Plans Rs. 1,500-crore investment in textiles
Arvind has announced demerger of three entities encompassing textiles, branded apparel and heavy engineering. The two new entities will be Arvind Fashions Ltd. which will house the company’s branded apparels business, and Anup Engineering Ltd., which will house the engineering business.
Arvind Fashions and Anup Engineering will be listed separately on the stock exchanges and will chart their own journeys in the future. All the shareholders will continue to enjoy proportionate ownership in all the three entities. The demerger will allow each business to have a sharper focus on developing their own aggressive growth models, on making their own capital allocation decisions and on incentivising their teams.
After the demerger is complete, Arvind Ltd. will continue to retain its Rs. 6,000-crore textile business, while continuing to incubate several young businesses and drive them towards realising their potential. These young businesses are wastewater treatment business, (Arvind Envisol), technical textiles business, digital business (Arvind Internet) and the telecom ventures, Syntel and Arya Omnitalk.
Re-orienting textiles
China, which controls 35 per cent of the $750-billion global trade, of which India has only five per cent, is losing its competitiveness, and there are very few countries in the world that can replace that capacity. India is one among them. The opportunity for India to double its trade is a real one, something not seen for many decades. Second, the Indian clothing market is growing very fast – 10 per cent growth – and within that the organised segment is growing at double the rate, fuelled by the positive impact of the Good & Services Tax (GST). To unlock the potential of this growth and to expand its incubation businesses, Arvind will invest Rs. 1,500 crores over the next three years.
With an annual production capacity of more than 100 million meters in denim, 132 million meters in woven fabric, 10,000 tons of knit fabric and 48,000 meters of voiles, Arvind supplies fabrics to many leading brands, both in India and abroad. Through its subsidiary Arvind Fashions Ltd., the group has built a strong portfolio of brands that straddles consumer segments across the income pyramid. Arvind has garment manufacturing capacity of more than 32 million pieces annually.
The company will invest along four key themes to grow the textiles business:
Verticalisation: Global fashion brands are seeking complete solutions and their preference is moving towards procuring final finished garments and not just fabrics. Today Arvind is converting around 10% of the fabrics that it manufactures into garments. It envisions growing this number to 30-40% over the next three years, providing a one-stop solution to its customers, including design and innovation.
This will make Arvind a strategic partner in the value chain of its customers where the company will be able to contribute more by building on its intellectual property and developing newer ones, including jointly with them. Arvind is projecting a 30% plus growth in garmenting this year. Its expansion in Ethiopia is stabilising and is allowing the company to take advantage of its favourable duty structure. The group is also expanding its domestic garment facilities with new units being planned in Ranchi. With increasing capacities and multi-location facilities, Arvind is fast becoming a garment maker of choice for the leading brands across the globe.
Sports and Athleisure: The second big trend is innovation in newer categories like sports and athleisure. This is the fastest growing segment globally. Arvind is planning to set up India’s first comprehensive facility in this area and build capability to service global sports brands.
Technical Textiles: This is a very new and exciting area for the group. Textiles can play a large role in the development of several non-apparel segments of the economy. Arvind has an opportunity to build a business that has high entry barriers, potential to generate valuable intellectual property (IP), and one that has great domestic and export growth potential.
Arvind’s Advanced Material Division (AMD) primarily consists of four solution verticals: Human Protection (fire-resistant fabrics and garments, work wear, etc.), Industrial products (filtration, conveyor belt fabric, coated products, etc.), Advance Composites (glass fabrics and structural composites) and Automotive Fabrics (in JV with Adient). AMD is one of the fastest growing divisions of Arvind Ltd.
Growing Brand Arvind: The group currently sells its textiles, and now ready-to-wear apparel under the brand name Arvind through more than 10,000 points of sale across India. This segment is witnessing rapid growth and becoming more organised. Arvind is one of the very few players who can leverage its existing brand equity and build a rapidly growing and exceptionally valuable business in this space.
Arvind’s brands and retail businesses led the growth for the company with market leading 31% y-o-y increase in revenue, also accompanied with a sharp increase in profits. While the company continues to see high growth in its established brands like US Polo, Arrow, Flying Machine and Tommy Hilfiger, the new emerging brands like Sephora, Gap, Aeropostale and Calvin Klein have huge potential. Arvind is particularly excited about its value retail format Unlimited, which is scaling up significantly.
As disposable incomes go up, more and more cities will support retail stores, and online channels will provide a huge new market for branded apparel. Arvind is well positioned to ride this opportunity wave, with its best-in-class operating platform and proprietary omni-channel approach that gives a unique and seamless shopping experience to Indian fashion consumers.