ARVIND MILLS
LIMITED
Arvind Mills is India's largest and the world's third
largest denim manufacturer.
Background
Arvind Mills Ltd. (AML), the flagship company
of the US$ 500 million Lalbhai Group, was
incorporated in 1931. It aimed at manufacturing
high-end superfine fabrics with imported state-of-
the-art machinery.With 52,560 ring spindles, 2552
doubling spindles and 1122 looms, it was one of
the few companies in the early period of India’s
industrialisation to have spinning and weaving
facilities along with full-fledged facilities for dyeing,
bleaching, finishing and mercerising.
In the mid 1980s the Indian textile industry was
faced with a crisis on account of the power loom
sector churning out vast quantities of inexpensive
fabric which led to many large composite mills
losing their markets.While the company was
operating at its highest level of profitability during
this period, it took a proactive measure to increase
its focus on the international markets to counter
the threat from the power loom sector. In 1988,
the company entered the export market for two
segments, denim for leisure & fashion wear and
high quality fabric for cotton shirting and trousers.
By 1991, the company had become the third largest
producer of denim in the world.
Company Products Established
Arvind Mills Fabrics and 1931
Ltd. Garments
The company has carved out an aggressive strategy
to further expand its current operations by setting
up world-class garment manufacturing facilities and
offering a one-stop shop, offering complete
garment packages to its international and domestic
customers. Apart from this, the company with a
host of international and domestic brands like Lee,
Wrangler, Arrow, Flying Machine, Newport, Ruf &
Tuf etc in its portfolio is focusing on becoming the
largest branded apparel company in India.
The Indian promoters hold 37.0 per cent of the
total equity in the company. Foreign institutional
investors, non-resident Indians and overseas
corporate bodies hold 24.4 per cent stake in the
company while the Indian public holds 20.03 per
cent stake. Mutual funds, banks, financial institutions,
insurance companies and private corporate bodies
hold the remaining stake in the company.
Founder Distribution Production plants
Lalbhai Brothers Europe, US, India
West Asia,
19
 Products and brands
Arvind Mills has been one of the leading textile
producers in India.The company is present in both
the fabrics and garments segments of the textiles
industry value chain. In fabrics, the items of
manufacture include denim, shirting, khakis,
knitwear and voiles. Denim contributes more than
60 per cent to the company’s turnover. In the
garments segment, it is present in both the
domestic and international markets for formal and
casual clothing.
The company is one of the leading players in the
domestic ready-to-wear garments segment. It has
successfully launched and established multiple
brands - own as well as international ones (under
license from the respective companies). Its own
brands are managed by its subsidiary Arvind Brands
Limited and are marketed in India and some
neighbouring countries. Own brands include Flying
Machine, Newport and Ruf & Tuf in jeans and
Excalibur in shirts. Licensed brands include Arrow
(formals and casuals), Lee (jeans),Wrangler (jeans)
and Tommy Hilfiger (fashion).
Financial Analysis
Arvind Mills has witnessed a growth in gross sales
during the period 1999 to 2005 at CAGR of 10.6 per
cent, with gross sales reaching US$ 389 million in
2005. Exports have grown at a CAGR of 8.6 per cent
to reach US$ 177 million in 2005. Profit after tax has
grown at a much higher CAGR of 43 per cent in the
same time period owing to improved market
conditions, better price realisations and lower
financial expenses especially in the last three years.
The company’s top line and bottom line have been
highly volatile in the past, particularly between 1999
and 2002, when it faced rising interest costs because
of high level of borrowings, volatility in cotton and
other raw material prices as well as depressed denim
20
prices in the international markets.The company
managed to turnaround from 2002 onwards by
undergoing financial restructuring which helped in
substantial reduction of interest cost. Apart from
this, the company also followed a disciplined strategy
of improved product and customer mix, increased
capacity utilisation and control on sourcing of cotton
and other raw materials to reduce procurement
costs.These changes have been largely responsible
for the upswing in the company’s profitability in the
last 3 years.
The company achieved a higher capital efficiency,
which is evident from its return on capital employed
(ROCE) of 9.1 per cent in 2005, which was better
than the textiles industry’s ROCE of 7.3 per cent.
Arvind Mills’ contribution in making
‘Made in India’ global
Arvind Mills has over the years become a force to
reckon with in the entire textile value chain.The
yarn manufactured by one of its subsidiaries, Arvind
Cotspin, is ranked amongst the best in the world.
The company has a strong foothold in the
international markets for denim fabric. Many
varieties of the shirting fabric manufactured by the
company sell at a premium in international
markets. Its khakis are also becoming popular in
the export markets. Its Knits division serves some
of the best brands in the world and the company is
in the process of ramping up the capacities to cater
to the increasing demand.
