ICICI Securities: Arvind Fashion Q1 Review - Leverage To Remain High Despite Fund Raise
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ICICI Securities Report
Key takeaways from Arvind Fashions Ltd.’s Q1 FY21 result:
1. 77% network is operational in August 2020 with overall sales at 46% of same month last year;
2. Expects 8-10% improvement in sales recovery every month;
3. Online channel consumer offtake increased by 30%;
4. Targeting structural cost reduction of Rs 1.2 billion-1.5 billion per annum;
5. Expects Ebitda and cash breakeven in Q3 FY21 and Q4 FY21 respectively on exit-month basis; and
6. Net debt declined by Rs 3.3 billion in quarter-to-date to Rs 9.7 billion as of August 2020-end post fund raise of Rs 6.6 billion.
However, net debt to Ebitda is still likely to remain high at approximately 4 times even in FY22E, in our view.
Factoring slower demand recovery, we cut our FY21-22E revenue by 2-6%.
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