History

The 1930 was the year when world was facing a great depression. In India,
Mahatma Gandhi had a great success in creating a Swadeshi movement.
The people from every part of company were boycotting the fine and
superfine fabrics which was being imported from England. At that time,
Lalabhais saw an opportunity and three brothers Kasturbhai,
Narottambhai and Chimanbhai set up a mill to produce superfine fabrics.
The company was started with share capital of Rs. 2,525,000 ($55,000)
Reno vision
The reno vision simply meant to look issues with new ideas and also in
depth which later becomes the new corporate philosophy. In 1987, Arvind
ltd. has gone global and they started exporting its goods to the
global market. In 1991, Arvind ltd. Reached sales of 1600 million per
meters of Denim per year and they became the worlds 3rd largest
producer.
In 1997 Arvind ltd. set up a state-of-the-art shirting, bottom weights and
knits facility, the largest of its kind in India, at Santej. The brands of
company has lead to global footprints, Arvind has carved a niche with brand
names like Arrow, Flying Machine, USPA, New Port, Mega Mart and The Arvind
Store.
In mid-1990s, the company extended its denim production and took a huge
loans from domestic and foreign financial institutes. The denim market was
slowing down but still the company focused on production of denim only. The
company faced financial problems due to its debt burden, the company
incurred huge loses.
The company was reconstructed and came up with debt reconstructing
plan and took long term debts in February 2001. This financial
reconstructing activities involved several domestic and international lenders.
The restructuring was overseen by Mr. Jayesh Shah and advised on by a
JP Morgan Hong Kong team, led by Mr. Ahmad Ayaz.
In 2003, for the fourth quarter, Arvind Mills witnesses 280% growth in
the net profit.
In 2005, for the fourth quarter in a row, Arvind Mills posted a profit growth
in excess of 80 percent.

Today, Arvind has diversified into other major segments like Fabrics,
Garments, Advanced Materials, Chemicals & Dyes, Retail, Engineering, Real
Estate, Sustainable Agriculture and Telecom.

Brands
The following are the brands of the company:
Arvind Brands (owned)

Flying Machine
Newport
Ruf & Tuf
Excalibur

Arvind Brands (licensed)

Arrow
Lee
Wrangler
Gant U.S.A.
EdHardy
Izod
Cherokee
Mossimo
U.S. Polo Assn.
Billabong
Nautica

Competitors
As we all know, the market is very dynamic and have a lot of players who are
looking for opportunity. So, Arvind ltd also does face competition from other
companies. The following is the list of the competitors who are looking to
cover market to:

Nandan Denim. (NSE and BSE)

K.G. Denim. (NSE and BSE)
Aarvee Denim. (NSE and BSE)
R and B Denims. (NSE and BSE)

Vision And Mision

Vision
The corporate vision of Arvind ltd. States:
We will enable people to experience a better quality of life by providing
enriching and inspiring lifestyle solutions.
Mission
The company is a serving global and domestic customer both. To sustain in
Market Company is only focused on providing high quality products and it is
also the mission of company. The company is always tried to achieve a niche
in market.

Management Thoughts
The following are three points which describes the company managements
thought:

We belive
In people and their unlimited potential; in content and in focus on
problem solving; in teams for effective performance, in the power of
the intellect.
WE ENDEAVOUR
To select, train and coach people to obtain higher responsibilities; to
nurture talent, and to build leaders for the corporations of tomorrow; to
reward, celebrate and activate all intellectual business contributions.
WE DREAM
Of excellence in all endeavors; of mutual benefit and prosperity; of
making the world a better place to live in.

Sources of finance

The following table shows the sources of finance of company:

Sources Of Finance

Total Share Capital

Equity Share Capital
Reserves
Net worth
Secured Loans
Unsecured Loans
Total Debt
Minority Interest
Total Liabilities

------------------- in Rs. Cr.

