab Banerjee — Managing Director
Thank you Shashir and good morning everyone. I welcome you to the quarter one financial year 26 earnings call. Along with me we have our group CFO Sanjay Gandhi, our Head of Investor Relations Shashir Gahoy and Strategic Growth Advisors and our Investor Relations advisors. I am pleased to share our consolidated revenue of quarter one financial year 26. It reached INR 1,228 crore reflecting a 16.6% year on year growth and marking the fifth consecutive quarter of 1,000 crore plus quarterly performance. Adjusted EBITDA also grew by 13.4% on a consolidated basis with margins at 9.3% during the quarter.
If we exclude the impact of operational losses at our newer facilities and the tariff related costs which we incurred. Our adjusted EBITDA margin stands at approximately 10.7% thus continuing the trend of double digit margins for the second straight quarter. The performance underscores the strength as a leading global manufacturer. Now as we all know, the U.S. white House under the leadership of President Trump has announced reciprocal tariffs across all countries and all major garment manufacturing countries are at the receiving end of either 19 or 20% additional tariff. This is in addition to the pre existing customs duty under the Harmonized Tariff System or as we refer them commonly as MFN tariffs.
This can be perceived as some amount of certainty to our US customers over the uncertainty that was prevailing since April 2nd. However, unfortunately India is currently at the center of geopolitical storm and discussions are still open and it seems that we are at its worst point with almost not almost, but 25% reciprocal and a 25% penalty tariff on top of the HTS tariff or the MFN tariff that we have. With so much happening from the US side still a lot of specific details and definitions are awaited in the written documents. One example is the definition of transshipment.
This is still not very clear apart from what we know now that 40% value add has to happen in the country of shipping to avoid the transshipment tariff. This has naturally led to a growing diplomatic efforts and lot of legal scrutiny across the globe. Meanwhile, the US retailers and the brands has been experiencing good sales in the first half of 2025 and are ready to place their Spring Summer 2026 business to their supply base which is for us the quarter three or the quarter four sales. We are seeing a positive momentum from these US customers for our Vietnam, Indonesia, Bangladesh and Guatemala region.
Remember, Guatemala is net 10% baseline tariff only and they do not have any MFN tariff. And on the other hand, India has suddenly come under a lot of pressure in this last one week. Our business model rooted in a strong geographic diversification, deep customer relations and a solid order book which gives us the resilience and the flexibility to navigate through these current uncertainties. We remain confident in our ability to adapt swiftly and continue delivering the consistent performance that you expect from us. Let’s take a closer look at the progress and the operational highlights across each of our geographies.
Let me start from Vietnam. Vietnam got a tariff additional tariff of 20% this quarter. We recorded a very healthy revenue growth from our Vietnam operations. Here the sales grew by 75% year on year reflecting the success of the strategic decision and of US securing the capacities within time. This also translated into a higher realization driving the healthy demand and strong customer engagement for the rest of the year as well. Vietnam proved to be an important manufacturing hub for us and has secured one of the earliest deal with Trump administration. The early clarification of trade policies has paved the way for market confidence amongst the customers and enabling us to tap into the emerging opportunities much more effectively.
We are well positioned to sustain this momentum in the coming quarters as well. Moving on to Indonesia, here again the additional tariff is at 19%. Indonesia has demonstrated an impressive growth for us, approximately 50% on a lower base, although a lower base compared to last year and we continue to regain the business after the relocation of our factory. As you all know, this is another country where we are witnessing early resolution of tariff deal with us and a very positive momentum. We are seeing a lot of migration from China continue to happen both in Vietnam and Indonesia, so we are confident to carry this momentum in the coming quarters as well.
Speaking of Guatemala, it continues to be at a net reciprocal tariff of 10% baseline tariff which Trump administration has announced and there was no WTO or MFN component of the tariff. So the customer interest naturally is high in this region and also it is driven by the logistical advantages being the proximity to us. So we are gaining strength as we steer through the early challenges of a new country that we have established. So as you know like we incurred some losses the last financial year so we are looking forward to improve on them and then grow this business.
Now moving on to Bangladesh. Here the US tariff additional tariff reciprocal tariff has been defined as 20%. This decision got delayed and was announced on 30th of July. Post this clarity we are witnessing a very positive momentum from this geography as well following the last year’s remarkable growth. Our facilities are currently operating at optimum efficiency. Bangladesh plays a pivotal role in our long term vision because it offers various advantages. The existing free trade agreements are due to its LDC status to countries like European Union, uk, Australia, China and its overall competitive costs, higher productivity, skilled labor and a matured ecosystem of an experienced leadership.
So all these things definitely helps us to really leverage the strength of Bangladesh. We continue to scout for new opportunities in Bangladesh should the right prospects arise. The lower tariff rates compared to the competing markets like India and China strengthen the conviction that we had to expand our footprint in this country. This aligns well with our broader strategy and reaffirms our confidence in Bangladesh’s long term potential as a key garment manufacturing hub. We remain committed to our earlier announced CAPEX plan towards capacity expansion and sustainable laundry capacity expansion. This expansion is expected to add additional capacity of 5 to 6 million pieces in our Bangladesh capacity.
Now finally talking about India. We delivered an encouraging performance in India with an adjusted ebitda increasing almost 47.2% year on year and the margins improving 250 basis points to 7.3% in our quarter one of financial 26 up from the 4.8% last year. Due to change in our customer mix and product mix and some productivity gains, we continue to see significant potential to further expand margins in the India business. On the flip side, US has recently announced a 25% tariff on the Indian exports which is applicable from 7th August and an additional penalty tariff of 25% which is applicable from 27th of August.
Now these deadlines offer scopes for negotiations. However, if these situations remain unchanged, we should make our plan and it will prompt a strategic shift in Pearl Global’s manufacturing and marketing approach. In response to these trade barriers, Pearl Global plans to prioritize its other manufacturing hubs such as Vietnam, Bangladesh, Indonesia and Guatemala for fulfilling the USA orders and to maintain the cost efficiency and the timely deliveries. Meanwhile, India’s manufacturing operations will pivot to focus on the non US markets where India produces. Our India products remain competitive in quality and also in price. However, while we are working out this realignment, the near term challenges to India operations remains.
India constitutes approximately 25% of our top line and last year we had more than 60% of this 25% business in India from USA. This year due to the growth in our other markets, this trend is now above just above 50%. In this context also we must say that the India UK Free Trade Agreement is a promising opportunity for Indian exporters. Pearl Global has a well established office and customer relations in the UK market, mainly servicing from our Bangladesh manufacturing and some in India. Now this is poised for growth as the Indian shipments will get a duty advantage from 2026 onwards.
