Aditya Birla Fashions Vs Arvind Fashions: The apparel industry has been rapidly growing over the last few years. This is mainly due to the drastic shift in consumer choice and preferences.
The beneficiaries of these changes have been the companies that are a part of this industry. In this article, we will take a look at two of the biggest apparel companies in India. Keep reading to find out!
Table of Contents
Industry Overview
Globally, the fashion retail industry was among the most severely impacted sectors by the pandemic and the subsequent lockdowns. However, the pandemic has accelerated many trends in this space.
The apparel retail industry’s shift from unorganized to organized has become quicker, as aspirations for better fashion and brands are being coupled with wider and deeper supplies.
Some of the recent trends in the industry have been the digitalization across the value chain, new trends in the market especially the Activewear & athleisure segment, and the rising youth fashion have boosted the industry further.
The Indian textiles and apparel industry is the 6th most prominent globally, with an estimated size of USD 70 Billion, and contributing nearly 4% to the global pie. India is also the 5th largest exporter of textile and apparel in the world with exports worth USD 36.4 billion.
About companies
Aditya Birla Fashion and Retail Ltd. (ABFRL)
It is one of India’s leading branded fashion players, with a portfolio of some of the most aspirational brands of the country. ABFRL was previously known as Pantaloons Fashion & Retail Limited prior to its acquisition by the Aditya Birla Group.
The company holds the title of being the country’s first billion-dollar pure-play fashion powerhouse. It has a retail space of 8.4 million square feet with more than 3212 stores which are spread across 850+ cities in India.
Arvind Fashions Ltd. (AFL)
Arvind Limited (formerly Arvind Mills) is a textile manufacturer and the flagship company of the Lalbhai Group. The company’s first business was the manufacturing of sarees.
The company is one of India’s largest denim manufacturers. AFL has a retail space of 194400 square feet with more than 1249 stores across the country.
Famous Brands under Arvind Fashions vs Aditya Birla Fashions
Financials
Aditya Birla Fashions Vs Arvind Fashions- Revenue
In comparison, Aditya Birla Fashions has earned a higher revenue than Arvind fashions over the last five years. It can be seen that ABFRL saw a 51% increase in its revenue in FY22 whereas Arvind Fashions Ltd. saw a spike of only 38.84% in the same period.
| Revenue (Rs in Crores) | ||||||
|---|---|---|---|---|---|---|
| 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | |
| Aditya Birla Fashion and Retail Ltd. | 6,603 | 7,172 | 8,118 | 8,743 | 5,181 | 7,824 |
| (Revenue growth in %) | 9% | 13% | 8% | -41% | 51% | |
| Arvind Fashions Ltd. | 1,292 | 4,219 | 4,644 | 3,614 | 2,201 | 3,056 |
| (Revenue growth in %) | 226.49% | 10.07% | -22.19% | -39.09% | 38.84% |
Aditya Birla Fashions Vs Arvind Fashions- Profitability
The gross profit margin shows how well the company has been able to maintain the cost of producing its products. Over the years, the margin of ABFRL has increased. On the other hand, AFL has had a more fluctuating margin in the last 5 years.
The operating profit margins measure how much profit is the company able to earn through its core business operations after accounting for its variable cost. ABFRL saw a negative ratio in FY21 post which their margin has increased. AFL has seen a consistently declining ratio in the last five years.
The net profit margin is an important metric that measures how much net income is generated as a percentage of revenues received by the company. Both the companies saw a negative ratio due to the decline in sales. In FY22, AFL had a positive ratio of 1.44%.
| Profit Margin ratios | |||||
|---|---|---|---|---|---|
| 2018 | 2019 | 2020 | 2021 | 2022 | |
| Gross Profit Margin (%) | |||||
| Aditya Birla Fashion and Retail Ltd | 6.98 | 7.62 | 14.76 | 12.87 | 14.99 |
| Arvind Fashions Ltd | 9.51 | 9.45 | 7.29 | 11.73 | 7.64 |
| Operating Margin (%) | |||||
| Aditya Birla Fashion and Retail Ltd | 3.07 | 4.14 | 4.73 | -5.36 | 2.89 |
| Arvind Fashions Ltd | 8.37 | 7.94 | 5.76 | 5.85 | 4.13 |
| Net Profit Margin (%) | |||||
| Aditya Birla Fashion and Retail Ltd | 1.64 | 3.95 | -1.66 | -12.53 | -1.03 |
| Arvind Fashions Ltd | 5.33 | 6.09 | -0.57 | -19.91 | 1.44 |
Aditya Birla Fashions Vs Arvind Fashions- How much are the investors earning?