Mar
Mar
Mar
'15
'14
'13
258.2
258.1
258.0
4
7
4
258.2
258.1
258.0
4
7
4
2196.
2050.
1718.
88
25
15
2455.
2308.
1976.
12
42
19
2719.
2651.
2196.
68
59
05
374.9
142.6
89.69
9
4
3094.
2794.
2285.
67
23
74
34.76
24.24
10.8
5584.
5126.
4272.
55
89
73

------------------Mar
Mar
'12
'11
258.0
254.4
4
258.0
254.4
4
1488.
1134.
93
58
1746.
1388.
97
98
1842.
1901.
88
16
109.1
62.81
1951.
98
9.13
3708.
08

1963.
97
16.05
3369

The most of the companys funds are coming from debts. The company
has collected a lot of funds from the secured loans. This type of
behavior for collecting funds reminds the approach of capital structuring
called net income approach.
The company is increasing debts as they think debts are very cheaper than
equity and also they do not have to share its ownership. The investors
perception is also same that that he doesnt have to pay taxes and less risk
will be taken by him.
The increase in companies total debts had led to decrease in total cost of
capital and the value of firm has also increased along with its share price.

The base rate of Arvind share is Rs. 10 but today it has increased to Rs.
270 and also has seen the heights of above Rs. 320.

Changes in sources of finance

The following chart shows the increase in the value of firm along with the
increase in the funds from debts and also there are very few changes in
funds from equity. This proves that increase in debts has led to increase in
the value of firm and its share price from last few years. The following is data
showing change in various sources of finance from last 5 years.

Sources of finance
6000

5000

4000

Funds (in Crores)

3000

2000

1000

2011

2012

2013

2014

2015

Equity capital structure

The companys equity has not changed a lot it has remained a bit constant
from the past 5 years period. The company has found debt funding more
relevant than funds from equity with the value of the firm.
The companies has a lot of authorized capital but have not issued it to the
public. They have kept around 55% of the total authorized capital with them
and only issued 45% to the public.

The face value of the companys equity is Rs. 10 but as per NSE the value of
companies share today is 270 approx.
The following is the table showing Equitys capital structure:
Equity Capital Structure
-------------In Crores----------From

To

2010

2011

2011

2012

2012

2013

2013

2014

2014

2015

Instrume
nt
Equity
Share
Equity
Share
Equity
Share
Equity
Share
Equity
Share

Authorized
Capital
360

Issued
Capital
254.4

565

254.63

565

258.04

565

258.18

565

258.24

Total
Shares
2543991
41
2546325
41
2580430
69
2581763
89
2582430
69

Face
Value
10

In
Crores
Capital
254.4

10

254.63

10

258.04

10

258.18

10

258.24

The company has paid dividend four times in the last 5 years. The following
chart shows the increase in dividend of last 5 years:

Dividend Distribution (in percentage)

30
25
20
15
10
5
0

Series 1
Linear (Series 1)

Application of Funds
The company is using its funds on following various thing as shown in the
chart:
Application Of
Funds

2011

2012

2013

2014

2015

Net Block
Capital Work in
Progress
Investments
Inventories
Sundry Debtors
Cash and Bank
Balance
Total Current Assets
Loans and Advances
Total CA, Loans &
Advances
Current Liabilities
Provisions
Total CL & Provisions
Net Current Assets
Total Assets

2204.
72
89.8

2308.
33
191.8
1
41.7

2416.
68
207.6
4
67.8

1236.
34
501.7
5
58.52

1126.
12
642.2

1796.
61
545.9
8
2342.
59
1308.
38
20.7

1839.
17
743.5
2
2582.
69
1265.
36
151.0
9
1416.
45
1166.
24
3708.
08

1412.
89
754.6
5
185.5
8
2353.
12
910.3
6
3263.
48
1580.
59
102.2
8
1682.
87
1580.
61
4272.
73

60.97

1329.
08
1013.
51
3369

70.85

2618.
12
134.6
7
129.3
3
1628.
14
1009.
31
166.3
3
2803.
78
1402.
77
4206.
55
1853.
95
107.8
3
1961.
78
2244.
77
5126.
89

2939.
47
100.0
1
58.55
1845.
03
1165.
81
83.32
3094.
16
1514.
7
4608.
86
1993.
36
128.9
8
2122.
34
2486.
52
5584.
55

The following chart shows the use of funds in various activities in 2015:

Net Block

Cash and Bank Balance

1%
Capital Work in Progress
Investments
20%
30%

15%
Loans and Advances
1%
12%

1%
Current Liabilities
1%

Inventories

Sundry Debtors

Provisions

19%

As we can see clearly that the most of the funds are invested in the fixed
asset (net block) that is 30% of the total funds. 19% of funds are invested in
inventories and 15% are present in form the cash and bank balance.

