PDS Limited ($PDSL)

Ladies and gentlemen, good day, and welcome to the PDS Limited Quarter 4 and FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Shirley Rodrigeuz. Thank you, and over to you, ma'am.

A warm welcome to all participants to Limited at FY '26 earnings call. Our presentation and financial results are available on the company's website and stock exchanges. Please note that anything said on which reflects our outlook for the future or which may be construed as forward-looking statements when we viewed in conjunction with the risks that the company faces. The conference call is being recorded and the transcript along with the audio will be available on the company's website and stock exchanges. Today, we have with us the management, which includes Mr. Pallak Seth, Executive Vice Chairman; Mr. Sanjay Jain, Group CEO; and Mr. Sadik Sunasara, Group CFO. I now hand over the call to Mr. Sanjay Jain to make the opening remarks.

Thank you, Shirley. Greetings to everyone. Thank you so much for joining the earnings call. The year of '26 was a year that tested the resilience, agility and execution capabilities of global or global apparel supply chains. The operating environment remained very challenging throughout the year, shaped by cautious consumer sentiment, the evolving trade dynamics we ramp and geopolitical disruptions and the continued inventory discipline across global retailers and brands. Notwithstanding the challenges, we delivered GMV growth of 5% to approximately INR 9,666 crores and a revenue growth of 4% to INR 13,000 for FY '26. Importantly, limited quarter 4 only very modestly and remain highly value led in nature. Within this context, our ability to maintain stable to modest growth, but we did grow in the challenging time frame. It reflects continued customer retention and increasing relevance of scale, compliant and flexible sourcing platform like PDS. And as we are into the year FY '27. Our order book as of early April stand at about INR 5,074 crores, reflecting a growth of approximately 11% and thereby are providing an encouraging visibility into FY '27. Plus within this order book, there is momentum building in higher value sourcing and the service engagements in North America. In fact, while our order book on the whole is up about 11%. In North America, it is up closer to 30% as compared to same period last year. We continue to deepen our presence in the U.S. through new customer additions and stronger scaling across existing strategic accounts. A key milestone during the year was securing the new sourcing as a service mandate with a leading U.S. value retailer with a relationship, having the potential to scale beyond approximately INR 475 crores over a period of time. This further validates our long-term strategy of building a higher value service led sourcing platform rather than operating as a purely transactional sourcing partner. We're also witnessing green shoots across the U.S. market -- we're now close to 5 strategic partnerships established across leading global retailer and the brand ecosystem in U.S. Structurally, we believe the global sourcing landscape continue to evolve in favor of diversified asset-light and compliant supply chain platforms. Retailers are increasingly consolidating their vendor base and seeking partners who can offer agility, diversification and speed-to-market compliance and integrated sourcing capabilities across multiple regions. While customers continue to remain cautious with shorter order cycles and selective order deferments in certain regions. We are not witnessing any broad-based cancellations and now are beginning to see stable throughput across the core sourcing platform. We informed you about this circa INR 475 crores scalable order or sourcing the service in U.S. and we are also witnessing a buildup of healthy traction in our U.K. and European markets for sourcing and service orders as well. Alongside growth, we remain very sharply focused on profitability, cash generation and importantly, capital discipline. One of the important achievements during FY '20 was the strengthening of our balance sheet and operating cash flow through disciplined working capital management almost across all our verticals and tighter operating controls the net working capital days reduced from about 17 days, 1 year back to about 4 days at the end of FY '26. In fact, we added the new [indiscernible] business about 2 years plus pack. And if we take that out of our calculation, which we are now increasingly trying to make that working capital efficient. For the rest of the business, the milling sourcing and manufacturing, it is almost down to 0 days or even slightly negative as well. Business generated operating cash flow of approximately INR 780 crores during the year and net debt reduced from about INR 374 crores 1 year back to close to INR 100 crores. And this is despite the addition to the debt by way of the Knit Gallery acquisition, wherein the acquired company had its own debt as well. The consolidated position came down from INR 37 crores to about INR 105 crores net debt. We remain focused on rationalizing loss-making verticals, curtailing investment into new businesses, strengthening our governance around capital allocation and embedding stronger cost discipline across the organization. Our investment into new vertical reduced by approximately 27% during FY '26. While several restructuring and portfolio optimization initiatives are already beginning to improve the profitability trajectory of the business. In fact, in some of our mature businesses as well we took some call to rationalize the cost structures as well. Alongside the financial discipline, we continue to sharpen our strategic positioning for the next phase of growth. Importantly, we are now transitioning from our technical cost stabilization to structural efficiently driven transformation. Our BCG led cost tasty initiatives are now getting institutionalized through an internally named project, Project Pulse. Our enterprise-wide digital platform, integrated sourcing, supplier governance, procurement workflows, pricing intelligence and importantly, the master data management are all getting unified into an AI-enabled platform thereby, whatever BCG gave a recommendation on procurement efficiencies, we believe should get institutionalized. We believe this initiative should keep giving us benefit year-over-year. And in some of our large verticals, besides the initiatives related to procurement efficiencies -- we also witnessed room to improve the OpEx and the utilization thereof. And in the later part of the year, we took measures to in case we had to take some calls for redundancies. We took that and provided for that in the latter half of the year as well. As we enter FY '27, we continue to remain mindful of ongoing macroeconomic and geopolitical uncertainties. We believe the foundations of the business have materially strengthened now. We're entering the new year leaner, more disciplined operationally sharper and strategically better positioned to benefit from the emerging sourcing shifts and improving trade tailwinds globally. With this, I would like to hand over to Mr. Sadik Sunasara, our group CFO, to walk you through the financial performance for the quarter and full year FY '26.

