Arvind has received approval from the NCLT for 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. 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.
Global textile business is at an inflection point with clear megatrends playing out on both Demand and Supply sides. Fast-fashion is now table-stakes. The success of Zara, H&M and Uniqlo is forcing all brands to be nimble. Increasingly global brands strongly prefer buying complete apparel solutions.
Innovation and Sustainability have become critical drivers. Weatherproof, ultra-light and smart-clothing are increasingly becoming the norm. Performance sports/sports inspired clothing are becoming the largest and growing segment.
Arvind is strategising the various business segments for sustainable future growth. The company plans to expand capacities for vertical garmenting play by leveraging on global cost/tax advantages. Arvind is investing in product innovation to capture next-gen opportunities and building consumer brand and scale fabrics retail. The company is planning to further scale-up its Advanced Materials Division (AMD) and push the bar on Sustainability
Arvind is expanding garment capacity towards larger vertical play. The company plans to increase the capacity 4 times from the existing garment capacity of 31 million pieces to 125 million pieces by 2023.The capacity will be increased across its existing plants in Bangalore, Gujarat, Indore and future expansion in Jharkand and Andhra Pradesh.
The Advanced Material Division is focusing on IP driven human protection and industrial products. Arvind’s AMD offers speciality suits, gloves and gear for firefighting, high altitude, chemical and radiation protection, etc. In Industrial application, the company offers Non-woven filters, felts and auto interiors, Coated fabrics for tents, awnings, large signages etc and Glass and Carbon reinforced composites. Arvind is targetting a turnover of Rs. 1600 crores in this business by 2023. Currently the AMD business clocks turnover of Rs. 505 crores.
Arvind Limited is targeting a total turnover of Rs. 12, 000 crore by 2023 from the existing Rs. 6798 crores. This turnover doesn’t include the branded apparel and engineering business. Arvind Fashions aspires for Rs. 9, 000 crores topline by 2022 targetting a growth rate of 20-24% annually.
Re-orienting textiles for growth
China, which controls 35 percent of the USD 750-billion global trade of which India has only 5 percent, is losing its competitiveness, and there are few places in the world that can replace that capacity.
India is one of those countries; the opportunity for India to double its trade is a real one, something we may not have seen in many decades. Second, the Indian clothing market is growing very fast – 10 percent growth – and within that the organised part is growing at double the rate, fuelled by the positive impact of the Good & Services Tax (GST). To unlock the potential of this growth, Arvind Limited will invest Rs. 1500 crore over the next three years. During this time, 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 manufacture into garments. The company 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 deeply 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.
ii.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
iii.Technical Textiles: This is a very new and exciting area for Arvind. Textiles can play a large role in the development of several non-apparel segments of the economy. The company sees 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 will focus on building a technical textile business in the areas of Human protection, Environment protection, Transport solutions and Industrial solutions
Growing Brand Arvind: The company sells its ready-to-wear apparel 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 few players whoc can leverage on its existing brand equity and build a rapidly growing and exceptionally valuable business in this space.