Brands focussed on becoming omni-channel
PDS Multinational Fashions Limited operates as an integrated design-led platform offering product development, sourcing, virtual manufacturing, and distribution for major brands and retailers worldwide. The company operates a vast global network covering over 51 offices, 21 countries, and over 1,800 associates and 5,100 factory workers worldwide. Sanjay Jain, CEO, PDS Multinational Fashions Ltd, spoke to Paulami Chatterjee about the brand's success story and major achievements, and the way it has efficiently handled the current Covid crisis by addressing the PPE market thereby reducing the impact on its revenue and profitability.
Based on consumer preferences, how has your business altered?
Given the platform is multi-product and multi-country we have created an agile organisation which can operate in line with changing consumer preferences. We operate across categories, geographies and so we are swiftly able to adapt to changing trends in consumer preferences. With our over +500 vendor partners we have created an agile organisation which works closely with retailers and brands.
PDS has created a portfolio of Venture Tech Investments. This portfolio enables us to stay ahead of the curve and be future ready. These investments focus on sustainability, technology and consumer brands which enhances PDS value proposition to its customers and stakeholders.
When was the company started and where is it headquartered?
PDS Multinational Fashions Limited was incorporated on April 6, 2011 after demerging from Pearl Global Industries in 2014 and was listed as an independent entity in 2014. Over the years, the company expanded operations in India, China and Bangladesh and currently has presence in over 22 countries globally. The company has its registered office in Bengaluru, India.
Where does the company have its global footprints? Which of them are the major countries/cities?
The company has established its presence in 50 offices across 22 countries with sales and design operations in UK, Belgium, Germany, US, Canada, Turkey, India, Sri Lanka etc and sourcing and manufacturing presence across India, Bangladesh, China, Sri Lanka, Turkey, Myanmar, Cambodia, Egypt, Jordan etc.
What new innovations are you likely to come up with to meet the demands of a Covid-hit world?
The Covid disruptions have further increased our focus towards agility and technological solutions. Our in-house team is working on technological solutions such as 3D Design, sampling and fit, 360 showroom, digital fit and colour, data analytics, among others. Given that ease of travel is severely restricted during these times and is expected to be limited in the near future, such solutions provide us an edge.
What are the competitive advantages of PDS over some of the other leading textile manufacturing companies in terms of quality, speed of delivery, innovation, any other aspect?
The inherent PDS business model with its roots in entrepreneurship and profit share provides PDS an edge. Further, PDS has created an asset light platform with teams working closer to the customer and closer to manufacturing. Given our limited exposure in creating manufacturing capacities ourselves, we are not limited by capacity constraints. We can service orders faster using our vast network of manufacturing partners/vendors globally depending on the requirement of the customers. Further, through our investments in new age sustainability and technological solution companies, we can provide enhanced value to our customers and vendors.
What is the success story of PDS? What are the major achievements of the company till date?
PDS Multinational Fashions Ltd has created an integrated platform focussed on design, sourcing, manufacturing. The platform is enabled by PDS's expertise in robust risk management, social, environmental, and ethical compliance, and value-added services. PDS has created a platform of sustainable and responsible sourcing with its foundation laid in an entrepreneurial business model. PDS is able to identify the right product for the right market and the right factory which is further supported by a strong compliant supply chain and a core understanding of different geographies and markets. PDS platform capabilities enable multi-country sourcing from countries like India, Bangladesh, China, Pakistan, Sri Lanka, Myanmar, Turkey, and Vietnam. Similarly, multi-product sourcing for all categories pertaining to apparel, fashion, home furnishing has also been well established. Supported by creative inputs from their market intelligence, PDS has steadily perfected the product development aspect of their business through innovative fabrics, extensive trend research, graphics and most importantly sampling. PDS has constantly strived to support its brands and retailers to increase their sustainability footprint. The PDS platform enables speed to market and finally cost-effectiveness along with margin improvement through strategic sourcing / favourable credit terms for retailers and suppliers.
Over the last 5 years, the top line of the company has expanded 1.3x to ₹6,213 crore and EBITDA has expanded 4x to ₹230 crore (along with EBITDA margin expansion from 1.2 to 3.7 per cent). During this same tenure, net profit of PDS increased at a CAGR of 40 per cent to ₹148 crore. PDS has reported enhanced leverage ratios with net debt/EBITDA of 0.26x vs 3.8x in FY17. This has translated into enhanced returns for stake holders with Return on capital employed (ROCE) and Return on equity (ROE) increasing to 22 per cent in FY21 from 6 per cent and 7 per cent respectively. PDS also declared a dividend of 15.75 per share (49 per cent payout on EPS). The Earnings per share (EPS) of PDS in FY21 was ₹32.37 per share, an 83 per cent increase over FY20.