Thank you, Sanjay. Good evening, everyone. Will take you through the key financials and operational highlights for Q4 and FY '26. For FY '26, the business delivered GMV of approximately INR 19,666 crores reflecting 5% year-on-year growth, while revenue grew 4% to INR 13,110 crores. From a margin perspective, gross margins for FY '26 improved by 48 basis points to 20.6%. supported by procurement efficiencies, disciplined sourcing and opportunities in Q3. On the OpEx side, we witnessed encouraging sequential improvements during Q4. Employee expenses remained largely flat versus the previous quarter, while other expenses declining by approximately 6% quarter-on-quarter, reflecting tighter operating discipline and ongoing cost optimization initiatives. And these are despite the additions in P&L of Knit Gallery in manufacturing and one vertical of GSCL and Michael Lee in sourcing side. EBITDA for the year was INR 385 crores versus INR 457 crores last year. Other income almost doubled to INR 99.7 crores in FY '20 primarily driven by FX gains and mark-to-market gains of around INR 19 crores on PDS venture investments. We are witnessing positive traction across our venture tech investment portfolio with improving value realization, and it is now moving towards a self-sustaining model with new investments will only be done from cash realized from exits. Finance costs for the full year was INR 14.65 crores, higher by about 16% compared to last year. If we remove Knit Gallery interest component, the interest cost on a like-to-like basis was only higher by around 3%. There's a decline of approximately 5.4% sequentially, supported by stronger operating cash flows and improved working capital efficiency. Effective tax rate for FY '26 was 13.5% compared to 10.1% in FY '25. As guided earlier, we have full impact of Pillar 2 now in our ETR. At India stand-alone level, we have taken an impairment of about INR 14 crores on investment in DBS lifestyle vertical. DTA on account of this and other losses have reduced our Q4 ETR to almost 7.7%. PAT for the year was INR 178 crores versus INR 241 crores in FY '25. Our profitability improved during the quarter, with Q4 PAT increasing almost 95% quarter-on-quarter to INR 72 crores compared to INR 37 crores in Q3, driven by improved operating leverage tighter control on operating costs and moderation in finance costs. During the year, we undertook several restructuring and rationalization initiatives, including the closure of designer brands and Lilly $ Sid, consolidation of design as Asia and design our licensing business into [indiscernible] other exits from loss-making businesses such as Grupo and JPM verticals. We are engaged in strategic discussions with business heads of other verticals identified as part of our portfolio optimization initiative to improve overall profitability and capital efficiency. From a segment perspective, the sourcing business remained resilient, contributing revenues of approximately INR 12,397 crores with EBIT of INR 266 crores. The manufacturing segment also delivered strong performance during FY '25, with revenues growing 31% year-on-year to approximately INR 1,034 crores and EBIT increasing to INR 57 crores, translating into EBIT margins of approximately 5.5%. The performance was supported by operational improvements, better utilization the successful integration of Knit Gallery acquisition. Our balance sheet continued to strengthen materially during the year. Sanjay has briefly mentioned the numbers. Net debt reduced sharply to around INR 105 crores as of March '26 from INR 374 crores in March '25, despite the consolidation of approximately INR 98 crores of debt from Knit Gallery acquisition. Net working capital remained as supporting strong operating cash flow generation of approximately INR 780 crores during the year. CapEx during the year was almost reduced by more than half compared to FY '25, reflecting disciplined capital allocation. Our leverage ratios remain comfortable with net debt-to-EBITDA at around 0.36 and normalized return on capital employed at approximately 25%, reflecting improving capital efficiency and stronger balance sheet quality. Lastly, I am pleased to share that we have proposed a dividend payout INR 3.3 per share, of which INR 1.65 per share was paid as interim dividend amounting to around 42% of FY '26 PAT, maintaining our capital return track record. With this, we'll now open the session for queries from all the participants.

