Pearl Global Industries Limited (NSE: PGIL) Q2 2025 Earnings Call dated Nov. 13, 2024
Corporate Participants:
Pallab Banerjee — Managing Director
Sanjay Gandhi — Group Chief Financial Officer
Analysts:
Palash Kawale — Analyst
Pranav Shikhare — Analyst
Pulkit Singhal — Analyst
Shrinjana Mittal — Analyst
Monish Ghodke — Analyst
Bhavya Gandhi — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to Pearl Global Industries Limited Q2 and H1 FY25 Earnings Conference Call.
This conference call may contain forward-looking statements about the Company, which are based on the beliefs, opinions, and expectations of the Company, as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict.
[Operator Instructions] Please note that this conference is being recorded
I now hand the conference over to Mr. Pallab Banerjee, Managing Director of Pearl Global Industries Limited. Thank you, and over to you, sir.
Pallab Banerjee — Managing Director
Thank you and good morning, everyone. I welcome you to our Q2 and H1 financial year ’25 earnings conference call. Along with me, we have our Group CFO, Mr. Sanjay Gandhi, and SGA, Investor Relations Advisors. I hope all of you have had a chance to go through the Investor Presentation uploaded on the exchange and our Company website.
I’m pleased to announce that our growth momentum persisted in the first half of the fiscal resulting in our highest-ever consolidated half yearly revenue, adjusted EBITDA, and profitability. During the first half of the fiscal, we saw a 21.6% increase in consolidated revenue, led by the sales growth in Bangladesh, India, and Vietnam due to strong order book and healthy growth in sales volume. We have touched almost INR200 crore adjusted EBITDA on a consolidated basis in H1 of financial year ’25. Once again, this is a proof that our strategies are working well and a testament to our competitive advantage. as a global manufacturer.
Our consistent growth is fueled by capitalizing on our key strengths, multi-country presence, diverse product categories, in-market design expertise, and the strategic customer relationships. This growth has been largely driven by the increased orders from existing customers, enhancing our relationships, and by expanding the wallet share among customers we have acquired over the past five years.
Let me share an overview of the industry and our business outlook. Global retailers are sharing positive outlook on both inventory levels and overall demand trends. The global inventory destocking cycle has concluded, leaving retailers and with optimized stock positions. In their recent updates, they indicated lower inventory levels driven by a stable demand.
The U.S. retail demonstrated a resilience in 2024 with estimated monthly [Technical Issues] reaching $17.7 billion in September, a 1% increase compared to September of 2023. We anticipate that the purchasing activity will remain healthy and stable throughout the rest of the year. Annually, U.S. market has been growing 2% to 5% over the last few years, and I think this trend will continue through this year. We may end anywhere between 1% to 3% growth.
As of August 2024, year to update apparel imports into the U.S. have declined by nearly 4% year-on-year with improved expect — with improvement that we expect in the second half of the year. Most retail brands were out of the situation of a reduced buying due to overstock situation after the summer season, which was up to the import of months — up to the import of month of March of this year. Most U.S. retail industry leaders held a cautiously optimistic outlook thus far, then that is due to majorly because of the election year. With the Trump government coming in with a focused approach towards U.S. economy at its center and the MAGA movement, we anticipate a positive outlook going forward.
Moving on to the U.K. retail situation, this market grew last year by almost 5% and year-to-date, we have seen a trend of 2% [Phonetic]. As of August 2024 date, the apparel imports into the U.K. have decreased by almost 11%. Though improvements are anticipated in the latter half of the year, the Christmas sales seems to be gaining momentum this month. We are seeing a positive trends from our customers.
The apparel imports into European Union have decreased by approximately 3% year-to-year — year-to-date, as of August 2024, whereas for Japan, it has decreased by almost 5%. However, we have seen positive traction in both these markets with our wallet shares with our customers growing somewhat significantly. We have received positive response from an Australian — from our Australian retailers as well.
As we continue to improve our market shares with customers across all the above markets, our order book — our business share with our U.S.-based customers is trending towards 67% and the non-U.S. being at 33%. Non-U.S. customers are from European Union, Japan, Australia, U.K., and Canada in that order. However, please do note, that most of these customers do have stores across the world and thus our numbers for ship to country will be somewhat different.
Moving on to the logistics, Red Sea crisis and elevated logistics costs continue to drive-up the transportation expenses for the retailers in U.S. and U.K. and some of the other Western countries. However, our cost remains unaffected, as all our shipments operate under FOB terms. Our priority is to accelerate delivery timelines, as customers expect shipments at least a week earlier to accommodate this [Technical Issues] time, which is needed for vessels to reroute around the African continent. This has been a norm for now.
Further challenge in recent months is also the cost of and availability of the containers for our vessels. This has started to ease off. Our manufacturing facility in Guatemala with a transit time, the USA is just over a week continues to attract increasing interest and inquiries from our customers. However, the overall capacity of Central America and even for us, it remains limited and is only a fraction of what we have in Asia.
Now moving on to Bangladesh. Bangladesh underwent a period of unrest followed by a change in government and had faced a curfew, shutdowns for few — almost six days of July and early August. Since then, our facilities have been running at full capacity. We noticed good opportunities to gain market share, as some of the bigger vendors were forced to scale down their operations due to financial irregularities and stricter regulations from the banks and the interim government.
We experienced 97% plus attendance immediately, as we restarted after the curfew was lifted. This further improved, as we moved on. Our business in Bangladesh is at all-time high. Following the disruptions in July, we achieved our highest shipments volumes ever in August and in [Technical Issues] with zero delays in our deliveries. Our customers are now confident on our ability to deliver on-time from Bangladesh facilities as and having a strong backup growth [Phonetic] orders.
We have witnessed good — good growth coming from customers based in Europe, U.K., U.S., and Japan in our Bangladesh factories. We are pleased to share that our order book is currently full with strong visibility for the fiscal year and beyond. We do take pride in highlighting that our ability to navigate the crisis both financially and operationally remained resilient, enabling us to achieve our best-ever performance from Bangladesh. It is the second-largest exporter of apparel just next to China.
Through the recent turmoil, it is driving some consolidation within the industry and companies with strong balance sheets like of — that of Pearl Global are in a position to thrive and capitalize on this trend. In fact, we are seeing a greater willingness amongst our partners, factories for even greater collaboration. Our European Union and U.K. customers are keen to strategically guide and support us in this journey.
This country still has advantages of lower-cost, higher efficiency, productivity, availability of skilled workforce, and a well-experienced middle and lower-level management staff, along with the favorable trade agreements with important markets of EU, U.K., Canada, Australia, and China. It continues to improve its logistics infrastructure. This will continue to keep them ahead of the competition from other geographies.
Moving to our [Technical Issues] in Vietnam, we have seen strong growth from this country in this quarter and we are confident in maintaining this upward trajectory. Going forward, we will continue to expand in this geography at a steady pace, while providing exceptional service for high-end customers.
