Pearl Global Industries (NSE:PGIL) Q2 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to Pearl Global Industries Limited Earnings Call for Q2 and H1 FY 'twenty seven. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Mr. Ashishir Ghahoy, Head of Investor Relations of Pearl Global Industries Limited. Thank you, and over to you, sir. Thank you very much. Good afternoon, everyone, and I am delighted to welcome you all to our earnings call for Q2 and H1 FY 'twenty seven.

0:49 I hope you all had an opportunity to review our press release and the investor presentation, which are available under the Investors section of our website and the same are uploaded on the BSC and NFC websites. To discuss our results, we have with us our Managing Director, Mr. Pallav Balaji and our Group CFO, Mr. Sanjay Gandhi. They will take you through our results and business performance, after which we will proceed for question and answer session. Before we start, I just want to highlight that this call may include forward looking statements based on the company's current views and expectations. Actual results could be different as future performance is uncertain and involve risks that are hard to predict. I will now hand over the call to our MD, Mr. Pallav Banerjee. Over to you, Pallav ji.

1:41 Thank you, Sushir. Good afternoon, everyone. I welcome all of you to quarter two of and H one financial year twenty seven earnings call. We continue to deliver a strong top line and bottom line by our focused execution and multilocation presence. For h one of two thousand twenty seven, we achieved a revenue of 3,330 crore, and adjusted EBITDA stands at 348 crore, which is at 10.5% and a PAT of 225 crores. And during this quarter, we achieved revenue of 1,802 crores. EBITDA stood at $1.84 crore and PAT at $1.26 crore.

2:29 We shipped 43,600,000 pieces as compared to 37,000,000 pieces last year, same period of h one. Working capital days and receivable amount and days have increased a bit due to two reasons. There have been significant shipments towards the end of the quarter, and conversion into cash is likely in the next quarters. And there are some deferment of some of our receivables factoring and use of internal accruals for this working capital was done this quarter. Both these will get normalized within this year itself, within these next two quarters. Now let me speak of of our key markets.

3:16 US continues to our... To be our biggest market, and The US customers generates approximately half of our revenue. And what we saw that consumers in US... These consumer spending continued to be strong this year despite all the hindrances that we were expecting because of inflation or because of the war and gas prices, but still they continue to buy strongly. The economists were forecasting a cautious approach, and the market exhibited both opportunities and areas of caution as far as we speak to all the retailers that we are servicing. What I find is retailers have kept their inventory level quite lean as they went into the biggest selling season during this Christmas holidays.

4:08 This year is a compressed timeline between the Thanksgiving and Christmas, which is their biggest retail activity days. And as you know, that this date varies because it's the Thursday of the week of twenty second. So that means the Thanksgiving can be anywhere between November 22 to November 28. This year, it has fallen on November 26. That is shortening the period by almost 12%, 12, 12 and a half percent compared to the better years that they get where the selling window is bigger. And this is especially important for the brick and mortar retailers. Overall projection are higher sales in dollar value, but we have to factor in the inflation that is happening in the market.

4:56 The recent election results and the drop in crude prices with some some of the economists are projecting that average gasoline prices in US may remain below $4, and that's a very important number for The US consumer. So which should, you know, further improve or, you know, sustain the consumer confidence in terms of the retail spends. What we have witnessed earlier is that as soon as the gas prices goes beyond $4 per gallon, so that's why I'm... I know they... The the the discretionary spending goes down, and that's how it gets affected in the apparel retail and other retails.

5:45 But this year, I think with these results and with this current movement of gas prices, it should be better. We are witnessing a monopolistic behavior in the shipping lines. And in terms of container prices, retailers do a long term contract to mitigate these prices and the surges during these peak months. Normally, peak months are between August to October, and we saw a huge increase. This particular year, it went up to $12,500 per container, which normally the rates are at 2,000 to $3,000. Now that... Definitely, all these retailers do a long term contract and get those, you know, more consistent prices.

6:33 But we saw that, recently, in the recent years, there's been a trend of surge price surcharge. So in form of the surcharge, the logistic or the shipping lines are charging to these customers, and the availability of containers at the spot prices goes down. So that is some of the challenges that the retailers went through. As PGIL, we offered some of the logistical help to the smaller customers and some other department customers to get their goods connected and reach earlier compared to their own logistics and thus gain some strategic relationship improvement. We utilize the spot rates, and this is... We have taken it as a value added service to some of our limited amount of customers where we have some strategic relationship.

7:26 Apart from that, we are experiencing a strong growth in Canada and UK markets this year. European Union also is inching up in terms of the volume with us, while Japan and Australian customers, the volume has been steady this year. Now talking of the India, UK FDA implementation that happened from 07/15/2026, this is a significant positive development for Indian exports and for companies like Pearl Global who have been servicing these customers from our other locations. Now this agreement does provide a tariff free access to the Indian goods...

8:14 Indian manufactured goods, and thus, the sourcing from India are expected to go up. Our UK based customers are showing very much elevated interest, and we are experiencing an... A significant increase in the volume from them. This was predicted by our shareholders also. We'll see a significant growth, and our sales in this market has been growing this particular year in significant numbers because this is an additional assurance of fungibility between the countries as PGIL has got its base both across Bangladesh and India. Similarly, the European Union FDA, which is under discussion and or, like, signed up, should get into effect by early two thousand twenty seven. We are seeing an elevated level of interest from European Union customers as well.

9:14 Once again, we are seeing a huge amount of push from their side to find out opportunities in India and what are the programs that can be executed out of India. So that discussions are well on. As a result, you will see that utilization of PGIL India's capacity is much higher in the first half of the year, and this trend continues with our h two bookings. Our new factory in in Bihar is ramping up well and moving as per plan. The 35% increase that we experienced in Haryana and the wage increase that happened in Haryana and then followed by some adjustment also.

10:00 So these are the ones, like, which does affect the bottom line of India as we have four factories in Haryana. Karnataka spoke about a significant wage increase, but our industry, that means the government manufacturing, was exempted for now. That's providing some relief, but such threat is continuing. We believe that the Eastern part of India, that is states like Bihar, West Bengal, and Odisha, will play more and more important role for the industry going forward. Moving on to Bangladesh. During this quarter, we have inaugurated a new manufacturing unit. This has added 7,000,000 pieces of annual capacity at at its optimum utilization.