At the same time we are experiencing a growth in our business with the Japan and Australian customers. Now to provide an update to our Bihar facilities, 500 machines have already been installed and the remaining 300 will be added in a phased manner depending on the demand. We plan to operate in two shifts. Overall our order books are looking healthy despite the global challenges, we are confident of a moderate growth plans that we have highlighted earlier. A recent situation does provide some unusual challenges and simultaneously some significant growth opportunities for Pearl Global and I’m proud to say that Pearl Global is ready to face them.
With that I will hand over to Sanjay, our group CFO who will provide a detailed overview for the quarter one financial year 26. Sanjay, over to you.
Sanjay Gandhi — Group Chief Financial Officer
Thank you Pallav and good morning everyone. Welcome to our quarter one FY26 earning call. I will now walk you through our financial and operational performance for the quarter ended 30 June 2025 I am pleased to share that we have delivered yet another strong quarter with top line revenue exceeding INR 1,000 crore. In quarter one FY26 our consolidated revenue stood at INR 1,228 crore representing a 16.6% year on year growth. This growth was led by enhanced contribution from Vietnam and Indonesia fueled by strong order book and healthy sales volume despite ongoing tariff related uncertainty. Adjusted EBITDA for the quarter came in at INR 114 crore, a growth of 13.4% year on year with margin at 9.3%.
Adjusted EBITDA margin excluding the impact of operational losses at New facility, Guatemala and Bihar and tariff cost of INR 11.75 crore stands at approximately 10.7% in quarter one FY26 continuing the trend of double digit margin for the second consecutive quarter. Quarter PAT in quarter one FY26 grew to INR 66 crore, a growth of 5.9% year on year basis. Excluding exceptional item in quarter one FY25 PAT registered a year on year growth of 13.5%. Now turning to our standalone financial performance, in quarter one FY26 our revenue stood at INR 267 growth, a marginal decline of 3.4% on year on year basis.
Historically our performance in the second half has consistently outpaced the first. However, tariff imposed by us do pose challenge to this trend. As highlighted above, we are working aggressively on realignment of our strategy for our India operations. Adjusted EBITDA rose to INR 20 crore up by 47.2% year on year margin also improved by 250 basis points from 4.8% in quarter 1 FY25 to 7.3% in quarter 1 FY26 due to change in customer mix and product mix pad for standalone business grew to INR 26 crore, a growth of 62.6% on year on year basis. As we recalibrate our strategy to adapt to these evolving trade dynamics, it is pertinent to note that US revenue from Indian entity in FY 2425 stands at 16 to 18% of the group revenue while profit from this business is between 4 to 5% of the group profit.
We believe such recalibration strategy as highlighted above should help in maintaining the profitability. During the quarter we received a total dividend of approximately INR 18 crore from Norfolk Industries Ltd. Bangladesh subsidiary and PEL Global Hong Kong Hong Kong subsidiary. In line with the fungibility of cash across group entity, the company has been consistently declaring dividend from subsidy company in Bangladesh and Hong Kong since FY 2022. Despite global headwinds and tariff uncertainty, our operational performance remains steady year on year. Number of PC Ships rose to 17.2 million in Quarter 1 FY26 from 16.7 million in Q1 FY25.
Our average realization for the quarter is higher because of the increased share of Vietnam and Indonesia in the Group 6. We have successfully commissioned solar panel installation across three key unit in Gurgaon manufacturing facility adding a cumulative capacity of 722.2 kilowatt of clean renewable energy to our operation. Another two plant will be commissioned in quarter two. When we look at our CAPEX plan. While we have not committed new CAPEX this quarter due to ongoing tariff uncertainties, we have continued to progress with strategic investment. Going forward, we will await stability in tariff environment before pursuing additional CAPEX in our respective geographies. In summary, we have delivered a good quarter of growth while sustaining our margin despite the challenging environment. As we move forward, we remain confident in our strategy and execution capability.
Thank you. Now we can open the floor for the question and answer.
Questions and Answers:
operator
Thank you very much. We will now begin with 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 assembles. The first question is from the line of Bhavya Gandhi from Dalal and Brocha Stockbroking. Please go ahead.
Bhavya Gandhi
Yeah, hi. Thanks for the opportunity and congratulations on a good set of numbers even in a challenging environment. So my first question is regarding the realizations. S. How sustainable are these realizations? Because historically we’ve been guiding for 600 rupees sort of realizations. And in Q1FY24 we had seen this kind of realizations like 715 odd levels and then again it started dropping to 650 odd levels. So what would be the average realization one should work out with? Yeah.
Sanjay Gandhi
The Q1 in journal has.
Pallab Banerjee
Go ahead Sanjay.
Sanjay Gandhi
Yeah Pallav, please go ahead.
Pallab Banerjee
No, no, I was just talking about the seasonality because Q1 definitely has got more of outerwear which goes to the western market, the jackets and all. So it is trending a little higher. But please add on to it and further explain. Sanjay.
Sanjay Gandhi
No. Yes, Prahlab. This is in line with what I was about to add that this fact that you know, the seasonality Vietnam Contribution in quarter one is always more. And as the average, average garment realization in quarter one will be higher, higher than the quarter three or quarter four of the financial year. In this particular year, in this quarter since Vietnam, contribution has even outpaced the previous quarter, the realization has gone high. So when you look at quarter on quarter comparison year on year going forward also I think this kind of a level will be sustainable. However, for the full year basis, we have already stated the assumption what we need to take around 625, 650. That level I think is something which we still would like to hold on.
Bhavya Gandhi
Fair enough, sir. And second question was. Yeah, yes sir, go ahead.
Pallab Banerjee
Just a small addition is that we are now making outerwear even in other locations as well. We have just experimented with on order in India and Indonesia also will improve on the share of making outerwear. So as this goes up, so there could be a trend. But yeah, it’s still not a definite forecasted number as yet. As Sanjay said, like we have to see the overall annual average.
Bhavya Gandhi
Fair enough, sir. And sir, if you can share the capacity utilizations at Indonesia and Vietnam, that will be really helpful.
Pallab Banerjee
So as you know, Vietnam, we do both our in house facility as well as the partner factories so that we are to the minimum and Indonesia as well as located the factory. So that was still not at 100%. That’s. I think we are ramping up as of now. Sanjay, any numbers that you have in your ready numbers, then you can share.
Sanjay Gandhi
You’re right. And I would just like to add that Indonesia is in a ramp up phase. It still was operating at only 50% of its capacity last year. The growth is say on a low base. So there is a still ample opportunity, opportunity for us to grow to the grow to the level of 90, 95% utilization. At that level on an annualized basis, we should be achieving a sale of 32 to 35 million dollars. So currently there is a scope for, you know, further utilization in Indonesia, Vietnam. Yes, we have, you know, reached almost 90, 95% utilization in quarter one. But every quarter will have its own opportunity to bring it up.
