Arvind Ltd to spin off branded apparel and engineering businesses

Textile and apparel maker Arvind Limited announced on Tuesday its decision to demerge its branded apparel and engineering businesses from the parent company, in a regulatory filing.

The branded apparel business - which has a growing portfolio of global brands including US Polo, Tommy Hilfiger, Gap and Nautica, as well as Arvind’s own value brand “Unlimited” and posted revenues of almost ₹2,900 crore in FY17 – will be spun off into Arvind Fashions. While the engineering business, which manufactures critical process equipment for the oil and gas, petrochemicals and pharma industries and posted revenues of Rs 179 crore in the last financial year, will demerge into Anup Engineering.

Existing investors will receive one equity share of Arvind Fashion for every five shares of Arvind Limited they hold. Similarly, they will receive one equity share of Anup Engineering for 27 shares of the parent held by them.

On completion of the eight-nine month process, both companies will be listed as separate entities on the BSE.

“Arvind Fashions and Anup Engineering will now also pursue independent courses,” said Sanjay Lalbhai, chairman and managing director, Arvind Limited, at a press conference. Two years ago, Arvind had demerged and transferred its real estate business into Arvind Smart Spaces (formerly Arvind Infrastructure). The business has since grown in revenue by 34 percent CAGR, while its market cap has multipled four-foldto Rs 519 crore today. “Financial independence will help unlock the full potential of these businesses,” he added.

The demerger will also free up Arvind Limited’s free cash flow, said Lalbhai, which was otherwise allocated to other businesses within the parent. Those resources will be ploughed back into the textiles business, which Arvind hopes to transform into a “future-ready” business by focusing on next-generation products like multi-functional textiles and smart wearables. The company plans to invest around ₹1,500 crore over the next three-four years in the business.

“This focus will not only enable us to grow at an accelerated pace but will also drive better return on investments and build a business model that is future-ready,” said Lalbhai.

Arvind posted revenues of ₹2,628 crore in the quarter-ended September 2017, up 13 percent over the corresponding quarter of the previous year, while net profit fell by 15 percent to ₹66 crore.