The company is set to benefit from strong demand and low labour costs in Bangladesh.
Arvind Ltd, the world’s third-largest denim producer, plans to set up a manufacturing plant in Bangladesh in a joint venture with Nilol Group. Arvind, which already exports 36 million metres of denim to the neighbouring country, will invest around Rs 275 crore in the next three years to expand capacity by 30 million metres to 140 million metres a year.
The move seems to be in line with the company’s investment target of around Rs 300 crore in the textile business over the next three years to add 50-60 million metres to its capacity. Of the planned corpus, an investment of Rs 116 crore will see a capacity addition to the tune of 10 million metres in the first year.
Bangladesh seems to be a lucrative opportunity, as it offers robust demand growth, coupled with low labour costs. The current demand for denim from Bangladesh stands at 280 million meters a year and is growing 25 per cent annually, say analysts. Arvind expects revenues from the textile business to increase from Rs 2,200 crore in FY10 to Rs 4,000 crore in the next three years.
Besides textiles, Arvind is also betting big on the retail business. Along with the marketing brands like Arrow, Flying Machine, Newport and Excalibur (under the Megamart banner), the company plans additional outlets this year with an investment of Rs 100 crore. Almost 100 exclusive brand outlets have also been planned over the next two years, with the first one coming up in Hyderabad. Andhra Pradesh will have 20 such outlets by the end of the current financial year. With this, the company expects its revenues from the retail business to double to Rs 800 crore by FY12-FY13.
Successful completion of expansions and targets can propel the stock over a period of time, reckon analysts. It ended 4.13 per cent higher on Tuesday at Rs 44.10.