The company plans to invest around Rs 1,500 crore over the next three-four years and transform the textiles business by investing in garment manufacturing facilities, advanced processing and technology-driven innovation. It expects the online business to contribute more than 20% of sales in future.
As Arvind Ltd, the country’s largest denim maker, looks to unlock value from its fastest growing lifestyle division by spinning off its branded apparel and engineering businesses into separate companies, it is confident that the textiles business will clock revenues of Rs 10,000 crore over the next five-six years, riding on an improvement in textile revenue growth from 4-5% per annum at present to 10-12%, Kulin S Lalbhai, director of Arvind group, tells Jharna Mazumdar. The company plans to invest around Rs 1,500 crore over the next three-four years and transform the textiles business by investing in garment manufacturing facilities, advanced processing and technology-driven innovation. It expects the online business to contribute more than 20% of sales in future. Excerpts:
What is the main objective of the demerger of Arvind’s apparel and engineering businesses?
We have decided to spin off our branded apparel and engineering business into separate companies to focus on our core textiles business. The branded apparel business clocked revenues of `40.72 crore, while the engineering business posted a revenue of about `5 lakh. The branded apparel business will be demerged into Arvind Fashions and the engineering business into Anup Engineering. On completion of the process, both the companies will be listed on the BSE. Going forward, the company will have three main verticals — Arvind Fashions, which will focus on branded apparel and accessory; Arvind Ltd will focus on leading fabrics and apparel suppliers to world’s top brands like Zara and H&M; and Anup Engineering will focus on critical process equipment manufacturing.
This demerger frees up our resources and allows as to renew our focus on textiles businesses. In the last few years, Arvind has nurtured a diverse set of businesses. Post demerger of Arvind Smart Spaces two years ago as an independent company, it has grown at 30% and multiplied its market capitalisation. Arvind Fashions and Anup Engineering will now also pursue their independent courses and financial independence will help unlock full potential in these businesses.
In Q2FY18, the company’s profit and margins declined? Why?
The profit after tax, after exceptional items and including retrenchment compensation, was Rs 62 crore for Q2FY18, down 13.4% year-on-year. Consolidated earnings before interest, taxes, depreciation and amortisation (EBITDA) declined 9% to Rs 212 crore, primarily due to revenue challenges in domestic market and higher cotton prices on a year-on-year basis. The second quarter turned out to be challenging due to implementation of the GST impacting our domestic textile business. The consumer-facing brands business was impacted in July as both the wholesale and retail channels were under pressure. Going forward, we expect transition impact of the GST to settle down and revenue growth likely to return to normalcy. In Q2FY18, the company reported a 13% revenue growth to Rs 2,628 crore.
What are your future expansion and investment plans?
Over the next 3-4 years, we will invest Rs 1,500 crore and transform the textile business. While we focus to grow our online business and are targeting 20% sales growth, we will continue to expand our retail stores – Unlimited. Currently, 96 Unlimited stores are operational in the country and by March, we plan to add another 14-15.
Do you have any more plans to raise funds for expansion or reducing debt?
The company had net debt of Rs 3,322 crore as of September 30 and we are not looking to reduce our debt at the moment. Our expansion will be done through internal accruals.
Are you planning to tie up with any more international brands?
We have tied up with around 6-8 brands in the last few years. Right now, our focus is to scale up these businesses over the next couple of years rather than getting more brands into the kitty. Going forward, the future of fashion and brands will change as innovation will drive the businesses with advanced technology. The day is not too far when customers will not require to buy separate Fitbit or clothes that will keep 3-degree warmer or cooler. All these innovations are in the process. Arvind has tied up with international brands such as Gap, US Polo Association, Nautica, Gnat, Calvin Klein and Sephora, among others.