[Operator Instructions] Our first question comes from the line of Jitendra Pradhan with Maximal Capital.

So my first question is with regards to the gross margin. So sir, what is our outlook for gross margin and EBITDA margin for this year? If you can elaborate right on the tender side. And as you can see on the client side, how the situation is currently start up and you can further gain on gross margin from Europe?

Could you kindly repeat your question briefly again? I think you all could not hear it clearly.

Please speak a little louder and closer to the mic.

I was just was asking for the outlook on gross margin and EBITDA margin, obviously also. On the gross margin, if you can elaborate on the -- if we can further kind of gain from these levels, specifically from the vendor side or on the client side because situation is a bit difficult macrolide, as you mentioned highlighted. So if you can elaborate on the gross margin side, that would be helpful.

Yes. I think as we mentioned at the end of our third quarter call, that we are anticipating an average 40 to 50 basis point improvement in the gross margin in the next 1, 2 years, every year. So we remain at that number. this year, if all goes well, we should see gross margin improvement of this order. I think slightly more than that 50 to 75 basis point we are targeting that it should reflect in terms of improvement in the EBITDA margins for the current year. a, the benefit of gross margin. Secondly, the current costs between gross and EBITDA reflects a lot of restructuring initiatives as well, which have been onetime costs. So as we look forward to make recovery. should see slightly better than gross margin improvement in the EBITDA margins.

Yes, sir, on that point, sir, like if we execute the investment into the associates. I mean you have guided that will kind of moderate down. I think it is currently 120 [indiscernible] and it will come down further. But excluding, the other expenses seem to have spiked this year as well. So sir, what will drive the efficiency gain in the other expenses, you are saying that will contribute to our EBITDA margin gain.

Yes. So I think, firstly, we need to make a like-to-like comparison of the other expenses. For example, while on the whole increase appears to be 16% for the entire year. But if we exclude net call the GE acquisition that we did, it is more closer to about 11% or so. And some of the 1 or 2 drivers of this increase is, for example, we had an impact of royalty payments related to our brand sales, while we were in the mode of curtailment of certain brands, but our -- we could not, in the near term, bring down our royalty obligations -- so that was one. And as Sadik also mentioned that the businesses that we have taken a call to shut down. There are some provisions related to that as well. So I guess, as our top line traction build up, as these one-offs go away, you should see efficiency of that coming in as well.

Got it, sir. And sir, sir, final one on the working capital. So there has been significant kind of improvement this year seems to be led by our account receivables as well as, I think, other in liability. So sir, the 16 to 17 days of working capital, is it sustainable? Or we can expect some other kind of increase considering a local situation and in on the logistics side or from the to gaining more clients on the U.S. or a market signal it like kind of improve or further on this level? Or working capital days can increase from. I mean if you can give your thoughts on that.

I think on a lighter note, is surely not going to allow it to go back to 17 days. And I think we've come a long way. Our endeavor towards the year would be to try and keep it at current levels. You may see some fluctuations quarter-by-quarter. -- for the entire year, our endeavor would be to maintain where we are at present.

[Operator Instructions] Our next question comes from the line of Sanvil Patel with GT Partners.

Yes. Can you hear me?

Yes, please.

Yes. So first up, looking at the PPT in your top 10 verticals. When we look at Poeticgem and simple approach, we see that there's been a sharp erosion in the margins that they've had in PBT terms, can you just throw some light on what's happened there?

So as I said earlier, some of the BCG led exercise initiatives, which were twofold on procurement efficiency and also, in general, the operating efficiency of manpower deployment and time meet the best use of it. So Poeticgem, Simple Approach, our 2 key verticals who participated through that exercise. And while we started early on efficiency, procurement efficiencies on the manpower and other OpEx, the initiatives go into implementation in the second half. So therefore, on the whole, actually, across these verticals, there has been an end production in the manpower and redundancy costs was also built in terms of trying to make it more efficient. So therefore, to answer your point with that backdrop, what you see here is more an impact of the onetime redundancies than anything else. And we should see now with that behind us, we should see that these 2 verticals, we are very positive on them. that they should bounce back to an increasing trajectory of profit.

That's helpful. And the second question I had is on -- when we look at this year, it's been challenging for us, when we look at our top 10 customers, 2 of them have a lot of challenges in this year, going into FY '27, what is the outlook for...

Samvit, we cannot year you.

Sir, I'm saying going into FY '27, what is our outlook for the top 10 customers that we have in terms of growth the 11% growth that we have said in the overall order book. I think across our top 10 clients, we should see growth more in the vicinity of about 7%, 8%, slightly lower than the average. It is the new verticals that will find the growth. It is in North America, that would be firing the growth. But an average 7%, 8% overall growth across the top 10 accounts, we feel positive on that.

