Arvind to sell 15% at $1bn valuation in brands arm

Mumbai: Textile tycoon Sanjay Lalbhai-led Arvind has met with merchant banks ahead of its plans to raise

Rs 900 crore

($134 million) by divesting about a

15%

stake in the fully owned subsidiary

Arvind Lifestyle Brands

, people directly familiar with the matter said.

Arvind management is in the midst of finalizing banks to run a formal fund-raise process, which could value its brands and retailing subsidiary, also the country’s second largest fashion and retail enterprise, at around $1 billion. The industry leader, Aditya Birla Fashion and Retail, has a market value of $1.7 billion at the prevailing share price.

Arvind Lifestyle Brands has rights to operate a slew of international brands such as GAP, Calvin Klein, Arrow, Gant, US Polo, apart from its own portfolio including Flying Machine, Newport and others. The company also runs a value fashion retailer Megamart and reported around Rs 2,400 crore revenue last fiscal.

An emailed query to Arvind went unanswered.

The private fund-raise could see the fashion and retail unit rivalling the seven decade-old parent, among the world’s top three denim makers, in market value. The flagship Arvind has a market capitalization of slightly over $1.2 billion based on the trading price on Wednesday. The private equity funding could be a prelude to the potential listing of the brands and retail unit on the bourses.

Arvind has a more diversified portfolio compared to Aditya Birla Fashion and Retail, which has a dominant share of formal fashion. However, the “capital intensive” nature of its operations and “subdued profitability of its brands and retail” are constraining factors, a note from rating agency CARE published in April this year said. “The ability of Arvind to improve the profitability, sustainable improvement in capital structure and in working capital efficiency would be the key rating sensitivities,” the report on the company added.

Arvind Lifestyle Brands reported operating income of Rs 2,111 crore turnover and Rs 32 crore loss in FY15.


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