Arvind Retail merges with Lifestyle Brands

Arvind Lifestyle Brands expecting sales of Rs 5,000 crore in next five years with leadership positions in menswear, kidswear and speciality retail

Textiles major Arvind has merged its retail subsidiary,  Arvind Retail with the brands holding arm, Arvind Lifestyle Brands. Recently, in a mail to suppliers, it said, “Arvind Retail is merged with Arvind Lifestyle Brands. With effect from June 1, all invoices will be raised in the name of Arvind Lifestyle Brands.” The two entities were two separate investment vehicles; we have merged the two for operational efficiencies. We don’t have any divestment plans in the short term, said Kulin Lalbhai, executive director of Arvind. Analysts believe the merged entity might get listed. Lalbhai declined to comment on the matter. Arvind Lifestyle Brands, which accounts for brands such as Arrow and Ed Hardy, recorded revenue of Rs 796 crore in 2012-13.

Arvind Retail, which holds the rights for Megamart, recorded business of Rs 510 crore in the same period.

Through the next five years, Arvind Lifestyle Brands expects sales of Rs 5,000 crore, with leadership positions in the menswear, kidswear and specialty retail segments.

In 2012-13, the company’s brands and retail segment recorded a loss of Rs 2.9 crore, against a loss of Rs 4.48 crore in 2011-12. Its revenue stood at Rs 1,404 crore, six per cent higher than in 2011-12. Through the next five years, the company is eyeing a compounded annual growth rate of 29 per cent.

Jignesh Kamani, research analyst with Nirmal Bang Securities, said, “The merger is for tax purposes and does not have much impact on the financials of the company.”

In a recent investor presentation, Arvind said it wanted to raise the share of its brands and retail segment to the revenue from 27 per cent in 2012-13 to 36 per cent in 2015-16. Currently, 68 per cent of the revenue is accounted for by the textiles segment; other businesses account for three per cent.

Analysts said the return on capital in the brands and retail segment was under pressure. In 2011-12, it stood at 11.4 per cent, which was lower than its cost of capital. In 2012-13, it was 10.4 per cent.

Meanwhile, Arvind on Friday said it planned to open 300 stores under its multi-brand retail format The Arvind Store in five years; 60 of these would be opened this financial year. The company is eyeing revenues of Rs 600 crore from The Arvind Store by 2017-18.