10:48 Another important step we are taking now is to go for a backward integration. We are setting up a knitting and processing unit. For this project, we have a CapEx of $3.50 to $3.75 crores allocated, and 200 crore has already been finalized by the board. This particular unit of processing will be operational by the beginning of two thousand twenty eight. The first phase of 10 tons of netting capacity has already started its operation. Now both these, in addition to the washing laundry, the new washing laundry that also we started in September, we have spoken about it earlier to all of you. So both... All these three projects, we are very excited in Bangladesh and so does our customers. We are seeing a lot of interest, and a lot of developments have started already.

11:42 The wage revisions are due at the... By December first week, and you have been reading about the disturbances on the Dhaka Street for the last seven days. As an update, you must have seen that Bangladesh PM has already tasked a wage board committee to come up with an early recommendation and implementation by early December with the arrears to be paid in January. Now during these last few days, our factories got good attendance, I would say high attendance throughout this week. However, we found that there have been mobs that was doing disturbance in the main streets of of Dhaka and the outskirts.

12:28 And wherever these mob activities we found near our factory, we halted the operation and let the workers go so that... To avoid any untoward instances. As of yesterday, all of our five owned factories were running fully. The new facility that we started last month did not experience any disturbance and have been working smoothly. Bangladesh authorities so far has moved swiftly, and we hope that situation will be constrained after these two days of holiday because they have their liberation day and other holidays at this point of time. But we are we are already sure that there will be an increase in the wage, and that's something we have been compensating in our calculation.

13:24 Earlier, Bangladesh used to have this wage revision every five years, but the critical government time, it got revised to three years. So this is something... It's part of part of parcel of, I would say, a third third world country, and we will continue to see this kind of disturbances that happens, but it settles down quickly. And as a country, they give a lot of importance to the industry. And as you saw, you must have read in the news also that the government is definitely very active and taking the right actions and time. Moving on to Indonesia, business growth trend is significant, although from a much lower base compared to these other countries of Bangladesh and India and Vietnam.

14:10 We are getting a good support from our premium car clients that we service from Indonesia, and we remain confident of delivering both the top line and the bottom line from this geography. Vietnam, again, continues to grow at a steady pace with the premium customer segment and the products that we do. We are ready for further growth, and CapEx is under evaluation at this point of time. As you know, that the land acquisition is complete. European Union and Vietnam FDA is driving additional interest amongst the customers, and we are seeing a shift from... Further from China and Myanmar into Vietnam from these customers. While some of The US customers are diversifying out of Vietnam because they felt that too much of business is in Vietnam for some of their categories.

15:02 So this kind of adjustment, what we are seeing in the world today, especially in The US retailers after the the tumultuous year of the tariff and the geopolitics. So they are diversifying their product base from... So that they are not concentrated in one region. Again, this particular strategy of of these customers is opening up a huge opportunity for companies like Pearl Global who have multiple location. And we are experiencing a higher level of engagement with our key customers in US. Talking of Guatemala, our effort continues to stabilize the operation and to achieve a breakdown sorry, breakeven.

15:48 Overall, we believe our diversified manufacturing footprint and the diversified market and client base with ongoing capacity additions, we are strengthening our customer relationships and the geopolitical challenges and the trade environment continues to position Pearl Global for a very sustainable growth in the medium term. Now with this, let me hand over to Sanjay Gandhi, our Group CFO, to share the financial highlights, and then we can open up for questions. Thank you. Sanjay, over to you. Thank you, Pallav. Welcome all to our quarter two and H1 FY 'twenty seven earnings call. I will now take you through our financials and operational performance.

16:37 H1 FY 'twenty seven consolidated performance. During the H1 FY 'twenty seven, we marked our highest ever consolidated revenue, adjusted EBITDA and profit after tax for the period. Consolidated revenue grew to INR 3,330 crore, up 31.1% year on year. This was driven by growth across all locations. Revenue from value added services stood at INR 98 crore against which the expenses are INR 96.5 crore included in other expenses. Adjusted EBITDA excluding ESOP expenses stood at INR348 crore, up by 47.7% year on year. EBITDA include a one time net tariff adjustment and the marginal contribution from aforementioned value add services. Total gain from the two items listed above stands at INR 11.5 crore.

17:33 Adjusted EBITDA margin stood at 10.5%, up by 120 bps year on year. PAT in H1 FY 'twenty seven stands at INR $2.25 crore, a strong growth of 63.6% year on year. Quarter two FY 'twenty seven consolidated performance achieved highest ever quarterly revenue of INR $180.02 crore, up 37.2% year on year. Adjusted EBITDA excluding lease up expenses stood at INR184 crore, up by 51.1% compared to quarter two FY 'twenty six. Adjusted EBITDA margin stood at 10.2%, up by 90 bps year on year. Achieved highest ever PAT in quarter two FY 'twenty seven, which stands at INR 126 crore, a growth of 74.7% year on year basis.

18:23 Now talking about the stand alone financial performance, H1 FY 'twenty seven stand alone performance, total revenues stood at INR $6.48 crore, grew by 22.1% year on year, PAT stand at INR 29 crore. Quarter two FY 'twenty seven stand alone performance, total revenues stood at INR $30.08 crore, grew by 16.8% year on year, that stand at INR 16 crore. Balance sheet highlights. Net worth as on 09/30/2026 stood at INR $16.34 crore compared to INR $14.38 crore as on 03/31/2026. Cash and bank balance excluding cash earmarked for LC payment, which is approximately INR 70 crore stood at INR $5.34 crore.

