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Textile company Arvind Ltd recently merged its retail arm with its subsidiary holding brands. The company also has aggressive plans for its multi-brand store chain, The Arvind Store. Kulin Lalbhai, executive director of the company and son of chairman and managing director Sanjay Lalbhai, speaks to Raghavendra Kamath and Sharleen D’Souza about Arvind’s plans in brands and strategy:
What is the idea behind the merger of Arvind Retail with Arvind Lifestyle Brands?
The two entities were two separate investment vehicles, and we have merged the two for operational efficiencies. We don't have any divestment plans in the short term.
The company has said it wants to achieve Rs 5000 crore in brands in the next five years. Don’t you think it’s very aggressive?
Not at all. If you look at the portfolio and markets we are in, the growth strategy is well thought out. Brands such as Arrow, US Polo and Tommy Hilfiger are already Rs 400-crore brands, which are growing at 25 to 30 per cent. We are growing quickly and we have lot of platforms to grow.
You have got into different categories such as menswear, kidswear and speciality retail, and launched half-a-dozen brands in the last one year. Don’t you think you are spreading too thin?
In the short term, as you rightly said, it’s important to focus and we are not saying anything different. In our portfolio, we have had brand additions, but we are focusing on how do we push towards larger and established brands. So the strategy is clear as to how do we build power brands. These are brands which are more than Rs 300 crore revenue. The bottom line and top line will be very healthy. You will see in the next year or two years, a lot of powerful brands coming from our stable. So while you are seeing brand additions and the market often gets anxious when it sees brands activity, we are are also working on a strategy to build our existing brands strongly. On the long term, we want to be the leader in apparel brands. There is focus. We do not want to do everything. There are so many proposals we have rejected.
The return on capital employed (ROCE) in the brands and retail segment is between 10.4 per cent and 11.4 per cent, which is less than your cost of capital. Your comments...
The beauty of brands and retail business is that shifts in ROCE happen quickly as portfolio moves towards large brands. You can expect very healthy uptick in ROCE in the next three years because our strategy is like that. In the last three years, with the changes in excise and difficulty in consumption in India, the ROCE went down. We have actually beaten the markets. As brands grow, operational efficiencies will cick in.
Your rival Madura has half a dozen key brands and focusing on building them. What’s your take on that?
Again, everyone has a different strategy. How we look at short term versus long term is different from how they look at it. They have certain view of the world in the future and we have a different view. We are very confident that our strategy will help us attain leadership position overall, in the next four to five years.
