Opinions/review of Arvind

[dewayne777]

Arvind textiles is among the largest denim manufacturers in the world. It also manufactures a range of cotton shirting, denim, knits and bottom weights (Khakis) fabrics and Jeans and Shirts Garments. Arvind through its subsidiary Arvind Fashions Limited and its subsidiaries is marketing in India the branded apparel under various brands. It recently demerged into Arvind Fashion Ltd (AFL) and Anveshan Heavy Engineering Limited (AHEL)

Some basic financials
Market cap of 2363.76
P/E o f11.58 (standalone) and 8.2 (consolidated)
Book value of 122.12 (standalone) and 158.08 (consolidated)
CMP of 91
EPS of 7.89 (standalone) and 11.14 (consolidated)
Face value of 10
Dividend yield of 2.63%
ROCE of 8.79(standalone) and 9.69(consolidated) in 2018. 2017 figures stand at 11.98 (standalone) and 11.40 (consolidated)
Share holding as of Dec 2018 43.1%. Been increasing from 42.92% in Jun 2018 to 42.98% in Sep 2018.
Debt to equity ratio of 0.77

Please do let me know if any other information is required for a better analysis.
Disclaimer: Not invested, but considering

 

[profmaliki]

@dewayne777 Textile companies have low PE. It's pretty much an accepted fact due to the commodity nature of the industry, so standalone and consolidated PE values of 11.6 and 8.2 are not surprising.

What's interesting about Arvind are the various retail brands it is licensed to manufacture and sell in India. That's mostly a concern of it's subsidiary - Arvind Fashions Limited which is listed separately. Arvind Fashions is recognized as a retailer, with an asset-light model. The retailer is asset-light in name mostly, because it outsources the manufacturing of textiles to Arvind Mills. So, the retailer behaves more like a store licensed to sell various brands, and should effectively receive a higher valuation than the textile mill company whose role is commoditised.

The only good reason to buy Arvind Mills in the past, was to realize profits from value unlocking that happened post demerger of the retailer business from the textile mill business. Now, that the demerger has happened, there is very little reason to hold on to the textile company, barring some special event that the market may be discounting. This also explains why the stock price has slumped, because it is quite possible for the stock to have been in a period of accumulation, only for the smarter shareholders to receive shares of Arvind Fashions, and once they receive those shares, they'll proceed to sell off the less lucrative textile stock.

So, the financial ratios are kind of misleading since they include the retail brand operations. The investor presentation is also misleading since the aim of the company is to increase the ROCE from the current dismal figure of 4.4% to an estimated 25% in FY2022. That is possible only in the retail side and not in the textile mill side.

 

[dewayne777]

@profmaliki Thanks for the explanation.

 

[keldastar]

@dewayne777 I was invested in Arvind simply because I wanted to own The Arvind Fashion shares which I believe are the major component of the stock price before demerger. Arvind Fashion though has been locked in circuits from day of listing hence I'm unable to buy more into that company. The day I'm able to I will sell Arvind and buy the fashion stock for equivalent amount of more.

 

[jewels261]

@dewayne777 You could compare their revenue and market share growth with those of its peers.

 

[eagle20]

@dewayne777 You could add why you are considering investing in Arvind at this juncture.