Our next question is from the line of Rohit from ithoughtpms.

So just you mentioned that gross margin you are expecting sort of to improve 50 basis points over the next 2, 3 years, every year. And the flow-through should be slightly higher to EBITDA. So like 30 to 75 basis points. Is that a first [indiscernible]?

Yes, 40 to 50 basis point average gross margin and slightly higher translation EBITDA margin.

So just -- I mean, on this point, so just wanted to understand like if one were to look at the cost structure today and looking at the employee costs and other expenses. Of course, you mentioned there were some one-offs. You alluded to that any -- at the same time, we're looking at some reduction as well, at an aggregate level based on the BCD program. I'm only talking about the OpEx right now. So from here on, like let's say, if we were to revert back to, let's say, 10%, 12% of revenue growth, how do you see the OpEx growing on a normalized level, I'm not saying that, that will be the growth rate that we are aspiring for or until these growth rate that will come to. But just wanted to get a sense that what would be the operating expansion that 1 should sort of look at, given a lot of it is one-off or [indiscernible] like that from here on.

So I think allow us to answer it in this manner that we will continue to be extremely cautious for this year. Global tailwinds are to everybody's knowledge, we've had a tough year, we're starting on a good order book note, but I think we're maintaining mid-single-digit growth outlook for the current year and then close to about 10% or so plus broad growth in the profits. So therefore, if we have to achieve this then we will -- we have been trying to curtail costs of course, the [indiscernible] have to be provided. So next year, to answer specifically your point, I think the growth employee costs and other expenses should not exceed our overall growth in the top line that I think is clearly we are seeing as a driving factor inside all our verticals. So that's something that specifically I can tell you that the growth in expenses should slower than growth in the top line.

That's very good to hear, sir. And just one more thing on the U.S. business. So there was one anomaly that I was noticing. So in the presentation for 9 months, we had said that a INR 30 crore negative, meaning that you invested INR 30 crores. And for the full year, it is INR 22 crores. So does it mean that there was some kind of a profitability achieved in that business in Q4. Just trying to understand that a bit better.

I think to make a note of your query, our team is here, and we will surely look into it in terms of what is the plausible reason of that. And I think we will surely circle back to you by this evening or tomorrow in terms of what you observed variance.

Okay. But just from a broader term, the U.S. business still sort of not at a scale, right? So I mean, is out getting into a special -- I'll wait to hear from you, because I think we were looking at getting into in the U.S. direct business from somewhere in '27, so early '27. So does that -- I mean, given the expectation of growth accelerating as that's still rolled and...

See, the U.S. business did make more money in the fourth quarter. [indiscernible] for sure. I think the business, as we had anticipated, it is CBT positive for third quarter, yes.

Okay, okay. And sir, this maybe more longer term -- so let's say, I mean, we are cautious for this year. I understand given so much of volatility. But let's say, let's extend this horizon to maybe 2 years from here, let's say FY '28 or '29. I mean we had that objective of getting to 5% part. And I understand that we are behind there. But like from here on -- I mean, of course, given so much of volatility, one would assume that order like ours would be very much favored by company, so what -- I mean, from our positioning with the customers and our positioning, especially with our newer customers. I mean given all that, let's say, 3 years out, we're starting '27 now, let's say FY'29, how to see like what would be the baseline achievements or baseline metrics that you would want to sort of definitely -- you feel confident to given wherever your conversations are going across different geographies, different type of customers. I mean if you could maybe talk a bit in terms of numbers because that will help us because business order-wise, I know we are a I mean, it is all for us to see what -- I mean the value that we bring. But if you can maybe contextualize in terms of financial numbers, I know it's difficult, but if you can just make -- and hence, I'm saying like let's not talk about next 4 quarters. I'm saying let's talk about maybe 2, 3 years out.

Yes. Sure. I think, firstly, allow me to request that post this, we move to the next participant, our teams are available to answer. And I also have Pallak joining me from London. So we divide answer to your question if acquiring 2 parts. Let me request Pallak to give you a 2, 3-year strategic outlook in terms of how we see things evolving from here. And I'll surely supplement that the numbers as you asked. Pallak over to you, please?

