Arvind Limited IC 070314

8/11/2019 Arvind Limited IC 070314

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Just Dial Limited 7 March 2014

JM Financial Institutional Securities Limited

Brand powerhouse

Quality play on the textiles and branded retail segment: With improving

economic growth in the developed economies, increasing currencycompetitiveness and favorable policy support, the textile industry in India is

poised to report healthy growth in the time to come. Arvind Ltd (Arvind), with

its leadership position in the textile industry, should benefit from the above

growth trends. Also, with rising income levels, favorable demographics, and

the organized retail channel gaining market share, we expect the branded

apparel segment to witness robust growth in the time to come. With a solid

pedigree, strong brand portfolio, extensive distribution network and

management focus on growth and expansion, Arvind is well poised to

participate in the growth opportunity in this segment.

Solid brands portfolio, extensive retail reach to drive strong growth:

Arvinds track record of scaling up licensed brands like Tommy Hilfiger and

Arrow in India should allow the company to attract newer licensed brands.The companys solid distribution network of over 1,500 Multi-Brand Outlets

and c.894 retail stores will help it rapidly scale up new brands and register

2013-16E CAGR of 31% in the segments revenue.

Textiles segment to support growth:With rising competitiveness, favorable

exchange rate and Arvinds dominant global position (ranked amongst the

Top 3 fully integrated Denim manufacturers globally), we expect the Textile

segment to register c.16% CAGR over FY13-16E. The growth mix is likely to

shift in favor of the garments and wovens business as the mature denims

business grows at a relatively slower rate.

Improved financial performance leads to return up-tick: We project an

improvement of over 481bps in ROE to 16.4% by FY16. This will be driven byFY13-16E revenue CAGR of 21% and 132bps EBITDA margin expansion over

the same time frame.

Initiate with BUY and Mar15 TP of 200: The stock is currently trading at

6.5x FY15E/5.6x FY16E on a EV/EBITDA basis. We expect revenues and

earnings to witness CAGR of 21% and 27% respectively over FY13-16E. We

initiate coverage with a BUY rating and Mar15 target price of`200based on

6.5x our FY16 EBITDA estimate, implying an upside of c.27%. 1.

Arvind LimitedI ARVND IN

7 March 2014

India | Mid-caps | Initiating Coverage Price:`157

BUY

Target:`200 (Mar15)

Jaisinh [email protected]

Tel: (91 22) 663030

Saurabh [email protected]

Tel: (91 22) 663030

Rajgopal [email protected]

Tel: (91 22) 663035

Key Data

Market cap (bn) `40.6 / US$

Shares in issue (mn) 25

Diluted share (mn) 25

3-mon avg daily val (mn) `476.0/US$

52-week range `159.8/6

Sensex/Nifty 21,514/6,`/US$ 6

Daily Performance

-40%

-20%

0%

20%

40%

60%

80%

100%

0

20

4060

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100120

140

160180

Ju l- 12 Oct -12 Ja n-13 A pr -13 Ju l- 13 Oct -13 Ja n-14

Arvind

Arvind Relative to Sensex (RHS)

% 1M 3M 1

Absolute 7.0 23.1 8Relative 1.0 20.7 7

* To the BSE Sensex

Shareholding Pattern (

Dec-13 Dec-

Promoters 43.8 4

FII 19.2 1

DII 18.2 1

Public / Others 18.8 20

Exhibit 1. Financial Summary ( mn)

Y/E March FY12A FY13A FY14E FY15E FY16E

Net sales 49,251 52,925 66,548 79,289 92,662

Sales growth (%) 20.6 7.5 25.7 19.1 16.9

EBITDA 6,022 6,874 9,090 11,057 13,258

EBITDA (%) 12.2 13.0 13.7 13.9 14.3

Adjusted net profit 2,447 2,484 3,437 4,249 5,092

EPS (`) 9.5 9.6 13.3 16.5 19.7

EPS growth (%) 37.7 1.5 38.4 23.6 19.8

ROIC (%) 12.4 13.6 13.4 13.0 12.9

ROE (%) 13.1 11.6 14.3 15.7 16.4

PE (x) 16.6 16.3 11.8 9.6 8.0

Price/Book value (x) 2.0 1.8 1.6 1.4 1.2

EV/EBITDA (x) 9.8 8.9 7.4 6.5 5.6

Source: Company data, JM Financial. Note: Valuations as of 06/03/2014

JM Financial Research is also availabBloomberg - JMFR , Thomson Publisher & Re

Please see important disclosure at the end of the


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Arvind Limited 7 March 20


Investment Rationale

Quality play on the textiles and branded retail segment:

With improving economic growth in the developed economies, increasing

currency competitiveness and favorable policy support, the textile industry in

India is poised to report healthy growth in the time to come. Arvind, with its

leadership position in the textile industry, should benefit from the above

growth trends. Also, with rising income levels, favourable demographics, andthe organized retail channel gaining market share, we expect the branded

apparel segment to witness robust growth in the time to come. With a solid

pedigree, strong brand portfolio, extensive distribution network and

management focus on growth and expansion, Arvind is well poised to

participate in the growth opportunity in this segment.

Exhibit 2. Favourable drivers for growth ( bn

0

20,000

40,000

60,00080,000

100,000

120,000

140,000

160,000

180,000

2011 2012 2013E 2014E 2015E 2016E 2017E 2018E

Gross domestic product per capita, current prices (Rs.)

CAGR:12%

0-4years, 9%

5-9 years, 11%

10-14 years, 11%

15-59 years, 60%

60+ years, 9%

Source: IMF estimates, Census of India, JM Financial

Favourable demographics: The Indian demographic age is ripe for

consumption where style dominates utility. The median age of the Indian

consumer is 26 years with maximum population lying in the age bracket of 15-

59 years; it is expected that India will add another 140 mn people in the

consuming age group by 2020. This population has more aspirations, is more

aware, has higher spending power and is expected to consume across a

greater number of categories than the previous generation.

Higher disposable income: According to the Indian census report, the

number of households with an annual income of $7,000 or more is going to

treble from about 30 mn today to 100 mn by 2020. There will be c.400 mn

individuals in the middle to high income bracket by 2020.

Solid brands portfolio, extensive retail reach to drive strong growth:

Arvind has a solid track record of scaling up licensed brands (like Tommy

Hilfiger and Arrow) in India and this should allow the company to attract

newer recognized licensed brands in the time to come. The companys solidand growing distribution network of over 1,500 Multi-Brand Outlets and c.894

retail stores should help it rapidly scale up new brands and register 2013-16E

CAGR of 31% in revenue, in the brands and retail segment.

Arvind is working towards becoming the top three companies in the Brands

and Apparel space in India, with the aim of c.`55bn revenues from brands

and retail by 2018, implying 2013-18 CAGR of c.30%.


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Exhibit 3. Brands and Retail- way forward

Source: Company, JM Financial

Solid brands portfolio Strategy in place to expand

Arvind has carried out extensive analysis of the developed world brand and

apparel success strategies (refer Exhibit 4) and adopted a strategy suitablefor the Indian market.

Exhibit 4. Developed World Brand and Retail Strategy


In order to become a market leader, Arvinds strategy is to play the Multi

Brand, Multi Price Point, Multi Channel Space and Specialty Retail Space (refer

Exhibit 5).