Indonesia is set to regain its performance levels after a decline over the past two years. Our new factory is now fully ready, and we have got good response from our existing and new customers. We will continue to ramp-up the production lines and output over the next two quarters to three quarters steadily. Again, our endeavor is to service our high-end customers from this geography as well.
Coming to our performance in India, we have witnessed good growth from our Indian operations, which grew by 31.4% year-on-year for quarter two of this financial year ’25 and 18.3% on year-on-year if looked at for H1 of financial year ’25. On the margin front in India, we still have opportunities to grow significantly. We added newer capacities in our existing facilities in metros of Gurgaon, Bangalore, and Chennai over the last eight months and are in process of adding newer capacities in the second-tier cities of Muzaffarpur, Bhubaneswar and in Indore.
As this production lines with diversified product and customers, they are still in a ramp-up phase, thus leading to temporarily higher costs. We expect this to improve in the next few quarters. We already have and we foresee good order book for upcoming spring and summer season products in H2 for India. Historically, quarter two and quarter three have been slower quarters for India, for us due to limited product offered, and we believe that we are on the right path to mitigate and lower these rates going forward. With above actions, we are confident of improving the margin trajectory from the year 2025 onwards even in India.
We do observe an active interest from our customers to have bigger presence in India, especially who feel they are overexposed in Bangladesh. However, we are used to the cost structure of Bangladesh. On a cost comparison, the Tier-2 and Tier-3 cities of India are closer to the cost structure of Dhaka and there is availability of steady workforce. However, we need to quickly ramp-up the ecosystem, train this workforce to be efficient, and compete with the Bangladesh factories. For now, our customers are confident of our strength across both sides of the border. Let us partner even more.
In summary, all our initiatives are progressing well. We will continue to [Technical Issues] our relationships with customers, who are strengthening their positions in the global market. Our focus remains on consistently breaking previous records in revenue, capacity, and efficiency, which will directly contribute enhancing our bottom-line profits. We are solidly on target with our forecast of top-line and bottom-line for the year and the strategic goals of 2025 — ’28 we have shared with you earlier.
Now, I will hand over to Sanjay Gandhi, our Group CFO, who will walk you through the quarter two and H1 financial year ’25 financials. Sanjay, over to you.
Sanjay Gandhi — Group Chief Financial Officer
Thank you, Pallab. Good morning, everybody, and welcome to our earning calls for quarter two and H1 FY25. I will now take you all through our financial and operational performance.
Starting with consolidated financials, we are happy to report that on a consolidated basis, the highest-ever quarterly revenue and half yearly performance in terms of consolidated revenue, adjusted EBITDA, and profitability. Revenue increased to INR1,201.9 crores in quarter two FY25, a notable increase of 25.1% year-on-year. For H1 FY25, revenue increased by 21.6% year-on-year to INR2,254.7 crores. The growth in revenue was led by sales growth in Bangladesh, India, and Vietnam due to strong order book and healthy growth in sales volume.
Adjusted EBITDA for the quarter — Q2 FY25 increased to INR98.8 crores, reflecting a growth of 24.4% year-on-year. Adjusted EBITDA margin stood at 8.2% in quarter two FY25. We are happy to share that we have almost touched INR200 crore consolidated adjusted EBITDA mark in H1 FY25.
Adjusted EBITDA increased by 21.6% year-on-year to INR199.2 crores in H1 FY25, with adjusted EBITDA margin at 8.8%. The EBITDA growth year-on-year is in line with the revenue growth. Please note that adjusted EBITDA exclude ESOP expenses of INR2 crore in quarter two FY25 and INR4.2 crores in H1 FY25.
PAT for quarter two FY25 increased to INR55.6 crore, reflecting a growth of 42.8% year-on-year, whereas for H1 FY25, PAT increased by 36.2% year-on-year to INR117.6 crores.
If you look at PAT after minority interest, this increased by 47.4% year-on-year to INR58.5 crore in quarter two FY25. For H1 FY25, PAT after minority interest increased by 41.1% year-on-year to INR123.8 crore. PAT after minority interest margin stood at 4.9% in quarter two FY25 and 5.5% in H1 FY25, witnessing a growth of 80 bps year-on-year in quarter two FY25 and H1 FY25 respectively. Please note, quarter two FY25 had an exceptional expense of INR4.2 crore, wherein H1 FY20 [Phonetic] had an exceptional gain — net exceptional gain of INR1.4 crore. Exceptional items include gain on the sale of non-core assets and QIP expense for H1 FY25.
Coming to standalone financial, for quarter two FY25, revenue increased to INR287.1 crores, representing a 31.4% increase year-on-year, whereas revenue for H1 FY25 increased by 18.3% year-on-year to INR563.2 crore. The increase in revenue due to growth in business with existing as well as new customer.
Adjusted EBITDA witnessed a decline of 54.7% year-on-year and stood at INR4.2 crore in quarter two with adjusted EBITDA margin at 1.5% for the reason which has been outlined by Pallab. For H1 FY25, adjusted EBITDA witnessed a decline of 40.7% and stood at INR17.5 crores with EBITDA margin at 3.1%. EBITDA margin as stated impacted due to lower gross margin on the new style and customer addition during the quarter and the year and higher manufacturing costs incurred during H1, with continuation of ramping-up of factory in Chennai and one factory in Gurgaon.
PAT for quarter two FY25 grew by 9.7 times to INR11.6 crore. For H1 FY25, PAT grew by 115% year-on-year to INR27.5 crore. Please note, quarter two FY25 has an exceptional expense of INR3.5 crore on account of QIP expense, whereas H1 FY23 [Phonetic] had an exceptional gain of INR2 crores.
Our strong performance at the Group level is reflected with our strengthening balance sheet. Cash and bank balance excluding cash earmarked for LC payments stood at INR337 crores, as of September 2024. Gross debt stood at INR498 crores. Net debt to EBITDA stood at 0.28 times in H1 FY25.
As of September 2024, net working capital day stood at 37 days. On a steady state basis with the growth in the business and the customer mix, we believe that net working capital days of around 35 to 45 should be a stable state for us going forward.
On a capital expenditure side, our capex commitment plan across geography for FY25 is approximately INR125 crores. Total fixed asset capitalized during H1 is INR63 crores across geographies. In India, it is largely Chennai factory expansion, building plant, and machinery. In Bangladesh, it is a washing facility expansion, replacement of plant and machinery. In Guatemala, it’s largely in expansion, addition of few lines, and buying of plant and machinery.
In Bangladesh, as Pallab mentioned earlier, this industry — the industry is witnessing consolidation and a growth in order book for vendor suppliers with a stronger operating metric. For us, we had the best ever performance from Bangladesh region due to some — due to the region, which we have highlighted. Looking at the situation, we will evaluate opportunity for greenfield, capex, acquisition respectively. However, we would wait and watch the stability and situation to normalize further.
Till such time, we’ll continue to expand via asset-light model, that is partnership facility to cater to the strong inflow of order from existing, as well as new customers. In Bihar, total capex commitment will be in the range of INR30 crores to INR35 crore in two phases, which will be a combination of debt and equity. This will be committed in H2 of this financial year.