What has been the impact of the pandemic on the fashion and retail industry as a whole?
Fashion and retail have been significantly impacted globally due to the unprecedented disruptions of Covid. The industry faced one of the worst times in history with disruptions in supply chain, complete store closures, change in consumer behaviour etc. This led to some players in the industry going bankrupt or depending on government subsidies for survival. However, the industry also witnessed strong demand every time the lockdowns were relaxed. Also, the online channels witnessed strong traction showcasing that demand for fashion is inherent in consumer buying basket.
What is the concept of virtual manufacturing? Where is it undertaken? How is the demand and supply worked out?
PDS has created ₹6,213 crore top line which is largely driven through its vendor partner network. Approximately 10 per cent of PDS platform production capacity is derived from its own manufacturing facilities. We do not need to own assets to drive sales and profitability. We have created a network of virtual manufacturing partners the who undertake manufacturing process on our behalf. This also enables us to operate across geographies without the need to invest in capacities for servicing any new region / category. Demand and supply are managed through our network of entrepreneurs who are based closer to the customer and capacities.
Who are your biggest competitors in the international market?
There are various players in the industry operating in the apparel sourcing and manufacturing space. Some brands and retailers also have their sourcing arms. The industry has fragmented value chain with some players operating in a purely asset heavy manufacturing business with limited capacities and others just operating in a trading and agency model with limited margins. However, PDS is an integrated platform with design teams, compliance teams, manufacturing capacities as well as large vendor base along with an ability to cater to and from geographies and across categories.
How has the pandemic impacted you as a company in terms of closed operations, cancelled orders, disrupted supply chains etc?
Given our global footprint, PDS also witnessed disruptions across geographies. On one end, we saw retailers in UK and Europe operating in prolonged periods of lockdown; on the other hand, we saw manufacturing and supply chain disruptions on the back end. We as an organisation undertook various measures to minimise/soften the impact of these disruptions. We worked closely with our retailers and brands to closely plan and monitor the situation and navigate through these unprecedented times. Being an agile organisation, while we lost some top line due to store closures and lockdowns, we also created top line by addressing the PPE market which helped in reducing the impact on the top line and profitability.
How are you equipped today to deal with a post-pandemic world?
As an organisation we always had in place policies, processes, and measure to closely monitor the business. For example, for managing our risk we have 6 Cs focussed on Customer, Credit, Currency, Cost, Compliance and Compliant Capacity.
We as a platform came together to withstand the headwinds focusing on cost optimisation which resulted in Operating expenditure (OPEX) reducing by 13 per cent in FY21 vs FY20. Further, we reduced our working capital days from 10 days (FY20) to 5 days (FY21). This translated into enhanced profitability and reduction of net debt by ₹186 crore to ₹59 crore. Further strengthening our leverage ratios with Net debt/EBITDA reducing from 1.32x (FY20) to 0.26x (FY21).
What are the upcoming trends in the fashion and retail industry?
The fashion space is ever evolving with new fashion trends, new fabrics, sustainable products etc. As per reports, casualisation and athleisure were already on trend pre-pandemic and have further accelerated in the post pandemic world especially with the flexible working environment. There is a growing market for smart textiles (for performance wear), functional clothing (for medical, surgical, special needs, high breathability, protective applications), etc.
What are your views on increased importance of sustainable fashion in the last two decades?
Brands and retailers are looking for higher standard of compliance with huge shift towards sustainability promoting sustainable materials, using recycled raw materials, low-impact manufacturing, reducing carbon footprint, etc. At the same time, suppliers need to comply and sign up to retailers own ESG goals. Sustainability is no longer a tick in the box for any player in the fashion industry. It has become an inherent metric which holds utmost importance even at the cost of higher operating costs.
For PDS, sustainability is integral to success, we endeavour to always behave in an ethical, transparent and responsible way and we believe we have the right to expect all of our business partners to do the same.
How has e-commerce evolved in the last one year? What could be the future possibilities with e-commerce?
E-commerce has been gaining momentum globally; the pandemic has only accelerated its progress. Over the last year, e-commerce witnessed strong traction as even consumers preferred digital channels due to reluctance of crowded retail spaces. As per reports, Europe and US are expected to have >30 per cent online growth and >20 per cent online growth in highly digitised markets like China in 2021 over 2019. E-commerce is here to stay; many brands are focussing on becoming omni-channel. We are witnessing brands which are largely created for the online model only (digital brands). (PC)
