Mithun Roy & Priyanka Golikeri

Mumbai: Arvind Ltd, the Rs 2,600-crore textiles player, will sell some of its non-strategic assets over the next three years to pay off debt.

The company, which changed its name to Arvind Ltd from Arvind Mills on Monday, also plans hive off its brands and retailing businesses into separate companies.

Sanjay Lalbhai, chairman and managing director,Arvind Ltd, said, “We have a portfolio of Rs 700 crore of assets,which can be unlocked in the coming years either through outright sale or by entering into a joint venture for its development. However, we will not get into the real estate business.”

“We had appointed Ernst and Young for the valuation of land parcels and it will submit a feasibility report in next two months,” Jayesh Shah, chief financial officer, Arvind Ltd, added.

J Suresh, CEO, Arvind Brands, which manages various group brands, accepted that the company will be hived off as a separate unit. He added that the management is likely to look into the matter in the coming months.

DNA Money had reported Arvind’s plan to unlock value through land sale on May 11, 2007, and the company’s proposal to hive off its retail and brands business on February 7, 2008.

Arvind holds almost 750 acres of land at Santej (Ahmedabad), of which close to 300 acres is lying idle. Analyst Siddharth Bothra of Motilal Oswal Securities said in a recent note to clients that the value for this property could increase significantly as Ahmedabad expands, providing Arvind an opportunity to unlock value.

In Arvind’s FY06 annual report, the value of its freehold and leasehold land stood at Rs 460 crore. Hence, a significant portion of Arvind’s real estate holdings is already captured in the books, which is in sharp contrast to other textile companies such as Bombay Dyeing or Century Textiles,where the land value appears at historical cost in their annual reports.

Meanwhile, Arvind founders plan to infuse capital of Rs 188 crore through the exercise of warrants, by May 2009. This will raise the promoters’ stake in the company to 47% from 34% now.

Arvind has also decided to shut down its Katrej denim unit, which has effectively reduced the company’s denim capacity by 20 million metres to 70 millions metres. Arvind is now focusing on growing its downstream businesses such as garment manufacturing, branded apparel and retail. It is targeting revenue od Rs 4,000 crore in 2009-10, led by expansion in its retail unit Megamart.

The company is targeting an 8-fold rise in revenue from Megamart to Rs 1,000 crore in the next three years.

The company plans to expand its garment capacities from around 12.7 million pieces in FY07 to around 42 million pieces by FY10.

Source : DNA