ROE is a gauge of a corporation’s profitability and how efficiently it generates those profits. The ratios of both the companies are negative as they have been incurring losses for the last three years as their operations were disrupted by could.
The ROCE is a metric that takes into account the debt of the company and estimates how efficiently the company is able to generate profits from its capital employed. ABFRL has a higher ratio than AFL.
A negative EPS means that the company has negative accounting profits. Both the companies have negative numbers as they did not earn any profits.
| Return ratios | |||||
|---|---|---|---|---|---|
| 2018 | 2019 | 2020 | 2021 | 2022 | |
| Return On Equity (ROE) | |||||
| Aditya Birla Fashion and Retail Ltd. | 10.79 | 22.48 | -13.37 | -24.19 | -2.8 |
| Arvind Fashions Ltd. | 1.36 | 1.48 | -66.97 | -111.07 | -35.64 |
| Return On Capital Employed (ROCE) | |||||
| Aditya Birla Fashion and Retail Ltd. | 8.6 | 13.78 | 10.31 | -4.92 | 3.77 |
| Arvind Fashions Ltd. | 7.89 | 9.96 | -8.23 | -11.12 | 0.92 |
| Earnings Per Share (EPS) | |||||
| Aditya Birla Fashion and Retail Ltd. | 1.52 | 4.15 | -1.88 | -7.95 | -0.87 |
| Arvind Fashions Ltd. | 2.55 | 2.87 | -68.37 | -62.91 | -0.61 |
Aditya Birla Fashions Vs Arvind Fashions- Valuation
The sectoral PE for both companies is 94.63. However, both the companies have a negative PE ratio as their earnings are also negative.
The PB Ratio indicated the amount the investors are willing to pay for a share of the company’s assets. The lower the ratio the better it is considered. In FY22, the AFL has a lower ratio than ABFRL.
The EV/EBITDA ratio is used as a valuation tool to compare the value of a company, debt included, to the company’s cash earnings less non-cash expenses. ABFRL has a better ratio than AFL as of FY22.
| Valuation Parameter | |||||
|---|---|---|---|---|---|
| 2018 | 2019 | 2020 | 2021 | 2022 | |
| Price to Earnings Ratio (PE) | |||||
| Aditya Birla Fashion and Retail Ltd. | 99.24 | 53.1 | -81.33 | -25.31 | -347.24 |
| Arvind Fashions Ltd. | 0 | 86.37 | -170.35 | -20.28 | 465.33 |
| Price to Book Value (P/B) | |||||
| Aditya Birla Fashion and Retail Ltd. | 10.65 | 11.96 | 10.92 | 6.86 | 9.83 |
| Arvind Fashions Ltd. | 0 | 4.53 | 0.63 | 8.2 | 1.63 |
| EV/EBITDA | |||||
| Aditya Birla Fashion and Retail Ltd. | 26.55 | 29.46 | 10.81 | 28.57 | 25.08 |
| Arvind Fashions Ltd. | 0 | 64.29 | 17.72 | 45.5 | 97.88 |
shareholding pattern of Aditya Birla Fashions Vs Arvind Fashions
Future Prospects Arvind Fashions vs Aditya Birla Fashions
Aditya Birla Fashions: To combat the pandemic, the company had digitized its internal processes across design, merchandising, and marketing. This was due to the company’s initiative to offer its products 12 times a year instead of the industry norm of 2 times.
The company has undergone major capital structure changes to be better prepared for any upcoming disruption. Moving forward the company aims to be more vigilant about the change in consumer taste and preference to be able to serve them better.
Arvind Fashions: The fashion industry has undergone a major change in the last few years. To be ahead of the competition the company has been preparing itself by making its digital ecosystem more efficient and user-friendly.
Apart from this, it has also been focusing on improving its omnichannel capabilities. Moving forward they will have to focus more on their high-conviction brands to improve their profitability.
In closing
In this article, we looked at two of the biggest retail apparel companies in India. Both the companies own some of the biggest and most well-known brands in India. Despite being affected by covid, both the companies have been resilient
Going forward, the leadership will be decided by the strategies adopted by each of them. That’s all for this post on Aditya Birla Fashions Vs Arvind Fashions. Happy investing!.
You can now get the latest updates in the stock market on Trade Brains News and you can even use our Trade Brains Portal for fundamental analysis of your favourite stocks.
Start Your Stock Market Journey Today!
Want to learn Stock Market trading and Investing? Make sure to check out exclusive Stock Market courses by FinGrad, the learning initiative by Trade Brains. You can enroll in FREE courses and webinars available on FinGrad today and get ahead in your trading career. Join now!!
well analyzed .