Pearl Global Ind Q4 FY25 earnings call

What moved the numbers, as management explained it

• Q4 revenue grew 40.1% YoY on volume growth across all geographies; FY25 hit record 74.3 mn pieces (vs 56.9 mn in FY24, +30.6% YoY).
• Q4 adjusted EBITDA margin (excl ESOP) at 9.7% (₹119 cr, +41.7% YoY); excluding losses at new facilities (Guatemala, Bihar), margin would have been 10.5%. (one-off)
• India standalone Q4 adjusted EBITDA nearly doubled to ₹40 cr (+96% YoY) from ₹21 cr, margin expanding to 10.2% on operating leverage and efficiency.
• FY25 results include an exceptional gain of ₹5 cr from sale of non-core assets. (one-off)

The numbers management led with

• FY25 consolidated revenue: INR 4,506 crores (+31.1% YoY, 3-yr CAGR 31.9%)
• FY25 PAT: INR 248 crores (+42% YoY, 3-yr CAGR 94.7%)
• FY25 shipment volume: 74.3 million pieces (vs 56.9M FY24)
• Geographic revenue mix FY25: U.S. 64% (only 46-50% lands in U.S.), EU 16%, Japan 7%, U.K. 5%, Australia 5%, Canada 3%
• FY26 capex guidance: INR 250 crores planned for FY26
• Capex-driven capacity addition FY26: ~8 million pieces; will take installed capacity from 93M to 101M pieces

Guidance on this call

By business

Balance sheet, capex and funding

• Net debt-to-EBITDA at (-0.04x) for March '25, down from 3.43x in March '21.
• Cash and bank balance (excluding cash for LC payments): ₹513 crores as on 31 March 2025.
• Net working capital days at 38; inventory days at 57 (in line with estimates).
• FY26 CAPEX plan: ₹250 crores (₹130 cr capacity expansion in BD/IN, ₹90 cr sustainable laundry in BD, ₹5 cr solar in IN).
• FY25 CAPEX incurred: ₹135 crores (₹75 cr capacity expansion, ₹22.5 cr BD land, ₹12.5 cr Vietnam partnership).
• ICRA credit rating upgrade: A stable (long-term) and A1 (short-term).

The industry, as management sees it

Apparel sourcing landscape is being reshaped by U.S. tariff policy (10% baseline + country-specific add-ons), U.K.-India FTA (eliminating 12% duty on Indian garments), and EU-India FTA negotiations (expected to conclude in 2 quarters). China's market share is contracting across major importing markets (U.K. share fell from 35% to 21% since 2020). Bangladesh, Cambodia, Vietnam, Turkey remain duty-advantaged in EU/U.K., but India is closing the gap. The U.S. is the largest and most attractive apparel market but will remain tariff-volatile through 2025-26, driving retailers toward multi-country, multi-product vendors with proven execution.

Risks management named

• U.S. tariff regime remains dynamic — 10% baseline, 30% on China (incl. 20% fentanyl tariff); 90-day reciprocal-tariff pause
• Bangladesh remains 5-7% cheaper than India on apples-to-apple garment manufacturing cost
• New facilities at Guatemala, Bihar, and Indonesia are operating at sub-optimal utilisation, dragging consolidated margins
• Retailers have asked for tariff burden-share ranging 1-4% of revenue; management has agreed up to 2-2.25% in some cases
• Order booking is more conservative on holiday/Fall inventory but no cancellations seen through May 2025

Asked for a number, answered without one

• FY26 EBITDA margin expectation: Stayed at 'medium-term 10-12%' range; declined to give a specific FY26 number, citing Guatemala losses, Indonesia utilization and India ramp-up as levers materializing at different times.
• New customer additions: Said 'at least 2 very significant customer has got added' with potential of $20-30 mn each; no specific count or names provided.

Every question, with its answer

1. 1. Geography revenue potential, U.S. tariff customer behaviour, new customers

   Bhavya Gandhi, Dalal & Broacha Stock Broking

   Question. What is the full-year revenue potential for Indonesia, Vietnam, and Guatemala assuming 85% capacity utilisation? Also looking for ground-level feedback on how retailers are placing purchase orders post the 10% U.S. tariff, and any new customer additions in Q4/FY25.