Exhibit 5. All-encompassing strategy



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By combining the multi-brand and specialty retail strategy, Arvind will

encompass a unique portfolio that will cover the complete income pyramid in

India. With Indian per capita income expected to reach around the apparel

inflection point of $2,000-$2,500 by 2020, the strategy is expected to ensure

solid revenue growth for the company. As testimony of the success of the

hybrid strategy, Middle-East offers compelling evidence (refer Exhibit 6).

Exhibit 6. Middle East- Brand Strategy example and Arvinds brand strategy


With sufficient evidence regarding the expansion strategy being pursued bythe company, Arvind is well placed to cater to its addressable market size of

c.170 mn households.

Exhibit 7. Catering to all segments FY13 (%)

Menswear, 82%

Womenswear,7%

Kidswear, 6%

Non-apparel, 5%


Brand strategy execution remains key

The brands business is operated under the Arvind Lifestyle Brands Ltd (ALBL)

and includes a wide range of owned and licensed international brands. The

company plans to execute its group strategy by focusing on creating power

brands, which have potential for high growth. Power brands are classified as

any brand with more than `1bn in turnover, double digit margins, positive

free cash flow and growth of over 20%. Currently, Arrow, US Polo, Tommy

Hilfiger and Flying Machine are categorized as power brands and recorded

`9.2bn revenue in FY13 with a healthy 10.5% EBITDA margin. The Power

Brands segment has recorded 43% revenue CAGR during FY09-13.

Total stores for Power brands have quadrupled to 487 (excl. JV) in the last

three years. Its recent acquisition of operating licenses for more international

Power brands are classified asany brand with more than`1bnin turnover, double digitmargins, positive freecash flowand growth of over 20%.


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apparel brands Billabong, Nautica and Hanes - will help expand its offerings

in the premium segments. The company is also looking to enter the specialty

retail segment shortly.

Exhibit 8. Power Brands performance (

mn/%

36%

61%

59%

21%

0%

10%

20%

30%

40%

50%

60%

70%

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

2009 2010 2011 2012 2013

Po we r Br an ds r ev enu e Yo Y Gr owth ( %)

2%

7%

10%

9%

10%

0%

2%

4%

6%

8%

10%

12%

0

200

400

600

800

1000

1200

2009 2010 2011 2012 2013

EBITDA Margin (%)


Management expects the brands and retail segments margins to increase

from c.5% in FY13 to 12% by FY16 driven by:

Increase in number of high margin power brands to six by FY15 (Nautica

and Hanes being added).

Company plans to focus on investing in Nautica and Hanes in FY14 and

Ed Hardy and Next in FY15.

Improvement in power brands margins (Arrow and US Polo enjoy c.14%

margins).

Retail footprint strength ensures brand reach

Arvind has managed to expand the stores in its brand segment from 81 in

FY08 to 487 stores in FY13, implying 43% CAGR. The retail stores have

expanded at a CAGR of 18% to 197 stores at the end of FY13. The JV withTommy Hilfiger has also displayed solid growth registering store CAGR of

41% to 189 stores at the end of FY13.

Exhibit 9. EBOs contribution is largest to retail revenue (%)

EBO, 57%

MBO, 16%

Departmentalstores, 15%

Other InstitutionalSales, 12%


The retail business was previously run by Arvind Retail Ltd. which was

amalgamated with Arvind Lifestyle Brands Limited (ALBL) in FY13. The retail


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business includes value retail chain, Megamart, which sells its own and other

licensed international brands. Megamart operates 197 stores which have

been reduced from 216 in FY12 as the company decided to shut down non-

profitable stores. The company has also repositioned the Megamart business

model as Fair price or Value retail from discount store earlier in 2012 to

adjust for the impact of unfavorable excise duty changes. Private labels

constitute c.40% of total sales, which the company wants to increase to 60%

to improve overall margins.

Exhibit 10. Extensive Brand Portfolio


With the latest addition of fashion retailers Debenhams and Next, the

company is expected to expand its positioning from value to bridge to

premium segments in the time to come.

Extensive distribution network to ensure successful Brand penetration

Arvind has a solid distribution network comprising 894 retail stores across

192 cities. It has presence through 1,500 MBOs.

Exhibit 11. Solid distribution network (

mn/%

24

192

74

894

0

100

200

300

400

500

600

700

800

900

1000

2005 Jun-13

No. of towns No.of s tores

Sales ChannelCAGR 30%

220

1,500

-

200

400

600

800

1,000

1,200

1,400

1,600

2011 13-Jun

Multi Brand Outlet

Sales ChannelCAGR 50%



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The company is also aggressively expanding its new retail format The Arvind

Store which will be positioned as a premium fabric retail and custom clothing

set-up, consisting entirely of Arvind licensed brands. With already 100 stores

opened, it aims to grow its store count to 400 stores by FY17-18.

Exhibit 12. Store exhibits


Exhibit 13. Store exhibits


To add to Arvinds strength is the fact that the company is one of the few

players which can take anchor space, ground floor, first floor & upper floor

stores in all grades of malls. It is a virtuous cycle as Arvinds existence across

the spectrum Brands allows it to take extensive space at malls and become an

important customer for the mall developers. This allows it to leverage these

relationships to get more brands.

Exhibit 14. Arvind has strong leverage as anchor tenant at malls


Virtuous cycle - extensive brandportfolio makes Arvind animportant customer for malldevelopers, thereby allowing itto leverage these relationships


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Textiles segment to aid margin and support growth:

With rising competitiveness, favorable exchange rate and Arvindsdominant

global position (ranked amongst the Top 3 fully integrated Denim

manufacturers globally), we expect the Textile segment to register 16%

growth in revenue over 2013-16E.

Arvind is the largest player in denim segment in India with around 13%

market share. It is also the leading supplier (c.50% market share) to domestic

and international denim brands in India. The company plans to expand its

denim capacity to 140mn metres by FY18 from 108mn metres currently, with

bulk of the expansion likely to come post FY15. The company is currently

operating at c.90% capacity utilization in denim. The Denim segment revenue

has witnessed 14% CAGR over FY08-13.

Exhibit 15. Integrated textile operations strength


Large capacity addition of around 250mn metres in low-end manufacturing

has taken place over the last 2-3 years. This has resulted in a situation of

intensified competition in the denim segment, with possible pressure on

realizations. The company has worked towards improving its product mix toensure better pricing, protectmargins and avoid competition. ArvindsDenimbusiness is focused in high value added segment (`170 per meter), where

average realizations are much higher (commoditized business: `120 per

meter). The companys pricing is mostly driven by demand, with a relatively

low correlation with the price of cotton, which is the largest cost component

(constituting c.40% of total cost).

Exhibit 16. Textile segment details

Textile Segment Exports as % of business Customer Profile Customer concentration

Fabric

Denim 45%-50%Local Distributors, Ready-madeExporters, Internal Garmenting Units

GAP is biggest (17% of volume). 35%-40% would be top5 customers. Customers include Levis, Lee, andWrangler etc

Woven 25%-30%Local Distributors, Ready-madeExporters, Internal Garmenting Units

Biggest customer is Madura garments. Customersinclude Marks and Spencers, Next, Gap Inc., Levi's,DuPont and INVISTA.

