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Stitching the future: A strategic transformation!

* ARVIND is a diversified textile and apparel solutions provider with strong fabric-tofashion capabilities across global markets. The company operates through three key segments – Core Textiles (~77% of revenue), Advanced Materials Division (~20% of revenue), and Others, including Envisol, Telecom etc. (~3% of revenue).

* We expect the core textile business (vs. a 2% CAGR over FY22–26) to deliver 6% growth, led by lower US tariffs (supporting a turnaround in the US business), new FTAs with the EU and UK, and stronger domestic performance (~44% of the textile business). We expect the garments segment to grow at 15%, driven by strong volume growth in exports (~40% of garment revenues).

* The AMD segment (technical textiles TAM of ~USD33b as on FY26, with ~11% CAGR expected over FY26–32) is projected to deliver 40% revenue CAGR (vs. 16% over FY22–26), driven by the Industrial vertical, supported by the Dalco-GFT acquisition, along with ~200 bp margin expansion to ~17%.

* We model a revenue, EBITDA, and PAT CAGR of 15%, 23%, and 29%, respectively, over FY26-28, fueled by growth in the garmenting business and the AMD portfolio.

* We initiate coverage on ARVIND with a BUY rating and an EV/EBITDA-based TP of INR670, valuing the stock at 13x FY28E EV/EBITDA (30% premium to the 10Y mean).

Core textile segment is likely to grow 6%, driven by garmenting

Arvind is strategically deepening its forward integration across the textile value chain, leveraging its fabric-to-fashion capabilities to drive higher value capture and improve earnings resilience. Core textiles comprises Woven & Denim Fabric (~44% of revenue), followed by Garment (~22% of revenue) and Other textiles business (~11% of revenue). Arvind’s growth strategy is increasingly centered on the garments business, where management is targeting 15% growth and scaling capacity toward 100m units by FY31, supported by supplier consolidation trends among global brands. In contrast, the fabric business is expected to provide 5% growth, led by a turnaround in the US business. Overall, the core textile business is expected to grow 6% over FY26-28. Other textile businesses, comprising Ankur Textiles and the wholesale & retail segments, are likely to deliver 5% growth, supported by store expansion (addition of 45 stores to reach 210 stores). On margins, we expect stable ~13-14% margins on fabrics, followed by ~8% on the garment business (+200bp expansion over FY26-28).

Forward focus on the value chain to improve profitability

Arvind strategic focus on forward integration into garments is expected to materially improve profitability and return ratios by capturing a larger share of the apparel value chain. As global brands increasingly consolidate vendors, the company’s integrated fabric-to-garment model offers faster turnaround, better cost efficiency, and higher customer stickiness. We expect 15% growth driven by ~14% volume CAGR, followed by realization. We also expect a margin expansion of +200bp for garments over FY26-28 to reach ~8%, driven by automation, scale benefits, and a stronger mix of knitwear. A greater focus on garment manufacturing is expected to drive higher volumes, supported by supplier consolidation trends among global brands. This shift will enable higher realizations compared to fabric-only supply and potentially generate incremental revenue from planned capex.

Valuation & view: Initiate coverage with a BUY rating

We initiate coverage on ARVIND with a BUY rating and an EV/EBITDA-based TP of INR670, valuing the stock at 13x FY28E EV/EBITDA (30% premium to the 10Y mean, led by the new M&A on the AMD segment). We believe ARVIND is on the verge of a strategic transformation from a fabric-focused player to a garments-led business, which offers a larger addressable market. Additionally, the AMD segment, which comprises a high-value segment, is expected to support with its superior margin profile and strong growth potential.

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