Bhavya Gandhi
Fair enough, sir. Really helpful. And just one more question if I can squeeze in. So this is regarding how much of the India production gets landed in us Just wanted to understand how much is directly imported in US out of the India region. Or I may rephrase it, how much is the exports from India to the US out of the total top line which gets landed on the US coast.
Pallab Banerjee
So if you look at the maths like India Last year did about 25% of our total top line and close to 60% of India’s shipment landed in US. So about. I think that means total number will be coming around close to 15% of our total top line.
Bhavya Gandhi
15% of the door. And so if we were to shift this, because we are truly multi geography, right? So if we were to shift this, we have only Indonesia, which is slightly underutilized and somewhat. You can ramp up in the Vietnam as well. But if we were to fulfill this demand, do we have additional capacities? Because Bangladesh is at 90% capacity utilization, if I’m not wrong. So how can we transfer those goods to other geographies?
Pallab Banerjee
So both in Vietnam.
Bhavya Gandhi
Yes, I’m good.
Pallab Banerjee
Yeah. So both in Bangladesh and Vietnam we have expandable capacity because we have been growing and we have the partner facilities where we can add more lines. And these facilities are already approved by our customers.
Bhavya Gandhi
Okay, great sir, great. All the best, sir. I’ll get back in the queue and thank you so much for the answers. Really appreciate it.
operator
Thank you. The next question is from the line of Kishore Kumar from Unified Capital. Please go ahead.
Kishore Kumar
Thanks for the opportunity. I have a question on the, the, the strategic shift that we gonna make. Actually see if, if we look at actually if we are shifting protection from India to Bangladesh or Vietnam or Indonesia for the US customers and vice versa for the other. So I understand that each of these geographies have expertise in certain product categories like cotton based in the South India and ASEAN countries actually have expertise in the man made fabrics. If we shift this way, the cost of production will go up, isn’t it? And also is it feasible to actually shift this way? Because you need to train the employees on those garments as well as sourcing also needs to be figured out.
Pallab Banerjee
You know, good question. It’s not that simple to shift overnight or without any preparation. So you see there are two things that comes into play. Something which is very short term, like that means this current which is in order or just getting placed in terms of order. So there’s a short term fix that we need to have to maintain the market share of the customers, wallet share that we have. And because most of these customers, the top customers, we are in a growth phase. So we do not want to hindrance them. And their expectation is also that we can support by shifting the product.
If you look at India and Bangladesh, there is a lot of similarity because Bangladesh also majority of the production is on cotton base. And if I look at Indonesia and Vietnam, we had that readiness. So in Vietnam, if You talk about or in Indonesia you talk about the two quarters which is your Q1 and partly Q2 or end of Q4. This is the phase where we make a lot of synthetic outerwear and activewear at this point of time. And then comes the quarter three, quarter four, which is more of supplying goods to the, you know, the summer of these western countries when cotton takes a precedence cotton and ceruleosic fiber.
So it’s not that this particular facilities cannot handle cotton or cerulezic they are ready to handle. But as this we are navigating through this, you know, geopolitics and this tariff war during that time. We have to see what are the best options that we have. The one of the key decision making factor for these shifts at this point of time would be the availability of raw material. In case these raw materials are available from the India region or the cotton, then it makes sense to move some of them to Bangladesh for a short term. For the long term, then we can plan from beginning like where do we source the raw material, how do you develop the raw material? The whole market, whole ecosystems can be developed.
So there are two phases to it to summarize. One is immediate response for the next immediate two, three months and then the longer term. So both we are working upon as of now. So it’s not that we will be shifting 100% of it. We are hopeful that there would be a resolution between India and us hopefully soon. So that and if then this production can be made in India as well. So at this point of time the readiness is very important and the swift action to gain and to maintain the confidence of our customers is the most important thing. And that I think Pearl is capable of doing.
Kishore Kumar
Yeah, yeah, pretty much. And on the second question actually sir, earlier the deadline was actually on July 9th. So given the significant growth in the Vietnam and Indonesia, is there any front loading of shipments happened to the US Actually.
Pallab Banerjee
Not much because this particular like for example, like other markets was more important at this point of time because of the fall and holiday goods are lower season for the India market. And as this extra tariff comes in at a phase where whatever are last goods of fallen holiday which are into production. So we are trying to do that and move it up, up but not a huge massive number.
Kishore Kumar
Understood sir, understood. My last question is on the guidance actually is our guidance on the volume 12 to 14 percentage still intact or any change on that and what is the full year guidance? If you can give that on the margins and revenues. Thank you.
operator
Thank you .
Pallab Banerjee
Sanjay If you can take that.
operator
Sir. He has left the queue. The next question is from the line of pricken Ramesh Gopani from Capri Global. Please go ahead.
Riken Ramesh Gopani
Thank you so much for the call and congratulations on a good set of. Numbers under this condition. The first thing I understand is if you look at our Overall capacity, about 20 million is the capacity that we have in India, correct. Or the current production. So of that you are basically saying about 15% is what goes to the US is that how we should read this?
Sanjay Gandhi
No, I think 24.5 million is a capacity in India. 15, 16 to 18% or 15% is a group revenue which goes to, goes to USA.
Riken Ramesh Gopani
Okay, so so from India specifically about 50%. Okay. About 50% of India.
Pallab Banerjee
As of now we are clocking. So naturally like you know, at this point of time our immediate response would be to fill up because see with 50% tariff most of these American customers will try to avoid paying this 50% tariff because then that will render their product to be too expensive to be sold to a customer. Certain customers can, certain product will still be there, but it will be a very insignificant portion. I would say very small portion would remain. So naturally our focus would be to fill up this 50% as much as possible through other business from other markets like Japan, Australia, you know, local Indian manufacturing.
So there will be the immediate response that most of our capacity has to be dedicated to. So that’s why I said the challenge would be in terms of this, you know, making sure that this smooth transition in a quick thing that happens of course on a longer term this is already in works. So we are not concerned. But for a short term, for the next immediate one, two months or three months, that’s something that is, is somewhat of a challenge that we need to navigate through if this thing is not resolved by the Indian government along with the U.S. right.
Riken Ramesh Gopani
So any which way, the worst case scenario here is that 15% of group, therefore about 7.5% of group revenues effectively would be what will be impacted. What is coming from India. Right. That’s how it should be.
Pallab Banerjee
Didn’t get that number. Sanjay.
Riken Ramesh Gopani
At the group level, how much of this impact will be there because of the India business to us?
Sanjay Gandhi
So let me just reframe the answer. So the number 16% of the group revenue is under the discussion for realignment. So you are understanding about 16% of group revenue revenue which goes to us is under the group realignment strategy, which is what Mr. Pallab has just mentioned about that.