19:13 Investment in liquid and mutual fund is approximately INR 104 crore as on 09/30/2026. Long term loan has increased by INR 61 crore to fund CapEx in Bangladesh, while short term borrowing has increased by INR $2.10 crore for working capital funding. The above is in comparison with 03/31/2026. Working capital days stood at fifty six days around 09/30/2026. The working capital days increase is mainly on account of increase in receivable days from thirty to fifty days. Receivable days got impacted because of heavy shipment for festivity, etcetera, towards the end of the quarter, leading to deferment of factory. We expect the receivable day normalization in quarter three, quarter four. This will also result in a better free cash flow generation in H2 FY twenty twenty seven.

20:02 CapEx update. As of previous in earlier discussion, the company is looking at INR900 crores to INR950 crores capitalization from FY 'twenty six till FY 'thirty. Breakup is as follows, sorry FY 'twenty seven till FY 'thirty. Capital work in progress of INR225 crores as at 09/30/2026, primarily pertains to Bangladesh operation expected to be capitalized in quarter three and quarter four FY 'twenty seven. CapEx of INR $3.25 crore to INR $3.50 crore earmarked for capacity expansion across geographies. Out of this INR 100 crore is likely to be capitalized in this financial year itself. Remaining is approved for growth opportunity across geographies to be implemented in coming two financials here.

20:52 CapEx on backward indication, which Pallav just highlighted, is approximately INR $350.75 crores. Commitment is expected to start in the current financial year. In short, we are hopeful that entire CapEx, which is mentioned above INR900 crores to INR950 crores is likely to be capitalized before or by FY 'twenty nine. Other highlights, the company has declared an interim dividend of INR5 per equity share, representing a 20.6% payout ratio with respect to the group PAT and which is 100% of face value of the share. Company shipped 43,600,000 pieces in H1 FY 'twenty seven, up from 37,100,000 pieces in H1 FY 'twenty six. As we presented our road map during Investor Day in September 26 on margin improvement till FY 'thirteen, which is EBITDA in the range of 12% to 14%, our result demonstrates our progression in the same direction.

21:47 In summary, we have delivered strong revenue growth of 30% plus in H1 FY 'twenty seven with improved profitability. H1 FY 'twenty seven performance testament to the strength of our global diversified business model, strong customer relationship and enhanced capacity and capability. With this, I now hand over to the moderator to open the floor for questions and answers. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question.

22:32 Ladies and gentlemen, we will wait for a moment while the question queue assembles. First question is from the line of Keshur Kumar from Unifi Capital. Please go ahead. Yes. Congrats on a great set of numbers. My first question is on The U. S. Market. Brands since the start of the tariff days have been using their inventory in hand, and the retail demand remains strong. Are you getting a sense of inventory restocking starting up given that tariff environment has somewhat resolved now? What's the sense that you are getting from the brands? Yeah. Thank you. Yes, sir. I am actually in US, and I'm taking this call from New York early morning out here today. And we have been interacting with the customers in the last few days.

23:27 What I find is that most of these US retailers have been careful, and they have gone in into the season with a very lean inventory. This is their peak season because, you know, there have been forecast or, basically, the economics have been forecasting because of war and the fuel prices that there could be a possible slowdown in The US in the second half of the year. So, naturally, most of the retailers have been very cautious about it, and thus, the inventory focus has always been there. I don't see a big change in that because with the current situation of geopolitics, local politics, they will be cautious. They will continue to be cautious. But, you know, the good thing is that we have not seen a big change in the consumer behavior pattern so far.

24:23 Of course, the market will punish... The capital market will punish them if the inventory goes up. So that's a fear factor that most of the retailers do have. What we are seeing is also a change. You know, as Pearl, we have exclusion in both kind of branding in US. There are what we call it as specialty retail and specialty brands and also the department stores. Now department stores have their own private label brands. So what we see as a trend in the consumer behavior is that once the market is going strong and and the consumers have money to spend, the discretionary income is high, that's the time they go for rebranding. That means, I mean, there are certain national brands like Nike or Tommy Figure or Calvin Klein's.

25:11 So these are the ones, like, at full price, their brands does well. And during the opposite kind of sentiment when their discretionary spending is less, the same customer would focus on buying the private label brands of a Walmart, Target, Kohl's, and often goes to a a trend down towards a discounting shop as well. So that kind of variation happens in the consumer behavior, and that's a cycle that we've... We need closely follow and train. That's why, like, you see that despite this kind of, you know, conservative approach by many retailers, our volumes have been growing up significantly because we have both sides of that of that market.

25:58 So, yes, small a small answer, quick answer to your question is that I don't see a huge change in their inventory planning of of the of the retailers. But within that inventory, how they're going to position themselves, between a national brand and a private brand, that definitely will alter, as we go in this season. Got it, sir. Very true. I hope that makes sense. Yeah. Yeah. Yeah. Yeah. It does, sir. As a second question, actually, the Bangladesh protest, you did talk about that. But given the due coming up, do you see can you give us some numbers on what is the expectation in percentage change that we can work on? Because Bangladesh is our key market. Do you think this wage revision impacting our margins in Bangladesh?

26:51 So first of all, you know, Bangladesh is a big market. As we are seeing that good my... You know, manufacturing is migrating out of China more and more. The two countries which have been benefiting maximum is Bangladesh and Vietnam. So Bangladesh, if you look at it, the wage, which was the minimum wage was at 12,500 rupees... Sorry, which works out to be just about, you know, a $100. And, like, when when... Three years back when the minimum wage was made into 12,500. After that, there's slight increases happened. At this point of time, it is averaging around 13,000 taka, which is hardly about, you know, a $100, $104. Compared to that, if you look into the other countries like India, we are averaging at 14,500 rupees is the minimum certain states have got.

27:44 Other states are in the range of 15,500 to close to 16,000 rupees. So the difference is quite big even between India and Bangladesh. If you go to Vietnam, Indonesia, then it goes up even even much higher. The difference is, you know, you talk of Vietnam, it is $2,280 is a minimum that you can get in anywhere in Vietnam. So so that kind of difference does exist. So Bangladesh has... And, you know, that is the reason for which a lot of these European customers and other customers have been focusing on on Bangladesh. Mhmm. Whether that business can actually move out if it goes up by 10% or 20% or 15%, 30%, I don't know how much the final increase would be in Bangladesh.

