PDS Limited: Navigating Global Headwinds with Strategic Precision in H1 FY26

PDS Limited, a global fashion supply chain company, has demonstrated resilience and strategic agility in its H1 FY26 performance, navigating a complex global macroeconomic landscape. The company reported a consolidated Gross Merchandise Value (GMV) of ₹10,101 crore, marking an 8% year-on-year growth. The topline for H1 FY26 stood at ₹6,419 crore, also an 8% increase over the previous year, with Q2 FY26 alone contributing ₹3,419 crore, reflecting a robust 14% quarter-on-quarter growth. Despite these positive top-line indicators, the company's Profit After Tax (PAT) for H1 FY26 was ₹68 crore, a 41% decline year-on-year, primarily due to investments in new verticals and other operational adjustments.

The company's existing verticals grew by 6%, while new verticals showcased significant traction with a 46% growth, contributing ₹469 crore to the topline. The gross margin expanded to 19.9% in Q2 FY26, up from 19.4% in Q1 FY26, indicating improving operational efficiency. However, other expenses saw a 21.8% increase quarter-on-quarter, driven by higher license fees, selling and marketing expenses, and freight costs. This led to an EBITDA of ₹103 crore in Q2 FY26, a 103.8% increase quarter-on-quarter, but the H1 FY26 EBITDA of ₹153.6 crore was a 27.8% decline year-on-year.

Financial Snapshot: H1 FY26 Performance

Strategic Initiatives and Operational Excellence

PDS Limited is proactively implementing a series of strategic initiatives to enhance profitability, optimize costs, and strengthen its balance sheet. The company's focus on working capital optimization has yielded significant results, with Net Working Capital days reducing from 17 days in March 2025 to a mere 6 days by September 2025. This efficiency translated into a robust cash flow from operations of ₹593 crore in H1 FY26, a substantial turnaround from an outflow in the previous fiscal year.

Under the guidance of BCG, PDS is driving process augmentation and cost optimization across corporate and business verticals. Key initiatives include implementing transparent bidding processes for core items like fabrics and trims, enhancing costing tools, and establishing a pricing review mechanism. These measures are expected to generate approximately ₹25 crore in benefits from corporate cost reduction in Q3 and Q4 FY26, and an additional ₹30 crore in savings from business verticals in FY26, projected to increase to ₹60 crore in FY27.

Digital transformation remains a cornerstone of PDS's strategy. The company is revamping its Master Data Management (MDM) and costing tools, implementing Coupa as an e-auction and invoice-to-pay platform, and developing a dynamic pricing tool. The transition to SAP HANA is underway to create a digital backbone that will streamline business processes, improve productivity, and provide powerful analytics for working capital management.

Geographic and Product Performance

Geographically, the UK and Americas regions demonstrated strong growth, with UK revenue up 31% and Americas up 25% year-on-year. However, Europe experienced a decline, primarily due to the bankruptcy of Gerry Weber, a significant customer. The company is actively working to replace this lost business with new clients. The diversified sourcing network, spanning Bangladesh, Vietnam, Sri Lanka, Turkey, Egypt, India, and Latin America, continues to mitigate geopolitical risks and tariff impacts, particularly in the US market.

In terms of product categories, Men's Wear accounted for 37% of revenue, followed by Women's Wear at 36%, Children Wear at 22%, and Essentials & Others at 5%. The company's investment in new verticals, while impacting short-term profitability, is aimed at future growth and diversification. PDS has also established clear financial and process guardrails for future investments, ensuring profitability and cash flow benchmarks are met before capital deployment.

Outlook and Investor Confidence

PDS Limited's management expressed confidence in a turnaround in profitability in the second half of FY26 and a strong financial year in FY27. The order book remains robust, standing at ₹5,308 crore, a 15% increase year-on-year, reflecting sustained customer trust. The company declared an interim dividend of ₹1.65 per share, consistent with the previous year, underscoring its commitment to shareholder returns.

The focus on profitability enhancement initiatives, working capital optimization, and digital transformation positions PDS to navigate current challenges and capitalize on future growth opportunities, including potential benefits from the UK-India FTA. The company aims to achieve a PBT margin closer to 3.5% in the coming years, demonstrating a disciplined approach to growth and value creation for its stakeholders.