Riken Ramesh Gopani
Understood. Okay. That is the one which we need to sort of redirect and move from other countries. That’s, that’s the. Got it, got it. And and second point is you did mention that the while the revenue contribution is about 15, the profit contribution is only 4%. Is it?
Sanjay Gandhi
Yes, you’re right. I mean profit contribution. If you look at overall India contribution to the group profit, operational profit is also minimal for the reason we have highlighted in our previous calls which we have been working to improve in India. So as the figures stand at 24, 25, that number is 4 to 5% for the group profit after tax.
Riken Ramesh Gopani
Got it. Very clear. The second question which I have is with regards to the, you know, performance for this quarter, what would have been the impact? Because we did mention that initially part of the tariff increase we had absorbed at our level and then effectively then passed it on to the client thereafter. So what kind of impact did you have to the gross margins in this quarter because of part taking that impact and how will that change going forward?
Sanjay Gandhi
So I can mention you the number in quarter one, quarter one as I mentioned in my speech is 11.75 crore. Roughly 0.9% of our group quarter one revenue is what has been impacted the EBITDA in the quarter one itself going forward strategy. I request Mr. Pallav to add on that.
Pallab Banerjee
So as I mentioned earlier also this is more of a negotiation process. So when the 10% additional tariff was implemented by US administration most of these US customers had to immediately absorb that 10% additional tariff reached to the supply base and asked to burden share. That means share this extra 10% whatever amount that we can. They were asking for 50, 50 and of course most of the suppliers of the supply chain negotiate. Our negotiation was mainly in the range of 2% as I said at that point of time Also over almost 50% of our total revenue was in US and I think we are clocking more like that.
There are certain customers where we could avoid the burden share. Certain customers we didn’t give any of these discounts and to certain customers we had to give up to 2% or a little more in one or two cases. So that’s how these negotiations was done. Now as the clarity is coming from the US more and more for other region this is coming to an end. So there are certain customers who said that okay, do share this burden for maybe a couple of more seasons. So this is a negotiation tactics that most of the customers are or some of the customers are still using.
So we will navigate it accordingly. But the fortunate thing is that now costing is done quarterly. Most of the costings is done on the quarterly basis. So as we have to, you know how we do the negotiation and how you build up some of these costs into our. As we are quoting the prices. So that’s, that’s a. Generally that will continue to happen. So there is no definite percentage that can be forecasted, but it will start going down from here.
Riken Ramesh Gopani
So we can say effective on a progressive basis over the next three or four quarters you could recoup this point nine percent impact that you have had in the Q1 numbers.
Pallab Banerjee
Yes, to certain extent because whatever like you know how the geopolitics and company is playing. So I don’t know, maybe it seemed that okay, it will be more of a buyer’s market for some time, but sometime it looks like a more of a suppliers market. So it will depend on how the things are. Things are moving very fast and depending on the negotiation power that the supply base would have, this effect will get minimized. Now with the scarcity that is getting created in the other markets, if suddenly one of the countries put at a 50% tariff, so then definitely the air suppliers will have an upper hand to negotiate.
I hope you understand what I’m trying to say.
Riken Ramesh Gopani
So this is very clear. Sir, thank you so much for the answer.
operator
Thank you. A reminder to all participants, you may press star and one to ask a question. The next question is from the line of Dwanil from I Wealth Fund. Please go ahead.
Dhwanil Shah
Good morning sir and thank you for the opportunity. Am I audible, sir? Yes, please sir, just on the. To understand the whole tariff now so broadly, sir, US retail market is growing at 3:4 odd percentage. And what we are also reading hearing that the inventories and also they had already prepared for that. Right. So how are you seeing now sir, the overall H2 shipping up with the minimum 20% in the other geographies and 25 or 50 in India. What should happen to a theory the volume growth and B the incremental margin hit we might have to take. I know sir, you tried to explain it in the earlier question. But just to Understand now from 10 now 20 has been the baseline with the overall market not growing there. So this has to be passed on to the whole ecosystem.
Pallab Banerjee
Yeah, very interesting question and very valid question at this point of time. See, this is the question that most of the economists and most of the news channels US has been trying to address. Everybody felt that with this kind of tariff there would be reduction in the sales and there would be some kind of problems that can be visible in the US economy. But somehow till now, till the month of June, numbers that came out and even like early expectations of July that we saw was that the retails were not facing this particular kind of projection that a slowdown or the inflation that would come in.
So one of the theory was that they have enough inventory in the retail to sell through at an old price. So normally this season, as the season changes, because what we saw is definitely the purchase as you’re seeing in our business, we didn’t see any reduced buy for the outerwears from our customers that we have serviced from other countries like Indonesia, Vietnam and other places. So that we have not experienced that as of yet. But yeah, this is something like, you know, most economists and more news channel worst are saying that as this will be passed on to the US customer there will be some kind of reduction in business.
So that’s definitely is still a question mark how and in what shape it will come through. Generally if you see for 20% additional tariff that these goods are attracting as it lands in us from my experience, if you talk of average retailer like the common names like Gap and Kohl’s and all that we service and PVH and all, so anywhere around 50% or 55% of the final retail realization that they do in the store is the cost of goods. So that means the goods which is we ship out what we get payment from them and.
And the coal cost of logistics and tariff, now that particular cost is going up by 20%. So your normal math will say that okay, like to absorb this 20% the retail price should go up by 2010%. That means 50% of it has to be passed on to the customer. So then basically all other costs remaining same, if they just improve the price ticket or increase the price ticket by 10% then they can mitigate it. Or the other option that these retailers would have to decrease some of their expenditures expenses and absorb some of these costs.
And let’s say the supply chain also absorbs some of these costs. So this is 10% will be the play. So there could be a pressure on their side to minimize the expenditure. They might put a pressure to the supply chain to do it. Depending on which side of the as I said, like it will be a supply market or it will be a buyer’s market. So then that’s how the negotiations will go through. Like I’m just hypothesizing and expanding the thoughts as you are asking the question. So this is how this will be played out as of now.
So naturally when suddenly 6 billion dollar market is taken out. I foresee that it will become more like a suppliers market. So let’s see how that goes with that situation. Definitely we may get some added advantage and added opportunity in the whole deal in terms of market getting shrunk. US Market have been expanding at a rate of anywhere between 2 to 5% annually for the last few years. This year in fact this week only we saw that CNN article in which they said that 60% of the immigration that used to happen annually the number has come down by 60%.
So it’s anybody’s guess like what will be the population of us and how the markets are size will grow or not. So let’s see, all of these are still good interesting questions. Our strategy now coming back to Pearl strategy would be to play with the players or the retailers and the brands who are in a growth mode. So who are gaining market share in the US and so that we continue to grow with them and stay away from those people who are losing market share or like in our dependence to those kind of people. There will be definitely a shakeout in the US market as well.
