Through turbulence and restructuring
Prof. Dr. Mrs. Bala Krishnamoorthy
Legacy of the company
Arvind Mills traditionally has had a legacy of family ownership in business. The Lalbhai family is an iconic family from Ahmedabad that has contributed to the Indian economy. Kasturbhai Lalbhai started Arvind Mills and the past three generations have made it one of the key pillars of Indian textile industry. The latest to join the league is Punit Lalbhai, son of Sanjay Lalbhai.
Mr. Arvind Narottam Lalbhai, as the chairman of Arvind Mills was a true visionary who led his company to become one of the leaders in textile in India. He left behind a legacy of leadership and human values. In the mid 80's, the emergence of power looms virtually wiped out most composite textile mills and it was crisis time for the textile industry. Even in the face of this adversity, he steered the company, stitching up a major restructuring plan in the 90's. His brought to the forefront his leadership qualities, craftsmanship and was an intellectual businessman.
'We will enable people to experience a better quality of life by providing enriching and inspiring lifestyle solutions'.
The underlying theme running across the broad spectrum of all business activities at Arvind is that of enhancing lifestyles of people, across all diversities and demographics. People at Arvind preach the philosophy to Believe, Endeavour and Dream. In short, they make things happen.
Arvind Mills was established in 1931. It was founded by the three brothers Kasturbhai Lalbhai, Narottambhai Lalbhai and Chimanbhai Lalbhai, one of the leading families of Ahmadabad.
The company initially manufactured dhotis, sarees, mulls, shirting, etc. and around 1987, it underwent intensive modernization and started to venture into yarn for exports and denims. To deal with the competition from the power loom and to cope up with the rising cost of raw materials, it diversified into indigo-dyed blue denim, two-ply shirting and Swiss voiles. Between 1991 and 1997, the company raised Rs. 10.54 billion to finance its expansion into denim.
In the mid 1990s, the world of fashion turned topsy-turvy. Global trends began moving away from denim to gabardine and corduroy. In the mid 1990s, Arvind Mills appointed consulting major McKinsey for a strategic overhaul of its business. However, McKinsey advised company to concentrate on its core competence. Other analysts felt that Arvind Mills failed to realize that the denim was facing a downturn.
In 1995, Arvind Lalbhai announced that the company would expand into other lines of cotton fabrics. It would add 30 million metre more in high value shirting, 20 million metre in denim, and 20 million in gabardine. The investment expenditure turned out to be Rs 11 billion, out of which Rs 7 billion was financed by debt. However, when Arvind Mills embarked on these investments, denim prices came down from Rs. 97 to Rs. 70 per metre. This was because of shift in fashion from denim to gabardine. At the same time, the fluctuation in cotton prices played with the cash flows of Arvind Mills. Since 1999, its debt had piled up due to weakening rupee and non-payment of interest.
Still, they were in line with the and also investing in latest trends and went ahead with the adoption of the SAP R/3 ERP package in 1998 for their manufacturing units. This was to bring about more efficiency in production, better inventory management and reduction of waste, thereby winning clientele....