Arvind Limited study report

Arvind Limited incorporated in 1931 is one of the India’s leading vertically integrated textile company. It belongs to the Arvind Lalbhai Group which is a diversified conglomerate having presence in textiles, apparel retailing, engineering, wastewater treatment and real estate sectors. In 2018, the brand retail and engineering businesses was demerged into separate entities namely Arvind Fashions ltd and Anup Engineering ltd respectively. This demerger helped the company to scale up its core textile business in both domestic and international markets. The company is headquartered in Ahmedabad, Gujarat. It has its facilities in Naroda, Santej, Khatraj, Bangalore and Pune. It is a prominent player in denim, woven & knits, garmenting and advanced materials. Textile segment: • Denim – It is the pioneer of denim in India since the early 1980s with supply to several iconic brands across Europe, US and Asia. The company produces about 100 million meters of fabrics and 6 million pairs of jeans each year. • Woven – The company is a one stop shop facility which deliver creative and high-quality fashion concepts in formal and casual shirts, tops & dresses, trousers and jackets across color woven, indigo, solid and print categories. It is evolving in this segment since 1931. It produces about 130 million meters of woven fabric annually. • Garments – It is the integral part of the company’s verticalization strategy. The garmenting facilities are located in Karnataka, Ranchi, Ahmedabad area and Ethiopia. It makes denim jeans, casual & formal shirts. It has a dedicated division for knits essentials that covers a wide range of garments. It cater mainly to the US and the EU market and manufacture about 10 million jeans per year. Being vertically integrated, the shirting division is equipped with a capacity to produce 11 million casual and formal shirts per year. Arvind knits garment division produces almost 20 million pieces per annum.

#SALES #GROWTH

In FY24, the revenue de-grew by ~8% due to lower realization as decrease in raw materials and input costs drove down prices, however, AMD segment continued to witness strong momentum. In Q4 FY24, volume across business segments of textile and AMD division clocked a healthy growth on a YoY basis which led to a healthy revenue growth of 10%. During Q4 FY24, the revenue includes sale of land of ₹32 cr. In FY23, the volumes in the woven segment continued to remain strong, while denim and garments volumes saw reductions. The realization was higher for both denim & wovens by 25% and 18%, respectively. 5 Year CAGR: 1.6%

#EBITDA #GROWTH

In FY24, EBITDA witnessed an improvement of ~6% despite lower sales. This was driven by improvement in AMD business. In Q4 FY24, the textile business witnessed higher volumes on a YoY basis. In Q2 FY24, the inventory correction cycle bottomed out among the key export customers. In October 2023, the customers started placing orders in small lots, closer to the actual demand. During Q4 FY24, the EBITDA includes sale of land of ₹6 cr. In FY23, there was contraction in EBITDA mainly on account of higher raw material prices. The average cotton prices stood at ₹214 per kg for FY23 as compared to ₹140 per kg for FY22. However, it was partially offset by good performance in the AMD segment. 5 Year CAGR: 3.4%

#PAT #GROWTH

In FY24, the net profit declined by 15%. It was impacted due to high base effect on account of exceptional item in FY23. In H1 FY24, the net profit was subdued on a YoY basis due to unfavorable consumer demand. Effective tax rate for FY24 stood at ~24%. In FY23, the net profit after tax stood at ₹415 cr, up by 56% YoY reflecting the lower tax outgo on account of losses due to sale of subsidiary shares and migration to the 25% tax regime. Effective tax rate for FY23 stood at ~15% v/s 36% in FY22. 5 Year CAGR: 8.2%

#EBITDA #MARGIN

In FY24, the margin improved for both textile and AMD business. In Q4 FY24, the textile margin improved on a YoY basis on account of softening of input cost, efficiency gains in garmenting and better product and customer mix. In FY23, EBITDA margins remained flat at ~10% levels. The textile margins stood at 9.8% as against 10.7% in FY22. It was impacted due to slightly lower volumes as well as the fact that raw material prices were higher. The capacity utilization of garments & denim segment were low which impacted the absorption of the fixed overheads expenses. AMD continued to deliver strong growth in margins. EBITDA margins for this business improved to 13.2% as compared to 12.5% FY22.

#ROCE

In FY24, ROCE witnessed increased marginally. It was on the back of higher contribution from AMD segment as compared to FY23 which governs higher ROCE. In FY23, the company has reported ROCE of 14.4% compared to 13.1% in FY22.

Company FUTURE OUTLOOK


The management is focusing on achieving ROCE of 20% from textile business in the coming period. It stood at 11% in FY24. • The company expects AMD margins to be 17%-18% in the next few years. In FY24, they reported EBITDA margin for AMD of 15.6%. • The garmenting business is expected to have low double digit margin on the back of capacity addition in the coming period. In FY25, garmenting will grow significantly by about 25%. • The capex in FY25 will be ~₹400-₹450 cr towards AMD and garmenting segment. • In Q1 FY25, the garmenting business might get impacted due to absenteeism on account of elections and heat waves in some parts of the country. • They expect H1 FY25 to be 40% of the business plan and H2 FY25 to be 60%. • The company envisages AMD to contribute 30%-32% to the total revenue in the next 3 years. In FY24, it contributed 18% to the revenue from operations. • The garments business has a capacity ~45 million and is planning to increase it to 60 million in 3-year period. In FY24, it grew by 25% from 32 million to 40 million full garment. The new capacities will come online more towards H2 FY25. • The Mass Transportation factory went live in Q4 FY24 and is expected to generate revenue of ₹200 cr in coming period.

Arvind 330-384
Expected level 500
Support 280

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Crompton Greaves Consumer 380-435
Expected level 500
Support 348

CG Power signed definitive agreements to acquire a 55% stake in G G Tronics Pvt Ltd, for ₹319.38 Crore

Key Highlights:
➡️Acquisition Details:
🔹Stake Acquired: 55% of G G Tronics
🔹Consideration: Up to ₹319.38 Cr
🔹Method: Combination of purchasing equity shares from GGT Promoters & subscribing to Compulsorily Convertible Preference Shares

➡️Strategic Impact:
🔹GGT, HQed in Bengaluru, specializes in designing & installing Electronic Safety Embedded Signalling Systems for the Railway Transportation segment.

🔹Notable offerings include the Train Collision Avoidance System (#TCAS) and Automatic Train Protection Systems (IRATP/ #KAVACH).

➡️Financial Strength:
🔹Turnover: ₹98.13 Crores (FY23)
🔹PBT: ₹10.84 Crores (As of March 31, 2024)

This acquisition aligns with CG’s strategy to enhance its Railway product portfolio and leverage synergies between the companies.

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