PDS Limited Q3 FY26 Earnings Call Summary

Summary

PDS Limited - Q3 FY26 Earnings Call Summary Wednesday, February 11, 2026, 4:00 P.M. IST

Event Participants

Executives 3 Pallak Seth (Executive Vice Chairman), Rahul Ahuja (Group CFO), Sanjay Jain (Group CEO)

Analysts 5 Kiran Gadge (Knightstone Capital Management LLP), Kushal Goenka (Mangal Keshav Financials LLP), Madhur Rathi (Counter Cyclical Investments), Prakash Diwan (Matterhorn Investment Advisors), Rohit (ithought PMS), Rudraksh Raheja (ithought Financial Consulting)

Financials & KPIs

Geographic & Segment Commentary

• United Kingdom: Revenue share increased to 43% (vs 37% last year) with 24% absolute growth. PDS is benefiting from vendor consolidation among large UK retailers like Primark, Tesco, and Next despite Matalan’s restructuring.
• Europe: Revenue share declined to 31% (vs 38% last year), representing a 12% absolute decline. Performance was significantly impacted by the Gerry Weber bankruptcy and subdued consumer sentiment in Germany.
• Manufacturing: Segment saw 35% growth in 9M FY26 and is now profitable with PBT margins of 3.5%–4%. The segment is transitioning to a strategically aligned model focusing on higher “earning per minute” customers.
• Americas: Revenue grew 20% YoY, now accounting for 20% of total sales. Growth is supported by new account openings with Target, Walmart, and TJ Maxx, while US reciprocal tariff framework (reducing India’s exposure from 50% to 18%) improves competitiveness.

Company-Specific & Strategic Commentary

• Knit Gallery Integration: The acquisition is performing well with an expected ₹250+ crore revenue this year and 4%–5% PBT margin; management targets 40%–50% growth next year via internal efficiencies.
• Sourcing as a Service (SaaS): PDS is pitching for contracts worth ~$1 billion in the US, UK, and France. The model is a transparent “cost-plus” structure with zero working capital requirements and day-one profitability.
• Cost Transformation: An enterprise-wide initiative is underway, including merging “Design Arc” into “Poeticgem” to optimize manpower after the Matalan business declined.
• Leadership Transition: Rahul Ahuja is transitioning to Strategic Adviser; Sadik Sunasara (formerly Head of Banking & Treasury) is elevated to Group CFO to focus on credit risk and liquidity.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

Customer Consolidation (Pallak Seth)

• Question: Why is growth slowing if vendor consolidation is happening? (Madhur Rathi)
• Answer: Growth is hit by specific accounts (Gerry Weber/Matalan), but new accounts (Walmart, Target) are opened. These take 2 years to scale. US tariff hikes led to 5-10% price increases, dampening volume demand.

Gross Margin Sustainability (Sanjay Jain / Rahul Ahuja)

• Question: Are the record-high gross margins sustainable? (Rudraksh Raheja)
• Answer: Q3 benefited from high negotiating power with factories during industry headwinds and the Knit Gallery mix. A 50 bps YoY improvement is a more sustainable long-term target than quarterly spikes.

Manufacturing Strategy (Sanjay Jain)

• Question: When will manufacturing reach high ROCE? (Prakash Diwan)
• Answer: Manufacturing has ~$90M capital employed. We aim to multiply Knit Gallery’s influence 8-10x through third-party partnerships, similar to the Bangladesh model.

Key Takeaway

PDS Limited delivered a resilient 9M FY26 with 6% revenue growth and 7% GMV growth, despite the significant bankruptcy of a major client (Gerry Weber) and restructuring of another (Matalan). Excluding these, core growth stood at a robust 11.2%. The company achieved record gross margins in Q3, driven by procurement efficiencies and the integration of Knit Gallery, which is expected to grow 50% next year. Strategically, PDS is pivoting toward high-value manufacturing and “Sourcing as a Service” (SaaS), with active bids for $1 billion in new contracts. Although near-term growth is tempered by US tariff uncertainties and a cautious 6-7% order book, the onboarding of tier-1 US retailers like Walmart and Target provides a strong medium-term runway. Management remains focused on the “333/555” strategy, aiming for structural profitability and asset-light scaling as global supply chains shift toward India and Bangladesh.