As you all are aware, we have a stated dividend policy in place with respect to the same. The company has declared an interim dividend of INR5 per share with dividend distribution amounting to INR22.9 crores, which is 19.5% of consolidated PAT after tax. — consolidated profit after tax.
Just to summarize, we have witnessed a strong performance in the first half of this fiscal. This coupled with a strong and diverse customer base, geographical presence, we are well-positioned for a strong performance in the coming years and are on well track to achieve our stated guidance for this year and towards our FY28 goals.
Thank you. We shall now open the floor for question-and-answer.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Palash Kawale from Nuvama Wealth. Please go ahead.
Palash Kawale
Hello, sir. Hope I’m audible. Hello?
Operator
Yes, sir, you are.
Pallab Banerjee
Yeah. You are audible.
Palash Kawale
Thank you. Yeah. Thank you for the opportunity and congratulations on good set of results. Sir, do you see operating leverage kicking in for — in for second half of the year? Yeah, that’s it — that’s the only question, which I have?
Pallab Banerjee
Sanjay, you’ll take that?
Sanjay Gandhi
Sure. So we — see we are seeing the volume growth in H1, and we believe that this volume growth and value growth should continue in H2. And yes, by end of this year, we should see that leverage kicking in.
Palash Kawale
Okay, sir. Thank you. Thank you for your answer. That’s it from my side.
Pallab Banerjee
Normally like if I have to add to what Sanjay is saying, definitely the second year is the spring summer season for the Western markets, and we are seeing a good traction in terms of our order book. So naturally, this volume will continue to go up and that will give some kind of leverage benefit to us. That’s why like the kind of forecast that we have been saying, we think that we are solidly on track on that.
Palash Kawale
Thank you. Thank you for your answer, sir.
Operator
Thank you. [Operator Instructions] The next question is from the line of Pranav Shikhare from Navneet Family Office. Please go ahead.
Pranav Shikhare
Hello, sir. Am I audible?
Operator
Yes, sir.
Pranav Shikhare
Hello?
Pallab Banerjee
Yes, please.
Pranav Shikhare
Sir, my question was, what are your capex plans going forward? And what is the capacity utilization we could see at all the three facilities, which is in India, Bangladesh, and Vietnam? And what kind of capacity expansion also we could see at these three facilities going forward?
Pallab Banerjee
So I will let Sanjay speak specifically on the capex part. But what we can tell you about in terms of the trend of business that we are seeing, in India, definitely, as you just heard from us that we are seeing quite a significant uptrend. And even in Bangladesh, I think the utilization would be very high because the kind of order interest that we are seeing from our customers are significantly higher out there. So in India, like our capacity utilization will improve.
Bangladesh, I think most of it will cross and that’s where like, we will be adding some more partner capacity. And Indonesia, as I just mentioned that it will — the new facility that we have started that we’ll be ramping up to the full capacity over the next two quarters to three quarters. And Vietnam, we are experiencing a steady growth again. So in all the locations, we will be seeing a better utilization of the capacity that we have published. Of course, in geographies like Bangladesh, we have to expand some of the capacity as well.
Sanjay, over to you for the capex part?
Sanjay Gandhi
Sure. So as I mentioned earlier that we are looking at INR125 crore of capex commitment approximately in the — in H2 of this year and this will happen in Bangladesh and India. We are also looking at an opportunity or some strategic opportunity, which may fructify in the second half of this financial year, so that may entail additional capex of INR20 crores, INR25 crores.
Pranav Shikhare
So what is the split between all the capacities for the capex?
Sanjay Gandhi
Sorry, if you could repeat your question, I couldn’t hear it.
Pranav Shikhare
What will be the split between all the three facilities, the capex?
Pallab Banerjee
Three geographies, you mean, India, Bangladesh, and Vietnam. I think that’s what the question is.
Pranav Shikhare
Yeah, yeah.
Sanjay Gandhi
What will be the blend?
Pranav Shikhare
No, what will — what will be the split…
Sanjay Gandhi
What will be the split of the capex?
Pranav Shikhare
Yeah, between all the three capacities.
Sanjay Gandhi
Sorry, there is some voice disturbance. So I could not hear you. Split? Yeah. So the — the split in terms of — so we are looking at INR35 crores to INR40 crores in India in H2 and INR70 crore to INR80 crore in Bangladesh and INR20 crore to INR25 crore in between Vietnam and Indonesia.
Pranav Shikhare
Okay. Okay. That is helpful. Okay. Sir, my second question is what kind of traction are we seeing from U.S. retailers like there is in terms of imports now and what are the inventory levels and what is the update with the destocking, which has happened? So has it normalized now?
Pallab Banerjee
Yes. I think U.S. what we are seeing is in terms of the high stock level that we had experienced for the last one year. I think that part is over from the spring summer buy, like that was over — getting over in this holiday season, which is currently in-store, which is getting sold. So this holiday ship actually was shipped much earlier. So if you see like now from spring/summer onwards, the numbers that have been coming in have been quite normal.
So when you — if you even look into the month-wise imports of U.S. like where January was minus 16% of this year, whereas if you look into the recent months, it’s hovering at a very low negative percent or like in the positive. That means like they are buying much, much more. And again, as we are — now the shipments will start going for the summer season now and then followed by the fall and holiday, which we think fall and holiday of next year. That means the goods, which will be sold in the period of August to December. I think we should be back on track with that normal.
So like if I talk in terms of number, last year, they had done about $78.8 billion worth of imports U.S. I think this year, it will cross that number. And again, for the next year, the number would start going up. So from that point of view, I think this economy if you’re talking about with the election over now and we have a, you know, clear majority, I think that was one thing that was disturbing everybody, whether there will be a clear majority or there will be chaos.
So I think with that thing now behind us, I think we should be looking into a good growth in the U.S. market. There are certain policies, which are being debated and all, but I think still overall, the consumer sentiments and all things could improve.
Pranav Shikhare
And also, sir, what are — what are the top five clients contributing to the total revenues currently?
Pallab Banerjee
So if we look at our top five customers at this point of time, top five or six, I think the number is quite significant. Like we are closing to almost about 67% plus — 68%, 69% in that range is coming from the top five customers. And I think these are the customers, who are also like in regular conversation with us in terms of their strategy over the next two years to three years. So I think we are in a very comfortable position from that point of view and getting that visibility from these guys.
Pranav Shikhare
Also, sir, you mentioned that we’ll be only focused on value-added products, which will increase the realizations for us.
Pallab Banerjee
So you see, like we are operating across seven countries, and we are also, in our mix, if you look at it, like we have all sections of the market. So we are supplying to the, what do you call premium customers or the premium brand and then we are also supplying the bigger kind of stores or the big box retailers. And we are also supplying to the discounters, if you talk of U.S. market.
Similarly for other markets also, we have always targeted all the three segments. I think by focusing on the three segments and having a separate strategy for all does mitigate the risk of the economic downturn or upturn. So that’s something I think we are stably on that path, and we are not looking to change that.
