- Arvind Fashions Limited (AFL), which continues to reduce debt, made the move as it focuses on six important lifestyle and beauty brands.
Arvind Lifestyle Brands Limited, an apparel retailer, announced Thursday that it had signed a definitive agreement with retailer V-Mart Retail Ltd. to sell its Value-fashion Retail Chain Unlimited for Rs150 crore in an all-cash deal.
Arvind Fashions Limited (AFL), which continues to reduce debt, made the move as it focuses on six important lifestyle and beauty brands. ALBL is an AFL wholly-owned subsidiary. It will also use funds from the sale to fund working capital.
Unlimited has 74 retail outlets that sell fashion accessories and apparel for women, men and children in South and West India.
ALBL will also sell the assets of its 74 retail stores, warehouses and inventory to V-Mart for their book value. ALBL will receive cash consideration of approximately Rs150 crores upon closing the transaction. This will allow the company to fully recover its capital. Arvind Fashions stated in a statement that contingent payments will be made based on milestones V-Mart achieves over the next few years for these stores.
Arvind Fashion is currently in consolidation mode. It has been closing down unprofitable stores, exiting brands and offloading them. The company presented its latest investor presentation. It stated that it has completed the sale of brands including Hanes, Newport, Ruf & Tuf, and The Children’s Place. In FY20, it had already sold Gant, Izod, and Nautica.
The ongoing fiscal has delayed its exit from GAP franchise.
It stated in its Q4 presentation to investors that the company achieved a cost reduction of 40%, or approximately Rs540 crore, across rental, warehouse, and manpower optimization.
Retailers of formal and occasion wear have had a difficult last fiscal. Flipkart Group purchased a minority stake of Arvind Fashions Ltd’s Arvind Youth Brands subsidiary in July 2020 for Rs260 crore. The company, which also owns the denim brand Flying Machine in India, plans to expand its brand online as well as in India’s smaller markets.
AFL will focus on six brands: US Polo Assn. Tommy Hilfiger Arrow Flying Machine Calvin Klein, Arrow Flying Machine, Arrow, Flying Machine and Sephora
Shailesh Chaturvedi (Chairman, Arvind Fashions) stated that the sale will allow the company to invest capital in growing these six brands.
“We had built a scalable structure with significant product capabilities in value-retail, which has great potential. He stated that the decision to exit was made in accordance with our strategy to focus on 6 high-conviction brands.
V-Mart, which sells quality clothing, accessories, footwear and other products in large format stores but focuses on smaller cities and towns across India–the acquisition will allow it to expand its footprint in South India. V-Mart is well-known for its presence in the northern and eastern regions.
Lalit Agarwal (Managing Director, V-Mart Retail Limited) stated that the business “fits well with the retailer’s strategy to expand its regional presence and add capabilities in select categories.”
Agarwal stated that V-Mart’s experience in building a profitable and scalable fashion retailing business model and Unlimited’s strong presence in South India, with a fashion mindset, provide a long runway to sustain stakeholder value creation.
Unlimited reported a turnover in FY 2020-21 of Rs289 crore. According to an exchange filing, this accounted for 25% in ALBL’s revenues. Unlimited, an earlier Megamart was established in the 1990s.