So that our path is clear that we should be. We are still on a growth path and we will do everything, you know, we’ll keep our antenna, all our analysis, all our inputs ready so that we are on the right side of the market. So that’s the endeavor, that’s the goal and that’s the objective that we working with. I hope it made sense.
Dhwanil Shah
No, I. It makes sense. So basically sir, just to summarize what you told me that what we shift from here it said broadly our ASP is at 600650 rupees and the retailer there would be selling at somewhat 1500 to 1800 to two and half times over our price. So to mitigate this 20. No, no, no.
Pallab Banerjee
That will be. 50% is. 50% is their landed. So once they have paid the duty that is 50% and the other 50% is there. They’re all the SGNA expenses, their marketing expenses, rent, depreciation, everything. Is that our balance 50% after the goods are landed. So not the 650. We are talking about 650 lands at about used to land about 1.3. Nowadays it will be landing at 1.5.
Dhwanil Shah
Okay. And then you. 650 into 1.59. So around 221900 to 2000 rupees. Got it. So.
Pallab Banerjee
So minimum yeah retail price.
Dhwanil Shah
And to mitigate this 20% they’ll have to take this. They have to take 10% of price increase. Broadly. Yeah, got it. And, and, and sir, on the H2 now, right, the last year our volume growth was very healthy. Right. So, so how, how are you sensing sir with the, the orders and I. Think it’s little early but you.
Pallab Banerjee
Yeah. So like now the current quarter we have the order book that’s like you know we are maintaining the trend. There are two things that happens in the quarter wise because now as we are growing in the other markets like Japan, Australia and all so they are not goes as per the US timeline. So certain times like you know we have to produce in one quarter, the shipment goes in the other quarter. So there will be some kind of minor shifts here and there that we may see. Like as of now it has been working with a quarter on quarter so there could be a little bit of a shift here and there.
But overall we are seeing a positive trend and as I just mentioned like the market has not shrunk so far. So the indication that we got from the US also like which is let’s say 50% of the market, we saw that they were ready to place the spring summer business knowing very well that There is a 20% hike in the tariff. We didn’t see like from the customer that we are servicing, we didn’t see any significant drop in the numbers as they were projecting it. Now with this 50% tariff in India there is definitely a shift and exercise that is going on at this point of time how much it will be possible to shift and all those things they will be working out.
So so far we haven’t seen a huge shift in the US marketing trend or buying trend. Other markets. If you see the number the import that has happened in Japan or in UK or in European Union in the first five to six months of this year, it has so much significant growth anywhere between double digit growth. If you see all these three markets that have experienced us experienced a single digit growth almost about 7% if you see the stats. So with those things it looks like the kind of fear or the kind of conservatism that was prevailing in the market due to the wars and all are slowing down. So this tariff thing is definitely a B2B kind of problems but the markets are still not shown the kind of slowdown on the consumer end.
Dhwanil Shah
Got it. Thank you. Thank you so much sir. I’ll come back.
operator
Thank you.
Pallab Banerjee
Thank you.
operator
The next question is on the line of Chirag from Ms. Capital. Please go ahead.
Chirag Fialoke
Hi, thank you for the the opportunity. Am I audible, sir? Hello.
operator
Yes, you’re audible.
Chirag Fialoke
Yes, perfect. Thank you. For the opportunity. Sanjay, just two questions actually. One, the the base erosion, the BPS norms that came into effect in April, that’s not applicable to us yet for the Hong Kong entity because of scale, is that correct? Or if there’s any other color on that, if you can provide and you know, what is your sort of overall guided tax rate from that perspective? If you can start with that. Thanks.
Sanjay Gandhi
Yeah, sure. Thank you so much. Yes, you’re right. The base erosion is not applicable as of now to Pearl Group. We still have to read the threshold limit. Our effective tax rate, you know, we mentioned that, you know, as of now will be at 15% under base erosion. Also it lead to a 15% as per the current rules. But we are I think a couple of years far from that reaching that limit. And we’ll see that at that point in time this is how the limits will propose and work.
Chirag Fialoke
Understood. And that’s very helpful. The second question is on the realignment of the capacity and the India operations. So obviously we understand that the India operations currently are below the average EBITDA or the average profitability of the group. Given that there might be more volume impact here, does that make sense then to assume that there might be some retracing back to sort of a loss making kind of a position in the India entity? Is that possible? Is that something which is on the cards? That’s the second question.
Pallab Banerjee
So in the short run that means the immediate one, two months. How do we react if this penalty tariff is prevailing? So then as we just spoke about that some of these US business would be moved out to the other locations and that capacity had to be filled with something else. So we have so far seen a significant growth from our Japanese customer and an Australian customer. So whether it will be completely able to fulfill the vacuum that may get created if this is not resolved, that is something to be seen. So naturally like we are at this point of time, we’ll be looking into options of any and every other options if this has to play.
Because if I move out to the other region, at least the current business which I have a site into, I will not be losing on the margins and the market share of that. So that’s prudent to move. Definitely. If something remains in US the customers would come back for a burden share because this is additional 25, 30% of tariff if we are shipping from India would pinch any customer. So they will definitely force us to burden share. So for this immediate business which is like supposed to have been placed either end of July or beginning of August.
So this only portion, a temporary thing that we need to tackle through and work it out. But yes, fortunately for us the exposure is very small. At a group level it is as we just discussed, hardly about 15%. So that’s something we have to quickly tackle and we are working definitely full time so that this impact, a negative impact doesn’t come through. So we have to manage the cost as well as this allocation very swiftly and smartly.
Chirag Fialoke
Understood. That’s, that is very clear. If a number is, this is a follow up of this question. If the number is readily available, could. You share also as a percentage of the overall opex, what does the India entity contribute? So it’s 4% of profitability for this piece. But what is it on the OPEX side? If that’s available readily or I can take it offline.
Sanjay Gandhi
Yeah, I can understand you, you know, in a bit more detail about this offline. I think we can discuss that.
Chirag Fialoke
Okay, perfect. Last question. Just Pallavar, you alluded to the fact. That given all the uncertainty and the shakeout, possibly what’s going to happen is. That there are going to be certain customers in the US who are going to sort of go through their own financial trouble or their own operating trouble. And we are kind of steering clear of that. Could you help us, you know, just with what are the broad things that you look at? Because even a big chain can go through trouble. You know, just scale will probably not defend someone from the kind of uncertainty that is going on right now. So what are the kind of things that you look at at a customer end to ensure that, you know, ongoing businesses is protected and they’re not going, you’re not going to get into any receivables or any other, you know, related problems. If my question was clear.
