MUMBAI: Textiles firm Arvind has raised Rs 740 crore by selling 10% stake in its retail arm to Multiples, a private equity firm, in an effort to pare debt.
The retail division houses more than two dozen in-house and global franchisee brands such as Gap and US Polo, along with joint ventures with Calvin Klein and Tommy Hilfiger.
The company’s debt currently stands at Rs 3,540 crore, which is expected to decline to Rs 2,500 crore once the deal is effective in November. “We are going to use the funds to retire debt. I don’t like long-term debt and I don’t want to ever worry about cash flows. We have sufficient cash flows for a growth engine,” said Sanjay Lalbhai, chairman, Arvind Limited.
With an enterprise value of Rs 8,000 crore, Arvind’s retail arm is more than double than the market capitalization of Shoppers StopBSE 0.61 %, which stands at Rs 3,102 crore and nearly four times that of Future Lifestyle, which stands at Rs 2,588 crore.
The valuation of the retail arm is close to the market cap of the parent company, which stood at Rs 10,427 crore on Tuesday. The stock of Arvind Limited jumped over 12% after the announcement and closed at a 52-week high of Rs 403.60 apiece on the BSE on Tuesday.
Apax Partners and ChrysCapital were also in the race to pick up stake in the company. However, Multiples, founded by former ICICI Ventures head Renuka Ramnath, had an upper hand as it already holds 4% stake in Arvind, which it bought for Rs 150 crore four years ago.
Multiples’ other investments in the country include PVR Cinemas, Livpure and logistics service provider Delivery.
A decade ago, Arvind’s retail business contributed just 7% to the parent’s annual sales. But today, the segment accounts for over 30% of overall revenues, which stood at or Rs 2,300 crore in FY16 and has been growing at a CAGR of 25% for the last three years. Lalbhai said the branded business of the company has reached maturity and does not require financial support from the parent company.
“We have a very balanced mix of mature and growth business. We have power brands like Arrow that have matured, growth brands that are doing well and then the newer brands,” he said.
The company has identified four power brands — Arrow, Tommy Hilfiger, US Polo and Flying Machine — that contributed Rs 1,460 crore to the company’s revenue in 2016 and are growing at a CAGR of 25-30%.
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Source: Economic Times
