Textile major Arvind limited, a flagship company of the lalbhai Group, has agreed to demerge its branded apparel and engineering business into separate entities. The Arvind board, on Wednesday, has approved the demerger of branded apparel business to Arvind Fashions and demerger of engineering division to Anveshan. Arvind Anveshan and Arvind Fashions will be listed on NSE & BSE by the middle of next year, according a senior official of the company.
“Arvind Anveshan and Arvind Fashions will be listed on both the bourses, NSE and BSE, by July or August 2018. Arvind shareholders will get 1 share of Arvind Fashions for every 5 shares hold in Arvind and will get 1 share of Anveshan for 27 held in Arvind,” the official said, adding that there will be no cash to be paid by Arvind Fashions or Anveshan to the company or shareholders.
After the demerger, the company plans to rename Anveshan to Anup Engineering which manufactures heat exchangers, pressure vessels and reactors for oil and gas firms. Besides, the company is manufacturing some products for petrochemicals, pharma and fertilizer companies as well. The firm's licensed product include global brands like Tommy Hilfiger, Calvin Klein, Arrow, Gant, Nautica, IZOD and US Polo.
“We have decided to demerge our branded apparel and engineering businesses from the parent company. The branded apparel business will be demerged into Arvind Fashions and the engineering business will be demerged into another entity Anup Engineering,” Arvind Chairman and Managing Director Sanjay lalbhai said at a press meet in Mumbai.
It is expected that Anup Engineering's effective share capital will increase to Rs 10.21 crore from Rs 1.02 crore post demerger. “The company has offloaded 10 per cent stake in Arvind Fashion last November to a clutch of private equity investors for Rs 740 crore, valuing the company at Rs 8,000 crore,” said Jayesh Shah, Chief Financial Officer (CFO).
“The company has low capital base of Rs 5.77 crore and will now increase to Rs 23.07 crore with face value of each shares changing from Rs 2 to Rs 4. Given its intrinsic value, it should list at about Rs 280,” he added.
According to the company, Arvind Fashion, which has over 1,400 retail outlets, has been adding 150 stores a year with an average investment of Rs 150-200 crore. Meanwhile, the company reported a poor set of second quarter earnings with a decline in profits at Rs 64.5 crore against Rs 76.6 crore in same quarter last fiscal. Total income during the quarter under review stood at Rs 2,654.03 crore, up from Rs 2,353.22 crore in the same period of 2016-17.