Pallab Banerjee
No, very clear. And that has been one of the foundational structure of our financials prudence that Sanjay had brought in. So we in fact, as you know that almost every customer of ours we have a non recourse factoring or a very strong insurance company backing it up. So we do collect continuous input from them about the health of the customer. That is one way of keeping track. The second way that we do is that as we have repeatedly said that we identified these customers and really invest on them, either me, myself, our vice chairman Pulkit Set, or one of our CEOs from Bangladesh, Vietnam.
All these locations, we have deeper relationships at the senior or the senior most level of this company so that we have a regular communication with them to understand how they are doing the business and how they’re planning the business. So that also like you know, is always a route to understand like what’s happening to their company, what kind of broad decision that they’re taking. So this is something is key as we laid our foundation for the growth and our objective to be one of the bigger global players. So I would say that we are fairly strong in that journey at this point of time. And fortunately the network that we have been able to establish from my past experience and my network and these other CEOs network from each of the locations, we do have a very robust process in which we continue to do this risk mitigation.
Sanjay, like could you like to elaborate more on this in terms of the process?
Sanjay Gandhi
Yeah, I mean you have broadly covered the process of you know, various financial discipline which are existing and this is how it works out. And at the time there is a strategic decision also to be taken and combination of all that drives the entire process whether it’s opex, Capex or any other financial decision which are being taken. And there is a continuous, you know, review and monitoring on the credit risk side as well. So any, any new customer which is getting onboarded, any increase in the wallet share of the existence existing customer, the entire validation process has to be run through and is continuously reviewed and monitored on a more regular basis. So that’s understood on the process side.
Chirag Fialoke
Perfect, thank you. Thank you Sanjay. Just to follow up on this and these analysis are at a group level or at a buying division level, Is there a need to do it at that level or at a group level? Sort of. You’re safe enough. Sorry, not aware of, you know, what the internal dynamics look like in those big players. But I don’t know if my question was clear but what I’m trying to understand is is it enough to do. It at a group level?
Pallab Banerjee
Yeah, yeah, yeah. This list is regularly reviewed on a monthly basis and sometime even twice a month if the situation is tight. If you feel so that something is a very robust process that we have in Perl, including at the independent director level as well.
Chirag Fialoke
No, I meant at the customer side. Is it enough to review their financials at a group level or do you need to go down to the buying division, look at cash flows there or is it enough that at a group level things are look good and then everything else sort of slows down on its own customer.
Pallab Banerjee
Customers would be, sorry like if I’m understanding the question correctly, their financial teams. So we do like for example, I have one customer who wants to increase the business at this point of time. And so we are getting our part of the process like the kind of insurers and all if they are not getting publicly listed information. So then we reach out to the top level and meet with their financial teams so that this information is complete.
Chirag Fialoke
Understood. Perfect. Thank you. Very clear. Thank you so much for the time.
Pallab Banerjee
Does that make sense to you? Am I able to understand?
Chirag Fialoke
Yes, very clear. Thank you so much.
operator
Thank you. The next question is from the line of Pulkit Singhal from Dalnis Capital Management. Please go ahead.
Pulkit Singhal
Thank you for the opportunity and congrats on a good set of numbers. Your diversified business model is clearly coming to the fore at this point. Just a few questions. One is that I understand you talked about first half in the US being good, but we were also coming from the backdrop of there was over correction of channel inventory in the previous year and some bit of that was also coming back. But if tariffs are going to come across all products in the US and it’s going to be inflationary, wouldn’t that have some level of impact on overall apparel demand? And I’m just thinking that you know, 20%, let’s say baseline tariffs translate to 6 to 7% at an MRP level for the customer purely on apparel and obviously for all goods they will be paying some higher level of mrp. This is provided the entire thing is transferred to the customer. So in your experience whenever goods are apparel prices have increased so much. What has been the kind of impact.
operator
Hello sir, are you there?
Pulkit Singhal
Yeah, am I audible?
operator
Yes sir, please continue.
Pulkit Singhal
Sorry, sorry, did you not hear my question or should I repeat? Hello? Hello?
Sanjay Gandhi
Hello. Yeah, yeah, we could hear your question. I’m just waiting for.
Pallab Banerjee
I think but I think overall what you are asking is about the US apparel demand and if the. Yeah, it’s. It’s is my. Can you hear me? Can you hear me? What I.
Pulkit Singhal
Thought your voice is cutting, getting cut up my end.
Pallab Banerjee
Hello, is my voice clear? Am I audible?
operator
Mr. Palab? Yes, now it’s clear. Please continue.
Pallab Banerjee
Yeah, am I audible?
operator
Yes sir.
Pallab Banerjee
Maybe this connection problem at my end but I understood the question about the US retail price as well as what could be the appetite in terms of the demand. So two things out here us the one is like you know we are seeing some changes like some of the retailers did change the price ticket where they increase the price ticket but majority of them have not touched the price ticket as of yet but decreased the markdown that was prevalent in the market. Hello, Am I audible?
Pulkit Singhal
Yeah, yeah.
Pallab Banerjee
Yeah. Okay. So yes, like, you know, your understanding is correct. Like anywhere between 6, 7 to 10% kind of increase would be needed to absorb this 20% if everything has to be passed through to the customer. So the US Citadels have got two tools. Either they have to change the price ticket or they have to do the average markdowns that they do in the market, like while selling the goods. So that has to go down so that the realization goes up by this many percentage. So that’s the obvious math tells us that how it will pan out, only time will tell.
So far we have seen the customer that we are shipping to, they have increased their prices not on all products, but on certain products, a certain percentage of the products, almost like about 30 to 40% of the products. The price ticket has started changing. Markdowns have started changing already in this season, last season. So I think as they do it, as they have the sell through, their confidence will go up. Everybody was very skeptical in the beginning. They were not changing their markdowns or the price ticket. And initial reaction was to pressurize the cost from the supply chain.
But I think now people are experimenting and getting some data. Of course, like, I’m not privy to the 100% of the data so far, but yes, what I can see is that the projection that they had given to us for spring, summer season that showed that confidence in their numbers, we didn’t see a major drop. Now this projection, as it is finally placed to us, I think we are in the middle of the placements. So I think over the next two to three weeks, we will see the numbers are changing or they are maintaining it.
Pulkit Singhal
Okay. And secondly, since you’re already. Yes, yes. So the second question is, because you already have 20% tariffs in other countries except India, how has been the sharing of, you know, how. What has been the expectation of how much burden will be shared by the supplier? Because 20% is a huge number. Is there? Is it? I mean, is there some data you can share? I understand. Because India is. Now they’ve held back on India, so you’re probably not being asked to share as much. But suppose India also settles at 25, then almost all countries are at 20 to 25. So in that case, our suppliers expected to share.
