Apparel maker Arvind, owned by Sanjay Lalbhai, sold its 40% stake in its joint venture VF Arvind Brands, which sells ?Lee? and ?Wrangler? brand jeans, to its partner VF Mauritius for R257 crore, a move to reduce debt in its parent company hit by shrinking export orders from slowing economies in the US and Europe.
The sale values Arvind?s 40% stake at more than twice its share of revenues of R120 crore from the venture.
?Arvind plans to utilise the proceeds from this deal to reduce the company?s debt,? said Jayesh Shah, its director and chief financial officer, in a statement to the media. At present, Arvind?s long term debt stands at R2,520 crore, reported ThomsonReuters. On Wednesday, Arvind shares were down 0.47% to close at to R106.70 on the BSE.
VF Mauritius, a part of the global apparel maker VF Corporation, formed a venture with Arvind in September 2006 where the Indian company purchased 40% stake for R5.47 crore with a licence to sell Lee and Wrangler in India.
?Arvind is right in exiting the JV,? says Sharad Mehra, chief operating officer of Pearl Academy of Fashion, who earlier worked as an apparel consultant at retail consultancy Technopak Advisors. ?The money can be invested in its other brands like Arrow and US Polo which are doing well.?
Arvind, the second largest global denim maker, reported a 58% rise in net profit to R52.4 crore in the fiscal second quarter ended September with an operational income of R750 crore. Arvind also operates a equal joint venture with American fashion retailer Tommy Hilfiger in India.