Yes. one.So what we are definitely seeing both in the U.S., U.K. and European markets that the retailers are under pressure to cut costs and restructure organizations. So what that is doing is definitely bringing opportunities to a platform like PDS, where they're coming to us for various services. So as Sanjay mentioned earlier, the sourcing as a service business model that we had started on 2 years ago is having some very large active conversations with retailers who are talking about cutting overhead it in their social operation in Asia and giving PDS option to run those businesses. So hopefully, in the next 2, 3 months, we'll have some large contract size, and they are normally 4 to 5-year contracts. They are not businesses which every quarter, we have to start from 0. These are long-term contracts where PDS can predict revenue and bottom line based on discussions. Similarly, on the designer sourcing business, which is the core of the company, we are again seeing that there are a lot of retailers who are restructuring the organization, reducing their own design function and depending on certain vendors to bring them those opportunity. So overall, the markets are tough, but the macroeconomic condition that is pushing our retailers to cost restructure the organization is showing a lot of opportunities towards PDS. In the last 2 to 3 years, we took a conscious decision to invest in a few new verticals. And I think out of the 2 vertical we have started, 12 or 13 of them have actual succeeded and have become profitable. And there all these businesses that have started with all scale up in the next 2 to 3 years based on the traction and the customer base that we've been able to onboard we have seen. The only segment in PDS, which we are currently considering how to carry forward and what to perform is the entire brand business because the brand wholesale business is more challenged. So PDS is trying to rationalize this portfolio on the brand business designer sourcing, source as a service structure is really working in our advantage, customers cutting costs, outsourcing more activities. And fortunately for us, there are not too many other competitors who can professionally work with the retailers on these large opportunities. So the good thing is if there are any global source contracts coming up, it's only fund, which are actually in the RFQ stage at then. So I think overall, we are remaining quite confident. Last 12 months, we have lost started any new vertical or invested in a new business. We continue to in next 12 months, you probably will continue not to also make any new investments, but the investments we have made last 3 years, many of them have started working quite well and we lay the foundation for future profit and growth of the company. So Sanjay, you want to add anything on top, please?

Yes. Thanks, Pallak. And I think in terms of cancellation of that numbers, while I will again emphasize our continuation of caution for current year but we remain very positive about mid-teens growth through medium- to long-term outlook. And I think everything is in place. We, first and foremost, this year, '26, '27 we got to make sure the restoration of our profitability and then changing gears to scaling up thereafter in the next year. So therefore, to answer your point, medium to long term in growth that we've also historically achieved in the past, we are very positive that, that is very much doable.

Our next question is from the line of Vinod Krishna from Avendus Wealth.

In continuation with the last part spend I'm new to the company, so pardon me if you have answered. My like, let's say, you add new customers like Walmart and you are also with retailers, brands and PE players. So my doubt was because sourcing of textile runs into, I don't know how many tens of billions of dollars. So when you try to scale up with each customer because they are not going to completely shut down their procurement or sorting, how will we get the bidding to them and start gaining our wallet share. Can you explain more in detail like the value proposition of PDS and why we will win over the long run and because where is this question coming is given such a huge opportunity, market should not really force us to post very low growth rates, right? And we -- and how confident are we of achieving that [indiscernible] in the coming -- I won't say a decade or at least before this et in the coming 7, 8 years -- so I think you understood my question and how do you -- because Walmart is not going to shut down the procurement department, but they're still have onboarded you means, there is some dynamic playing over there that some kind of vendors or manufacturers, they wanted through you or some kind of categories they wanted through you. So if you can explain us why you can scale with Walmart kind of players and why they are low because they're not going to close down everything so that's our understanding. If you can explain it would help us understanding the PDS ability to scale in the long run.

Pallak, do you want to take that first?