Pallab Banerjee
If you see like, you know, when this 10% had come in, that’s the time almost all the US citizen. Yeah, I will take this. Answer this in. So when the first 10%. Am I audible?
Pulkit Singhal
Yes, please go ahead.
Pallab Banerjee
Yeah. So as the first 10% was implemented by us, we had a reaction from almost all the US customers to do a burden share. And the negotiation or the discussion that went is that when the final numbers of the, you know, the liberation day will come through. So that’s the time like we cannot take this. But yes, it is still, it is 10%. We offered like whatever 1 2% kind of thing that we had offered as a supplier. Now that when this final number has come in, this is now almost about a week old or just over a week old.
We have not heard anything from the customer as yet when the India thing came up of 50% and everybody else at 20%. So that’s the time only in the last 24 hours we have heard from one or two customers that what will happen. Either you move it out or you take this additional 25%. So our answer has been clear that okay, we would first of all move it out because absorbing a 25% doesn’t make sense. And naturally they’re also speaking about like they can’t take this 25% so they will be counter costing it in some other country.
So that’s the kind of first reaction. But it is like too soon soon to say to establish an answer to your question because it’s just about 24 hours. Like only yesterday was a day that this thing started happening. So I don’t think everybody has reacted for the specific to India but the last seven days of the all over tariff that has been declared, we have not heard back from any of the customers of any additional burden share, right?
Pulkit Singhal
No. So the question is if every country is at 2025.
operator
Interrupt Mr. Singhal, but I request you to rejoin the queue for the follow up question.
Pulkit Singhal
Sure.
operator
Thank you. The next question is from the line of Prerna Junjunwala from Elara Securities.
Pallab Banerjee
No, let’s finish this if I may. What is the extended question that you’re asking?
operator
Sir, he has left the queue. Pulkit has left the queue. The next question is from the line of Prerna from Alera. Please go ahead.
Prerna Jhunjhunwala
Thank you for the opportunity. Congratulations sir on good resilience shown in these tough times. I just wanted to understand what helped you to maintain this kind of margins and, and what cost control initiatives did you take to really, you know, get over this difficult burden sharing thing that has been initiated by the US.
Pallab Banerjee
So if I have to answer that, we have been on the journey of reducing our cost and making the efficiency better. So that’s a regular process. I would say that yes, it does take a momentum as the challenges become more so that definitely played on our side. But at the same time, the negotiation that happened, like most of these customers came back with a 50% burden share kind of thing to reduce that to maybe a 1% or a 2% also is something like, you know, you are in the position of negotiating it because you’re not totally reliant on only one market. I think also played in our favor. If the situation had happened three years back or four years back, then that would have been a different challenge for us where our dependence on the US market was almost 90%.
Fortunately, as the growth happened, we accelerated the growth in the other markets. So that gave us some kind of negotiation power. And because of our diversified presence, and I think the customers also realized that it is prudent to go with a vendor like us who can juggle around. This is the experience during the pandemic time and with this sudden tariff war situation that we are in country by country. So that readiness is definitely giving us some extra advantage to do this negotiation. So I would say like both sides played equally. One is that the continuous improvement of our efficiency and reduction of cost and on the other hand, the ability to confidently negotiate as an organization.
Prerna Jhunjhunwala
That’s fantastic, sir. In terms of expanding revenues from other geographies, I think UK Japan are one of the most attractive ones right now given the tariff situation. There is like we are, we have an important FTA with them, eventually with the UK also. So in current scenario, just wanted to understand whether, you know, India’s cost structure would still give us decent profitability to service UK market, given Bangladesh is at a very strong position in the UK market given the cost structure.
Pallab Banerjee
Yeah. So if I have to say, like, you know, US is definitely an attractive market because of the size and, you know, the opportunity of the various brands where the profitability can vary to a good extent in our favor. So that’s why, like US continues to be an attractive market. I think after us, we find Japan as an attractive market where we see that the quality, like if you can get to that 0% quality defect, then it’s an attractive market, which is definitely a barrier in the beginning. So now we have an experience of almost six years of supplying to the Japan market.
So, for example, like, you see that our exposure in Japan has been steadily increasing in the last one or two years. So that I think is definitely a feather in our cap. And after that comes the Australia and the UK market. Now, Japan, if I’m talking about these brands like Muji, Uniqlo and certain other brands who are at this point of time experiencing a global growth and we want to like, you know, of course Uniqlo has already achieved it. We are more with Muji, which is at this point of time is a growing brand. Similarly, if you look at the compared to this, the kind of volumes that you get from a UK market or from an Australia market is significantly smaller.
UK is almost about one fifth or one sixth of the size of the US market as of now. So naturally we have a presence in UK market. We have been executing the business from Bangladesh and some of them because this FTA was under discussion for a long period of time. So there have been the interest to expand in India. So we had started the India business couple of years back with some of these UK retailers. Now they are poised to grow in India as well. Same thing we are experiencing with the European Union. Now if you talk of the EU market as a whole, that is almost comparable to the US of course the EU means brands from many countries and individually the brands would have smaller volumes compared to a brand of US or Japan.
So this is how it is getting played. So we definitely are focused to have this footprint, a global footprint as a result, Japan, Australia, uk, European Union and we are keeping a watch on the CIS or the Russian market as well. So let’s see how that plays and what’s the geopolitics that happens. So these are all the important market. India we have been shying away so far because of the cost structure of the Indian or the expectation of the Indian retailers. But I think it would be prudent to have a footprint in India as well.
Now we have started with two small customers out here. We may grow that as well. So that’s how we are looking at the diversification as of now. China, we have not started as yet. But some of these brands are UK brands, US brands, especially US and Japan brands who are significantly present in China. We are servicing them already. Yes, Prena, like you know, I have expanded your question to all.
Prerna Jhunjhunwala
Thank you sir, this is really helpful. Just one more question. Are the US customers also diversifying their delivery locations given that they have multi country presence? So that this tariff.
Pallab Banerjee
Yes, so not. We have not heard from as of yet after this tariff reaction. If they are really putting them more marketing and more diversifying out there. But most of these brands that we are servicing like Calvin Klein, Tommy Hilfiger, Gap, these are the kind of brands like who have a global presence, American Eagle, Abercrombie and Fitch. So they have more like a, you know, global presence. As of now what we are seeing is that department stores like if you talk about cores and all, they are more limited to us only. But the brands that we are servicing, they have a global presence.
So naturally, for example if you talk of gap old navies and all, there is significant business which goes to Canada and Mexico apart from USA and brands like Tommy Calvin and all are all over the globe. American Eagle. So those are all over the globe. So yeah, so that has been an advantage. So although one of the numbers I give you that are US customers are almost about 65% but the goods that is going into us is less than 50%. So that’s how it plays.