But yes, like if you’re talking specifically of value items or the premium segments, we do quite a lot and that’s significantly growing both across our Vietnam and Indonesia and the demand is going up at this point of time. And also, like we are servicing that kind of clients from Guatemala as well. India and Bangladesh, we have a section linked to this kind of premium customers. And also, we have a larger section in these two countries, which is catering to the other two sections of the market, that is your mass market retailer, as well as the discounters. So that’s something that we have been following.
Pranav Shikhare
And sir, can you also give — yeah, sir, one last question. Can you also give a breakup of what is the average selling price for our product in India and in Bangladesh and Vietnam and Indonesia etc.
Pallab Banerjee
So we have so far been talking about an overall average price. I think we have given you a forecast of 2028. So we calculated on an annual average of our realization price that was done in the last year. So from there onwards, you know, what we are seeing is that as the market improves and the premium segments definitely is going up, then there will be a minor change in the overall business of this unit value realization that you’re talking about. But depending on the kind of customers and what is the split across all these geographies we have not been publishing so far.
So Sanjay, like do we — do we — give some kind of visibility in terms of individual market-wise FOBs.
Sanjay Gandhi
See, we have been mentioning about that our average realization should be around INR600 and that’s where our strategic plan has been built-up. This will of course, have a range, where in markets like Vietnam and Vietnam and Indonesia, our FOB price can go anywhere between the range of $20 to $25. And the rest, we are — Bangladesh and India, of course will be on the lower side. On an average blended basis, we’ll be looking at $7, $7.1. That’s — that’s how the blended average is. We have been discussing largely.
Pranav Shikhare
Thank you, sir.
Sanjay Gandhi
Yeah. Thank you.
Operator
Thank you. The next question is from the line of Pulkit Singhal from Dalmus Capital Management. Please go ahead.
Pulkit Singhal
Thanks for the opportunity and congrats to Pallab and team for a good performance. My first question is on Bangladesh itself. So the revival that you have seen and the kind of operations that you’re running in Bangladesh, is it reflective of the local industry experience or is there something different that Pearl might have been benefiting versus other players in Bangladesh?
Pallab Banerjee
So if you speak about Bangladesh, like you know, Bangladesh is a very big market and there were many major players of — out there. What we have seen in this last few months that certain big players have definitely started scaling down their operations, as they are, you know, getting investigated for financial irregularities in terms of their leverage and in terms of their loans and all. So I don’t know like that could be politically motivated or because they were — had the support of the earlier political regime that was there in Bangladesh.
So whatever is the reason, so that as a result, what we are seeing is certain kind of consolidation or shift that is happening in the Bangladesh. It’s not that only Pearl is gaining, but there are many other players in Bangladesh is definitely gaining a lot of traction at this point of time. We’re also seeing the players, the external players like you know, the Chinese and the Koreans are — and the Taiwanese are also moving into that market and acquiring business and business facilities out there. So yes, it’s an interesting change that is going through in Bangladesh at this point of time.
If you ask me, overall exports may fluctuate a little bit, may not grow as aggressively as it was growing earlier, but it’s not going to go aggressively also, or you will not see a very big difference in terms of the total volume in terms of Bangladesh. If you see like this particular year, they have been gaining market shares in U.S. steadily.
Europe overall has been going relatively slow compared to the last year. So that’s definitely is being compensated by the U.S. business that has been steadily growing in Bangladesh. So overall, I think the market will continue to [Technical Issues] any major change. But yes, the players might change. Some of the players have gone out of business or is going really, really from a big player to becoming a mid-size or a smaller player. So that’s — that kind of internal change and consolidation is definitely happening in Bangladesh.
Pulkit Singhal
Understood. But that is an interesting change, right? So when existing big players, I mean, if there is a change of hands between who is running operations and you’ve been in Bangladesh for a long-time, isn’t — I mean, rather than Chinese and Koreans acquiring capacities there, shouldn’t it be our strategy to go to acquire capacities there and capitalize on this opportunity?
Pallab Banerjee
Yes. That’s definitely is on the cards. So definitely, we are continuously evaluating the situation. So whether to acquire some kind of business or to go for greenfield to grow — have some kind of growth. Yes, you know, what we have been talking about you have been with us for some time, as you have seen like we have the growth that we forecast, 15% 20%. So that much of additional capacity or partnership capacity is always we have.
So what we are witnessing now is that, that capacity is getting completely full, and the demand is even more. So it’s a good time to invest. So we are evaluating it. There were a little bit of the turmoil or unrest that we all have been reading in the newspapers and all. So I think now we are seeing much more steadiness, both in terms of government and in terms of the business environment in Bangladesh. So we’ll continue to watch that.
In terms of acquisition, you know, the complexities that always there is a history like what kind of finance they had taken, which bank, how much was clean or how much was not a political investment and all, so know that. So that’s something is a little bit more complex, I would say. So we are evaluating both. We had some opportunities of acquisition earlier, which we held back due to this unrest. But at the same time, some greenfield opportunities are coming up, which we are evaluating very, very seriously. And we will in fact take some steps within the next period, as just mentioned by Sanjay.
Pulkit Singhal
Understood. Secondly, I mean, being a — I mean, having presence in India and Indonesia, is there — I mean, since you mentioned that some of those players are looking to diversify, are you getting some benefit of being that player, who can offer them Bangladesh or India, whichever they choose and basis whatever situation arises in the future. Are you able to capitalize on that as a player right now? Are you…
Pallab Banerjee
Yes, I mentioned that. I see what’s happening is that we have a significant kind of capacity both side of the border, like if you talk of India and Bangladesh. And the difference is that like we — our factories were in the metro cities at this point of time, where the cost difference still is significant. But if I go to these Tier-2 cities and Tier-3 cities, like especially in the Eastern zone like Bihar and Odisha, [Technical Issues] is a focus at this point of time and that also gives a lot of comfort.
The people who had little bit of overexposure, for example, the Australian market, which had a trade benefit earlier with Bangladesh and there was a huge exposure of Australian customers in Bangladesh. We see some kind of diversification for them. And if I can offer capacities both in Bangladesh and India, that’s definitely very attractive for them. Same thing what we are seeing in the European market.
So people like who doesn’t want to [Technical Issues]time to take that financial hit by giving higher price in India or in Vietnam or other countries are there, but who have a backing from us that, okay, yes, if there is any problem, we can always shift the business to India with the same fabrics immediately can be sourced and can be shifted. So those kind of benefits really is giving a lot of confidence to these players.
There are a few categories like bottoms and which have been really the strength of Bangladesh and it’s so — so that’s something some of our U.S. customers also have said that, okay, if you — they are asking us to diversify the product in India and build-up the capacity — capability for those products as well, so which we are now looking at and building up those kind of capabilities in our factories as well.
Same is the case that we are finding from our Japanese customer. So what they are finding is that the advantage that the Japanese brands have, especially in China and also China and Bangladesh still have a — to China, India. So that’s something also being capitalized by keeping the same program, let’s say, going to the other markets from India, but for China, it goes out of Bangladesh.