28:29 We don't see that it will move out drastically because still the difference would be significant when you compare with the other countries. Yes. Bangladesh... If I look at our own company, the average that, you know, where they're talking about 100 are, what we are paying to our workers is significantly higher because we are not at that, you know, bottom rung of of the industry who are just surviving on the minimum wage. So so, yes, these kind of changes were happening in Bangladesh every five years. Now it is expected to happen every three years because the government changed that ruling to three years. But I think it's necessary because the inflations have been high. The living conditions had deteriorated in Bangladesh.

29:16 And, you know, the flip side of it is that it got an extension in the in the status because if... So Yeah. That's also not good as a... From a humanitarian point of view. So I think there will be an increase of how much, you know, politically, there would be opposition who would be asking for a very, very high increase. But then the Bangladesh Government is very sensitive to this particular industry because 80% of their foreign exchange is coming from this industry, and they will taking a very, very cautious approach satisfying both sides. They should not be losing business, and at the same time, the workers' demand also to... Cannot be completely ignored. Yeah. So whether it will be from, you know, 13,000 to 20,000 or 18,000, that's something is difficult to guess at this point of time. But I think in that region, anywhere between 15,000, 18,000, it may end up. That's my take.

30:13 Again, like, you know, completely novice in that because the wage board is now constituted. So they are looking at it. So they will be proposing their wage, and then there will be conversation between the PGMA, the workers associations, and the government. And we'll get to know within the next two to three weeks how it's trending. Got it, sir. Got it. Sir, I have a question on the numbers. Our rent rate in both Q1 and Q2 has been much higher compared to the previous few quarters. Although there's an impact on the tariff in the last year. But do you see this run rate then continuing in the H2 as well, H2 and beyond? And are you facing any cost inflation pressure given the energy cost or freight cost increase? Are customers trying to push some of the freight cost to share with you?

31:09 So first of all, the growth that you are speaking about, yes, we came out of of a year where the whole sourcing decisions were quite very, very conservative last year because of the, you know, sudden implementation of the tariff and then going up and down on tariff and various kind of, you know, statements were coming out of the US administration. So that definitely had given a very, very conservative approach, and most strategies were getting built up. Even the strategy and the the discussion that we had with our customers over the last few years. So everything didn't follow through as an execution the last year. So our growth was limited to only, you know, below 9%, around 9% as you saw. So as we come out of that particular year in this year, we are seeing that whatever strategies were in place got implemented, and we got that sudden increase.

32:04 And this, I think, will continue for the second half of the year as well. How much the numbers is difficult to predict because, like, for example, our order books were there. A lot of shipments went in the last few days. Some of them still are in WIP. So this is something we'll stabilize next year... Projecting next year, like, whether this kind of growth will happen. That's difficult to say at this point of time. We have been adding new customers, and the diversified approach to different market has paid up very well for Pearl Global. So that's why, like, you know, we were confident of this growth. And I think we still continue to maintain the the projection that we discussed in Mumbai earlier last month when we had had that session.

32:52 So we are strongly, you know, on path on on that kind of trajectory. This year, definitely, we are seeing an exceptional growth because of the suppressed environment that was there last year. And, you know, the other factor is that both these FTAs are also playing on, and we are servicing those customers out of Bangladesh. So, naturally, they are placing more business in Bangladesh at this point of time also even before the India fully starts because they know that the fungibility exists for them. And we are one of the few, you know, established company who can serve them from both the countries. So, you know, that that tailwind is very high at this point of time, and that's why you're seeing this good growth. So there will be some of it will continue over the next few years, I'm sure. But to project, like, whether it will be 30, 37% again next year, I think that's too early to say.

33:45 Got it. And any cost inflation I'm so sorry, mister Kumar. You may please rejoin the queue for more questions. Thank you. All of us, sir. Thank you. Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participant in the conference, kindly limit your questions to three per participant. If you have have a follow-up question, please return the queue. We will take the next question from Harshmatull from MK Global. Please go ahead. Yeah. Thank you for the opportunity. So I have a a couple of questions. And firstly, congratulations to the team on a strong set of consolidated results. So my first question is on the value added services. You mentioned that we did around INR 98 crores of revenues in value added segment with approximately 1.5% EBITDA margin.

34:38 Where do you expect this run rate going ahead? And correspondingly, the margins also, should we see it to converge it to our consolidated EBITDA margin? And what is the time line to that? Thank you. Thank you, Harsh. I will answer that question to some extent, and then maybe, like, Sanjay can add on. So this is more like a service that we extended because of the extraordinary time or or the situation, the global situation that was there. Now whether this will be a business strategy and all, it is too early to say. We've took this action because we are set up globally to provide this additional benefit to our customers.

35:27 As you know that we have... We do have, you know, our infrastructure across US, Europe, and other places. So where we can, as and when required, we can add this kind of services to our customers. So there were definitely challenge when the freight rates went really up and the containers were not available even for the biggest of the retailer because the the shipping lines were definitely preferring the spot rates and giving priority to that, and the shipments were getting delayed. So that's the time, like, we came up to this service and and provided some advantage to the dealers who wanted to have a better control over their inventory planning. Now this also was a surge because of of the holiday season compared to, you know, what was earlier because we had discussed in earlier calls also if you remember that every retailer were going very, very cautious in terms of their inventory.

36:25 So naturally, as they're going into the holiday season, they didn't really stack up or stocked up earlier. So, naturally, they were depending on this period of of the inventory. So, yes, we did this service that improved the stickiness of our customer. Their reliability on us went up quite well, as you can see in the numbers also. And I think this will give us a better wallet share, continue to give us better wallet share of the customer. Now whether this will be a a going forward strategy or not, that's something we are not looking at it from that angle as of yet. So this is more of of these services as and when required to the customer to gain a better wallet share, more stickiness, more stronger partnership, we can provide this kind of services to our customer.