Knits 60%

Biggest customer is Shahi Exports. Other customersinclude Marks & Spencer, Eddie Bauer, Zara, JosephaBanks

Voiles 0% Sold primarily through distributors

Garments 100%

The goods are primarily sold tovendors (most times Bangladeshand Sri Lanka) of International brands

Customers include Gap Inc, Patagonia, Tommy HilfigeQuicksilver, Brooks Brothers, Silver Jeans, Calvin KleinFCUK, Pull & Bear, Jack & Jones, Energie, Esprit,S.Oliver, Mexx, Sisley, Benetton, Coin



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Arvind is the largest woven fabric manufacturer in India. The companys

success in the segment is driven by its ability to produce wide range of

finishes and delivering the same in relatively short lead time. Woven

segments installed capacity is expected to reach c.150mn metres in FY18E

from c.90mn metres in FY13.

Exhibit 17. Textile segment break-up Financial Performance (

mn/%Sales FY09 FY10 FY11 FY12 FY1Denim 7,865 10,513 13,586 16,019 15,42

Wovens 5,713 8,190 9,867 10,991 14,30Knits 487 556 1,095 1,486 1,49

Garments 4,625 5,261 4,576 4,602 5,04Voiles 1,622 1,788 2,108 2,281 2,69Total 20,312 26,307 31,232 35,381 38,96Less: Intersegment 738 1,985 951 1,154 1,83

Net Textiles sales 19,575 24,322 30,281 34,226 37,13

Sales Growth (%) FY09 FY10 FY11 FY12 FY1Denim -3% 34% 29% 18% -4

Wovens -7% 43% 20% 11% 30Knits -2% 14% 97% 36% 1Garments 28% 14% -13% 1% 10

Voiles 8% 10% 18% 8% 18

Total 2% 30% 19% 13% 10Less: Intersegment 4% 8% 3% 3% 5Net Textiles sales -3% 24% 24% 13% 8

As % of totalDenim 40% 43% 45% 47% 42

Wovens 29% 34% 33% 32% 39Knits 2% 2% 4% 4% 4

Garments 24% 22% 15% 13% 14Voiles 8% 7% 7% 7% 7Total 104% 108% 103% 103% 105Less: Intersegment (as % of sales) 4% 8% 3% 3% 5Net Textiles sales 100% 100% 100% 100% 100


Garments will be the fastest growing category

The Garment business is slated to become a key growth driver of the textile

segment. Revenue growth has been tepid at only 2% CAGR over FY09-13, but

EBITDA margin has almost increased by three times to c.11% during the sameperiod. We expect the company to demonstrate strong growth in the mid-

term and slightly improve its margin. It is also more than doubling its

capacity from 8 mn pieces per annum to 18 mn pieces by setting up a

greenfield denim garments plant, which is likely to become operational by

FY15. Apart from the companys owned capacity, it also outsources garment

manufacturing.

The garment industry is highly labour-intensive albeit it requires less time to

set up a facility. Quick turnarounds, high service levels, and strong customer

relationships built through fabric operations are expected to support Arvinds

further penetration into garmenting.

Improved financial performance leads to return up-tick:

We project an improvement of over 481bps in ROE to 16.4% by FY16. We

expect the company to report:

- Revenue CAGR of 21% over FY13-16E on account of healthy double-digit

growth in all the major product categories in textiles, and brands & retails.

However, the brands & retails and textile businesses should lead the growth

with expected CAGR of 31% and 16% respectively during this period.

-

We estimate an improvement of 132bps in EBITDA margin to 14.3% over

FY13-16 on the back of a) higher realization in textile segments owing to


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better product mix in denims, and b) margin improvement in Megamart and

addition of brands to Power Brands, offset by higher pre-operating expense

related compression in the brands business.

-

We expect tax rate to increase for Arvind in FY13-16E as the MAT credit that

the company was availing declines. However, we expect the company to

witness lower interest cost despite rising debt as new borrowings for capex

will be entitled for 5% interest subvention under the Technology

Upgradation Fund Scheme (TUFS) launched by the central government. Weexpect repayment of the high-cost old debt and additional debt at lower

cost to restrict further increase in financing cost.

Exhibit 18. Key financial parameters (%

12%

14%16%

16%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

FY13 FY14E FY15E FY16E

ROE (%)

0.93x

1.08x1.10x

1.05x

0.80x

0.85x

0.90x

0.95x

1.00x

1.05x

1.10x

1.15x


Net Debt /Equity


Exhibit 19. Key financial parameters (%

13.0%

13.7%

13.9%

14.3%

12.0%

12.5%

13.0%

13.5%

14.0%

14.5%

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000


EBITDA EBITDA margin %

0%

13%

19%

25%

0%

5%

10%

15%

20%

25%

30%


Tax Rate (%)


Real estate:

The management has started to monetize c.400 acres of land in and around

Ahmedabad. The company is following a two-pronged strategy to monetizeits land bank. It has entered into a JV for c.150 acres of land development and

plans to monetize the balance by either outright sale or development. In June

2010, the company had announced a 50:50 JV with B Safal group to develop

1mn sqft in East Ahmedabad. In May 2011, the company entered into a 50-50

JV with Tata Housing to develop 134 acres of land (9mn sqft) for a township

in the outskirts of western Ahmedabad. The company expects cash flows of

c.`1bn every year over next five to six years through these land related

activities.


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Financial Analysis

Exhibit 20. Historical trend in net sales, EBITDA and net profit (

mn)Particulars FY08 FY09 FY10 FY11 FY12 FY13 CAGR

Net sales 26,740 27,367 32,073 40,846 49,251 52,925 15%

YoY % growth 23% 2% 17% 27% 21% 7%

EBITDA 3,481 3,015 3,561 5,297 6,022 6,874 15%

YoY % growth -5% -13% 18% 49% 14% 14%

EBITDA margin % 13% 11% 11% 13% 12% 13%

Adj. Net Profit 161 (1,012) 500 1,649 2,447 2,484 73%

YoY % growth -41% -729% -149% 230% 48% 2%

Net Profit margin % 1% -4% 2% 4% 5% 5%

Source: Company reports, JM Financial

The companys revenueswitnessed CAGR of 15% between FY08 and FY13, while

adjusted net profit grew at a higher rate of 73%.

Exhibit 21. Historical revenue trend (

mn/%)

23%

2%

17%

27%

21%

7%

0%

5%

10%

15%

20%

25%

30%

-

10,000

20,000

30,000

40,000

50,000

60,000

FY08 FY09 FY10 FY11 FY12 FY13

Net sales YoY % growth


Arvind derives majority of its revenue from the textiles segment, which formed

c.70.2% of revenues in FY13. The other major segment is Brands and Retail

(c.26.5% of FY13 revenues).

Exhibit 22. Revenue composition (%)FY08 FY09 FY10 FY11 FY12 FY13

Textiles 75.5% 71.5% 74.6% 74.1% 69.5% 70.2%

Brands and Retail 22.2% 24.8% 21.9% 23.1% 26.9% 26.5%

Others 3.6% 4.5% 4.1% 4.7% 4.6% 4.5%

Less: Intersegment 1.3% 0.9% 0.5% 1.8% 0.9% 1.2%

Net sales 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%


Revenue growth has been led by the textile segment which has witnessed a

CAGR of 13% over FY08-13.

