Home >Companies >Strike at Naroda plant may hit Arvind profits

Mumbai: Arvind Ltd, maker of denim cloth for brands such as Lee, Wrangler, Arrow and Tommy Hilfiger, may see annual net profit fall by close to 8% and revenue decline by 1% if a strike at its Naroda plant in Gujarat continues for 10 more days, Nirmal Bang Institutional Equities said in a report released on Tuesday.

Sanjay Lalbhai, chairman, Arvind Group

The workers at the plant are demanding for a 40% increase in wages.

The factory produces 84 million metres of the 108 million metres of denim the company makes, and contributed 37% to Arvind’s consolidated revenue in 2011-12, analysts Jignesh Kamani and Saiprasad Prabhu said in the report.

They expect Arvind’s profits to be under pressure in the first quarter of 2012-13 and also see a strong impact on revenue and profitability for the full year.

Arvind ended 2011-12 with net profit of 434.23 crore on revenue of 3,494.12 crore.

“We can’t say what the impact will be on revenue and how long the strike will last. We are looking at ways to resume production with temporary workers and had 300 temporary workers report today," Sanjay Lalbhai, chairman and managing director, Arvind Ltd, said on Tuesday.

According to the Nirmal Bang report, the company’s management has not started negotiating with the workers.

Yashpal Jaiswal, an employee at the Naroda plant, and associated with Majur Mahajan Sangh, a trade union, said 15,000 workers at various textile mills will support the strike. Mint couldn’t independently confirm this.

“The company is ready to consider the demands of the workers even though the matter is sub-judice, but not at gunpoint," said Lalbhai.

The sole objective of the strike, according to Jaiswal, is revision in wages.

The wage differential between Arvind and other textile mills is not more than 20% currently, said the Nirmal Bang report.

Workers at Arvind’s Naroda plant earn an average salary of 5,000-7,000 per month. “We believe if the wage hike takes place, it would not have a significant impact on the company’s profits, but if the strike continues for a longer period, the loss of production may have adverse impact on profits," said the report.

Shares of Arvind Ltd ended at 76.25 on BSE, up 1.26%, while the 30-share benchmark Sensex index rose 1.17% to 16,862.80 points.

Subscribe to Mint Newsletters
* Enter a valid email
* Thank you for subscribing to our newsletter.

Never miss a story! Stay connected and informed with Mint. Download our App Now!!

Edit Profile
My ReadsRedeem a Gift CardLogout