Flipcart hold 26% in flying machine which is 100% subsidiary of Arvind fashion, non controlling interest is coming from there, though this is also an item of concern, need more clarity.
Can you please explain this in detail? If Fipkart holds 26% then Arvind Fashion can hold only 74%. Is that correct understanding.
Yes, in flying machines sales and profits, Flipkart gets 26%, remaining is under arvind fashion.
I believe Flying Machine is AFL’s own brand, then why is their 10-12% royalty?
Could it be that they’d sharing between themselves and Flipkart?
In FY23 - out of the consolidated net profit of Rs 87 Cr, 100 Cr came from 50% subsidiary PVH Arvind Fashion Private Limited. So ex of this subsidiary, company made loss of -13 Cr. Could anyone share some details on this subsidiary - what are the brands under this? How many outlets?
PVH hold Tommy and C&K.
Personal opinion:Sephora did had edge over reliance tira but management was more focused into clothing part
Business with huge potential and having revenue of 337 crore sold at 100 crore only!! cant digest
Hello everyone,
Thanks for sharing your thoughts in this thread. It helped me a lot in understanding the business.
In the Q2FY24 PPT, they’ve mentioned about “minority interest” and the profit that’s transferred to them is significant amounting to almost 40% of overall profit.
There was a question regarding this in Q2FY24 concall and mgmt mentioned it is linked to Tommy and CK.
I understand Flipkart holds a minority share in Flying machine brand.
To summarize,
Flying machine - Flipkart owns minority interest.
Tommy and CK - 50:50 JV with PVH
USPA and Arrow - Appears to me that whole profit stays with the company.
This implies company may own only ~4 complete brands effectively.
In Q2FY24, overall profit = 37 crores, minority interest share = 15 crore. From the above concall snippet, it can be safely concluded that minroity interest is PVH brands who owns 50% in Tommy and CK and 50% profit made from these brans transferred to PVH. So, this in effect makes Tommy and CK brands together made a profit of 30 crores.
Mgmt made it clear in the concall that Flying machine and Arrow are profitable with a low single digit EBITDA. Even if we assume nil profit from these 2 brands then we’re left with 7 crore and USPA.
Mgmt says USPA is their biggest brand with highest revenue and highest EBITDA in their portfolio but it appears it made only 7 crore profit. I have a very strong feeling this cannot be true for USPA brand.
Either my calculations are wrong or mgmt is not being clear with their profit sharing agreement with PVH. If anybody has made sense of this @Souresh_Pal @Simrat @akshat_investor , could you please shed some light?
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From Subsidiary Annual reports we can see the below :
PVH (Tommy & CK) - 1040 cr Revenue, 100 cr Profit. (50% Share of this goes to PVH)
Arvind Youth Brands (Flying Machine) - 474 cr Revenue, -5 Cr Profit
Arvind Beauty Brands (Sephora) - 338 cr Revenue, -20 cr Profit (Sold to Ril)
Rest - ~3000 cr Revenue, 13 cr Profit
With Sephora exit, the remaining business FY22-23 Profit can be taken as 57 (37+20). Plus the sale proceeds can be used to reduce debt further, resulting in annual interest payment reduction by ~8 cr (100 * 8% interest),leading to like for like profit of 62.5 cr post tax (57 +5.5).
Do let me know if some false assumptions made.
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@Shashank_Sinha1 Your calculation is spot on. I understand you’re referring to this from the FY23 annual report.
Arvind Lifestyle Brands Limited reported a revenue of INR 2240 crore, accompanied by a relatively modest profit of INR 3.60 crore. Notably, this includes the prominent USPA brand (recognized as the company’s best-selling brand with the highest EBITDA) and Arrow. The constrained profitability may stem from either Arrow facing losses in the previous year or the possibility that the entirety of the company’s interest payments is channeled through this subsidiary. The same pattern of less profitability is seen in the latest quarter also.
If you have discerned the underlying reasons for this diminished profitability, could you please elucidate them?
Was looking at the P&L of 3 key subsidiaries of Arvind Fashion and Comparing the same with other retail fashion players for FY22-23. Though not like for like comparison ( Trent has non fashion business also, though very small. Metro also has multiple brands which might have different dynamics individually), it gives an idea regarding the key metrics to look at.
The key call-outs were :
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Margin post commission & Royalty is the key monitorable as the the difference between this and Profit before tax is more or less constant for each brand/ retailer (except PVH where it seems very low and Trent where it is high). Min 35% seems critical for a ~7-8% PBT margin
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Apart from Margin, Inventory is another key monitorable, as excess inventory would lead to higher markdown in future. Flying Machine, PVH and Metro all seem to be sitting on pretty high Stock Cover (> 230 days).
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Gross Margin for Vedant is in another orbit all together. But, unless they crack the Women Ethnic Wear market, scalability might be a challenge.
Disc : Invested.
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Whether commission is based on sale only or minimum commission is guaranteed!! Beacuse commission is high for Arvind compared to others…
Commission would be sale based in my opinion. Because Arvind sells more on SOR model rather than outright, its commission might be on the higher side.
Nice illustration, thanks for sharing here.
USPA and Arrow together have the highest(together with Trent) COGS of ~57%. Do you suspect this is attributed to discounts, or could it be indicative of Arrow sales operating at a break-even point?
Royalty and Margin are mostly will remain same in future as well for these brands. How do you think company can increase PBT?