   Answer, Pallab Banerjee, Managing Director, Pearl Global Industries Limited. Indonesia: capacity supports $30-35M with room to grow; Guatemala smaller at $10-15M maximum; Vietnam nearing $100M and will comfortably cross that. On U.S. tariff ground feedback: April-May sales have been on-target and tariff whiplash (10% baseline, reciprocal, 145% then 30% on China) drove a brief conservative phase, but no order-book reduction seen. Holiday/Fall orders are slightly conservative but not a major change. Two significant new customers (>$20-30M potential) were added in FY25; the company is engaged in ongoing customer additions leveraging multi-country, multi-product positioning.

   Follow-up. $100 million on Vietnam — confirming. Ground feedback on retailer purchase orders post 10% tariff?

   Answer. Confirmed $100M Vietnam. On U.S. order behaviour: confusion from rapid tariff changes, but April was a good month and May started well; no empty-shelf situation observed; retailers conservative on holiday buys but no order cancellation visible.

2. 2. U.S. tariff burden-share, India-Bangladesh transshipment impact

   Ashmita, Electrum Capital

   Question. With tariffs in place, what is the share of added cost Pearl Global is absorbing versus passing on to the brand? And with India blocking RMG transshipment through land route from Bangladesh, what is the impact on supply chain and delivery timelines?

   Answer, Pallab Banerjee, Managing Director, Pearl Global Industries Limited. Three methods used to manage U.S. tariff cost: (1) burden-share with vendors, (2) emergency alternative sourcing to displace China, (3) landed-cost optimisation (freight, insurance, logistics). Burden-share requests ranged 1-4%; Pearl has agreed to no more than 2-2.25% in some cases, and only ~45-50% of total revenue actually lands in U.S., so impact is contained. On India-Bangladesh transshipment: ruling limits Bangladesh garment imports into India to Kolkata and Mumbai sea ports, adding ~2 weeks of transit — but this does NOT impact Pearl Global since none of its Bangladesh production was being routed into India.

3. 3. U.K. FTA India demand outlook, capacity addition pace

   Dhwanil Shah, iWealth Fund

   Question. With the U.K. FTA now in place, how is overall India demand shaping up and how does India compare on cost versus Bangladesh? On capacity, with Q4 utilisation at 88%, the 8M piece addition seems small versus the implied ~14M needed for 15% volume growth — by when will the 130-140M capacity come and what is the broad capex requirement?

   Answer, Pallab Banerjee, Managing Director, Pearl Global Industries Limited. On U.K. FTA: India apparel exports are $15-16B with $1-1.5B to U.K.; the 10-12% extra duty was a drag, so FTA levels the playing field. China U.K. share fell from 35% to 21%; India positioned to capture that shift. India vs Bangladesh: Bangladesh is 5-7% cheaper on cost, but the earlier 5-7% cost gap + 12% duty = 17% effective gap, now closed. India and Vietnam are now in a similar position vs U.K. On capacity: the FY28 plan is 130M capacity supporting 100M shipped pieces; current capacity 93M will reach 101M post-FY26 addition, with further partnership additions under discussion. Allocation by geography is driven by ROI/ROCE: Bangladesh most cost-competitive for mass merchandise, India promising on FTA tailwinds, Vietnam/Indonesia premium-end specialisation, Guatemala strategic showcase.

4. 4. Customer acquisition timeline, U.S. competitive intensity

   Rudraksh Raheja, ithought PMS

   Question. On customer acquisition: Pearl already caters to large players like Walmart and Target. What is the typical timeline and stages in acquiring a new client and reaching sizable commercial scale? And on U.S. business, an Indian textile service provider with strong reputation has grown in U.S. for 2-3 years — is competitive intensity increasing?

   Answer, Pallab Banerjee, Managing Director, Pearl Global Industries Limited. Clarified that Pearl caters to Target Australia and Walmart Canada/Mexico, not U.S. On customer acquisition: depends on fit and customer-specific gap; for strategics like Walmart/Target the wait is long unless disruption (e.g., tariff reset) creates opportunity. Pearl's multi-country readiness and design showroom presence help; one Canadian-headquartered retailer went from first contact to shipping in months, while another U.S. customer conversation has been ongoing for over a year without conversion. On competition: U.S. remains high-competition; main rivals are South Korean, Taiwanese, Chinese — India's share is small; one or two more Indian vendors don't materially shift the competitive landscape.

   Follow-up. Hypothetically, how quick is the acquisition — 6-12 months or faster?

   Answer. Varies: a Canadian retailer with a specific need was onboarded in months; another U.S. conversation has lasted 1+ year without conversion. Pearl's multi-country presence and design-team readiness make it faster than single-country competitors who have had to acquire companies to add customers.

