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Arvind shares up 1.12 per cent at BSE ahead of demerger

Ahead of the allotment of the shares of Arvind to Arvind Fashions and Anveshan Heavy Engineering, the company’s shares on Tuesday rose by 1.12 %, to close at Rs 311.45 on the Bombay Stock Exchange.

Arvind shares up 1.12 per cent at BSE ahead of demerger (Image: Arvind Store)
Arvind shares up 1.12 per cent at BSE ahead of demerger (Image: Arvind Store)

Ahead of the allotment of the shares of Arvind to Arvind Fashions and Anveshan Heavy Engineering, the company’s shares on Tuesday rose by 1.12 %, to close at Rs 311.45 on the Bombay Stock Exchange. The company informed the stock exchanges that the effective date for the demerger and allotment of shares will be November 29, 2018. As per the notice, shareholders of Arvind Fashions (AFL) will receive one fully paid up equity share of Rs 4 each for every 5 shares held in Arvind and Anveshan Heavy Engineering’s shareholders will be allotted one fully paid up equity share of Rs 10 each for every 27 shares held in Arvind.

While, the textile (denim, fabric ,and garments) and advance material business will continue under Arvind, the brand the retail segment will be shifted to Arvind Fashions, and the engineering business will be under The Anup Engineering (TAEL).  After the demerger, the process of relisting as per Sebi guidelines will be initiated and both the firms are expected to be relisted on the stock exchange by January, 2019.

Arvind, which was incorporated as Arvind Mills, the textile manufacturing company by Kasturbhai Lalbhai, has its foothold in fashion retail, real estate, engineering, environment solutions, advance materials and telecom industry.  Post demerger, Arvind Fashions will handle the brand and retail segment, and account for domestic brands like US Polo Association, Tommy Hilfiger, Calvin Klein, Arrow, Flying Machine, Gap, Sephora and other iconic brands. The engineering business under Anup Engineering mainly includes manufacturing critical process equipment for core business like heat ex-changers and pressure vessels for oil and gas and fertiliser industries.

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Apart from textile, branded apparel and engineering business, Arvind’s real estate arm, Arvind SmartSpaces is also listed on the stock exchange.

According to analysts at Edelweiss Securities, the firm has planned to use its resources specifically for the textile and advance material division business. Thus, capital expenditure of Rs 2,500 crore has been planned for investment over the next five years till financial year 2023.

With revenue growth of 15% in the garments in Q2 of FY19, Arvind plans to increase its share in the market by three times to manufacture over 90 million pieces in the next three years. The new garment facilities in Andhra Pradesh, Jharkhand and Ethiopia, will help in executing this target. Arvind also launched its largest garmenting hub today in Gujarat as a part of its capacity expansion plan. The hub with investment of Rs 350 crore, has three facilities set up near Ahmedabad and will contribute to the capacity of 3 million garments per month.

The advance material division (AMD) along with garments, currently accounts for 30 % of the business. Arvind plans to increase the share of these two segments to 50%.

The analyst report also states that even though the growth potential for the demerged entity remain the highest, its return and margin are not at par as that of its peer company.

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