Exhibit 23. Segment revenue growth (%)FY09 FY10 FY11 FY12 FY13 CAGR(FY08-13)

Textiles -3% 24% 24% 13% 8% 13%

Brands and Retail 14% 5% 32% 41% 6% 19%

Others 29% 8% 43% 18% 7% 20%

Net sales 2% 17% 27% 21% 7% 15%



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Raw material is the key cost element for Arvind, forming c.45% of total cost of

the company.

Exhibit 24. Cost break-up analysis for FY13 (%)

COGS, 45%

Employee Cost, 11%

Powerand fuel,

8%

Stores Consumed, 6%

Advertisement,2%

Other Expenses , 18%

Interest (net), 6%

Depreciation, 4%


Arvind has managed to increase its EBITDA and net profit between FY08-13 at a

CAGR of 15% and 73% respectively. This has been led by solid topline growth and

consistent margin performance. Net profit has grown at a significantly higher

rate primarily due to the MAT tax credit available with the company, which has

led to a lower tax rate for the company.

Exhibit 25. Historical EBITDA and net profit trend (%/m

13%

11%11%

13%

12%

13%

10%

11%

11%

12%

12%

13%

13%

14%

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000


EBITDA EBITDA Margin (%)

1%

-4%

2%

4%

5% 5%

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

(1,500)

(1,000)

(500)

-

500

1,000

1,500

2,000

2,500

3,000


PAT PAT Margin



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Financial Outlook

We estimate Arvindsearnings to witness CAGR of 27% over FY13-16E. We believe

this will be driven by strong top-line growth (21% CAGR over FY13-16E) and

c.132bps EBITDA margin expansion over the same period.

Exhibit 26. Financial projections, FY13-16E (

mn, except per share)Particulars FY13 FY14E FY15E FY16E CAGR

Net sales 52,925 66,548 79,289 92,662 21%YoY % growth 7% 26% 19% 17%

EBITDA 6,874 9,090 11,057 13,258 24%

YoY % growth 18% 49% 14% 14%

EBITDA margin % 13% 14% 14% 14%

PAT 2,484 3,437 4,249 5,092 27%

YoY % growth 2% 38% 24% 20%

PAT margin % 5% 5% 5% 5%

EPS 9.6 13.3 16.5 19.7 27%

YoY % growth -43% 38% 24% 20%


Revenues to witness 21% CAGR in FY13-16E on the back of Brands &

Retail growth:Weestimate revenues of the company to witness CAGR of 21%

in FY13-16E driven by Brands & Retail CAGR of c.31%. We expect the Textilessegment to witness c.16% CAGR during the same period. Albeit at a small

base, the real estate segment is expected to see c.30% CAGR in FY13-16E.

Exhibit 27. Segment level sales performance (%/

mn

6%

40%

28%

26%

0%

5%10%

15%

20%

25%

30%

35%

40%

45%

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000


Brands and Retail YoY growth %

8%

21%

16%

13%

0%

5%

10%

15%

20%

25%

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000


Textiles YoY growth %


As the company continues to witness solid growth in the Brands and retail

segment, we expect its contribution to increase from 27% of total sales in FY13

to 34% by FY16E.

Exhibit 28. Segment level sales break up (%)FY13 FY14E FY15E FY16E

Textiles 70% 68% 66% 63%

Brands and Retail 27% 30% 32% 34%

Real Estate 0% 1% 1% 1%

Others 5% 3% 3% 2%

Less: Intersegment 1% 1% 1% 1%

Net Sales 100.0% 100.2% 100.0% 100.0%



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EBITDA and earnings to witness 24%/27% CAGR in FY13-16E on the back

of strong topline growth and margin expansion: We expect EBITDA growth

to outpace revenue growth over FY13-16E, driven by EBITDA margin

expansion of c.132bps. We forecast Arvindsearnings to witness a CAGR of

27% over FY13-16E.

Exhibit 29. EBITDA and net profit margin (%/

mn

13.0%

13.7%

13.9%

14.3%

12.0%

12.5%

13.0%

13.5%

14.0%

14.5%

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000


EBITDA EBITDA margin %

4.7%

5.2%

5.4%

5.5%

4.2%

4.4%

4.6%

4.8%

5.0%

5.2%

5.4%

5.6%

-

1,000

2,000

3,000

4,000

5,000

6,000


PAT PAT margin %



15/30



Valuation and Recommendation

Exhibit 30. One year forward P/E and EV/EBITDA

0

50

100

150

200

250

Mar-

07

Aug-0

7

Jan-0

8

Jun-0

8

Nov-0

8

Apr-

09

Sep-0

9

Fe

b-1

0

Ju

l-10

Dec-1

0

May-1

1

Oc

t-11

Mar-

12

Aug-1

2

Jan-1

3

Jun-1

3

Nov-1

3

(`/share

)

4x

5.5x

7.0x

8.5x

10.0x

11.5x

1 year forwardP/E band

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

Mar-

07

Aug-0

7

Jan-0

8

Jun-0

8

Nov-0

8

Apr-

09

Sep-0

9

Fe

b-1

0

Ju

l-10

Dec-1

0

May-1

1

Oc

t-11

Mar-

12

Aug-1

2

Jan-1

3

Jun-1

3

Nov-1

3

3.0x

7.0x

6.0x

5.0x

4.0x

8.0x

EV(

Mn

)

1 year forward EV/EBITDA band

Source: Bloomberg, JM Financial

Arvind shares are currently trading at 6.5x FY15E/5.6xFY16E on a EV/EBITDA

basis.

We initiate with BUY and a Mar15 TP of 200:Our target price implies a

potential upside of c.27%. We believe our target multiple is justified based on:

Established leadership position in the textile segment and strong presence in

the brands and retail space through a solid portfolio of reputed international

brands (U.S. Polo, Tommy Hilfiger, Arrow etc.)

Strong visibility of revenue and earnings growth (FY13-16E CAGR of c.21%

and c.27% respectively).

The target multiple is in-line with the historical 5-year average EV/EBITDA

multiple of 6.5x.

EBITDA margin expansion of c.132bps over FY13-16E and improving ROE

profile of 481bps to 16.4% by FY16E.

High quality management team focused on growth and execution.


16/30


JM Financial Institutional Securities Limited 1

Peer comparison

Exhibit 31. Peer ComparisonMkt Cap Sales growth (%) EBITDA Margin (%) EPS Growth (%) ROE (%) P/E (x) EV/EBITDA (x

Company name bn FY13 FY14 FY15 FY13 FY14 FY15 FY13 FY14 FY15 FY13 FY14 FY15 FY14 FY15 FY14 FY1

Arvind Ltd* 40.6 7 26 19 13 14 14 2 38 24 12 14 16 9 8 6 6Future Retail India Ltd 20.3 (28) 8 3 8 8 9 98 7,408 63 0 1 2 47 23 9 8Shoppers Stop Ltd 31.2 14 25 19 3 3 4 NA NA 257 (2) 1 7 77 36 18 13Vardhman Textiles 21.4 7 22 14 20 22 0 152 70 (2) 22 18 18 4 3 4 3Average NA 20 14 11 12 7 NA NA 86 8 9 11 34 18 9 8

Source: Bloomberg, * JM Financial estimates

In the exhibit above, we have considered the financial performance and valuation of direct textile and retail peers for comparison with Arvind. We expect t

company to continue to perform well, given its strong revenue and earnings growth and improving return profile.


