Motilal Oswal has initiated coverage on Arvind Fashions with a ‘Buy’ rating and a target price of Rs 725. According to the brokerage house, the target implies an upside of about 46% from the current market price of Rs 496. Motilal Oswal said the valuation is based on a sum-of-the-parts approach and works out to 38x estimated December 2027 earnings per share.
As per the brokerage, Arvind Fashions is coming out of a long clean-up phase and is now positioned for faster profit growth. Motilal Oswal said the company’s tighter focus on a smaller set of brands and a lower-capital business structure is starting to show up in margins, cash flow and return ratios.
Motilal Oswal on Arvind Fashions: Cutting away weak businesses changed the story
According to Motilal Oswal, Arvind Fashions took tough decisions after Covid by exiting businesses such as Unlimited and Sephora. These businesses accounted for nearly 32% of FY19 revenue, but delivered poor returns and absorbed large amounts of capital. As per the brokerage, the exits helped the company remove loss-making operations even though they caused short-term pain.
Motilal Oswal noted that despite shutting down or selling these units, Arvind Fashions is expected to cross its pre-COVID revenue level by FY25, driven entirely by its core brands. The brokerage said this shows the strength of the remaining portfolio and the benefit of walking away from scale that did not pay for itself.
Motilal Oswal on Arvind Fashions: Five brands now drive the business
Motilal Oswal said Arvind Fashions now operates with a focused set of five brands: U.S. Polo Assn., Arrow, Tommy Hilfiger, Calvin Klein and Flying Machine. According to the brokerage, this portfolio offers a mix of size, pricing power and steady demand across segments.
As per Motilal Oswal, US Polo is the backbone of the business and already ranks as India’s largest apparel brand. The brokerage added that Tommy Hilfiger and Calvin Klein, run through a 50:50 joint venture with PVH, operate in premium and super-premium categories where profitability is structurally higher. Motilal Oswal also pointed out that Arrow has recovered from its post-COVID slowdown, while Flying Machine remains a strong denim brand with room to grow among younger consumers.
Motilal Oswal on Arvind Fashions: From clothing to lifestyle categories
According to Motilal Oswal, Arvind Fashions has steadily expanded beyond apparel into categories such as footwear, kidswear and accessories, which now account for about 15% of FY25 revenue. The brokerage said these categories improve average billing and allow brands to stay relevant across more occasions.
Motilal Oswal on Arvind Fashions: More control over sales channels lifts margins
Motilal Oswal said one of the biggest changes at Arvind Fashions has been how products reach consumers. According to the brokerage, exclusive brand outlets now contribute around 43% of revenue, up from 39% in FY23. Online sales have also changed in nature, with direct-to-consumer channels accounting for about 13% of revenue in the first half of FY26.
Motilal Oswal on Arvind Fashions: Balance sheet repair is largely done
According to Motilal Oswal, Arvind Fashions has made visible progress on its balance sheet over the past few years. Gross borrowings have come down from about Rs 1,300-1,500 crore, helped by asset sales and tighter capital discipline. The brokerage expects the company to move to a net cash position by FY28.
Motilal Oswal highlighted that Arvind Fashions looks very different from what it was before Covid. As per the brokerage, the company has stopped chasing size for its own sake and is now focused on businesses that earn more per rupee invested. With fewer brands, lighter stores and tighter control over pricing, Motilal Oswal believes the company is better placed to grow profits than revenue alone.