So those kind of leverage is definitely playing in our advantage at this point of time quite well. And that has been the strategy that has been — has been our footprint of our strategy and our company in the last five years, as we have been talking repeatedly about it. So we are seeing that benefit. Thank you. Thank you for highlighting it. Yes, definitely it is working in our favor at this point of time.
Pulkit Singhal
Yeah. Just lastly on the Tier-2 cities, I mean, given your current experience, are you able to clearly see that these can be big centers for manufacturing in the future or you still need certain amount of experience there to be able to call it out?
Pallab Banerjee
Yeah, whether it will become — Bihar will become a Karnataka overnight, no. It may not because Karnataka has been having this industry for a very long period of time. But if you look at the workforce, especially in Bangalore or in Chennai or in Gurgaon, you will find a significant amount, a significant portion of it is coming from Bihar. So our experience so far in Muzaffarpur has been quite good. So we are just starting at this point of time. And the kind of interest that we are seeing from the workforce is encouraging. And we have — we plan — we do plan to shift operation out.
Similarly, from Odisha also, we find a lot of workforce, which has come into [Technical Issues] Chennai plants. Again, like we are in Odisha, we are finding the workforce to be quite stable. But yes, both these places what we find is that the new population that coming into the work stream, we need to train them up. See the old people like, who have been already in the industry and have worked in Bangalore or in Gurgaon and all, certain things [Indecipherable] metro gives is definitely more over time because when these workers come to these centers like they tend to, you know, find out all opportunities to earn more, which is a good and a bad practice, I would say.
So as we go into these Tier-2 cities and Tier-3 cities like we would like to make the industry much more disciplined rather than this overtime culture or this only working for money kind of culture. That’s something that is — has to happen. I would say, that discipline of working without, I would say uninformed absenteeism and other things. So that we need to discipline them and train them up for a higher productivity, high productivity culture that we have already in Bangladesh.
So these are some of the things that we are working on, as of now. So far, experience has been good both in Odisha and Bihar, whether it can be scaled up immediately, but yeah, it cannot be. It might take a few years to get to that level of Karnataka or Gurgaon or Tamil Nadu specifically. But then, I think we’re on the right path. Not — I’m not meaning Pearl Global only, but as a country, I think we’re on the right path.
Pulkit Singhal
Got it. Thank you and all the best.
Operator
Thank you.
Pallab Banerjee
Thank you.
Operator
The next question is from the line of Shrinjana Mittal from RatnaTraya. Please go ahead.
Shrinjana Mittal
Hi, thank you for the opportunity, and congrats on the good execution. Sir, a couple of questions. One is on the India business. You mentioned that the gross margins were a little bit on the lower side because we added new customers. So I just wanted to understand, is that the newer customers that you have added, the nature of the customers and the orders are a little bit lower realization and lower margins or is it just because currently it’s in a trial phase? Yeah.
Pallab Banerjee
It’s a combination of both to a certain extent. As you see, like we are growing — we intend to grow in this Tier-2 and Tier-3 cities, where we are starting our operations. So that operations is not fully established as of yet. It’s just starting. And we had or we have opportunities at this point of time from certain customers, who are migrating a part of the business, let’s say, from Bangladesh and all and needs that very price sensitive customers I’m talking about.
So those kind of customers can be developed in these Tier-2, Tier-3 cities. So as these particular quarters are normally been low quarters, so we didn’t restrict ourselves from booking the business and executing it, getting the teams ready, both in the Tier-2 cities and some of these quantities were also executed from our metro cities factories as well, thus hitting that margin.
But I think this is more of that ramp-up period what we will see, which both in terms of getting a new customer, understanding their requirement, and executing it and then executing it to match them to the right factory, where the cost could be low. So both these are under the process at this point of time. So that’s the reason for which we said that maybe like what you can see there is a question [Phonetic] on the margin because of these facts. But as we make it much more well-oiled and much more experienced at this point of time, with the movement of time, the next couple of quarters, you will see a significant advantage.
Shrinjana Mittal
Understood. Understood. That’s very clear.
Pallab Banerjee
I hope that answers the question. Yeah.
Shrinjana Mittal
Yeah, yeah, it does. My second question is, it might be a little bit naive question, but I wanted to understand the seasonality of our business. Like you mentioned for India business, the Q1, and Q2 are slower quarters. Likewise, for other regions like Vietnam, Bangladesh, like which quarters are bigger, and which are relatively slower quarters, if you can just give some color on that?
Pallab Banerjee
Yeah. See, India typically Pearl has been making a lot of woven tops and blouses, the fashion segment. So that was very much focused on the spring/summer. So naturally for fall and holiday seasons for the Western markets, this business, these numbers used to be down comparatively, it will go up. That’s the reason for which we have been focusing on markets like Australia and all, which could come late.
But not to the extent that the size of U.S. market versus size of Australian market, you can understand, the big difference. So that’s — those are challenges that we had in India. So of what we talked about today is that as we see this opportunity of both Tier-2, as well as the new customers and categories, so we are diversifying our product. So we are growing our capacity in the knits area, as well as in the bottoms area. Pearl was not manufacturing in India to a great extent, which was more, I would say, these knits and wovens were more in Bangladesh with the denims.
Typically, what we do in the outerwear we have been focusing the synthetic outerwear. Majority of it was coming from Vietnam and Indonesia. Now the seasonality, if you’re talking about, so definitely for the Western markets and the Northern Hemisphere market, the outerwear seasons is more towards the Q1 and Q2. That’s where like the maximum shipping, shipment actually produced and shipped. Q2 is a, I would say, would be the maximum shipment, but I mean, Q1 gets lot of shipment. Whereas for the top-up, it would be more of Q3 and Q4. So that’s how the seasonality matters.
But if you see like at Pearl, we have been taking or talking in terms of seven different product categories, as a verticals in which we would design, we would see the market, we have identified the customers, and we are marketing that product. So that the ups and down of the seasonality like we would try to cover-up. I think we have made a good progress in that direction. And that’s something, as you can see, the difference between the seasons would continue to be lesser and lesser.
Shrinjana Mittal
Right. Thank you. That’s very clear. Just one last question. So on the tax rate, like you have mentioned some detail on the presentation, that’s also — that also helps. But just one clarification. So our India business, the effective tax rate is around 20% odd, like adjusting for the dividend income, which comes from the subsidiary, and like for the subsidiaries or the entities that are outside, what would be the tax rate there?
Sanjay Gandhi
So every tech — every geography entity has a different tax rate applicability. In Hong Kong, there are two entities, onshore and offshore, as a structure, where it is 16.5%. And then, in one entity, it is — there is no corporate tax –profit tax there. In Vietnam, it is 10%. In Bangladesh, it’s come effectively anywhere between 15% to 18%. Indonesia is 22%. So that’s how the tax structure is there across geographies.
So our blended tax rate on normal basis, we say that take around 13% to 15%. Now it will vary quarter-to-quarter depending upon which origin is making the highest shipment, which geography is making the highest shipment, and which geography is making what kind of a style, as a fun combination of that. So on a blended basis, we share, you can presume around somewhere around 15% for us to be effective rate.
