Arvind unlocks shareholder value, announces demerger of branded apparel, engineering businesses

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Published: November 9, 2017 4:41:55 AM

Arvind Limited on Wednesday announced its decision to demerge the branded apparel and engineering businesses from the parent company to renew focus on the textiles business and unlock shareholder value.

Arvind Limited, textiles businessArvind Limited on Wednesday announced its decision to demerge the branded apparel and engineering businesses from the parent company to renew focus on the textiles business and unlock shareholder value.(Representative Image: IE)

Arvind Limited on Wednesday announced its decision to demerge the branded apparel and engineering businesses from the parent company to renew focus on the textiles business and unlock shareholder value. The branded apparel business will be demerged into an entity, named Arvind Fashions Limited. Post demerger, shareholders of Arvind will be entitled to one equity share of Arvind Fashions for every five shares held in Arvind Limited. Arvind Fashions’ own brands include Flying Machine, Colt, etc. The firm’s licensed product brands include Tommy Hilfiger, Calvin Klein, Arrow, US Polo Association, etc. According to the company, Arvind Fashions is aiming at a top line of Rs 9,000 crore by 2022.

Furthermore, the scheme proposes the demerger of the engineering business from Arvind to Anveshan. According to the process details stated by the company in its presentation, the engineering undertaking including the holding in Anup Engineering  Limited, a subsidiary, will be demerged  into Anveshan. Shareholders of Arvind will be entitled to one equity share of Anup Engineering for 27 shares held in Arvind Limited. Anup will then be merged into Anveshan, which will then be renamed Anup Engineering. The engineering business is involved in manufacturing of critical process equipment such as heat exchangers, pressure vessels, reactors, columns/towers and centrifuges.The transaction, which is subject to corporate and regulatory approvals, is expected to be completed in eight-nine months. Both the resulting entities will be listed on the stock exchanges.

Bloomberg data show Arvind has a  net debt of Rs 3,263.80 crore at the end of September 2017. Sanjay Lalbhai, chairman and managing director at Arvind Limited, said the demerger will be a clean one with no cross-holdings. “Over the next 3-4 years, we will invest almost Rs 1,500 crore and transform the textile business,” he said. Arvind on Wednesday reported a consolidated net profit of Rs 64.50 crore for the September quarter, against Rs 76.65 crore in the same period last year.  It is noteworthy that beginning April 1, the group has consolidated Tommy Hilfiger Arvind Fashions Private Limited and Calvin Klein Arvind Fashion Private Limited as subsidiaries.

“The said entities were equity accounted as joint ventures in the consolidated financial statements till March 31, 2017. To this extent, the current period numbers for the quarter and half year ended September 30, 2017 are not comparable with the previous periods,” the company said in an exchange notification.  The textiles segment reported revenues of Rs 1,437.63 crore on a consolidated basis, while the branded apparels reported revenues of Rs 1,032.41 crore in the second quarter of FY18. The engineering segment reported revenues of Rs 47.29 crore.

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