Yes, I can take that first. So I think you look at a retailer's typical procurement model, especially people like Walmart, approximately 15% to 20% of their sourcing is from their sourcing offices currently. 70% to 80% is through third-party -- so there is -- if you are a direct factory based out of India, Bangladesh or China, Vietnam of these countries, typically, your source of getting those orders is going to the local offices of Walmart or other similar retailers and taking a executing to tech packs and confirming orders. The large part of the business is still done from New York or domestic wholesalers or third-party vendors. So the buyers are given a clear opportunity to buy from there wherever they can get the best price and design and value equation. So today's G&A, very few retailers are insisting that the business happens only to the procurement officer. So this is where PDS Design that sourcing ends up becoming more and more useful and meaningful to our customers. So that is on the Walmart. But then there are other retailers, for example, we are talking to one of the largest French supermarkets. They are one of the largest supermarket which have got huge procurement happening in Asia, but we are becoming a food first business. So there, they have a strategic intent to divest the entire sourcing. So in that case, then PDS is talking to that supermarket that we could sourcing as a service and then take on the headcount and payroll they have across countries in Asia and then become their sourcing operation and run the entire procurement on their behalf through the sourcing as a service business model. So the industry is very dynamic, right? So the way the whole market is going, there is opportunity for different formats and different retailers and similarly for the supply companies. I would say if you are a factory today sitting in Asia and you're not in the top 5 factories in any one country, a large manufacturing group, it's very difficult to get any traction from any retailer today. So retail is also consolidating their supply chain. And if you're -- there's another factory some production in some part of Asia, we're not able to attract the right customer strategically as well. So the value process to offer is clearly there. That is why we are looking at close to INR 20,000 crores GMV this year and some of the discussions happening that will continue to grow in the years to come. We are only services business industry reach approach our customers. PDAs, we have got 4 core services. One is manufacturing, where we own our factories as well, where we have factories in Bangladesh, Sri Lanka and India. Second is strategic vendor model that's designed as sourcing design into the retailer private label, and we've got around 600 factories approved across Asia, where PDS become the vendor to the retailers, and these factories are attached under PDS to those retailers. So for example, with the [indiscernible] PDS is a vendor on record. And under us maybe 30 or 40 different factories have been approved in different parts of the world, PDS is design, development and sales and then procures from these parties and maintain a gross margin of 15%, 17%, 18% whatever maximum we can get in that designer sourcing model. So first is manufacturing. Second is strategic vendor, which is designer sourcing. Third agency, which will be called sourcing as a Service and become retailer sourcing operation and run the entire operation in different parts of the world and fourth is the brand business, where we got brands have been sold to IT companies and then PDS will in and then help distribute on the wholesale basis. So the for 3 businesses, we are quite confident the manufacturing, the designer sourcing and social service, definitely, this [indiscernible] business model. On the brand side, we are evaluating our portfolio, how much we keep and what we invest in the future or disinvest. So out of the 4 services, 3 are actually gaining a lot of traction in resume value proposition from the customers that tie and continue to give us opportunities. So hopefully answers the question.

Thank you Very much for Detailed answer, Pallak. So the $5 billion...

I request you to please rejoin the queue if you have any further questions. Our next question is from the line of Madhur Rathi with Counter Cyclical Investments.

Sir, I'm trying to understand that when the global appeal market is INR 1.9 trillion, and our GMV is INR 2.2 billion, which is 0.1% of the market share, then why have we chosen to get into the brands and started competing with our customers instead of not first get a 1% market share and then try to diversify into noncore areas.

So I think offering of private label stroke brands have been very synergistic to our offerings. The customers through their loyalty programs came to this conclusion they can do some customized offering in their stores and they invited us to participate in that. It went very smooth and fine because there has not been any inventory risk as well and our brand business has been growing steadily. It is when we went ahead with the Ted Baker arrangement, whereby we relied on while we did our own diligence, but we relied a lot on a very large private equity bad [indiscernible] having the ownership of Ted Baker brand and having appointed their own franchisee to run the U.K. and U.S. operations. So everything looks good. It is when the retail franchisees went into administration that the agency sales of new [indiscernible] Ted Baker got impacted. So therefore, we started has seen good traction. We relied upon a large players appointment of the third-party franchisees. So I think that did not work out well. So that is where you hear a bit of caution. As Pallak also rightly said, manufacturing, we are very positive sourcing as a service very positive with design and sourcing very positive. Brands, we are carefully evaluating. We have curtailed a few. So I think in our journey, brands has been a mixed kind of success. But that's fine. I think we seem to have taken the corrective actions. And the focus for the near term shall continue to be the 3 segments that Pallak mentioned. And the brands being run by us more in the shape of private labels without any inventory risk being taken.

Sir, so the INR 124 crore loss that we did last year, when will be breakeven? And what is the loss expected for FY '27 and when will we reach our EBITDA that we did 4 years back of INR 475 crores in FY '23. After that, we raised INR 400 crores, INR 450 crores also. So basically, since FY '23, the net worth has gone up by 70%, but the EBITDA has collapsed. So I mean, are you satisfied with this performance?

So I think I will answer what you asked first that we had in the last financial FY '25, INR 168 crores of investments across new verticals and we had foreseen that in the coming 2 years, firstly, we will try and bring that down to 1/4. It actually brought it down by 27%, and we have said we will be able to bring it down to about INR 80 crores in FY '27. We remain positive that we will be able to bring it to INR 80 crores, beyond that INR 50 crores to INR 60 crores every year is going to be a recurring investment. That is the way my model is that we bring new partners on board and they take about 12 to 24 months of gestation. So that's the answer to your first point. I think as this happens, number one, as we discussed earlier in terms of gross margin improvement impact and the EBITDA margin, we should see us seeing an EBITDA improvement. Of course, we are not happy with the last 18, 24 months performance. So therefore, we tightened our belt and took some -- of course, the global environment have been tough as well. But notwithstanding, I think we are not happy, and we are trying to get into a stage wherein our performance should be reflective of what our platform is due. So I guess next few quarters, the measures taken, initiatives taken, should see the translation of that into numbers.

