Arvind to spin off apparel, engineering businesses

Arvind Ltd has demerged its branded apparel and engineering businesses into separate companies and plans to list them on stock exchanges through a National Company Law Tribunal-driven process.

The branded apparel business will be demerged into Arvind Fashions and the engineering business will be spun off into Anveshan and then renamed Anup Engineering.

Existing investors will be entitled for one equity share of Arvind Fashion for every five shares of Arvind Ltd they hold.

Similarly, they will also receive one equity share of Anup Engineering for 27 shares of Arvind Ltd held by them.

Both the new companies are expected to be listed on NSE and BSE in six-nine months. The promoters, who now own 43 per cent in Arvind Ltd, will get 36 per cent stake in Arvind Fashion and 38 per cent in Anup Engineering which is into manufacturing of heat exchangers, pressure vessels and reactors for oil and gas, petrochemicals, pharma and fertiliser companies.

Anup Engineering's effective share capital will increase to ₹10.21 crore from ₹1.02 crore post demerger.

Justifying the high valuation for the demerged entities Jayesh Shah, Chief Financial Officer, said the company has offloaded 10 per cent stake in Arvind Fashion last November to a clutch of private equity investors for ₹740 crore, valuing the company at ₹8,000 crore.

Moreover, he added the company has low capital base of ₹5.77 crore and will now increase to ₹23.07 crore with face value of each shares changing from ₹2 to ₹4.

Given its intrinsic value, it should list at about ₹280, he said. Arvind Fashion, which has 1400 retail outlets, has been adding 150 stores a year with an average investment of ₹150-200 crore, he said.

Garment hub

Insisting that India is still competent to emerge as garment hub despite rising cost, Shah said the Gujarat government has been offering a salary subsidy of ₹4,000 per worker employed and the Jharkhand government has also announced a similar package to attract textile industry.

The average salary of a worker is about ₹11,000-12,000 a month. It works out to $200 a month and with the government subsidy of $75, India is still an attractive destination for garmenting, he said.

Post demerger, Arvind will have net debt of ₹2,792 crore and it will be ₹696 crore on Arvind Fashion, while Anup Engineering will be cash surplus of ₹36 crore.

Arvind Fashion plans to more than triple its top line from ₹2,898 crore to ₹9,000 crore over the next five years with an investment of ₹1,500 crore planed in the next three years.