One of India’s biggest textile makers Arvind, which successfully demerged its business in November 2018, now plans to focus on technical textiles along with other businesses such as water and wastewater treatment as well as garment production for international players. The branded retail arm of the company, which includes brands like Arrow, GAP, Tommy Hilfiger and Flying Machine has been hived off as Arvind Fashions while the much smaller engineering arm is now known as Anup Engineering. Branded retail has over 60 per cent of the value of the original company.
New garment making model to be introduced
The textiles business generates around 80 per cent of the group’s total operating profits. Many parts of the business, like denim for example, have fully depreciated machinery and a virtually negative working capital — as they also buy material on credit. As these businesses tie-up with third parties for basic weaving and dying, they offer a high returns on capital employed.
With textiles, Arvind plans to ramp up labor-intensive garment production business of the company. It plans to introduce a new model at its garment making units in Jharkhand’s capital Ranchi and in Bavla in Gujarat by providing dormitories for women, especially from tribal regions. The workers are also imparted skill training or college education, and are expected to complete the training in four years.
Also on the anvil are plans to increase its Bavla workforce to 12,000 from 1,500 and Ranchi to 7,500 from 2,000. The company’s, which benefits from payroll incentives of these state governments, plans to employ over 80 per cent women in both locations.
Focus on capital returns
Arvind also offers fabric research and development, and production, solutions. The company has invested in Ethiopia unit to leverage the tax advantage offered to Europe.
The demerge focuses more on return on capital employed (ROCE) and less on the earnings before interest, tax, depreciation and amortisation (EBITDA), as the textile business is now moving towards an asset-lite model and, therefore, capital investments would be less. The two businesses that were moved out of Arvind — Anup Engineering and Arvind Fashions — were listed in early March. The combined market capital of these two companies inched up to Rs 8,989 crore on March 29, 11 per cent more than its pre-demerger value in November. Their main focus now should be to cross Rs 10,000 crore in market capitalisation