17/30



Key Concerns

Volatility in input costs

Raw material is the key cost element for Arvind, forming c.44% of net sales of the

company. As the textile segment still comprises 70% of companys net sales,

yarn is a key raw material for the company. Yarn prices are volatile and any sharp

rise in yarn prices could lead to interim margin pressure on the company.

Exhibit 32. COGS as % of net sales and cotton prices (%

39%

46%47% 49%

44%

0%

10%

20%

30%

40%

50%

60%

FY09 FY10 FY11 FY12 FY13

COGS as % of Net Sales

80

100

120

140

160

180

200

1

/1/2008

5

/1/2008

9

/1/2008

1

/1/2009

5

/1/2009

9

/1/2009

1

/1/2010

5

/1/2010

9

/1/2010

1

/1/2011

5

/1/2011

9

/1/2011

1

/1/2012

5

/1/2012

9

/1/2012

1

/1/2013

5

/1/2013

9

/1/2013

1

/1/2014

India Cotton price index

Source: Bloomberg, Company, JM Financial

Arvinds move towards higher value-added fabrics, especially in denim, should

enhance the companysability to pass on a cost hike (albeit with some lag) to the

customers.

Competition risk

Competition from domestic and foreign players in the textile, apparel and retail

segment can adversely impact the market share and profitability of the company.

Competition in Textile segment: The textile industry has witnessed huge

capacity addition of c.250 mn metres in the last 2-3 years. The capacity addition

has been primarily focused in the low-value add manufacturing segment. To

mitigate the above risk, Arvind is focusing on producing value-added higher

margin products.

Competition in Apparel and Retail segment:A growing number of international

brands across formats are planning to foray into India (either through license or

JVs), to leverage the countrys apparel growth potential. As a result, many

competitors are keen to expand retail operations and scale up their brand

portfolio. Several retail players like Shoppers Stop, Pantaloon retail are

expanding their store footprint aggressively.

Arvind, with its vertically integrated operations, solid distribution network andinternationally recognized brand portfolio is well poised to participate in the

attractive growth opportunity in this segment.

Labour risk

Arvind has a huge employee base of c.20,324 workmen and over 5,296

management staff

owing to the labour-intensive nature of the retail and apparel

industry. Any unrest in the large workforce could adversely impact the smooth

functioning of the business operations of the company.


18/30



In FY13, the companys operations were impacted by an unforeseen event of

strike by its workmen at two of its manufacturing plants in the month of June

2012. The strike led to loss of production of 6.1mn meters of fabric which

resulted in revenue loss of`950mn and EBIDTA loss of`350mn. The dispute with

the workers was eventually resolved amicably with the company agreeing to hike

the wages by c.16%.

Over the years, Arvind has consistently invested in attracting and retaining an

efficient and solid workforce. The employee benefits expenses constituted c.10%of sales for the last five years and all-in-all the company enjoys a harmonious

relationship with its workforce.

Exhibit 33. Employee expense trend (%/ mn)

10.7%

11.0%10.5%

9.5%8.9%

10.5%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

-

1,000

2,000

3,000

4,000

5,000

6,000


Employee Cost % of Total Revenue


Termination or change in terms of license agreement

Arvind operates in the branded apparel space through a diverse portfolio of

owned and licensed international brands. The company has pursued and willcontinue to follow the strategy of creating several large and high-growth Power

brands (e.g. Arrow, US Polo, Tommy Hilfiger and Flying Machine). With many

other strong growth brands in the portfolio (including those acquired recently)

like Gant, Nautica, Elle, Billabong, Ed Hardy, Hanes and Wonderbra, the

companys approach would be to gradually make these brands the next set of

Power brands. Any termination or change in terms of license agreement can

adversely impact the companys growth plans. We see two risks for the company:

Due to unforeseen reasons, any termination or change in terms of agreement

between Arvind and licensed brands could have an adverse impact on the

business model of the company.

The company currently pays certain % of sales as royalty to the licensed

brands. Any increase in royalty payments can adversely impact the companys

profitability.

We believe the above risks are mitigated to a large extent by Arvind owing to its

strong relationship with these brands and the solid performance the company

has delivered over the years.


19/30



Currency Risk

The company earns c.30% of its revenues from exports (2013 share of exports

c.28%), any sharp appreciation of`/$ could affect its export revenues.

Exhibit 34. Export share of sales and /$ trend (%

63%66%

69% 69%72%

37%34%

31% 31%28%

0%

10%

20%

30%

40%

50%

60%

70%

80%

FY09 FY10 FY11 FY12 FY13

India Outside India

35.0

40.0

45.0

50.0

55.0

60.0

65.0

70.0

75.0

Mar-

08

Jun-0

8

Sep-0

8

Dec-0

8

Mar-

09

Jun-0

9

Sep-0

9

Dec-0

9

Mar-

10

Jun-1

0

Sep-1

0

Dec-1

0

Mar-

11

Jun-1

1

Sep-1

1

Dec-1

1

Mar-

12

Jun-1

2

Sep-1

2

Dec-1

2

Mar-

13

Jun-1

3

Sep-1

3

Dec-1

3

INR/USD

Source: Bloomberg, Company, JM Financial

The companys sales mix has been trending in favor of domestic business overthe last 5 years. The above trend should assist the company in mitigating its

hedging and currency risk. Moreover, the management has shifted to a strategy

of hedging as soon as an order is received versus hedging on anticipation or

order basis. This step should ensure much better currency risk management for

the company.

Macro risk

The brands and apparel space being discretionary in nature can be impacted

adversely by a slowdown in the economy, resulting in weak consumer sentiment

and discretionary expenditure. Currently, Brands and retail segment constitute

over 27% of the companys revenues and any slowdown in consumer segment

can adversely impact the business and profitability of the company.

India is expected to become worlds 5th largest consumer economy by 2025.

Indias brands and retail industry is one of the fastest growing industries in the

country thanks to a burgeoning middle class and increasing purchasing power.

The overall retail market is expected to grow at 10-12% in the time to come, with

an expected market size of $1,440bn by 2021. More importantly, the share of

organized retail in total retail has grown over the last 4-5 years from c.5% in

2007 to over 7% in 2013, and is expected to reach c.20% by 2021. This would

translate into a CAGR of over 25% over the coming decade.

Arvind is well poised to participate in the growth opportunity in this segment

owing to its brand building strength, real estate and project management

expertise, integrated operations and solid warehousing and logistics knowhow.

Hence, the company is relatively less vulnerable to any slowdown in economic

activities.

Regulatory risk

The textile industry is susceptible to policy decisions by the government with

regard to incentives, sops and taxes. For example, the entire textile industry was

hit in 2009 by the Madras High Court ordering the closure of some 700

bleachers and dyers in Tirupur (Tamil Nadu) for polluting a water source. Any

such regulatory change concerning the industry can adversely impact the

operations of the company.