Important Ratios
The ratios can also be used as an effective tool of analysis. So, the following
are some of the important ratios listed which can give the overview of the
whole capital structure of the company.
Important Ratios
Investment Valuation Ratios
2015 2014
Bonus in Equity Capital
1.52
1.52
Net Operating Profit Per Share (Rs)
304.
265.
03
79
Return On Capital Employed (%)
16.1
15.2
5
Return On Net Worth (%)
13.8
15.3
9
3
Return on Assets Excluding Revaluations 95.0
89.4
7
1
Return on Assets Including Revaluations 105.
100.
48
05
Return on Long Term Funds (%)
23.2
21.2
1
9
Liquidity And Solvency Ratios
Current Ratio
0.89
0.89
Quick Ratio
1.3
1.31

2013
1.52
205.
1
13.2
2
12.5
7
76.5
8
87.3
5
18.9

2012
1.52
193.
42
15.1
2
24.9
5
68.6
1
79.7
9
22.1
6

2011
1.54
160.
56
12.2
8
11.8
6
54.6

0.79
1.1

0.71
1.03

0.69
0.83

66.6
2
18.0
3

Long Term Debt Equity Ratio

Debt Equity Ratio
Total Debt to Owners Fund

0.57
1.26
1.26

0.58
1.21
1.21

0.51
1.16
1.16

0.44
1.12
1.12

0.64
1.41
1.41

Financial Charges Coverage Ratio

2.8
2.83
Management Efficiency Ratios
Debtors Turnover Ratio
7.22
7.78
Cash Flow Indicator Ratios
Dividend Payout Ratio Net Profit
23.1
20.0
6
5
Dividend Payout Ratio Cash Profit
14.2
12.2
7
5
Earning Retention Ratio
79.2
80.7
7
7
Cash Earning Retention Ratio
86.6
88.0
9
6
Adjusted Cash Flow Times
5.21
4.7

2.44

2.33

2.48

7.58

8.61

8.81

20.0
5
11

6.88

0.03

5.02

0.01

79.9
2
88.9
9
5.05

84.2
9
91.4
9
5.54

99.9
7
99.9
9
5.81

The current ration can be seen as the problem of the company as it is very
low the current assets are very much less than current liabilities it is
improving but still its only 0.89:1 which is very lower than the ideal point of
1.5:1. All other ratios are good and company is growing well.

Calculations of profits
The following table shows the various calculation for the net profits :
Operating
Profit
PBDIT
Depreciatio
n
PBIT
Interest
PBT

2011
386.1
2
584.3
5
172.4
9
411.8
6
236

2012
501.2
4
965.7
8
161.3
9
804.3
9
309.1

175.8
6

495.2
9

2013
586.6
9
767.9
7
204.3
563.6
7
315.3
4
248.3
3

2014
794.5
987
225.2
1
761.7
9
354.4
7
407.3
2

2015
827.1
9
1062.
6
212.3
5
850.2
5
394.6
455.6
5

Tax

10.51

59.41

0.26

54.77

PADIT

165.3
5

435.8
8

248.0
7

352.5
5

118.0
3
337.6
2

The following table shows the relation profits and shares:

Shares in issue
(lakhs)
Earnings Per
Share (Rs)
Book Value (Rs)

2544
6.5

2546.
33
17.12

2580.
43
9.61

2581.
76
13.66

2582.
43
13.07

54.6

68.61

76.58

89.41

95.07

The following chart shows the changes in earning per share in the last 5
years:

Earnings Per Share

18
16
14
12

Earnings Per Share

10

Linear (Earnings Per Share)

8
6
4
2
0
2011

2012

2013

2014

2015