5. 5. Customer concentration, wallet share, design team contribution

   Parth Patel, Unifi Investment

   Question. What is the revenue contribution from Pearl's top 5 and top 10 strategic clients in FY25? What is Pearl's wallet share within these top clients? And how is the in-house design team (75 members across 4 locations) contributing — to core business or new ventures like Pearl Unlimited?

   Answer, Pallab Banerjee, Managing Director, Pearl Global Industries Limited. Top 5 customers contribute ~60% of revenue; top 10 contribute 78-80%. Wallet share varies: for top 3 customers, Pearl is itself in their top 3 — at Kohl's a single vendor typically has 5-7% wallet share, Pearl similar; PVH Group similar; Inditex is so large Pearl is probably 1-2%. Pearl's target is $100M+ revenue for top 3-4 customers and $50M+ for the next tier. On design: Pearl has design teams in all manufacturing locations and in major markets (U.S., U.K., Spain) with showrooms for co-creation. 40-50% of what Pearl finally manufactures originates from its own designs. The design function supports core manufacturing; 65-70% of business is auto-mode with strategic customers, the rest is design-led pull.

6. 6. Capacity addition pace, margin expansion path

   Pulkit Singhal, Dalmus Capital Management

   Question. Capacity expansion rationale: 5-year volume CAGR has been 15%, so for 15% growth Pearl needs 14-15M pieces of capacity annually, but the announced addition is only 8M. Why is capacity addition lagging growth? And on margins, business has grown 50% over 2 years but EBITDA margin has moved only from 8% to 9% — what is the path to double-digit margins?

   Answer, Pallab Banerjee, Managing Director, Pearl Global Industries Limited. On capacity: Pearl has a mix of own-investment and partnership capacity; 74M shipped in FY25, 93M ready, going above 103M with the 8M direct addition. Additional partnership additions under discussion (incl. outsourcing in India) will push capacity higher during FY26. CFO Sanjay Gandhi added: at 15% volume growth FY26 will need ~85M pieces; current 93.1M plus 7-8M addition covers it. Other projects under active evaluation. By early FY28, capacity should reach 130M. On margins: CFO Gandhi responded that Q4 India at 10.2% and group at 10.5% ex-new-facility losses already shows double-digit is achievable; medium-term target is 10-12%. Levers: Guatemala turnaround, Indonesia utilisation ramp from 50% to double, India capacity ramp from INR 1,200 cr to INR 1,600 cr+

   Follow-up. What is the margin expectation for this year?

   Answer. Gandhi reiterated medium-term 10-12% double-digit target; did not commit to a specific FY26 margin number, citing multiple levers at different points of maturation.

   Partly answered.

7. 7. U.S. volume growth and tariff sharing, profitability levers

   Prerna Jhunjhunwala, Elara Capital

   Question. On U.S.: how are clients talking about volume growth and tariff burden-sharing during the 90-day pause? And on profitability, given Pearl is investing ahead of demand so some capacity stays idle, what are the levers beyond utilisation to push margins toward 12%?

   Answer, Pallab Banerjee, Managing Director, Pearl Global Industries Limited. On U.S. volume: imports have been up double-digit in early 2025; market is not suppressed despite tariff uncertainty. On tariff: retailers tried to raise ticket prices publicly and were reprimanded; in this quarter some asked for burden-share, others for logistical solutions, others for help — all combinations in play. Pearl does not foresee a heavy discount scenario; whatever burden-share is being given was already in order costings. CFO Gandhi added: key margin levers are Guatemala stabilisation (currently in loss-making ramp phase), Indonesia utilisation from 50% to full, and India ramp from INR 1,200 cr to INR 1,600 cr+ — Q4 India at 10.2% demonstrates the path; foundation is set for sustained double-digit group EBITDA once new facilities stabilise.

8. 8. India-Bangladesh yarn restriction, Q4 utilisation India/Vietnam

   Vignesh Iyer, Sequent Investments

   Question. Last month there was a restriction on yarn imports from India to Bangladesh via road route; Bangladesh is heavily dependent on Indian yarn. What is the impact on lead times and how well is Pearl placed? And what is Q4 capacity utilisation for the India and Vietnam units specifically?

   Answer, Pallab Banerjee, Managing Director, Pearl Global Industries Limited. On yarn restriction: Pearl has not seen any impact; Bangladesh business is growing ~35% YoY. There are enough alternate routes and stockists for yarn into Bangladesh. On utilisation: CFO Gandhi clarified Q4 India utilisation was 90%+; Vietnam ~65% — Vietnam has a seasonal pattern with H1 (Fall/holiday outerwear) being higher utilisation and Q4 typically lower.

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In their words