Arvind Mills' major change in market focus came
about in 1987 when the company established its
Denim division to market denim fabric in
international markets. Since than, it has become
world’s third largest manufacturer of denim with a
capacity of 110 million metres per year. Its
vertically integrated denim plant ranks amongst
the most modern in the world. In 2005, the
company sold denim worth about US$ 234 million,
majority of which was sold in more than 70
countries in Europe, US,West Asia, the Far East
and Asia Pacific.
The company has a major presence in the
international premium shirting market and has a
modern shirting plant to manufacture high value
cotton shirting.The plant has a capacity of 33.5
million yards per year and the company is one of
the largest exporters of premium shirting fabric
from India.The plant has an integrated
manufacturing facility from yarn to finished fabrics
under one roof to produce world-class quality.The
shirting division has an in-house design studio with
a team of qualified professional designers, including
designers based in Italy and UK.
The company has a state-of-the-art garment
manufacturing plant at Bangalore (Karnataka) to
manufacture shirts and tops primarily for the
international markets.The plant has an annual
capacity of 4.5 million pieces.This factory has been
put up in technical collaboration with an Italian
apparel consultancy firm, CF ITALIA, which
specialises in apparel manufacturing and technical
consultancy. Most of the output from this factory
is being exported to USA and European markets.
Apart from the above, the company has a major
presence in the international knitwear and khakis
markets also. The knitwear division is a part of the
‘multi-product textile facility’ set up at Gandhinagar
(Gujarat) with an investment of US$ 50 million in
technical collaboration with Alamac Knits Inc. of
USA.The company offers one of the world’s most
comprehensive range of knitwear products for
renowned garment brands and retailers of the
world.The khakis division of the company is the
only one in South East Asia to launch two
collections annually.The in-house product
development team co-ordinates with European
designers to prepare the new collections on
regular basis.
Factors fuelling Arvind Mills’
global initiatives
Till mid 1980s, Arvind Mills’ focus was more on
marketing its products in the domestic market. Its
major change in strategy came about in 1987 when
the company established its Denim manufacturing
division with the primary aim of marketing denim
in international markets. In the last two decades,
the company has become the world’s third largest
manufacturer of denim with a capacity of 110
million metres per year.
In order to strengthen its international presence, the
company has focused on producing the highest
quality of products, both fabrics and garments, while
incorporating the latest designs at the same time.The
company has its own dedicated teams of designers in
its various offices who work in close co-operation
with international designers based in Italy, UK etc.
21

Apart from the above, the company has adhered to
its aggressive strategy to expand its operations by
setting up world class manufacturing facilities, which
offer complete packages to its international and
domestic customers. Its woven garments unit for
example has been set up in technical collaboration
with the Italian apparel consultancy firm, CF
ITALIA, while its Knitwear garments unit has been
set up in technical collaboration with Alamac Knits
Inc. of USA.
In order to capture the maximum market share
globally and to create new markets, the company
has continuously expanded its product portfolio
and manufactures denim fabric and jeans, cotton
shirting, khakis, shirts/tops, knitted garments etc to
market them in international markets. Under this
scenario, the company’s exports, which already
account for more than 45 per cent of its gross
sales, are set to increase further in the future.
Future plans
The ATC ceased to exist from 1st January 2005
and with that the quota system between member
states of the WTO also came to an end.This has
opened up all the big garment markets in the world
including the European Union and USA, which are
the major importers of all types of garments. India
is expected to be one of the biggest beneficiaries
of this development as additional garment
production moves to countries like India. Arvind
22
Mills is already in the process of increasing its
capacities for various products and also tying up for
outsourcing opportunities to take advantage of the
changing market dynamics.
The company is focusing on optimising the product
mix for all its divisions to further improve the
performance of each division, which is being done
by emphasising on the high value added products.
As denim already accounts for about 60 per cent
of the company’s gross sales, it is trying to spread
the product risks by reducing dependence on only
one product. As part of this, shirting, knits and
khakis are being focused on to achieve a more
balanced product mix.The company also plans to
have increased focus on high value added garments
in both existing and new geographies.
Branded apparel consuming class in India is
expanding at a CAGR of 11 per cent and this is
turning out to be a major force impacting the
domestic apparel sector. Arvind Mills has been
making efforts to capitalise on this opportunity for
sometime now by using one of its subsidiary
companies 'Arvind Brands Limited' as a platform.
The company plans to renew its focus on the
domestic branding and retailing of its own apparel
brands as well as developing closer relationships
with the global retailers by increasing value added
products in its portfolio.
Globalisation at a glance
• World class manufacturing facilities catering
to the best brands in the world
• World’s third largest denim manufacturer
• Presence in more than 70 countries
• Independent design teams working with
international designers for latest designs
• Technical collaborations for high quality products
www.arvindmills.com