Shrinjana Mittal
Right. Makes sense. And India would be around 20% — 20%, 25%.
Sanjay Gandhi
India is — India rate is 25.15% this quarter particularly because there is some — when you look at a book profit and the tax profit, there are certain calculation, which has to be done. So on the book space of it, it is coming around 22%, yes.
Shrinjana Mittal
Got it. Got it. Thank you. Thank you so much for taking my questions and all the best.
Sanjay Gandhi
Thank you.
Operator
Thank you. The next question is from the line of Monish Ghodke from HDFC Mutual Fund. Please go ahead.
Monish Ghodke
Hello, sir. Thank you for the opportunity. So this 33% volume growth, which we have in H1 of this year as compared to last year, has this been broadly similar for our factory locations, particularly Bangladesh or is it higher for some geographies?
Pallab Banerjee
It is largely for Bangladesh, the higher for Bangladesh and then accordingly, slightly lower than Bangladesh for other geographies.
Monish Ghodke
Okay. And sir, what is driving this growth? Like, I mean if we see the volume growth is outpacing the revenue growth now. So is it — so first of all, the 33% volume growth, what were the key drivers? Is it like new category, new customers? And at the same time, what is the reason for lower realization as compared to last year?
Sanjay Gandhi
So if I have to answer that — am I audible?
Monish Ghodke
Yeah.
Sanjay Gandhi
Yeah. So see like in terms of the customers, like as I said, like across the seven categories, we have things like outerwear, which is at higher FOBs. And if you talk of the knits, which is being supplied to the big box retailers or the major mass retailers, that will be at the lowest price range. So the average would be because of that. So season to season maybe like you might see a little bit of a fluctuation when we see that average across all the categories and all the locations, but we are not seeing a significant trend in that.
Monish Ghodke
Okay. So has outerwear — what would be the growth in outerwear category as compared to last year?
Pallab Banerjee
So we are seeing general traction from our customers, the wallet shares. Like, what we do is that for every customer, we track whether it’s an up trending customer. First of all, are they doing good in the market? Will they be existing in 5 years to 10 years’ time profitably or not? And if we find that a customer is going on the right path and will be very — or getting stronger every year, so we try to invest more with that particular customer. We try to, you know, deepen our relationship and grow our market share with that kind of customers.
So far, the kind of mix that we have in the top five, all of them are doing quite well in the market. And if I look at the top 20 to top 25 customers that we have been focusing upon across all our geographies, we don’t see any risky customer at this point of time. So that’s why one of the policies that we also have been talking about is that all our customers are properly like risk mitigated. So either we have some kind of factoring or some kind of insurance against each one of them and that gives me the measure.
Now in terms of whether like each — having a particular price points or particular product, we try to get maximum wallet share of each of these customers if they are doing well across all the seven categories of product. So that’s been our strategy so far. So when you’re asking — just like keeping this in mind, can you just narrow down your question exactly what you want to know from us?
Monish Ghodke
No, I’m saying, I mean, the 33% volume growth, I mean, what were the key drivers for it? I mean, is it like a particular category like outerwear or is it a new customer, which we added? So just wanted to understand some granular details.
Pallab Banerjee
So we are growing, in fact, if you see most of these customers across all the geographies have been very positive [Technical Issues] tracking with us and we are experiencing growth in most of them. There are few customers like which used to be in my top five like, Macy’s and all, who have not been doing so well in the market. So definitely, we have decreased our exposure as well as the business. But yeah, we are just keeping a watch and maintaining the relationship. So that continues.
In terms of growth in a particular category, I think what we have seen is that wovens have been tracking quite well in the last few quarters. And so, we think that there could be an opportunity that knits might come back, but that’s depending on the customers end as well, like what goods they are selling and what they are buying more and more.
Certain categories that we have not been doing, let’s say, in India, like bottoms category, we have grown significantly, which would give a slightly higher FOB value. We have grown the sleepwear category quite significantly. So that’s not the high FOB value compared to an outerwear or a bottoms, but otherwise it’s a very steady business because sleepwear is always needed across the year.
Similarly, like knits, so like if I’m — if any particular region is getting a little bit more orders, then you’ll see a little bit of dip in the FOBs if I’m doing it with the mass retailers. But at the same time, we have got customers like at the higher end like Chico’s or PVH, Tommy Hilfiger’s and all. So their knits prices are also significantly good.
So yes, we are not tracking exactly like which particular category is going up or down season by season. But yes, we have a strategy for each of our categories over a longer period of time and that helps us to gain the market — wallet share of each of the customers. So I’m sorry, like, I may not be exactly specifically able to apply — reply to your question about which particular category has tracked up in this particular season, but we can come back to you and give some more details on that.
Monish Ghodke
No, sir, this will give — I mean, this gave a detailed idea as to where we are standing. Sir, one bookkeeping question. So in our quarterly P&L, so there is purchase of stock in trade of INR138 crores. So does it mean — is it like our purchase from our partner factories?
Sanjay Gandhi
Hello. It’s not — yeah, it is inclusive of that part. Hello, am I audible?
Monish Ghodke
Hello? Yeah,
Sanjay Gandhi
Yeah, yeah. So yeah, that partnership factory is included in this also. The job work what we do is definitely a part of it.
Monish Ghodke
Okay. Okay. Thank you, sir.
Sanjay Gandhi
Thank you.
Operator
Thank you. The next question is from the line of Bhavya Gandhi from Dalal & Broacha Stock Broking Limited. Please go ahead.
Bhavya Gandhi
Yeah. Hi. Thanks for the opportunity. Couple of questions from my end. Sir, first thing on the subsidiary structure, because we have a couple of step-down subsidiaries. So is it not possible to consolidate it and maybe have a region subsidiary altogether so that it becomes a simple structure altogether on the corporate front. Any thoughts on this?
Sanjay Gandhi
So the structurally, if you look at it, every entity is catering to certain geography or certain customer. So specifically, if you look at Vietnam entity or Bangladesh entity, there are certain tax benefits, which are available for setting up the manufacturing unit there. And therefore, they become the entity has to be incorporated in those particular geographies here.
Within — within Hong Kong, there are — there are three entities, which are onshore entity and the three entity, which are offshore entity. Now offshore entities are largely driven from the — from the requirement coming from consolidated supplier from our retailer. That’s the one. Secondly, the other subsidiary, which we have in Hong Kong was largely to consolidate the procurement from, let’s say, China or elsewhere else and catering to the needs of — needs for Bangladesh and Vietnam. So there is a specific purpose for which this entity got created, so that the value can be captured there.
Now when we have all these consolidated entry — entities in Hong Kong, our banking limit also take cognizance of all this requirement and hence the bankers are comfortable in terms of looking at overall position rather than looking at it on a piece basis. And they also want to have a specific — you know, the limits which is that attributable to the specific segment, which we are operating.
If you go to further down Dubai, it’s a different geography altogether. We got to have a separate legal entity there. And in Dubai also, there is a free-trade zone, where you have to incorporate the entity if you want to avail certain tax benefit, which are given by this — by the country as per the rules and regulation of that law of the country.