37:20 Sanjay, you want to add something in terms of numbers? Yes. Sure. I mean, yes, Pallav has already summed up. This is more for strong customer relationships, strengthening it and providing the services. And for that reason, we are not factoring that in any of our forecast. So nothing changes what we have been doing it earlier. The whole idea to show it separately is also to look at the business operation and the performance, excluding these two numbers to really get an idea of what potential is there and what was communicated in that sense. So if you remove this INR 1.5 crore from EBITDA, I think there will be hardly any impact. Likewise, we have to remove INR 98 crore from the top line. I think we reached at almost a similar kind of EBITDA percentage.

38:10 So this was the whole idea to this so that you can clearly earmark it. It is more for a customer retention and feeding the wallet share, then making it a segment altogether, which can start generating an EBITDA over a long period of time. So, to answer those questions. Sir, is it a fair assumption if I just take this INR 1.5 crores of EBITDA to other income because since it's like you said, it's one off and it is not going to be continued in same quarter. So is that a fair assumption? Can we take it below EBITDA? See, I think you will have to then do all the adjustment. You see that revenue is included in revenue from operation and expenses pertaining to the service are included in other expenses. So if you have to see a business evaluation, just exclude those line item also and see it without and then you can add whichever line item you would like to do that.

39:04 I think that may be a fair assumption to look at it. But just from the looking at the denominator perspective also, you've got to make an adjustment in the revenue as well. So we are fine with that. And my second question is also on the similar lines that we have mentioned that we have received approximately INR 11.5 crores. And out of that, INR 1.5 crores, I assume, is because of this value added services. So INR 10 crores is what we have received as the tariff adjustment. So what kind of quantum do we expect going ahead? Or is this the final number? So this quarter, the net tariff adjustment is about INR10 crore. We are not really forecasting that. As we had mentioned in our earlier call, there is an ongoing discussion, which is keeps on a partnership basis with our customer to really look at when the tariff was imposed, we absorb it and now the partnership, which is a strategic with some of the customer, they are coming and listening to us and then they have given this kind of a net tariff gain, which is coming in reflecting.

40:21 In future, we are not we are in a discussion with the customer, but we are not really saying that it has to come in the way of refund. It can be various other form of increase in the businesses or many other partnership opportunity, which could be there with the customers. So specifically forecasting the tariff refund per se in the P and L is not really something we are really looking at it, but there can be a potential of getting in this form as well in future. We should keep updating you on that. Sir, one question before I fall back in the queue. What would be the volume guidance this FY 'twenty seven? I think they have already done 43,000,000 pieces of. So yes, in terms of revenue, I think we are we had mentioned in before giving this guidance till FY 'thirty, we are talking about INR 6,000 plus crore by FY 'twenty eight.

41:15 I think we looking at the number and the volume, which is order booking for the next quarter, we are confident of reaching that milestone in this financial area, sir. Sir, in terms of volume, I'm asking, revenues, I understood, in terms of volumes? So volume will be a mix of will be also derivative of the product mix. Maybe in the next quarters, the next product will be shipped more, in which case the volume will go high. And if it's one product which is going, then the volume may be low side. So as the order keeps building up for the quarter four and some part of quarter three, we'll exactly know how the volume is going to be shaped up. But in terms of the value wise, whether it's the woven or lid, we are confident of reaching or crossing maybe INR 6,000 crore of top line, which we've mentioned Understood, sir. Thank you. Thank you.

42:06 I'll call back in the queue. Thank you. Thank you. Next question is from Raj from Piedent AMC. Please go ahead. Hi. Thank you for the opportunity and congrats on a great set of numbers. I just wanted to understand on the gross margins. So I mean, we have seen our ASPs grow by almost 15%, 20% on a year on year basis, much ahead of the whatever cost inflation we are seeing. So how do you see the gross margins going forward? I mean, there be any further price hikes to offset any increase in cost or and going forward? And do you see the gross margins staying at these levels or expanding further? So as we have mentioned, we have mentioned about the EBITDA percentage.

42:55 You see the EBITDA, we said in the long term, I mean, I would say the next four year trajectory is 12% to 14%, and which is what we are working towards it. And results as of now demonstrate that we are progressing in that direction. Now that improvement will come partly from the pricing for the cost improvement, operating leverage, really a combination of that, which will play out in terms of margin improvement. So I would suggest if you look at the EBITDA margin improvement, that may be better way because sometimes what happens that you have a mix of outsourcing and in house capacity, so the cost may get booked in employee costs or other expenses rather than reflecting in a gross profit improvement. So overall, that's how the trajectory will is likely to be, we are working towards it in terms of improving EBITDA margin, 12 to 14%.

43:48 Understood. And if I may add to earlier also, there was a question on the inflation of raw materials. So you see, normally, if there is any inflation that is passed on to the customer, because most of the customer in this... Our industry is involved in terms of the raw material prices and the sourcing as well. So so that's, like, you know, if there's a sudden increase or decrease in the raw material prices, that definitely gets factored in in the next season's cost. So I think, as Sanjay said, like, you know, if you look at the broader picture, that is a bit more accurate. Okay. Understood. And secondly, because of this... In in terms of the Bangladesh price increase and employee cost increase that you will see, do you think that we'll be able to gain market share from other players? Because as you already mentioned that we already are at a premium movie pay premium to the other players and those players who are operating at a cut through competition or don't have as such a broad customer base and diversified globally customer base as we have.

44:52 Because of these price increases, we may be able to gain market share from those players within Bangladesh? So in general, what we have seen because of of of our approach to the business of being multi country, multi location, providing the design service, and also running the operations much, much more professionally compared to local, you know, small time time players. So their business has continued to consolidate even in countries like Bangladesh to the players, like, who are able to service the customers well. So we are not certain that, okay, it is it is because of price that somebody else will gain.

45:39 The kind of efficiency level that we have been able to bring in into into the same market, we are definitely ahead of some of the local players. So that, I think, that advantage will continue with us in the medium term. I don't see that changing. Yes. If if there are any, you know, big decision changes that happens in Bangladesh or any big reaction that happens in Bangladesh, historically, we have gained more business. And that's because of the the infrastructure, the approach, the confidence that we can bring into a customer's mind. So that definitely helps us. Understood. And lastly, just on the tax rate. So what tax rate should we assume going ahead for FY 2017?

