Debut Trade: Arvind Fashions hits upper circuit after listing at Rs 591

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Published: March 9, 2019 3:19:47 AM

Amidst much confusion about its price, Arvind Fashions Ltd (AFL), the demerged entity of textile major Arvind Ltd, on Friday listed on the stock exchanges at Rs 591.

AFL, which demerged from Arvind Ltd on November 29, 2018, houses the branded and retail business with products across price points.

By Chirag Madia & Rakshita Sareen

Amidst much confusion about its price, Arvind Fashions Ltd (AFL), the demerged entity of textile major Arvind Ltd, on Friday listed on the stock exchanges at Rs 591. The confusion resulted from the base price of Rs 311, fixed by the exchanges, for trading. Market participants felt the price should have been in the range of Rs 1,200-Rs 1,500 per share. At the close of trading, the stock was priced at Rs 621.30 on the BSE.

In the case of a de-merger, the stock exchanges have a special trading window between 9.15 and 9.45 am during which time investors can place their bids on the screen. The exchanges decided on a base price of Rs 311 for the AFL stock; the closing price of Arvind Ltd on the last day of trading prior to the demerger was Rs 311.45. At 9.45 am, the stock opened at Rs 591, but soon hit the 5% upper circuit. The ratio for the demerger was 1:5; in other words, for every five shares of Arvind Ltd, an investor would receive one share of Arvind Fashions.

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AFL, which demerged from Arvind Ltd on November 29, 2018, houses the branded and retail business with products across price points. It reported a compounded growth in revenues and Ebitda, over FY16-18 of around 26% and 37% respectively, according to analysts at Anand Rathi Securities. The analysts said for 2017-18, it posted a net profit of Rs 13 crore, up from net losses of Rs 39 crore in FY16 and Rs 21 crore in FY17. The management expects a 17% revenue CAGR over FY18-22, to Rs 8,000 crore.

Arvind Fashions hits upper circuit after listing at Rs 591

The firm’s array of brands include U.S. Polo Association, Arrow, Flying Machine, Tommy Hilfiger, Gap, Sephora and Unlimited. Other brands include Calvin Klein, Aeropostale, the Children’s Place and Ed Hardy.

The fashion retailer has a long-term licence agreement with 11 brands and creates designs for international brands like Aeropostale, Gap, Arrow and many more after adjusting for Indian requirements, the analysts said. The management aims to add 200 exclusive outlets in the next two to three years.

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The firm has made big investments in speciality brands like Unlimited and from next year, speciality retail and emerging brands would materially contribute to bottom line growth, Kulin Lalbhai, executive director, Arvind Ltd, had said in a recent interview. “Beauty concepts like Sephora will become a Rs 500-crore opportunity in few years and other concepts like Calvin Klein and GAP are also scaling up. They have hit the Rs 100-crore mark. Our speciality value retail format, Unlimited will also near Rs 1,000 crore next year,” Lalbhai added.

AFL’s consolidated revenues stood at Rs 1,259 crore in Q3FY19, up by 17% y-o-y. The Ebitda increased 19% y-o-y to Rs 82 crore, while the profit after tax (PAT) increased by 98.5% y-o-y to Rs 8.4 crore. This growth in profit can be attributed to reduction of the deferred tax credit of Rs 5.6 crore from Rs 9.12 crore.

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