Arvind Ltd., India’s largest textile and branded apparel player, has announced its decision to demerge its Branded Apparel and Engineering businesses from the parent company.
The Branded Apparel business will be demerged into the entity Arvind Fashions Ltd. At 25% CAGR, branded apparel is one of the fastest growing apparel and accessory businesses in the country. It has a rich portfolio of international and owned brands, including US Polo Association, Arrow, Flying Machine, Tommy Hilfiger, Gap, Calvin Klein, Hanes, Gant, Nautica, Izod, Ed Hardy, Elle, Cherokee, The Children’s Place and Aeropostale. It also owns the value chain ‘Unlimited’ and is the franchise partner of the world’s largest beauty retailer ‘Sephora’.
The shareholders of Arvind Ltd. will be entitled for one equity share of Arvind Fashions Ltd. for every five shares held by them.
The Engineering business will be demerged into an entity which will be named Anup Engineering. This business is engaged in the production of critical process equipment. Anup has been consistently growing at 25% and delivering a robust financial performance. The shareholders of Arvind Ltd. will be entitled for one equity share of Anup Engineering Ltd. for every 27 shares held by them.
On completion of the process, both the companies will be listed on BSE and NSE.
Commenting on the development, Mr. Sanjay Lalbhai, Chairman and Managing Director of Arvind Ltd., said: “In last few years, Arvind has nurtured a diverse set of businesses. Two years ago, we demerged Arvind Smart Spaces as an independent company and its performance has exceeded expectations. Arvind Fashions and Anup Engineering will now also pursue their independent courses. Arvind Fashions has already demonstrated an industry-leading track record in the branded apparel and accessory space. Anup has demonstrated an impeccable trajectory on customer delight, topline growth and profitability. Financial independence will help unlock the full potential of these businesses.”
He further elaborated: “This demerger frees up our resources and allows us to renew our focus on our Textiles business, which is not only our foundation but is now well placed to achieve an accelerated growth trajectory. Over the next 3-4 years, we will invest almost INR 1,500 crores and transform the textile business. We will do this by focusing on three engines of growth and transformation, namely, Vertical integration, creating garment manufacturing to become an end-to-end solution provider and strategic supply chain partner to the world’s most successful brands and retail concepts; Next generation products, redefining textiles by focusing on path-breaking technologies and manufacturing processes like multi-functional textiles and smart-enabled wearables; and Advanced Materials, enabling textiles to catalyse the company’s entry into fields like human protection, industrial process, infrastructure and transportation, and thereby build a business with high entry barriers, intellectual property creation, and high returns. This focus will not only enable us to grow at an accelerated pace but also achieve drive better return on investments and build a business model that is future-ready.”
Arvind second quarter revenue up 13%
Arvind Ltd.’s consolidated revenue for the second quarter ended September 30, 2017 stood at Rs. 2,628 crores, registering a growth of 13% over the corresponding quarter of the previous year despite a challenging market due to GST implementation. Consolidated EBIDTA declined 9% to Rs. 212 crores from Rs. 232 crores in the corresponding quarter of last year, primarily due to revenue challenges the domestic market and higher cotton prices on year-on-year basis.
Profit after tax before exceptional items was down 15% to Rs. 66 crores as compared to Rs. 77 crores in the corresponding quarter of the previous year. Profit after tax after exceptional items, which consisted of retrenchment compensation, was 14% down at Rs. 62 crores as compared to Rs. 71 crores.
Commenting on the results as well as outlook of the company, Mr. Jayesh Shah, Director & Chief Financial Officer, said: “The second quarter turned out to be another challenging one for the industry with the GST implementation impacting our domestic textile business. Even the consumer facing brands business was impacted in the month of July as both the wholesale and retail channels were under pressure. However, brands business saw strong performance in August and September leading to good growth overall. Going forward, we expect the transitionary impact of GST to settle down and revenue growth to return to normalcy.”