Arvind Ltd Q2 FY24 Earnings Conference Call Insights

Key highlights from Arvind Ltd (ARVIND) Q2 FY24 Earnings Concall

• Financial Performance
  • Revenues up 4% sequentially to INR1,922 crores.
  • EBITDA at INR206 crores, 10.7% margin.
  • Volumes improved in exports and garments but still subdued.
  • Textiles segment revenue grew 3% to INR1,455 crores, 11% margin.
  • AMD revenue grew 13% with 20% plus volume growth.
• Outlook
  • Expects significant textile volume growth from Q4, driven by China+1, sustainability demands.
  • AMD to continue 20% plus growth trajectory.
  • Aiming for uptick in government vertical volumes in H2.
  • Continuing debt reduction, repaid INR49 crores in Q2.
  • Investing in innovation, technology, people to compensate for weak demand.
  • Input prices like cotton range-bound, not expected to see sharp changes.
  • On track with strategic initiatives.
  • Q3 will be better than Q2.
  • Traceability benefits expected from Q4
• Garment Business Margins
  • Currently in single digits, aiming for high single digits in a few quarters.
  • Scaling up capacity utilization to 100% will improve margins.
  • Automation investments underway to improve throughput.
  • Focused on denim, knits and wovens; anchor customers in each segment.
• Subsidiary Simplification
  • Reducing subsidiaries to the bare minimum.
  • Will keep progressing subsidiary reduction over next couple of years.
• Capacity Utilization
  • Denim at 80%, capacity around 60 million.
  • Woven at 80%, capacity around 130 million.
  • Garments around 75%, capacity 40-42 million.
  • AMD operating at high utilization with 20%+ growth.
• CapEx Spends
  • 600 crores total CapEx over 2 years as guided earlier.
  • About one third allocated to AMD business.
  • AMD having slightly higher patch margins than textiles.
  • More commitments in coming quarters.
• AMD Margins
  • Current 15% plus margins expected to be maintained in H2.
  • As business scales, aiming for small improvements over next few years.
  • Targeting 100 bps or more margin improvement in medium term.
• Domestic Demand
  • Muted overall, uptick due to festivals but not robust.
  • Pressure more in mass segments, premium holding up better.
  • Well positioned due to higher exposure to premium segments.
• Industrial Segment
  • Most segments doing well except conveyor belting.
  • Belting weak due to lower warehouse demand and high inventory.
  • Expects belting recovery in 1-2 quarters.
• Garments Capacity Expansion and Woven Margins
  • Plan to expand from 40 million units to 60 million units over 3 years.
  • Focus on denim, knits and woven shirts for vertical integration.
  • Woven aiming to improve vertical integration and return on capital.
• Business Segment Outlook
  • Expect continued growth in garments business with capacity expansion plans of 20 million in next 3 years.
  • Targeting 20% growth in advanced materials business through capacity expansion and new products.
  • Aiming to improve margins in textiles business by 100-150 bps over next 2 years through higher capacity utilization and operational efficiencies.
• Growth Strategy
  • Focus on driving organic growth in garments, advanced materials and textiles businesses.
  • Look for inorganic growth opportunities to accelerate expansion.
  • Targeting revenue growth of 7-8% in textiles and 20% in advanced materials going forward.