So I mean, what I’m saying is that in terms of the — in terms of the structuring, which has happened is largely to really keeping in mind the requirement, which is there from a retailer, buyer perspective, keeping in mind the requirement from the banking limit consolidation and also to really see the optimize our tax incident, so that the maximum valuation can be there for the shareholders.
Bhavya Gandhi
Got it, sir. Got it. And with respect to INR125 crore capex commitment that you set for H2, can you just provide what is the asset turnover because historically, we’ve been telling that our decision would be based on ROC. So I’m looking at for a region-wise ROC and asset turn for the further capex.
Sanjay Gandhi
So I mean, when we look at a net fixed asset basis, the fixed asset turnover, we like to target around 3.5% to 4% is what is our direction. And in terms of the return on capital employed, we are looking at threshold of 18% to 20% as the factory — as the capex gets stabilized. These are the threshold level for us to really look at an opportunity and for any brownfield expansion or even for the greenfield for that matter. In the interim, there can be a situation, where the ROCE can maybe come — maybe suppress. But eventually with all the plans, the strategic plan, this is what the direction we are really looking at.
Bhavya Gandhi
Okay. And also on the consolidated capacity utilization, what is the consolidated capacity utilization for the current quarter because we said that our order books are already full. So just wanted to understand.
Sanjay Gandhi
So the H1, when we look at H1, the shipment number of pieces, which have been shipped, we are looking at a blended utilization around 80% [Phonetic]. And then, as we highlighted in our earlier commentary that there are opportunity for getting partnership factory-associated with us because of the consolidation or the wallet share getting shifted within Bangladesh with the manufacturing facility. That’s another one, which is — will also enhance our capacity without incurring immediate capex. However, we do have a plan of committing the capex in H2 of this financial year, where the capacity will be added in India and Bangladesh.
Bhavya Gandhi
Sir, for the quarter — for the current quarter, if you can throw how much is the blended capacity utilization and where can it peak out along with partnership factories that we are going to — we are planning for?
Sanjay Gandhi
See the capacity utilization on a quarterly become a little bit you know, we will not be able to track it and we’ll not be able to make meaningful, you know conclusion out of it. What happens is that every style is a different, every style will have a different minutes, which is required to produce that. If the product style changes, the number of pieces, which can be produced from the same factories also changes.
So that’s why I mentioned the H1, we are looking at a blended capacity utilization, as of June — as for H1 of this financial year around 80%. I think we have a sufficient space even the order book is full, we should be able to meet and grow for the rest of the year without falling on the capacity — without facing any capacity constraint for the rest of the year as well.
Bhavya Gandhi
Okay. What would be the order book number if you can throw some light on it? And when can it be — what is timeline to fulfill that order book? Is it like three months, four months or if you can throw some light on that as well?
Sanjay Gandhi
But generally, we do not normally give orders? Yeah, Pallab, please go ahead.
Pallab Banerjee
Yeah. I can give a general answer, Sanjay on that because see in our industry, the orders — most of the orders are booked with a — about for the next three months to four months. Of course, like when we are talking about category-wise, certain categories like bottoms or the outerwear, where the lead times are generally slightly longer. So that goes up to about five months to six months or seven months also in some cases. So that’s where the kind of booking that we get.
But at the same time, the advantage that we can provide to our customers is a faster timeline. So we have certain customers like Inditex Group, the Zaras and of the world. So they try to decrease it to even lesser. So they try to work with about 60 days or 70 days kind of turnaround time as well. So depending on which customers, like our best customer that we would see is like the Japanese customers or certain other workwear customer that we have. So those are the ones like who give a longer lead-time.
And the fashion customers, like specifically as I talked about Zara or Mango and all, they give the least of the turnovers. So if I have to talk on of an average, I would say about four months, three months to four months is an average that we see as an industry.
Bhavya Gandhi
Got it. And can you throw some light on the absolute order book number if that’s possible?
Pallab Banerjee
So this particular year, like we had told that we will be increasing our top line, and we have been talking about a CAGR of at least about 12% to 14%. But then if you talk of the current order book, I think it’s higher than that compared to last year. So this year would be a better year compared to 12% to 14%. I already saw that in India, we have talked about 31% growth in this particular quarter. Overall, you are seeing the 21.6% growth that we have seen in terms of shipped quantity.
Now in our industry, what happens is there will be a lot of WIP also is there. So that means either goods, which are partly manufactured and partly yet to be manufactured and there are goods, which have been manufactured, but not yet accounted for in terms of sales, which we call it as in-transit or let’s say, handed over, but not yet shipped.
So those kind of all these numbers, so if you look at annual levels, that’s why Sanjay was saying that tracking it at a quarter-by-quarter level would be little difficult. So we talk about only the total revenue, that means what the sales that we can talk about in our books. So that number you are seeing this growth. I think overall this particular year, we will be definitely moving to a rich [Phonetic] healthy number.
Sanjay, any — any forecast that we can give in these calls?
Sanjay Gandhi
So Pallab, as a practice, we don’t go quarter-on-quarter order booking. We look at full year. And we — as you rightly mentioned that we have given a guidance of 12% to 14% growth in the next three-year time period. Some year will show a higher growth than 12% to 14%. Compounded annual is what we are looking at to grow with that business. And our capacity is getting built-up in line with that. This is how we look at these numbers.
Bhavya Gandhi
Right. And if you can just throw some light on the capex for FY26 because INR125 crores you mentioned for the second half. But if you can throw some light for the future capacities for FY26?
Sanjay Gandhi
So FY26, so we keep looking at opportunities say, there are two, three process, which happens along with that. While we are looking for the capex, you know there is a — there is a customer expansion, there is a wallet share expansion, there is a product design, sampling, marketing. And then basis that you keep on adding the capacity, right, at least some traction has to be there. In any case, if I — if you look at our three-year plan, which we have shared and which we keep working internally on a rolling basis, there is a — there is a plan, which we say that if — as the market develops up, FY26 will be the year where the balance of the capex, which we plan to do towards FY28 should get committed.
Bhavya Gandhi
Okay. Let me just ask you in another way. What would be the customer addition for the quarter? I believe because we add the customers first and then we add the capacities. That’s the right thinking or is the other way around?
Pallab Banerjee
So what we do in that — in this particular one is, we have our pipeline of customers, new customers, and the existing customers, what kind of wallet share that we would be gaining from them year-on-year. So that’s a due diligence we continue to do on a daily basis, I would say. So on that, if you look at it, the traction is — is happening and we have certain new customers, which we have acquired this particular year, whose business will also significantly grow over the next two years or next three years. And the ones that we have been working in the last five years, we can forecast what kind of growth that would be there.
So when we talked about this 2028 forecast, so that — this is something like this is a number that we have calculated and these is a number that we have forecasted, which has been in detail, it has been worked out. So both your questions in terms of getting the customers and then getting the capacity, so capacity, we told very specifically to get to that number of 2028, we would be adding equivalent to 10 factories of 1,000 machines each, which would be, you know, approximately around INR500 crore of total investment. So as you can see right now, most of it has already been — a significant amount has been done already or being committed within this next quarter or so. And similar, I think would be the numbers for the next 2025, ’26 also you will see.