20/30



Industry Overview

Global Textile & Apparel Industry Overview

The textile and apparel trade was estimated to be $662bn in 2011 and is

expected to witness 5% CAGR in the next 10 years. The EU, US, China, Japan and

India are the biggest markets for apparel, but apparel production is primarily

concentrated in China, India, Bangladesh, Vietnam and Turkey. Asian countries

like China, India, Pakistan, Bangladesh, Thailand, and Indonesia are among theleading countries in terms of installed machinery capacity. China alone has a

share of around 45% of worlds total installed capacity for spinning and weaving

machinery.

Overall trade is expected to grow at 5% until 2021.

Textile trade is

expected to grow at a slower rate due to increasing consolidation of textile

manufacturing base near apparel manufacturing.

Exhibit 35. Global Textile and Apparel trade projections (%)2011 2016 2021 CAGR (2011-2021)

Apparel 389 530 711 6%

Fabric 74 78 81 1%

Yarn 42 49 55 3%

Fiber 31 38 46 4%

Others 126 145 167 3%

Total 662 840 1060 5%

Source: Industry reports, JM Financial

Indian Textile & Apparel Industry Overview

The Indian textile industry is one of the leading textile industries in the world,

steadily improving in its capabilities and competitiveness vis--vis the other global

economies. It chiefly consists of ginning, spinning, weaving and processing

industries and plays a major role in the countrys economy.It contributes nearly

14% to the total industrial production of the country, nearly 4% to the countrys

GDP and accounts for about 17% of its total foreign exchange earnings through

textile exports. Employment in the Indian textile and apparel sector stands at 45

mn and with an additional employment of 60 mn in allied sectors, the total

employment stands at c.105 mn.

The Indian textile and apparel market size was estimated to be `2,730bn ($58bn)

in 2011 and is projected to witness 9% CAGR to `6,640bn ($141bn) by 2021.The

domestic home textile market is seeing CAGR of 8% and is projected to reach

`408bn ($9bn) in 2021.The technical textiles market of India is estimated to be

`646.5bn ($14bn) and reach`1607.5bn ($34 bn) by 2021, at a CAGR of 10%.

Exhibit 36. Textile Industry Size and growth (%/$ b

58

93

14131

50

82

0

50

100

150

200

250

2011 2016 2021

Domestic Expor ts

$89 Bn

$143 Bn

$223 Bn

9.5% CAGR

40

63

984

6

9

14

24

34

0

20

40

60

80

100

120

140

160

2011 2016 2021

Apparel Home Textile Technical Textiles

Source: Technopak Analysis, JM Financial


21/30



Currently, menswear is the biggest segment of the apparel market and

contributes 43% to the Indian market. However, this contribution is expected to

drop to 40% by 2021 due to faster growth of womenswear and kids wear.

Exhibit 37. Textile Industry Categorization (%/$ b

43% 41% 40%

38% 38% 38%

10% 11% 11%

9% 10% 11%

0%

10%

20%

30%

40%

50%

60%70%

80%

90%

100%

2011 2016 2021

Mens Womens Boys Girls

2011 2016 2021 CAGR (2011-21)

Mens 80,950 1,20,350 1,82,800 8%

Womens 72,040 1,11,450 1,75,300 9%

Boys 19,420 31,770 52,230 10%

Girls 17,890 30,430 51,920 11%

Source: Technopak Analysis, JM Financial

Exports constitute c.35% of the Indian textiles industry and this mix is expected

to largely remain the same given the balance of strong domestic consumption

growth and increasing global competitiveness.

The industry saw low exports growth in 2012-13, due to weaker international

demand partly compensated by a weak Indian Rupee. However, over the next 3-5

years, Indias share of global textile exports is poised to increase from current 4%

to around 7%, driven by the improving competitiveness vis--vis other major

exporters like China and Turkey.

Exhibit 38. Product-wise and Country-wise exports break-up (%/

Apparel, 39%

Yarn, 16%

Fabric, 14%

Fiber, 14%

Made-ups, 8%

Others, 9%

USA, 57%

UAE, 18%

UK, 8%

Germany, 7%

France, 6%Others, 4%


The US and the EU nations account for almost two-thirds of Indias textile exports.The other major destinations are Bangladesh, Turkey, Japan, South Korea,

Canada, Saudi Arabia and UAE. In order to keep the textile industry competitive

and world class, there is a periodic need for installing new machinery, adopting

latest technology and improving availability of accessories. Overall, going

forward, the exports market is expected to continue growing at 10% CAGR for the

next few years.

In the mid-long term, the Indian textile industry is expected to grow strongly with

growth being balanced from both domestic consumption as well as exports

demand. In the near-term, domestic demand would depend on the macro-


22/30



economic factors that are expected to gradually revive in FY13-14. On exports

front, there are both positive and negative factors. Positive factors include the

weak currency and decreasing cost competitiveness of China that are likely to

give positive impetus to the Indian exports. At the same time, factors like

slowdown and uncertainty in the global markets, volatile foreign exchange rates

and increase in cotton and yarn prices are likely to negatively affect growth and

profitability for the textile exports.

Exhibit 39. Cotton production and INR/CNY movement

22.6

25.9

22.324

3335.2

34

0

5

10

15

20

25

30

35

40

2007 2008 2009 2010 2011 2012 2013

Cotton Production (Mn Bales)

4.0

5.0

6.0

7.0

8.0

9.0

10.0

11.0

12.0

Jan-9

9

Ju

l-99

Jan-0

0

Ju

l-00

Jan-0

1

Ju

l-01

Jan-0

2

Ju

l-02

Jan-0

3

Ju

l-03

Jan-0

4

Ju

l-04

Jan-0

5

Ju

l-05

Jan-0

6

Ju

l-06

Jan-0

7

Ju

l-07

Jan-0

8

Ju

l-08

Jan-0

9

Ju

l-09

Jan-1

0

Ju

l-10

Jan-1

1

Ju

l-11

Jan-1

2

Ju

l-12

Jan-1

3

Ju

l-13

CNY/INR

Source: Bloomberg, Company reports, JM Financial

Key growth drivers for the textile export sector:

Strong cotton production as well as availability of wool, silk, jute; shift

from agrarian to industrial workforce; demographic advantage of young

workforce as compared to ageing workforce in China.

Ability to adopt/develop technology and add infrastructure, also

supported by the large & growing domestic market driving up

efficiencies & innovation capability.

Capacity constraints for China: with strong domestic demand growth.

Currency advantage: Strong depreciation of INR/USD compared to strong

relative appreciation of RMB/USD over the last decade.

Improving regulatory environment and clarity on fiscal measures.

Better compliance norms than some other SE Asian exporting markets.

Better talent and entrepreneurial ability.

Retail industry: sizeable and rapidly growing

The story of growth of organized retail in India is expected to continue to gain

momentum, with the additional boost of Ecommerce retailing (commonly knownas E-tailing). The total size of Indias retail market is pegged at $490bn in 2012,

of which organized retail has a low share of c.7% at $34bn, while e-Tailing is

currently a nascent model at c.0.1% or $0.6bn. The overall retail market is

expected to grow at 10-12% in the time to come, with an expected market size of

$1,440bn by 2021. The more important trend though, is that while the share of

organized retail in total retail has grown over the last 4-5 years from c.5% in 2007

to reach over 7% by 2013, it is expected that the combined growth of brick-and

mortar retailing and e-tailing is expected to take this share to c.20% by 2021.