Our next question is from Kiran Gadge from Knightstone Capital Management, LLP.

Under BCG initiative, we had COGS and OpEx cost savings. If you could provide full year number for both.

So I think our teams should be able to separately give you specific inputs. As I recall, we had foreseen on that annually about INR 40 crores to INR 50 crores, we should be able to save in our procurement and a similar number in our OpEx as well. So I think we are well on track. But specific cast. I think we're also earlier ask on some specific new vertical or these points we have taken a note and our team would be in touch to answer that.

And we saw the growth in H2 for Simple Approach, Krayons vertical, so if you could talk about them.

I think it's simple approach I would pick the first -- I think it's 2 has been an aberration. So we should see the vertical getting back in growth from H1 itself. So that's number one. I think Krayons is largely serving the U.S. market. And there have been, as you know, the [indiscernible] due to the tariff impact and otherwise. But structurally, beyond the U.S. impact, Krayons is looking fine both in terms of top line and profitability. So these 2, we are very positive that in H1 itself, you should see them posting both top line growth as well as profitability growth. Our vertical [indiscernible] maintain 1 or 2 more quarters, it is very leanly very low-cost structure, a profitable business, but it may take 1 or 2 more quarters to get the growth back. So -- but on the whole, these 3 put together aggregate should have an as well growth.

Our next question is from the line of Rudraksh Raheja with [indiscernible] Financial Consulting.

Sir, I wanted to ask on the dose division. How much revenue and profit before tax did we do in this for FY '26.

Yes. So sir, over to your second question, while we're just checking out in a few seconds numbers, please.

Yes, Sir, firing back on the operating expenses, but you mentioned that if we remove some other expenses, the growth rate would have been 11% instead of 1 -- could you quantify similar figures for employee expense as well? Like how much can the growth can be attributed to one-off, which we hope won't be repeated in FY '27.

Yes. I think our employee cost last year was circa INR 1,211 crores. This year has been about INR 1,310 crores. So this is almost an increase of INR 100 crores or so. I think Knit Gallery and the GSE are about INR 50 crores to INR 60 crores out of this INR 100 crore increase. So if I take that out, our employee costs would have gone up apple-to-apple about INR 40-odd crores as compared to the same period last year, which is almost an increase of 3. 3.5% in terms of percentage in terms of percentage come. So this is a does that answer your question before I come to New Lobster?

Partially, sir. Sir, just one small clarification. Since GSCL and Knit Gallery will be part of our business going forward. whatever base we have for revenues in the last 2 quarters, let's say, that should be ideally continue for next year as well and whatever growth we may do on top of that would be additional.

Yes. So INR 1318, the INR 1310 crores that we have as in employee cost is the base now. I think how they would be at all an increase or any initiatives in terms of employee cost efficiency should be on the base of INR 1310 crores. In terms of your question New Lobster, for the drier income from operations of approximately INR 500 crores and similar period last year was about INR 480-odd crores. So it's almost an of about 4%, but there has been a decline in the gross margin of the business by about 10% from about 30% last year to about 20% this year, mainly because the agency business of New Lobster almost dried away. So therefore, the gross profit, which was INR 150 crores came down to almost about INR 100-odd crores this year. And therefore as a result because of the 4% growth, but the margin declined. The profit after tax of the business, which was circa INR 130-odd crores last year, has actually increased this year to almost about INR 38-odd crore or so. So it's kind of that the situation it stands. And we are working on it to find -- bring the business closer to first, we cut losses and win the business to profitability. But this is where it stands that the decline in gross margin impacted the profits of the business.

Sir. could you help us understand, you have highlighted in your PPT, this New Lobster turnaround with a red circle, which signifies some initiatives that you are still undergoing here. So do you help us understand that?

Yes. I'll request Pallak to first give us thoughts and then required I will supplement the numbers.

Yes. So as Sanjay mentioned, out of most of our subsidiary of New Lobster which is the Ted Baker business remains one of the bigger challenges, especially around the bankruptcy, the retail partners that APG has chosen because bankruptcies have not happened and this business has been highly profitable. But it is what it is now. The financial situation of those retail partners was not -- what was expected. So we are in close discussion with ABG, the brand owner and discussing with them either they have to give PDS financial contribution every year for us to be able to maintain and run the head office of the business or they have to then find a new retail partner who will then be able to ramp up the volumes and give us adequate turnover required to be able to maintain the infrastructure of the entire buying and design operation of New Lobster for Ted Baker. So there are the discussions we're having right now. So hopefully, we'll have some conclusion in the next 4 to 6 weeks. In this current financial year, they've already agreed to a financial contribution of around $2 million, $2.5 million, which will be paid to New Lobster on a monthly basis, which will help us in improving our profitability. But that financial contribution will -- is only for 12 months. So we are asking them to extend it for another 24 months after the 12-month period is over or replace that with additional turnover coming to a new appointed retail franchise partner. So we are very actively trying to address this issue because for us, also, this is one of the bigger pain points and hopefully, we will have some positive companies in the next 4 to 6 weeks with our discussion. Sanjay, do you want to add anything further?

