Arvind Ltd will spin off its branded apparel and engineering business into separate companies to focus on its core textiles business as it looks to unlock value for shareholders.
Shareholders of Arvind Ltd will get 1 equity share of Arvind Fashions for every 5 shares held by them, and 1 equity share of Anup Engineering Limited for 27 shares held by them. On completion of the demerger process in 8-9 months, both the companies will be listed on BSE and NSE. There will be no cross holdings among the companies.
However, shareholders gave a thumbs down to the proposal. Shares closed down 9.11% to Rs. 413.50 apiece on the demerger proposal on Wednesday. Arvind Ltd clocked a standalone revenue of Rs. 6158 crore, Arvind Fashions Rs. 2898 crore and Anup Engineering Rs. 179 crore in the last financial year.
Arvind Ltd wants to grow the textile business into a Rs. 10,000 crore giant by doubling revenue growth to 10-12% from 4-5% at present. Over the years cash generated from the textiles business has been allocated to growth newer businesses such as apparel, real estate, engineering, telecom and internet.
“This demerger frees up out resources and allows us to renew our focus on our textiles business, which is not only our foundation but is now well-placed to achieve an accelerated growth trajectory,” said Sanjay Lalbhai, Chairman at Arvind Ltd. “Demerger gives companies an ability to chart their own growth and investors know what they are investing in. Existing investors get an exit options and management gets more public scrutiny.”
Arvind Ltd will invest Rs. 1500 crore over next 3-4 years to transform the textile business through vertical integration. The company wants to not just make textiles but also convert them into garments. It will invest in raising garmenting manufacturing facilities, advanced processing and processing and technology innovations.
“No one wants multiple players. Complex supply chains increase costs and slow down delivery in the age of fast fashion. We are expanding into sportswear, athletic leisure wear and women’s wear,” said Lalbhai.
Arvind Ltd will create garment manufacturing to become a strategic supply chain partner to the world’s most successful brands, focus on multi-functional textiles and smart-enabled wearables and enter into fields like human protection, industrial process, infrastructure and transportation.
Promoters will hold 41% in Arvind Ltd, 36-37% in Arvind Fashions and 38% in Anup Engineering post the demerger.
Metta Capital Advisors LLP acted as financial advisors to the demerger transaction, while Walker Chandiok & Co LLP acted as independent valuers and provided the share allotment and share exchange ratios.
This is not the first time Arvind Ltd has spun off a company. Two years ago, it demerged Arvind Smart Spaces as an independent company. “Arvind Ltd is an incubator and we demerge businesses once it reaches a size and scale,’’ said Lalbhai.
Portfolio of brands owned by Arvind Fashions includes US Polo Association, Arrow, Flying Machine, Tommy Hilfiger, Gap, Calvin Klein, Hanes, Gant, Nautica, Izod, Ed Hardy, Elle, Cherokee, The Children’s Place and Aeropostale.
Anup Engineering designs and manufactures critical process equipment for petrochemical, fertilizer, power and other process industries.