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Pressure builds on Arvind as inflation squeezes margins

May '08
Leading Textile manufacturer and retailer giant, Arvind, is facing the pressure of rising crude oil and cotton prices along with a drop in sales of its denim business. All this seems quite a lot for the company which has a number of captive energy units that run on oil.

Official sources from the company informed Fibre2fashion that in the fourth quarter that ended on March 13, 2008, a flat net profit of Rs50 million was registered. Besides, a net sales of Rs6.58 billion were recorded for the quarter as against Rs4.86 billion during the same period of 2007.

Arvind's net profit for fiscal 2008 dropped by a surprising 77 percent to Rs1.19 billion compared to Rs273.6 million of the previous financial year. However, net sales for the period rose by 23 percent to Rs22.71 billion against Rs18.48 billion of 2007.

Experts from the industry anticipate a continued pressure on the company's margins, as denim sales evidences feeble results. Arvind is actually betting on the sale of its non-strategic assets for repaying debts and raising funds for expansion.

The company has plans to raise Rs7 billion by either developing or selling about 5-6 million square feet of land in Mumbai. This sum will largely be utilized for paying back the debt of Rs14 billion.

However, Arvind is still optimistic and is targeting revenues of Rs40 billion in the next two years through its branded apparel and retail business.

A 40 percent growth is anticipated in branded apparel business alone, aiming a turnover of 7 billion by financial year 2010. Besides, the company's MegaMart, value retail format, is expected to be worth Rs20 billion by 2012.

Fibre2fashion News Desk - India

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