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retail | IST

Arvind Fashions to focus on 6 marquee brands, plans 500 new stores in 3 years

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Arvind Fashions Ltd (AFL), India's leading casual and denim manufacturer, on Saturday said it has raised Rs 439 crore from various marquee investors including promoters by issuing equity shares of the company. This will "significantly strengthen" the balance sheet and allow the business to pursue its growth strategy while insulating it from any COVID related uncertainties, AFL said in a statement.

Arvind Fashions surged almost 10 percent on Monday, after the company raised Rs 439 crore from marquee investors via preferential allotment of equity shares. With this fund raise, Arvind Fashions completed its capital requirement for growth and for navigating uncertainties.
Kulin Lalbhai, director, Arvind Fashions, said, “This capital raise, in a sense, completes a process which we had embarked on over the last 18 months of a reset and recapitalization in the Arvind Fashions business. So what we have done is we have exited un-strategic businesses on one side so that we can focus on six marquee brands that we have, which are industry leading brands.”
He added, “On the other side, we have significantly strengthened the balance sheet of the company. So we have more than halved our debt over the last 12 months. With this completion of the recapitalization, we will now be able to pursue profitable growth and enhance our return ratios and also, insulate the company from any sort of COVID-related uncertainties in the future.”
On debt position, Lalbhai said, “So we are around Rs 900 crores right now after this fund raise, and even though we will significantly grow in the second half of the year, we expect that to go under Rs 700 crores.”
On recovery after COVID, he said, “In the short term, the good news is that the recovery in the second wave has been much faster than the first wave. So even in quarter one, we were able to double the recovery of last year. In July, August, our recoveries have reached close to 90 percent of pre-COVID level. So I think the short-term recovery has been quite good.”
“E-commerce has been a highlight for us, it has become on a steady basis, more than 25 percent of the company revenue comes from it. We are at Rs 1,000 crore run rate on digital sales, so it is a channel that has been growing more than 25-30 percent. So we are very strong believers in an omni-channel future and the company has been investing in that very, very strongly. So I think that sets us for rapid growth in digital. We do expect the second half of the year, as we come into festive season, we do expect a near normal sort of demand situation,” he said.
On opening stores, Lalbhai said, “In the medium term, we believe that the category itself is looking very exciting. Digital has opened up, consumption has taken off. Even on the physical side, small town India is opening up and we have plans to open 500 stores across these six brands of ours over the next three years. So I think short-term demand is looking good and I think the medium-term opportunity also is quite exciting.”
On growth target, he said, “Even though we are going to be focused on profitable growth and significantly improve our ROCE, we believe that with the growth drivers that we have, which is digital, retail and category expansion, the company should be able to clock a 15 percent cumulative average growth rate year-on-year.”
For full management commentary, watch the video.