MUMBAI: India’s largest denim maker Arvind Ltd is demerging its branded apparel and engineering businesses into separate listed firms to pursue independent strategies. The move unlocks value from its fastest-growing lifestyle division, which contributes over a third of its revenue.
The branded apparel business — which includes inhouse brands like Flying Machine, Newport and Excalibur and global brands like US Polo, Tommy Hilfiger, GAP and Nautica - will be spun off into Arvind Fashions. Its revenue stood at Rs 2,900 crore in FY17. The demerger will also free up Arvind Limited’s free cash flow, which was otherwise allocated to other internal businesses. They will now be ploughed back into textiles business, besides lining up around Rs 1,500 crore investment over the next three-four years.
The engineering business, which manufactures critical process equipment for the oil and gas, petrochemicals and pharma industries, will demerge into Anup Engineering. Its revenue stood at Rs 179 crore during the last financial year.
“Arvind Fashions and Anup Engineering will now also pursue independent courses. Financial independence will help unlock the full potential of these businesses,” said Sanjay Lalbhai, chairman and managing director, Arvind Limited. 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.
Two years ago, Arvind had demerged its real estate business into Arvind Smart Spaces, whose market cap grew four-fold to Rs 519 crore now. Meanwhile, Arvind’s revenue stood at Rs 2,628 crore for the quarter ended September 2017, up 13 per cent over the corresponding quarter of the previous year, while net profit fell by 15 per cent to Rs 66 crore. The increase in revenue was driven by a 34.07 per cent jump in apparel business to Rs 1,032.4 crore, while engineering unit’s contribution was insignificant at Rs 47 crore.