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Business News/ Market / Mark-to-market/  Arvind on a brand acquisition high
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Arvind on a brand acquisition high

The share price of Arvind has been flirting with all-time highs

The stock has rallied over 20% in the past two weeks on expectations of strong operating cash flows despite capex of around `500 crore, which includes acquisition of brands in the current fiscal year. Premium
The stock has rallied over 20% in the past two weeks on expectations of strong operating cash flows despite capex of around `500 crore, which includes acquisition of brands in the current fiscal year.

The share price of Arvind Ltd has been flirting with all-time highs thanks to the upbeat market sentiment and a slew of announcements on tie-ups with marquee brand names from North America such as US retailer Gap Inc, known for its jeans and t-shirts, and speciality retailer The Children’s Place.

The stock has rallied over 20% in the past two weeks on expectations of strong operating cash flows despite capex of around 500 crore, which includes acquisition of brands in the current fiscal year. The company is planning to invest around 200 crore in brands through internal accruals, mainly its cash-rich textile business.

Operating cash flows are expected to increase 50% in the current fiscal year from 495 crore in the previous year as its brands business in which it has been investing heavily will start paying off, said analysts. The brands and retail business contributes around 30% to the overall revenue.

Standard Chartered Equity Research in a note dated 26 August said Arvind’s brands business will deliver 24% revenue growth over 2014-17 with over 4 percentage points improvement in operating margins, helped by newer brands such as Calvin Klein, Gap and The Children’s Place scaling up in size and better margins from existing brands such as Flying Machine, US Polo and Tommy Hilfiger.

Arvind Lifestyle Brands Ltd reported a loss in the last fiscal year and is expected to turn free cash flow positive by 2016-17, said J. Suresh, chief executive of Arvind Lifestyle Brands. “We are targeting revenue of 1,000 crore for Gap and 500 crore for The Children’s Place in the next 4-5 years," said Suresh.

The stock is trading at 18 times one-year estimated price-to-earnings multiple after rising by almost four times in the past year.

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Published: 04 Sep 2014, 08:43 PM IST
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