MUMBAI: About a fortnight away from securing the demerger of Arvind and listing the individual entities involving brands, heavy engineering and textile businesses, Sanjay Lalbhai, chairman, Arvind, in an interaction reasoned why standalone businesses will enable the companies to become independent and raise resources on their own.
“If I have to create shareholders value, I need to align the professional management (of each business) with the shareholders value and the only way to do this is to house the entities separately,” Lalbhai told ET.
“Also, because the entities are listed, their valuation crystallises and when you have stock options in a listed company you are also creating wealth for yourself and your stakeholders,” he said. “Its a win-win.”
With the demerger, the Rs 11,000-crore company of the Gujarat-based Arvind group will have four listed companies in all — its textile division which will also house its advanced materials business; its brands division or Arvind Fashion; Anup Engineering, its heavy engineering arm; and the already listed real estate business, Arvind SmartSpaces.
The largest of the four remains, the Rs 6,000-crore parent, textile business that earned the company the title of being the harbinger of the denim revolution in India in the early 1980s when the company started manufacturing the western fabric denim, along with cotton and khadi. Lalbhai now plans to enter sportswear and leisure segments and will be supplying to international sportswear brands like Nike and Adidas.
“These are high functionality fabrics which Arvind has already embarked upon (manufacturing) and we are getting very good response. Currently, they are all imported from China and Taiwan,” said Lalbhai. Along with entering new segments, the parent brand will continue to grow on the back of verticalisation by supplying to its global customers. In 2016, private equity firm Multiples Alternate Asset Management had picked up a 10% stake in Arvind Fashion for Rs 740 crore.
“With the demerger, all entities are free to raise resources separately. There are multiple options for the companies to raise resources and there will be no dearth of funds or growth… in any case we have reasonably large cash accruals which is capable of funding the kind of growth we have projected,” he said.
The companies are also open to organic and inorganic growth going forward, he added. The company had reported net profit of `67 crore, up 12% since last year, on a re-venue of Rs 2,861 crore.