Arvind Fashions shares jump 5% today as Motilal Oswal initiates coverage

The brokerage described Arvind Fashions, part of the Lalbhai Group, as a leading branded apparel player with a strong portfolio that includes US Polo Assn., Arrow, Tommy Hilfiger, Calvin Klein, and Flying Machine. According to Motilal Oswal, the company is at an inflection point, transitioning from a consolidation phase to a period of profitable scale-up.

The growth strategy is centred around sharpening focus on five core “power brands,” scaling these brands across channels, and expanding into adjacent lifestyle categories in a capital-efficient manner. Motilal Oswal expects this strategy to deliver a revenue CAGR of 13% between FY26 and FY28along with a 190 basis points expansion in operating margins over the same period.

The brokerage highlighted that Arvind Fashions enters this growth phase with a strong balance sheetdisciplined working capital management, and limited capital expenditure requirements. Most store expansion is expected to follow a franchise-owned, franchise-operated modelwhich should enhance capital efficiency and returns.

Motilal Oswal also pointed to the company’s post-Covid turnaround, where Arvind Fashions exited non-core businesses such as Unlimited and Sephora. Despite exiting segments that contributed 32% of FY19 revenue, the company surpassed pre-Covid revenue levels by FY25, driven by strong execution in its core brands.

The shift to a consignment-led and asset-light model has improved pricing control, margins, and cash generation. Return on invested capital improved from 5% in FY19 to 12% in FY25with the brokerage estimating free cash flow of Rs 660 crore between FY26 and FY28. Motilal Oswal expects ROE and ROIC to rise to 25% and 28% respectively by FY28.

With improving earnings visibility, expanding margins, and rising return ratios, Motilal Oswal believes Arvind Fashions offers a compelling long-term compounding opportunity within India’s branded fashion space.

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