No, Pallak, I think we answered the numbers earlier and you've answered on the thought process going forward to address the business.

Yes. Brand is doing well. It's still a very strong brand. But just the volumes are not there to support infrastructure to run the brand. We just opened a concession in [indiscernible]. So when a brand ends up becoming in self-regs in U.K., definitely the [indiscernible] would not take the brand unless rate value in the brand. And also, Aditya Birla the franchise parts in India is starting to open 10 more stores in the next 2 years. The bank continued to perform and has strong consumer connect sales, economic and financial model, we have to work out with ABG which they're quite committed. They also want the brand to grow and to flourish from where it is currently.

Our next question comes from the line of Dhwanil Desai with Turtle Capital.

I'm us afternoon, everyone. Large clarifications on the earlier answers that you have given. So the first question, Sanjay, is that we talked about 11% order book growth and mid-single-digit revenue growth while we also said that the U.S. business, the order book is up by 30%. Europe also last year from the [indiscernible] call out, so are we expecting a very sharp growth in Europe because this kind of doesn't add up?

If I slice the order book growth for example U.K. and Europe is a low single digit, about 3%, 4% growth in order book. Asia is looking at about 89% growth in order book and America is faster at 30%. So it's not degrowth in terms of order book. But when we talk about a 5%, 6% growth versus the 11% order book, yes, we are being cautious because last year also saw from time to time some pushback from the customers to hold the shipments. We deal with good credible customers. So eventually, they take shipments, but there has been a push back. The customers have been cautious on inventory buildup as well is this caution that is kind of holding us back. We hope that the order book growth faster into top line growth. But whatever one witness in the past few quarters makes one cautious about it.

Got it. Second question is, you talked about 40 to 50 bps margin improvement and down by another INR 40-odd crores. So if I add or kind of number flowing through to EBITDA. Now because our finance in the debt side is kind of managed balance very well, so if we don't increase the finance cost and not much of a CapEx. So ideally, this all should flow through this PAT, right, but you count about 10% PAT growth. I'm not able to reconcile.

So I think I don't have a difference of from the math you just did. I think a 5% top line circa 10% bottom line is where we stand in terms of extreme caution and hopefully, things should get delivered better. That is where we stand. And as quarter passes by, as we keep delivering that should allow us to relook at it, but this is where it stands as of now. We need to be prepared for the global headwinds that are there. So that's where we are coming from.

It is to translate whatever that you are saying, that means that INR 900 crores EBITDA delta will come, is we kind of able to pull it off to those things? Or am I missing something?

No. I think slicing it in a 40, 50 basis point gross margin, yes, we are geared towards that curtailment of expenses lower than the top line growth, we're geared for that. So if all goes well, it should translate into commensurate profit. Yes, it should. We are staining from committing to new investments for 1 more year. We would, of course, be signing sourcing as a service contract, but in a typical manner we take new verticals on board through the P&L., we are restraining for 12 more months. So therefore, all of this should translate, but this is where it stands right now.

Last question. So U.S. this quarter in 9 months, I think U.S. growth was 19%. And for the entire year, it is 10%. So it looks like that I mean there was some degrowth in Q4. Is that understanding correct? And given that we are from a low base, we have [indiscernible] into so many accounts, should we expect that 25%, 30% plus kind of a growth in FY '27 or how should we look at it?

See, if I understood your question right, I think our Americas top line has been pretty much flat. It's in tons of dollar terms, it's about 0.4% up. Sequentially in quarter 4 it has slightly come down as compared to quarter 3, it's about 4%, 5% lower. But I think tariff situation, in fact, one of the participant asked a question on Krayons that Krayons declined, yes it has declined, but it has got a stable order book like Costco client, et cetera. But that's history, today, where we stand is a 30% growth in Americas order book as compared to the same period last year. So we should see now more traction building up in terms of growth for Americas.

Thank you. Ladies and gentlemen, we will take that as the last question for today. I would now like to hand the conference over to the management for closing comments.

Thank you so much, EY team, and thank you so much for all the participants who time part of the call, and we shall be in touch with you at the end of the next quarter. And extending meetings to all of you, stay safe. Thank you.

Thank you. On behalf of PDS Limited, that concludes our conference. Thank you all for joining us. You may now disconnect your lines.