Textile major, Arvind Ltd, on Friday (October 26) announced that it has received National Company Law Tribunal (NCLT) approval for its scheme of demerger of its branded apparel and engineering businesses into separate entities.

Last year in October, Arvind Ltd made an announcement to demerge its branded retail and small engineering business. Post demerger, there will be three different companies, namely Arvind Ltd, Arvind Fashions and Anup Engineering Ltd.

Shareholders of Arvind Ltd will be entitled to one equity share of Arvind Fashions for every five shares held by them and to one equity share of Anup Engineering Ltd. for 27 shares held. At present, three companies are managed as separate profit centers with independent heads.

Post demerger, Arvind Ltd will continue with the textile business. The management guided revenue growth in the coming five years is 10-12 percent and a capex of Rs 500 crore per year for the next five years, totalling Rs 2,500 crore.

Ahmedabad-based Arvind Ltd expects ROCE (Return on capital employed) to improve with investments in the forward integration business than in the existing textile business. The other areas of focus are advanced materials and technical textiles, but each these areas will need a little more time to scale up.

Arvind Fashions is expected to be listed in October this year. Arvind will hold nearly 90 percent of Arvind Fashions' share capital.

Branded apparel business has reported five year revenue CAGR (compound annual growth rate) of 25 percent. Management expects 22-25 percent revenue growth for the branded business. All the brands are expected to turn profitable in FY19.

Anup Engineering, which manufactures critical process equipment for several core industries, is a debt free company. It reported five year revenue CAGR of 25 percent and expects 10-12 percent revenue growth in FY19.

In an exclusive interview to CNBC-TV18, Kulin Lalbhai, executive director, said, "Demerger or delisting will happen in next 3-4 weeks from now and the new listing will be in January 2019.”

“We have plans to spend Rs 2,500 crore of capex for textile business in the next five years and it will grow at CAGR of 10-12 percent backed by advance material and water technical textile,” Lalbhai said adding that, “Branded apparel business is expected to grow by 20-24 percent."

First Published:Oct 29, 2018 4:01 PM IST