Makers of Gap and Zara, Pearl Global posts record quarterly revenue and margin

GURUGRAM: Garment exporters rarely get much reason to gloat, caught as they usually are between capricious fashion cycles, jittery raw-material prices and customers who squeeze margins for sport. Pearl Global Industries, a key manufacturing partner to global names such as Inditex, the owner of Zara, Gap, PVH Corp, Walmart and Target, has bucked that script rather emphatically. India’s largest listed apparel exporter has just turned in its strongest quarter on record, and the numbers make for a properly good read.

Consolidated revenue for the June quarter came in at Rs 1,528 crore, up a brisk 24.5 per cent year on year and the highest the company has ever clocked in a single quarter. Growth was not lopsided either; it came in across every manufacturing geography the company operates in, from India and Bangladesh to Vietnam, Indonesia and Guatemala. That spread matters. A single strong market can flatter a quarter; five strong markets at once suggest something structural is working.

Profitability told an even better story. Adjusted EBITDA, stripped of ESOP costs, rose 44.1 per cent to Rs 164 crore, pushing the margin to 10.7 per cent, itself a record and an expansion of 140 basis points over last year. Net profit followed suit, up 51.4 per cent to Rs 99 crore. The margin gain came chiefly from a better product mix and operating leverage kicking in as volumes scaled, always the more durable route to profitability than a lucky pricing quarter.

Volumes back this up nicely. Pearl Global shipped 20.8 million pieces in the quarter, its highest ever for the June quarter and comfortably ahead of the 17.2 million pieces shipped a year earlier. On the standalone books, revenue rose 27.4 per cent to Rs 340 crore, with a margin of 6.6 per cent.

Management, unsurprisingly, sounded chuffed. Deepak Kumar Seth, chairman and non-executive director, called it an encouraging start to the financial year that reaffirmed the resilience of the group’s diversified manufacturing platform. Pulkit Seth, vice-chairman and non-executive director, went further, describing it as the best quarter in the company’s history and pointing to Pearl Global’s multi-country footprint as the reason global brands keep consolidating sourcing with it rather than scattering orders elsewhere. Pallab Banerjee, managing director, credited manufacturing efficiencies and operating leverage for the margin gain, and noted that business held up well through the quarter despite the disruption caused by the Iran war, a reminder that this was not a quarter free of headwinds even if the numbers read that way.

There is more to come, too. The company’s capacity expansion in Bangladesh, along with new laundry operations, is due to be inaugurated in September, adding roughly 7 million pieces of annual capacity and taking the group’s total installed capacity to about 108 million pieces. Management also pointed to the India-UK free trade agreement and continued progress on an India-EU pact as tailwinds for Indian apparel exports more broadly, alongside a broader shift among global brands towards suppliers who can offer scale and flexibility across several countries at once, precisely the pitch Pearl Global has been making.

The company also declared roughly Rs 5 crore in dividends at the holding-company level from its Hong Kong subsidiary during the quarter, continuing a practice it has followed since FY22 of moving cash fungibly across group entities.

Put together, this is a rare thing in garment manufacturing: broad-based growth, a genuine margin expansion rather than a one-off, and capacity being added into strength rather than desperation. For a sector that lives and dies by other people’s supply chains, Pearl Global looks to be writing its own script for now.