46:29 See, we have been mentioning that the tax rate of blended of 15%. The tax rate is though we've it is also blended tax rate is the result of the concentration of the profit in the geographies. On a long term perspective, we said around 15% tax rate is something which you can consider affecting ETR. Understood. Thank you so much. Thank you. Next question is from the line of Bharat Gilati from Dallal and Procha. Please go ahead. Yes. Hi. Thank you for the opportunity. Congrats on a great quarter. Just a question regarding the realizations.

47:14 I just wanted to understand what sort of dollar benefit have we seen given the rupee depreciation on our realizations, you know, just from a context of what's the sustainability of these realizations over the coming years, if you can give a sense of it, how much has been product mix gains and how much has been sort of currency gains? Yeah. Realization, average realization from the per piece of the government will be two functions. One, which you have mentioned in the question. The second, which I would just like to mention is also which product product mix is there in that particular quarter and for the full year. When I say product category, there are different product category. However, the broader segment is woven and the knit category. If the knit category is increasing, number of pieces will go high. So, every realization will look like. However, the overall revenue will remain the same. Likewise, on a quarter on quarter basis, the premium product will come, let's say, in quarter one, quarter two, which means the average utilization will be on the higher side.

48:24 That's one part of it. So this will be a function of these two parameter as well when you look at it. Now the second part of the question on the currency part, yes, so if you compare from the last year, the currency which is there about 7% to 8% of depreciation of INR to conversion from dollar to INR, I think that's where it's getting reflected in the current year average realization per se. But so is the cost part also, which is if you're converting the foreign books from the overseas book from the dollar to INR on the revenue side, the dollar to INR also get converted on the cost side. So both will get converted. So eventually, the net gain will be not in that percentage, which you will look at a currency conversion to the realization one. 7% will not be that gain. It will be on the lower side of that.

49:16 So current pricing which is their average realization, if this product mix continues the way it is, I think this will be much more sustainable as we move in the coming financial year. That's helpful, Sanjay. So, will be volume productive. Alab, you would like to add something, please? No, I think that's it. Yes, you've covered it. Yes, no, I think that's helpful, Sanjay. So, just trying to understand this realization mix improvement is primarily driven by the Indonesia utilizations driving it? Or have we seen a sort of improvement in realization in the Bangladesh and India business as well? There is an improvement in Bangladesh as well, slight improvement.

50:02 But this is driven mainly Vietnam and Bhakkadarasia on the higher side of it. But yes, there is a slight improvement in Bangladesh at this time. Understood, understood. That's helpful. And would it just be possible to provide the India utilization number for H1? Yes. You mean the capacity utilization, right? Yes, sir. Yes, sir. The capacity utilization will be around 68%, 69% for India. So is it still because the new capacities are in ramp up phase? Or is there some other reason behind it? I know Sanjay Palab spoke about in the earlier participant's question that some sort of ramp up is happening in Bangladesh for capacities that were supposed to come to India, but because of the fungibility, they're still sticking to Bangladesh.

50:55 Is that what the case is why utilization isn't ramping up in India? Or just trying to understand the perspective there. The Indian numbers have... If you... Sorry. Sorry. Go ahead. Go ahead, India. No. No. Please. No. Please, Philip. Go ahead. No. I'm saying that you can see that India numbers have gone up, and it will continue to go up. What I'm... What I meant was as these UK and European Union customers come in, so they are very comfortable with us. You know, the growth rate would be faster for them because they are already have that, you know, equation and and that understanding with our teams, which is the business can be easily ramped up. We have the facilities approved both in India and Bangladesh. So for example, they will not hesitate to place more in Bangladesh. We are seeing that growth happening in Bangladesh also. And only thing that they're asking for is, you know, you make out of these 10 programs, make one in India or two in India at this point of time as you ramp up. Then later on, like, we can go more into India. So that's the kind of, you know, every new steps that happen, it slowly ramps up. So that is happening.

51:59 In terms of India's capacity, I think we will see a growth in terms of the utilization this year. But, yes, Bihar, so far in the first half of the year, we have been hiring, training more people and putting into line. The number is going up every day. So when when we talk about installed capacity, so that is a bigger number when the full utilization and and the full factory will be running in its full strength. So that ramp up is happening at this point of time. Percentage wise, I heard Sanjay mentioned about 69, 70%. So let's see, like, how that number ends up by the end of the year. It might be a little higher as well. Understood. Understood. That's helpful. That's it from my side.

52:44 Thank you. Yeah. Thank you. Next question is from Suresh Pardesi from Motilal Uzmal. Please go ahead. Hi,. Thank you for the opportunity, and congratulations., just quick thought on Bangladesh. I... It's more of a clarification. They're asking from 12,000 to 30,000. This is the same thing they were demanding public in 2023. My quick assessment at this time, Bangladesh, Dhaka has not depreciated as compared to India. India has seen the depreciation. Now, politically, what will happen? I don't know. But, interestingly, the the government association has also been active. So there are two parts to my question.

53:31 Is it viable, or is it understood that 10 to 12%, 15% is still reasonable way to look at the demand? Or if it is beyond 30%, will it be viable for us to run the operation? Yeah. Interesting. Definitely, I think Bangladesh currency will change. The currency exchange rate will change definitely. Because you could see, right now, they're they're under a severe pressure in terms of the energy imports and all. So they are trying to... Because as a country, they have played it quite well so far. But the overall inflation, the availability of food and fuel is is a challenge out there.

54:22 At the same time, you know, in terms of the wage increase, yes, your observation is 100% correct. They always ask for double or very high. That's that's been, you know, all... Always these kind of things are also politically motivated. But at the same time, the country realizes their dependence on the manufacturing. Like India, we have got many industry. If you look at Bangladesh, it is manufacturing and apparel manufacturing is a big part into it. So, yes, our expectation is in the range of about, you know, 15%, maybe a little higher than 15%. But let's see how it goes. In terms of viability, as I just said, like, this is still the cheapest. And by far, if you compare the wages with the other countries, there's a huge difference.