Bhavya Gandhi
Okay. Sir, just last thing on the U.S. tariff and Japan FTA, if you can throw some light on that because are we seeing any increased traction from Chinese markets to any of our regions because U.S. is about to put in tariffs on China. That is the broad narrative out there. So are we seeing any increased traction from our customers, who are already wanting to shift or is it just a hoax?
Pallab Banerjee
That’s a very deep question, long answer. I can try to answer it as much as I know. The new president was talking about 60% duty — additional duty.
Bhavya Gandhi
Yeah. Sir, you’re not audible.
Pallab Banerjee
Hello?
Bhavya Gandhi
Yes, yeah, yeah. You’re audible now. Yeah.
Pallab Banerjee
Hello?
Bhavya Gandhi
Go ahead, sir. Yeah.
Pallab Banerjee
Sorry, I don’t know. Let me just repeat. So the 60% duty that I was talking about that Trump has spoken about, so may not be illegally possible, but there will be a significant jump, I think. And the team that he’s talking about that we are hearing in the news today, definitely, I think this is the direction that this team, the new government will follow. So whatever it is, most of the big retailers have significantly moved away from China.
What has happened is that particular hole that got created in terms of the capacity that China had for U.S. market is getting filled by in two different manner. One was the — the Xi’an and the Timor and like, the way they were doing direct shipping to the customer. So I think again, for that, they are going to come back with a law, which will direct-to-customer will be definitely affected. The de-minimis rule will — be — definitely be revised very soon.
And the second part that was happening from China is the importer business. So there were people like, who were — the Chinese big players, they were importing the goods and stocking in U.S. and then supplying to the big box retailers. And while importing into the U.S., they were definitely manipulating the prices. As a result that you see that the average import cost of an item had gone significantly down. So as U.S. is way lower than even a Venezuela import that comes compared to like what is coming from China.
So those are the things I think is known to all of us, but there was not much action that had happened in this last one, one and a half year. So which I think we will see some good movement, maybe like within the next few months. So that means opportunity will be opened up for migrating further business from China, the importer kind of business. And also, it will put a little bit of pressure in terms of the cost even after the manipulating the cost that some of these players have been doing.
So these two both are positive results. These — both these should give some benefits to — a real benefit to the China Plus One and countries like India should benefit along with Bangladesh and Vietnam and Indonesia. So that’s something definitely on the card. It looks like. So specifically, sorry, like you had a second part to your question or this is exactly what answers your question.
Bhavya Gandhi
If one were to export directly from China, let’s take a INR500 good realization, FOB price, INR500, I’m talking and one were to export from Bangladesh, assuming everything is constant, what would be the landed cost after applying duties, one exporting from Bangladesh, one exporting from China?
Pallab Banerjee
Yeah. As of now, now, the — let’s say, as typical cotton product would land about 25% to 26% is the cost of transportation and duty. Duty about 17% and then transportation and other transportation insurance and everything another 10%. So that particular cost, like China is at this point of time a penalty of another 10%. So as they import from China, the difference is about 10%.
Now Trump has been talking about increasing that to maybe 60%. So I don’t know like what will happen, may not be 60%, but some other percentage might happen. At the same time, Trump also spoke about that any other country from where goods are getting imported, including like Bangladesh, Cambodia, Vietnam and all this, he is talking about additional 10% to 20% of duty.
Again, whether it will happen or not, we don’t know. But significantly like in his talks, he didn’t mention India or the India name was little less prominent in terms of this penalization. So let’s see like what happens. These are things that are completely gray, I would say. One thing, if I look at the team that he’s talking about, definitely there will be impact on China to a certain extent.
Now how the — this INR500 goods that you — example that you spoke about, how the importers used to do is that they didn’t declare it as INR500. So they would declare it as, let’s say, INR200 or INR300 and play — pay a lesser amount of duty, which a big retailer, who is taking an FOB shipment from India or Bangladesh or Vietnam would never do it.
But an importer, China’s proxy importer maybe in U.S. would have done that. So definitely, there was little bit of tug and war — tug of war was going on. So U.S. were continuously blacklisting some of these companies, but it still continues. So that’s where the game was getting played. If this additional duty comes, even that manipulation activity also will slow down. That’s what I assume.
Bhavya Gandhi
Got it, sir.
Pallab Banerjee
Did that make sense? And just last part — yeah, yeah, perfect.
Operator
Sorry to interrupt you, Bhavya, due to time constraint, we will take this as the last question.
Bhavya Gandhi
Sure. Sure. Just last, second part on the U.K. — Japanese FTA because I think that’s a great opportunity for us. If you can throw light between India and Japan FTA, what is the FTA agreement between Japan and India?
Pallab Banerjee
India and Japan FTA has been existing, yeah. So it has been existing for some time. But Japan — Japanese customers are very process-oriented, very different kind of process. The processes are very different compared to how a U.S. market would operate. The — the Japanese people like our Japanese and Koreans and all. So they are — within the community, the trust is very high. So outside the community, it takes time to build up that the trust level.
And second is the quality. So they don’t — see most of the other U.S. retailers, they have a statistical method of doing the quality inspection and taking the goods, which they call it as AQL. So that thing doesn’t apply for Japan. So they go — most of the customers like Muji or Uniqlo and all, they believe in zero defect kind of policy. So we have a significant business with Muji, where they talk of almost zero defect. That means 180 defects are allowed for a million garments.
So that particular practice for Indian exporters have not been so successful. Somehow like we have been working with them for more than five years now and we are seeing a significant growth, as one or the other, our factories are getting trained in that way of operations of Japan. So we believe that we will continue to grow in the Japanese market. We have so far — so far like we have been focused on only one customer and it’s almost a significant amount of our business, almost like 7% to 8% of our total turnover is trending towards this market and this customer.
So in general, for India, it has been a struggle. For us at Pearl, like it has been one of our focus areas. So we are seeing a good success. After India, we have started with Bangladesh, and we’re talking of starting in Indonesia and other places as well. So yes, there is definitely a good opportunity.
Operator
Thank you, Bhavya for your questions.
Pallab Banerjee
And Australia is another — sorry, like just one small extension to your answer. Australia is the other country like where the FTA happened. So earlier Bangladesh had that advantage, but now India is also on equal footing. So we are seeing clearly an interest from Australia as well.
The U.K. FTA has been more like a mirage. It has been like, you know both at government level, politics, the ministry level and all, we have been hearing about it, but we don’t know when and how it will get done. So yeah, these are the three major ones. The other treaties that we have at this point of time in — with Kuwait and other markets and all, those are very insignificant. So we don’t see much of traction there.
Operator
Thank you. Ladies and gentlemen, we’ll take this as the last question. I now hand the conference over to the management for closing comments.
Sanjay Gandhi
Thank you very much. In case of any further queries, kindly reach out to us or Strategic Growth Advisor, our Investor Relations Advisor. Thank you.
Operator
[Operator Closing Remarks]