We ensure that every business grows at its logical pace: Sanjay Lalbhai

Arvind group is looking to build on its newer businesses such as advanced materials division

Having become synonymous with denim in the late 1980s, the Ahmedabad-based Arvind began to re-establish itself as a leading branded apparel retail player in the last decade. Now, evolving further, the group is looking to build on its newer businesses such as the advanced materials division that manufactures composites and safety equipment for the construction and health industries, along with the real estate and water management business verticals. In an interview with Vinay Umarji, Arvind Chairman and Managing Director Sanjay Lalbhai lays out the trajectory the group is taking. Edited excerpts:
 
Having established yourself as a formidable apparel retailer, what next for Arvind?

 
We have this business called advanced materials division (AMD), which is the newest textile business we have started. We are dealing with new fibres, new technology and new products to solve infrastructural problems as well as healthcare, aviation, energy, roads and industrial uses. We are making new generation products with composites. We are making innovative specialised products such as boiler covers, fire retardant suits, medical products and composite fabrics for cooling towers at power plants as well as aviation.
 

Another new-age business is the omni-channel ‘nnnow.com’ where even Levi’s and Reliance Brands have come on board. In the omin-channel business, every store becomes a warehouse and customers can choose and order from the channel, and they will be supplied from the nearest store. We are taking this business to other brands.

 
Our next new business is in water treatment where we provide last-mile solutions. There are roughly four stages of water treatment in reverse osmosis where you end up with high TDS water, which needs to be evaporated. Unlike the conventional costly method of using titanium for evaporation, we use polymeric film evaporation technology that makes it cost effective for industries. This is a patented solution by Arvind, which we are now selling to major clients, and it brings down operating costs by 60 per cent. Water will become a very important business for us. All our new businesses are profitable.

 
Where do these new businesses stand in the scheme of things?
 
AMD is already a Rs 600-crore business and we anticipate it can become a billion dollar business for us. We don’t want to hazard a number on the omni-channel business, but it is anybody’s guess on how big it can be. Water, too, will be a very large part of our business going forward. These are three upcoming stars for us. I have spent a good part of my life building the brands business. Now the new generation is taking forward these new businesses. Omni-channel is being handled by Kulin and AMD and water is being looked after by Punit. Some of them have reached a certain size but haven’t become predictable yet. Meanwhile, we are chasing the brands and apparel retail business to be a Rs 25,000 crore business by 2022. But we are pushing very large valuations in the new businesses too.

 
Which of your businesses are generating cash? Are there plans to hive them off and list them?
 
Most of them are generating cash. The ‘nnnow.com’ omni-channel is not generating cash right now but there will be a planned move towards the same. It is a technology company with a large contingent of people developing products.  But the water and AMD businesses are on good earnings. We are now looking at return on capital employed.
 
We will not invest but encourage our partners to invest and share profits with them. We will go for an asset light model. We have not really thought of hiving off. We also have Multiples as our partner. We will jointly deliberate but there are no thoughts of listing separately.

 
With Arvind going asset light, how is the capex planned for the next few years?
 
Firstly, we have a principle that beyond our free cash flows we will not leverage. We generate cash flows of around Rs 600-700 crore, which is enough for our capex requirement.  All these new businesses get nurtured. Once the concept is proven, we can work on a capital light model. We ensure that every business grows at its logical pace, but we don’t over-leverage.
 
Some of the brands are yet to kick off. How will this year and next be for these brands?

 
We have planned to make all the brands Ebitda positive, be it Aeropostale, GAP or Sephora. In retail formats, unless you reach a critical number, you won’t be able to make them EBIDTA positive.