Prerna Jhunjhunwala
Okay, Understood sir. All the best sir, in this difficult times. Thank you.
Pallab Banerjee
Thank you so much.
operator
Thank you. The next question is from the line of Vikram Suryavanshi from Philip Capital India. Please go ahead.
Vikram Suryavanshi
Yeah, good morning sir. Just I need a clarification on Bangladesh capacity addition because already we were planning to add 5 to 6 million pieces capacity in Bangladesh and there was an opening comment to add 5 to 6 million. So will that be on top of the existing capacity addition what we are looking at?
Sanjay Gandhi
So that’s the capex we announced last time? Yes, the quarter 4 we announced the CapEx that we’ll be riding a capacity of 5 to 6 million in Bangladesh. This is what was referred right now. So any, no new capex has been committed in the current quarter. So whatever capex was committed in the last quarter is what is under execution right now.
Vikram Suryavanshi
Okay, understood. And how will be the Guatemala play out going forward given the static situation for the usa because it is relatively small in terms of overall our capacity. So can we scale up to significant going forward for Guatemala for US market or it will remain as a smaller capacity in overall scheme of things.
Pallab Banerjee
We have made some capital expenditure as we took over the existing factory and at this point of time the priority will be to break even and make it profitable. So as we do that then we will go for the next expansion or planning of the expansion. As of now it is. There is definitely a demand from the US market. It’s a new country for Pearl Global. It’s not an easy country, it’s a smaller country. But yeah, the work culture, the, the efficiency levels. So as we master that, that I think would be prudent to really put in more capital for growth at that place.
So as we had declared that at this point of time our labor would be to break even, reduce the kind of, you know, the loss that we had last year and then take it up maybe in future. So this is the first step that we would like to go through and there are enough opportunities. Of course Guatemala has only 10% tariff if the goods are made out of the raw material from that region. And that I think also has to develop because the raw material in that region are limited. As this more and more investments from other parties we are seeing is going into it. If the raw material as it becomes more and more easily available out there then we can think of the next level of growth. So not immediate. So that’s why we have not planned it immediate in the short term.
Vikram Suryavanshi
Understood. And last. Yeah, understood. I think that was quite helpful. And last question on. Probably we have seen sudden U turn with the US opportunity but probably we can see Russia make emerge. So currently who are the major countries supplying to Russia and how that opportunity can play out in future at all?
Pallab Banerjee
So Russia is a somewhat smaller market but there are about four or five big brands and retailers are there. So we have been studying them. We did a little bit of you know, third party, some other customers that we spoke to and we have explored. But you know there’s always a risk because of this geopolitics that we don’t want to get associated with supplying to Russia and all. But yeah, it’s better to keep an eye and observe because of the fast changing world at this point of time and let’s see how that moves. So overall it will not be a big market. It will be something similar to I think Australia market maybe in terms of size but, but yet to come like you know, yet to know more and to really explore that.
Vikram Suryavanshi
Understood. So can we put it like because EU is important market for us and you may not like trade with Russia so it’s better to ignore Russia and focus on EU kind of a thing.
Pallab Banerjee
I would say that you know Russia is a market but it is too, I think it’s too premature at this point of time to really speak about it because we are not actively focused on that market. It got split from the EU earlier. It was part of most of these European Union brands were selling in Russia. Now after the Ukraine war it had stopped. Now there is a huge amount of effort that is going on globally to stop this war and I think that’s where like if you see like India also came into this focus suddenly. So if, if this get resolved, if this war get resolved in the next few weeks or months then maybe like that could be an opportunity that how it shapes up in the geopolitical scenario then we can look into it.
Vikram Suryavanshi
Got it, thank you very much.
Pallab Banerjee
But that doesn’t prevent US from studying it. So we are definitely studying China and Russia and all those markets also will continue to study.
Vikram Suryavanshi
Yeah, got it. Yeah. Thank you very much.
operator
Thank you. The next question is from the line of Kishore Kumar from Unified Capital. Please go ahead.
Kishore Kumar
Thanks again for the opportunities, sir. Actually given the. The. The tariff deadline of August 27th and there will be some kind of front loading can happen. What is our full year guidance on the volume? So earlier we guided for 12 to 14 percentage but in Q1 it was only 3 percentage. So can you give us the guidance on volume, revenues and margins as well?
Pallab Banerjee
Sanjay, will you take that or should I?
Sanjay Gandhi
Yeah. So I think yearly volume growth is something which you know we stick still stick to our, you know the guidance which we are given. We said, you know 12 to 14% CAGR is something which we are confident as we started this financial year. I think given the trend where has gone in the quarter one we have seen the realization going high. So it will be combination of the volume or the realization going high at its seams. But yes, to answer your specific question on the volume front as we speak, you know with all the recalibration strategy which is being looked after, which is looked at, I think we are on course to achieve those kind of a CAGR 12 to 14% volume growth which we have stated earlier. Yeah. So as we get into the H2, H1 of this year and then beginning of H2, I think we can give you much more clear guidelines on that.
Kishore Kumar
Yeah. Yeah, please. Yeah.
Pallab Banerjee
The end that I can only do is that Pearl Global is ready to take if some opportunity comes up. As we discussed earlier in this call. Like this kind of scarcity is being created suddenly for a short term. So that gives an opportunity in the other regions. So these are the kind of readiness that Pearl has and we will take that opportunity. Last year the situation in Bangladesh gave us a good opportunity and we were ready to take it. This year also if any opportunity comes up, we were ready to take that.
Kishore Kumar
Got it sir. My second question is on the tariff impact of 11.7 crores that was earlier mentioned. Is it only the discount or on the freight cost as well? I understand that we do FOB method actually of delivering goods. Does that amount include the freight cost as well?
Sanjay Gandhi
No, it does not include freight costs. It’s all FOB model as you rightly mentioned. So far our most of our shipment from all the countries are on FOB basis. So that’s the direct discount. No freight cost is included in that.
Kishore Kumar
Got it sir. Thank you. So much.
Sanjay Gandhi
Thank you.
operator
Thank you very much. Due to time constraints, we will take this as our last question for today. I now hand the conference over to the management for their closing comments.
Sanjay Gandhi
Thank you very much. As we reflect in quarter one FY26, Pearl Global has continued to demonstrate resilience and agility amid tariff challenges and global uncertainties. Our ability to navigate a dynamic and often unpredictable global environment reflect the strength of our diversified business model, strategy foresight and operational adaptability. Thank you very much. In case of any further queries, kindly reach out to us or Strategy Growth Advisor, our Investor Relations advisor. Thank you.
operator
On behalf of Pearl Global Industries Ltd. That concludes this conference. Thank you for joining us. And you may now disconnect your lines.