That would translate into a CAGR of over 25% over the coming decade.


23/30



Apparel industry: largest category of organized retailing

Apparel as a category constitutes the largest share of organized retailing at

c.30%, driven by factors like higher brand preference in apparel compared to

categories like Food & Grocery where fresh availability is a more primary

consumer need. Apparel is also a category that is more promptly being adopted

by the internet buyer, compared to other large retail categories. Hence both

trends put together, apparel is expected to be a large part of the India organized

retail opportunity in 2021, both in the brick & mortar format as well as in e-tailing.

In the shorter term, organized apparel retail witnessed some impact of softened

consumer sentiments during the last year, reflecting in slower like-to-like (LTL)

sales growth in the apparel stores and the overall industry growth of 4-5% in value

terms over FY12-13. However, the gradual revival expected in the economy in the

next few years, along with some major policy reforms in this sector, will facilitate

improved profitability of the existing brands as well as promote entry of new

brands that will further expand the market. Three specific drivers of short term

recovery in apparel demand include:

(a) Restoration of zero excise duty on readymade garments and made ups

announced in the Union Budget 2013-14

(b) Faster clearance of investment proposal of foreign branded retail, and

(c) Expected revival in the overall economy that will open up the unspent demand

for apparels.

Exhibit 40. Retail industry growth prospects (%/ bn)

93.0% 80.0%

6.9%14.7%

0.1% 5.3%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2012 2021

Traditional Retail: Brick & Mortar Corporatized Retail: Brick & Mortar Corporatized Retail: E-tailing

$490bn $1,440bn

Source: Company report, JM Financial

Arvind is well poised to participate in the attractive growth opportunity in the

Textile and Apparel industry through its comprehensive presence (refer Exhibitbelow).


24/30



Exhibit 41. Industry classification/size and Arvind presence (%/ bn)

Source: Company presentation, JM Financial


25/30



Company background

Arvind is the largest cotton textiles manufacturer in India, with annual installed

textile capacity of >230 mn meters, and a leading player in branded garments

and value retail in the domestic market. The company is the third largest Denim

manufacturer in the world and largest in India for Woven.

Its major business consists of textiles (Denim, Woven, Garments, Voiles etc), and

manufacturing and selling licensed and owned branded garments through EBOs,MBOs and its value retail chain i.e. Megamart. The other businesses include:

Technical Textiles, Engineering, Telecom Services (Syntel) and Real Estate. Its

plants are located at Ahmedabad, Gandhinagar, Pune and Bangalore. Arvind aims

to become a `130bn enterprise by 2018 through organic and inorganic

expansion.

Exhibit 42. Comprehensive product range

Source: Company presentation, JM Financial

Over the years, Arvind has setup a solid pan-India distribution network with

presence of 894 retail stores and 1,500 MBOs across India. The company enjoys

overseas retail presence in UAE and South Africa with 7 stores.


26/30



Exhibit 43. Key milestones

Year Event

1931 The inception of Arvind Limited at the hands of three brothers - Kasturbhai, Narottambhaiand Chimanbhai Lalbhai

1934 Arvind establishes itself amongst the foremost textile units in the country.

1980 Arvind records highest levels of profitability. The new strategy Reno vision, points atchanging the business focus from local to global, towards a high-quality premium nichemarket.

1988 Arvind enters the export market for Denims with a dual focus - Denim for leisure and Denim

for fashion wear.1991 Arvind emerges as the third largest manufacturer of denim in the world.

1997 Indias largest state-of-the-art facility for shirting, gabardine and knits is set up at Santej.

2005 Arvind creates a unique one-stop shop service on a global scale, offering garment packagesto reputed national and international customers.

2007 Arvind expands its presence in the brands and retail segment by establishing MegaMart One of Indias largest value retail chains.

2010 Arvind launches The Arvind Store, a concept putting the companys best fabrics, brands andbespoke styling and tailoring solutions under one roof. Arvind launches its first major RealEstate projects. Arvind becomes one of Indias largest producers of fire protection fabrics.

2011 MEGAMART repositioned from discount to value retail model.

2012 Arvind acquires business operations of Debenhams, Next and Nautica.

The company signs distribution agreement with surfwear brand Billabong .

2013 Arvind launches premium fabric brand Tresca with the aim of marking it a`250cr brand by

2017-18.Arvind enter into licensing agreement for Ed Hardy brand.

Arvind acquires license for Hanes and Wonderbra brands.


Ownership structure: Arvind is promoted by the Lalbhai family, who owns c.44%

stake in the company.

Exhibit 44. Shareholding pattern Arvind Ltd (%)

Source: Stock exchange data, JM Financial

FIIs / DIIs

37.4% 43.8% 18.8%

Promoters Public Float

Arvind


27/30



Management

The companys operations are managed by a high quality, professional team

under the strategic guidance of Mr. Sanjay Lalbhai.

Mr. Sanjay S. Lalbhai, 58 years, is the Chairman and Managing Director of

the Company. He is a Science Graduate with a Master's degree in Business

Management and has been associated with the Company for more than 33

years. He also holds directorships in Arvind Lifestyle Brands Limited, ArvindRetail Limited, Arvind Brands & Retail Limited, Amol Decalite Limited, Torrent

Pharmaceuticals Limited, Arvind Worldwide Inc., USA, Arvind Worldwide (M)

Inc., Arvind Overseas (M) Ltd., Arvind Spinning Ltd., Mauritius and Arvind

Textile Mills Limited, Bangladesh.

Mr. Jayesh K. Shah, 52 years, is the Wholetime Director with the designation

of Director and Chief Financial Officer of the Company. He is a Commerce

Graduate and a Chartered Accountant and has been with the company since

1st July, 1993. He has a distinguished academic career and extensive

administrative, financial, regulatory and managerial expertise. He also holds

directorships in many other companies.

Mr. Kulin Lalbhai, 27 years, is an MBA from Harvard Business School (USA),

along with a Bachelors degree in Science (Electrical Engineering) from

Stanford University, USA. He has held several leadership positions during his

academic role including serving as Co-President of Family Business Club at

Harvard, Associate Director for Stanford Asia Technology Initiative and also

served as Conference Co-Chair for the Harvard-India Conference. He is

passionate about Retail Industry and B2C businesses and has researched

extensively on Disruptive Business Models and Online space.

Mr. Puneet lalbhai, 30 years, is an MBA from INSEAD (France) specializing in

strategy and general management, along with post graduate degree in

masters of environmental science from Yale University, and bachelors degree

in science (conservation biology) from University of California, US.

Mr. J. Sureshis the Managing Director & CEO of the Arvind Groups Brands &

Retail Companies Arvind Lifestyle Brands Ltd. Suresh joined the Arvind

Group in September 2005 and since then has strengthened the Lifestyle

Brands portfolio of Arvind through organic growth and acquisitions and also

aggressively grown Megamart as a leading value retail chain in apparels.

Arvind Brands & Retail has now become a significant contributor to the Arvind

Groups results. The Brands & Retail business is poised to be a `50bn

business by 2018.