55:16 Even with Cambodia and all, it's a huge... Both in terms of capacity and weight, there's a good amount of advantage that Bangladesh at this point of time enjoys because of that. Even if it increases, by the thing that I don't see the business will become unviable and will migrate very fast. But, yes, the other countries will be able to compete a little better. And, like, as I said, in India, we went into the Eastern States so that, you know, we are as close to us to that wage, you know, provided the government gives us the subsidy for the new facilities that we have built up. But still, that advantage in Bangladesh is huge. 50% less than India's wage and about 20 to 25% higher efficiency because of the ecosystem that exists.

56:09 So both these give them that advantage. And there will be... Let's see how this number comes up. Anybody's guess, but I think your study is very, very detailed. No. I I I got that then. That's that's really helpful. Our business dependence in Bangalore is much higher and, increasingly, we have invested in Balooqa. So I think that's what my worry was. But, anyway, I'll take it out. So our investment, if you see, is because of the ecosystem that is prevailing in Bangladesh. The kind of customers that we are servicing, the kind of business that we are doing is not... Like, absolutely, the cost is the most important factor. So even if you look at today, like, you know, whatever increase that they were doing, our workers are earning more than that.

56:57 Definitely, this will give an impact to us also. Like, we will have to increase our wages, but may not be to the full extent what the government has to go through because we are already paying much higher, much much higher. So Okay. That's that's the important thing. You saw the kind of infrastructure as you visited that we have built up. The way that we are operating is not... We are not competing with absolutely the lowest end commodity part of the business that Bangladesh is known for. Our business, the way that we have built up, is definitely much more sustainable. And so that gives me the confidence to say that, okay. Like, whatever happens, Bangladesh will continue to be one of our biggest in the midterm range. But are you sure that is that there is no production loss so far? Because our factory is more on and the rights and the thing were happening in.

57:52 Is there any production cost? Far, like, you know, we were ahead of time. In fact, some of the customers really appreciated and that we were offered them goods ahead of time because of the holiday, the kind of pressure. That's the kind of, you know, when we talk of a value added service, is that what I'm adding extra for my customer's benefit? So that's the approach that Pearl Global has been doing, which is we don't talk about it in this in this platform. But there are many advantages that we bring to the customers. So far, when you see that we lost about, if I see overall, you know, about two days of loss has happened in three of the three of the factories, but we don't see any impact. If if the situation improves from here on, we or our customers won't see any kind of impact from from Pearl Global.

58:44 Okay. My last question, you have given the revenue split for first half, 31% is mid time balance is. Sanjay, can you be... Will you be able to give me a breakup of 43,600,000 pieces in terms of volume for mid time woven so that I can... I'll be able to get the realization number right? Sure. Maybe I can provide you detail in separately, Pon. Okay. All right. All right. Thank you and all the best. Thank you. Thank you. Next question is from Sunny Vishay from PL Capital. Please go ahead. Yeah. Thanks for taking the question.

59:30 We are almost to the end of the call. So most of my questions have been attended, but I'll just follow-up with my... Some of my clarification. So in terms of the that we were just discussing, last last time, whenever it has happened, there has been at least 50% of increase that has happened in the minimum wages. And you just touched upon that it may go somewhere around 18,000. So that is almost a 40 percent increase. And I think we have 17% of our cost coming from wages, out of which maybe half of it would be So a 40% increase would be easily impact us to, I think, three, three and a half percent. Is that understanding correct?

1:00:22 So provided that everything else remains constant, that's that's the assumption if you put, then then it will be this percentage, but things will change as I as I just mentioned or we just discussed. There is a currency factor. There will be a cost factor for the with the with the customers as well. Because Bangladesh is, as on date, the lowest cost center that of April. So that benchmark, if it goes up, the customers don't have too many options, definitely. So, again, like, you know, talking about Pearl Global in specific, as I mentioned, like, you know, we have developed our own, what do you call it, a niche or the strengths on which we do the business.

1:01:09 Yes. Wedge is a factor, but it is not the the most driving factor. Even I'm talking about in the mid range for the next three to five years. Yes. Forecasting in our industry beyond that may not be proper at this point of time. But, yeah, in this period, we don't see it will be a big needle mover. Yeah. But maybe I am sure calculating, that like, if other things remain constant, then that's the number that you get. Yes. I agree with you. Yeah. So... And you will be off stated with the cost optimization and everything. I understand. And you already are above the minimum wage. But I think in the near term, at least for a couple of quarters, we may see some that is what I believe. Yeah. So... And secondly, on the value added services that we just spoke about, and so Sanjay said, k, 6,000 crores, we should be able to cross this year.

1:02:05 So does it include potential... I mean, say, this year... This quarter, it was somewhere around 100 crores. So another 200 crores. So does it include that, or that is somewhere around 300 crores? That will be over and above the 6,000 crores. So we are definitely looking at INR 6,000 crores plus with this value add service, it will go INR 6,000 crores plus. Okay. Understood. And finally, just a small number. So... Yeah. Yeah. Go ahead. Sorry. Like, I I would like to pitch in that, you know, this value added service was more important to this particular, you know, Christmas season. Yeah. So whether that will continue or not also, and that number will be that significant or not, we don't foresee that in a in a short term as of now. No.

1:02:55 No. I understand that we have to factor in. If we factor in at the top, we'll have to factor in at the bottom. I was just trying to understand the guidance that is there, whether it is inclusive of that or not. And finally, the Bangladesh Sorry, sorry. To your earlier point that wage impact in the coming quarter may be there. I just want to mention that we when we are making a forecast for every country and especially in Bangladesh given quarter three, quarter four, The wage increase to some extent was already part of our costing. That has been already there. Now if there is a wage increase happening beyond that, I think we believe that currency fluctuation, you see, if you look at for the last one year, the depreciation, they have been holding their currency around 125 taka, 124 taka to $1 The general view and the economic section is that there will be a depreciation of the currency of taka against the dollar, which will kind of offset to a great extent any increase happening beyond that as well.

