In interaction with Sanjay Jain, Chief Executive Officer, PDS Multinational Fashions Limited

"We are and will continue to be an asset-light company. We will work on squeezing working capital employed so that our balance sheet keeps improving and our RoCE keep on growing." says Sanjay Jain, Chief Executive Officer, PDS Multinational Fashions Limited.

What is your outlook on the textile sector? What are the global opportunities you are focussing on?  

Regarding the textile sector, from an immediate lens as well as a long-term view, the overall outlook looks positive. The entire globe is trying to put COVID-19 back and the vaccinations are also scaling up; though there is still fear of the third wave, the quick spread of vaccination will help the economy recover fast. This means that the market would open up and people would slowly go back to shopping they used to do in pre-COVID times. There has been a huge pent-up of consumption that is wanting to be real. So, in the near term, as we all slowly put COVID behind, it should keep increasing the consumption as fashion is mainly linked to occasion, travel, parties, people travelling to offices, etc. The GDPs of most of the consumption centres are expected to remain positive. Globally, the overall market should go up, that is the estimation of a lot of experts. India, which is a smaller part of the global market, is anticipated to grow up fast as it is a young nation, the GDP per capita would keep improving as the younger generation would consume more. The Government of India has also declared investment in mega textile parks, government-linked incentive schemes, the recent announcement on giving back some of the duty benefits, etc. So, I think, in the medium to long-term, the overall outlook will be positive, especially in the Indian home consumption as the companies set up in India are catering to the needs of the world market as India has an edge due to the government support. 

PDS Multinational is an asset-light company with tie-ups across 500+ vendors across various geographies while our main markets are UK Continent, Europe & America. We are building our strengths to gain further traction among these markets. In the near term, these markets are the best place for growth due to the vaccination spread and post lockdown activities. We are well placed to focus on growth in these markets. We are also focussing on India as a market as well. Deriving a major part of sales from the UK Continent and Europe, it continues to be the focus offering to a larger share of customers. At the same time, with an increased focus on US and Indian markets, we feel that from a global strategic perspective, it will be beneficial. As we pursue this growth strategy, it would be done in an asset-light model and hence, our return on capital employed should keep positively growing.  

How is PDS Multinational Fashions creating an asset-light business model?  

Last year, our turnover was around $837 million while around 6 to 7 per cent came from our own manufacturing facilities situated in Bangladesh. The remaining 92 to 93 per cent came through 500 plus approved members across Bangladesh, China, Sri Lanka, Vietnam, and Turkey. Coming back to the question, as we are taking the efforts to pursue the growth trajectory for meeting that need to sell more, do we need to invest more in Capex correspondingly? The answer is no. We have a vendor base, through which, these capacities are available. If at all, we will invest in technologies that are catering to design and are reducing the impact of the textile sector on the environment, etc. So, for corresponding growth in the top line, we don’t really need to invest in Capex. Through our tie-ups, we will keep catering to the demand.  

How are you making in-roads into new geographies including the US, South Africa & Australia amongst others?  

In the above-mentioned continents, we do have a presence but we need to further strengthen our presence in the UK and Continental Europe. To answer your question, it is a multicon strategy; we have leadership on both, understanding markets on past experience as well as a good understanding of US as a market and in fact, we are also trying to expand on-ground presence in the US markets. Similarly, this is how we are gradually running a process as we have got large retail customers onboard in Europe and UK. Likewise, some of the large US retailers are in process of being onboard. For example, our manufacturing project in Bangladesh is certified by one of the largest retailers in the US. So, getting senior people on board, running the process of certifications of factories from US customers are some of the steps that we are taking, which we think will keep increasing the penetration in these markets.  

How does the post-COVID era define fashion differently? How are e-commerce channels changing consumer buying habits?  

There are a couple of things to be discussed in this particular question. As COVID-19 lockdown was announced on March 20, there were sudden structural changes that affected each one of us. People began to work from home, which started constraining them to their houses, and going to the office was halted. Demand for office wear as well as functional wear was lost for some time as social gatherings were also curbed. Physical stores were shut down and the channel through which we were accepting our need for fashion was e-commerce, which gained a lot of traction. The penetration of e-commerce in the western world grew from 20 per cent to 30 per cent from pre-COVID to post-COVID situation. These things have now somehow settled. Many retailers were gearing up to acknowledge e-commerce as more beneficial from this trend. It also threw up newer opportunities from the period of March 2020 to September 2020. That’s how 0 to 6 months changed post-COVID lockdown announcement in March 2020 and subsequently, the market came back while in the UK, retailers would see inventory vanishing very fast. The customers were making long queues outside the shops; as a result, sales were rapidly increasing. Huge demand was witnessed; in fact, some UK retailers that have disclosed their quarterly earnings indicated that the revenue in the last few months is coming back to the revenue levels of 2019-2020. In a way, people have started going back to the stores and formal wear is coming back into fashion. However, coming back to your question, things would not get completely back to the original scenario as people have now adopted a mix of working from the office to working from home. Structural changes, which happened in the first six months of the pandemic, have come back to physical and normal form but the comfort of e-commerce may keep its share high even post-pandemic.  

What are your top three strategic priorities at this point of time?  

I previously mentioned that there is a near-term potential to benefit from the pent-up demand. In the medium to a long-term positive outlook, we are there in terms of geographical presence and we have to make the most of it. As far as near-term strategic priorities are concerned, we would like to keep strengthening our position with our existing retail customers. At the same time, we shall focus on boosting sales in the US market. Secondly, risk management is an inherent building block at PDS Multinational; as a result, we are spreading the sales to near geographies and near customers. Also, we are trying to increase consolidating positions with the existing customers. We are also trying to acquire a larger share of wallets by offering newer categories. We will keep guiding ourselves not to overbank on a single customer or single geography so that we keep our risk profile well under control. Thirdly, capital efficiency is also an important strategic objective. We are and will continue to be an asset-light company. We will work on squeezing working capital employed so that our balance sheet keeps improving and our RoCE keep on growing.