Prior to joining Arvind, he has held several senior positions during his 18 year

old stint in Hindustan Unilever Ltd and has served as a member of the

management committee of the foods and beverages business. Appointed by

JP Morgan Chase as CEO when they invested in MTR Foods, he was

instrumental in growing a regional brand to a national brand with global

presence. He is an MBA from IIM Bangalore and an Engineering Graduate from

Madras University.

Mr. Aamir Akhtaris the CEO of Denim Business. He is a Masters in Business

Administration with work experience of 28 years. A Sales and Marketing

professional, he started his career with the Oil Industry. He worked for 4

years in Indian Oil Corporation (a Fortune 500 Company and also India's

largest Public Sector Oil Company). This was followed by a 4 year stint in

FMCG industry. He worked for Geep Industries, a manufacturer of torches and


28/30



batteries that was later acquired by Gillette. Since last 20 years he has been

working in the Textile Industry.

Aamir previously worked as Chief Manager Exports - Reliance Industries (also

a Fortune 500 Company), Ahmedabad, India. In that assignment he was

responsible for Sales and Marketing of Worsted, Blended and Polyester

Fabrics and Yarns to Europe.

Mr. Susheel Kaulis the CEO of Wovens & Knitwear. He has been working with

Arvind Ltd, and its group companies since 1993. He joined Arvind group as a

Management Trainee after completing Post Graduation in Textiles from The

Indian Institute of Technology, Delhi.

He has carried out diverse responsibilities across different businesses of the

company. His assignments included Quality Assurance and Product

Development, Operations and Business Process Reengineering. In 2002, he

took over independent charge of Khakhis Business division. In 2007, he took

over as the CEO of Shirting & Khakhis, called Wovens Businesses. He is

credited with the successful turnaround of Wovens and Knits Businesses with

exponential growth.

Mr. Ashish Kumar is the CEO of Garments Business. He is an accomplished

management (MBA) professional with 20+years domain expertise in

textiles/apparel leadership roles. Currently, he is heading the Garments

business of Arvind as CEO. He has worked in various capacities with

companies like DCM Shriram Industries, Kaybee Group and Piramal Group.


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Financial Tables

Profit & Loss Statement ( mn)


Net sales (Net of excise) 49,251 52,925 66,548 79,289 92,662

Growth (%) 20.6 7.5 25.7 19.1 16.9

Other operational income 0 0 0 0 0

Raw material (or COGS) 23,947 23,369 29,880 35,521 41,513

Personnel cost 4,514 5,656 6,901 8,074 9,285

Other expenses (or SG&A) 14,768 17,025 20,678 24,636 28,606

EBITDA 6,022 6,874 9,090 11,057 13,258

EBITDA (%) 12.2 13.0 13.7 13.9 14.3

Growth (%) 13.7 14.1 32.2 21.6 19.9

Other non-op. income 1,185 806 685 719 755

Depreciation and amort. 1,614 2,043 2,278 2,629 2,912

EBIT 5,594 5,637 7,497 9,147 11,101

Add: Net interest income -3,091 -3,153 -3,422 -3,901 -4,312

Pre tax profit 2,503 2,483 4,075 5,246 6,789

Taxes 594 3 489 997 1,697

Add: Extraordinary items 0 0 -164 0 0

Less: Minority interest 0 0 0 0 0

Reported net profit 1,908 2,481 3,422 4,249 5,092

Adjusted net profit 2,447 2,484 3,437 4,249 5,092

Margin (%) 5.0 4.7 5.2 5.4 5.5

Diluted share cap. (mn) 258 258 258 258 258

Diluted EPS (

) 9.5 9.6 13.3 16.5 19.7Growth (%) 37.7 1.5 38.4 23.6 19.8

Total Dividend + Tax 300 498 600 720 870


Balance Sheet ( mn

Y/E March FY12A FY13A FY14E FY15E FY1

Share capital 2,580 2,580 2,580 2,580 2,5

Other capital 0 0 0 0

Reserves and surplus 17,696 19,959 22,797 26,326 30,5

Networth 20,276 22,540 25,377 28,906 33,1

Total loans 19,608 22,960 29,104 33,165 36,8

Minority interest 91 108 243 243 2

Sources of funds 39,976 45,608 54,724 62,314 70,1

Intangible assets 1,410 1,341 2,111 3,925 5,3

Fixed assets 37,961 40,998 45,498 48,748 51,2

Less: Depn. and amort. 13,325 15,395 17,442 19,636 21,9

Net block 26,046 26,945 30,167 33,038 34,6

Capital WIP 1,803 2,076 2,388 2,746 3,1

Investments 417 678 441 507 5

Def tax assets/- liability -189 -58 -69 -83 -1

Current assets 25,785 32,635 40,235 47,427 56,2

Inventories 11,261 14,129 17,766 21,288 24,8

Sundry debtors 6,422 7,547 9,846 11,730 13,7

Cash & bank balances 709 1,856 1,699 1,299 1,9

Other current assets 2,623 3,050 3,660 4,391 5,2

Loans & advances 4,771 6,054 7,265 8,718 10,4

Current liabil it ies & prov. 13,887 16,668 18,437 21,321 24,3

Current liabilities 12,376 15,645 17,210 19,848 22,5Provisions and others 1,511 1,023 1,227 1,473 1,7

Net current assets 11,898 15,967 21,798 26,106 31,9

Others (net) 0 0 0 0

Application of funds 39,976 45,608 54,724 62,314 70,1


Cash flow statement ( mn)


Reported net profit 1,908 2,481 3,422 4,249 5,092

Depreciation and amort. -1,807 2,070 2,047 2,194 2,306

-Inc/dec in working cap. 8,648 -1,948 -4,698 -3,069 -3,114

Others -69 17 135 0 0

Cash from operations (a) 8,680 2,619 906 3,374 4,284

-Inc/dec in investments 23 -261 237 -66 -76

Capex 808 -3,241 -5,581 -5,422 -4,306

Others -8,273 -974 -1,289 -1,640 -2,036

Cash flow from inv. (b) -7,442 -4,476 -6,633 -7,128 -6,418

Inc/-dec in capital 1,719 281 15 0 0

Dividend+Tax thereon -300 -498 -600 -720 -870

Inc/-dec in loans -2,503 3,352 6,144 4,060 3,637

Others -34 -131 12 14 17

Financial cash flow ( c ) -1,117 3,004 5,571 3,354 2,784

Inc/-dec in cash (a+b+c) 120 1,147 -156 -400 649

Opening cash balance 588 709 1,856 1,699 1,299Closing cash balance 709 1,856 1,699 1,299 1,948


Key RatiosY/E March FY12A FY13A FY14E FY15E FY1

BV/Share (`) 78.6 87.3 98.3 112.0 128ROIC (%) 12.4 13.6 13.4 13.0 12

ROE (%) 13.1 11.6 14.3 15.7 16

Net Debt/equity ratio (x) 0.9 0.9 1.1 1.1 1

Valuation ratios (x)

PER 16.6 16.3 11.8 9.6 8

PBV 2.0 1.8 1.6 1.4 1

EV/EBITDA 9.8 8.9 7.4 6.5 5

EV/Sales 1.2 1.2 1.0 0.9 0

Turnover ratios (no.)

Debtor days 48 52 54 54

Inventory days 83 97 97 98

Creditor days 136 171 149 150 1



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