Arvind Limited is one of the largest textile and branded apparel players with the presence of almost eight decades. The company is among the largest denim manufacturers in the world.We are further bullish on the company with transformation from a pure textile player to a brands and retail powerhouse.
For the year ended March 2014, the company registered revenue of Rs 4,649 crore, up 26 per cent, from the textile segment against Rs 3,701.20 crore last year. Revenue from brand and retail business jumped to Rs 63.17 crore against Rs 25.38 crore during the same period. Textiles business includes fabric, yarn and garments business and brand and retail includes retailing of branded garments, apparels and fabrics.
I believe with its massive experience gained in the textile business over the past few decades, company is well placed to extend its experience to launch new initiatives. In August, it has entered into e-commerce business with clothing brand Creyate. We are bullish on the company and believe that it will post revenue of around 25% CAGR in the next four years on the back of improvement in brands and retail business coupled with tie-up with GAP Inc. GAP Inc is a leading global retailer offering clothing, accessories and personal care products for men, women, children and babies.
Demerger of real estate business, a positive step: On July 30, 2014, the company announced its demerger and transfer of its real estate business to its wholly owned subsidiary Arvind Infrastructure Limited. According to the announcement the equity shareholders of Arvind Limited shall receive one fully paid up equity share of Rs 10 each of Arvind Infrastructure Limited for every 10 fully paid up equity shares of Rs 10 each help on the record date in the company. The company has plans to list Arvind Infrastructure on stock exchange(s).
After the announcement, the share price of the company jumped 17% from Rs 241 on July 30 to Rs 282 on November 14. Meanwhile, it touched a high of Rs 336 on September 12. We believe, the demerger is a positive step for Arvind Limited as investors will get an opportunity to invest in pure play brands and textile business. Also, the company will continue to hold on to 275 acres of undeveloped land bank, which it will utilise to expand the brands and retail business.
Strong Product Portfolio: With strong portfolio of foreign and domestic brands, Arvind is now poised to lead the branded apparels space in India. While with brands like ARROW, USPA, Tommy Hilfiger, CK, Nautika, Flying Machine, Arvind will dominate menswear category, it is building meaningful presence in kids, innerwear and women category. With successful re-positioning of Megamart as value retail format, it will not only drive the growth but will lead to margin expansion too. Under the above scenario, the management is expecting revenue growth of about 22-24% for the year 2014-15. The textiles business may achieve growth of around 15%, where as brands and retail business may clock growth in excess of 30%. We believe the company growth brands which are presently small but have high potential for growth and can be power brands over the next three years. These include Nautica, Hanes, Gant, Calvin Klein. We believe the company’s power brand will continue to witness growth of over 20 per cent
Financial and Valuations :
In the past 12 years, the consolidated gross sales of the company jumped from Rs 960.85 crore by the end of March 2012 to Rs 7,030.56 crore at March 2014. For the year ended March 2014, the company registered net profit of Rs 352.55 crore against a loss of Rs 69.83 crore by the end of March 2014.
Conclusion- Arvind ltd is a great stock to buy and forget