1:04:05 And plus there will be a productivity improvement, which we are really looking at it to really offset that. So we don't see as of now, unless the we'll see how the impact comes up. Given the historical trend, the past trend of the wage increase, which has happened, I think few percentage here and there will get offset from the currency fluctuation currency depreciation as well. So that plan is also there with us. Yes. Just wanted to clarify on your... Yes. It's very clear. Understood, sir. Finally, the new facility in Bangladesh, 7,000,000 pieces, where are we in terms of utilization there? And when can it become to the normal levels? I mean, are there for optimum level? So we have started the operations there.

1:04:54 The... This is because, as you know, in our industry, like, you know, line by line, we go on increasing it. So as on date, I think, already almost about 20% of the total capacity is already operational. And every day, we are putting in new new workers, training them up, and putting them into the lines. So that, I think, over the next six to eight months, it will get into the full capacity. Yes. Okay, sir. Thank you. Thanks a lot for answering patiently. Thank you. Next question is from from Dulmus Capital Management. Please go ahead. Thank you for the opportunity, and congrats on a great set of numbers.

1:05:42 So first question is on the FTAs, India, UK, and with the EU subsequently. Which countries do you think will lose market share to India in the process? Which country will lose market share? See, as of now, their dependence on Cambodia and Bangladesh has been very high. What is happening amongst the retailer, as I mentioned earlier also, there have been very heavy concentration of certain category of products in one country. And with the recent development of whether you call it geopolitics, tariff, logistics, so that diversification is definitely happening.

1:06:27 What we saw in the last few months, countries like Turkey and all have lost a significant portion of the business, and that has moved in into this part of the world. The increase of cost and all that happened there was quite significant, and the business became unsustainable for many of the products of of The UK and European retailers. So, yes, that's one country from where migration has happened. And the second, what we found is from China also. These are two countries where numbers are perceivable. And when we speak to our customers, we see these are the two countries that comes into the discussion very often.

1:07:14 Turkey, the difference is also the speed. So that's sometimes some of the customers don't want to compromise, as it becoming more and more unviable, they are taking certain steps. China is more natural. And as India is... Countries like India is developing more in their fabric base, that's a huge opportunity that may fall through or come through. India was completely missing on the synthetic fabrics. And other places have shown some good interesting development in this last few quarters. So that gives us a little bit more confidence that things will come from China more and more. This is my take at this point of time. From Bangladesh or Cambodia, Cambodia, depends on lot of Chinese fabric. Bangladesh has built up their own fabric base and the raw material base that might be more sticky. But, yes, there will be some fungibility that this team... Customers are definitely looking for. That if required, you can shift between the two countries.

1:08:19 That's how I I am seeing. Yeah. But, I mean, the question really was whether you expect some of your other sourcing destinations to have an impact or not. So and to No, have I understand. Second question was on, I think, Sanjay, you probably mentioned about some CapEx plans till FY 'twenty nine. If you could just repeat the figures that you mentioned about and which areas? Yes, sure, sure, sure. So we had said from FY '27 till FY twenty thirteen, we had INR900 crores, INR950 crores capitalization and the CapEx commitment plan, out of which we have now capital work in progress stand as on September 30, if you see INR $2.25 crore, this should be capitalized in quarter three, quarter four FY 2027.

1:09:10 Then in the investor call, we have given a two broad category of the CapEx. One is for the capacity expansion across geography, which was about INR $3.25 crores to INR $3.50 crores. Out of this, 100 crores is likely to be capitalized in this financial year, which is already underway and improved by the Board. Remaining part of that, the CapEx is under evaluation. This will be this is Satham part is for Vietnam and for Indonesia as well in this remaining INR $2.25 crore or INR $2.50 crore rupees. That's another one. Third one is on the backward integration, which Pallav also mentioned, is about INR $3.50 crores to $3.75 crores. We are working on it evaluation. The commitment is expected to start in the current financial year. So and in summary, I said, we are hopeful that entire CapEx is likely to be capitalized before by the end of FY 'twenty nine.

1:10:02 These are the numbers Yes. We Because in your the presentation, the forecasted growth CapEx till FY 'thirty was $6.75 crores to INR $7.25 crores. And right now, you're saying INR 900 odd. Has there Yes, been an yes. No, no, the same number is there, but INR $2.25 crore of CVIP, which is there on September 30. This CapEx was approved last year, FY 2025, 2026, but will get capitalized in this year. So that's the additional clarification, which I was just saying from a capitalization perspective. Okay. Okay. And just last question is this I mean, we are growing at 30% plus in the first half. And your suggestion of INR 6,000 crores plus I mean INR 6,000 crores odd implies that the second half would suddenly fall down to 10% kind of growth. So I just wanted to be clear whether we are seeing some kind of demand slowdown or we are expecting high growth rates to continue for this year?

1:11:08 We said INR 6,000 plus crore turnover. Let's see where is there. There is a we have a strong order book as we go into quarter three. Quarter four order book will get built up in the next few weeks, and we'll see where we end up where INR 6,000 plus crore where we'll end up. And but quarter three, as we enter, the order book is very healthy. Punjeet, we're not seeing such a slowdown as of yet, If that's the question that you're asking. Yes. Yes. I mean, I think Okay. Got it. Great. Thank you and all the best. Thank you. Thank you very much. Ladies and gentlemen, we will take that as the last question for today. I would now like to hand the conference back to management for closing comments. Over to you, sir.

1:11:57 Thank you to all the participants for joining us today. The first half of FY twenty twenty seven has delivered a strong performance, reflecting the resilience of our business model and strength of our global manufacturing platform. As we move into the second half, we remain focused on sustaining our growth trajectory, improving the free cash flow generation, enhancing operational efficiency and driving profitable growth. I hope we have been able to address your queries. Should you require any further information, please feel free to contact Seshir, our Head of Investor Relations or our Investor Relations Adviser, Strategy Growth Adviser. Before we conclude, I would like to wish all our investors, analysts and their family a very happy Diwali and a very happy, healthy, prosperous New Year. Thank you for your continued confidence in Pearl Global. We look forward to connecting with you again next quarter.

1:12:53 Thank you very much, sir. On behalf of Pearl Global Industries Limited, that concludes this conference. Thank you all for joining us today, and you may now disconnect your lines.