Arvind Fashions Ltd Management Discussions

Revenue growth

Revenue from operations grew 14.0% to Rs. 5,266.2 croreGrowth was supported by performance across channels and brands, healthy retail LTL, strong online B2C momentum, expansion in direct channels and continued growth in adjacent categories.

Gross margin

Improved to approximately 54.4% from 53.5%.

The improvement was supported by better product freshness, lower discounting, sourcing gains and a richer channel mix. The Companys continued focus on full-price sell-through and disciplined inventory management contributed to margin improvement.

Employee benefits expense

Increased to Rs. 321.8 crore from Rs. 268.7 crore Growth was supported by performance across channels and brands, healthy retail LTL, strong online B2C momentum, expansion in direct channels and continued growth in adjacent categories.

Other expenses

Increased to Rs. 1,837.4 crore from Rs. 1,599.7 crore Growth was supported by performance across channels and brands, healthy retail LTL, strong online B2C momentum, expansion in direct channels and continued growth in adjacent categories.

EBITDA

Increased by 17.1% to Rs. 745.3 crore Growth was supported by performance across channels and brands, healthy retail LTL, strong online B2C momentum, expansion in direct channels and continued growth in adjacent categories. Profitability Profit before tax grew

16.3% to Rs. 261.9 crore PAT from continuing operations increased significantly to Rs. 184.9 crore, while reported PAT stood at Rs. 122.6 crore. This marks a meaningful improvement over FY25 and reflects the Companys ability to convert revenue growth into profitable growth.Capital efficiency

ROCE crossed

23%

A multiyear high. This is a key indicator of the Companys improving business quality. It reflects stronger operating leverage, better inventory management, asset-light expansion, working capital discipline and improved profitability.

Margin Expansion Bridge

The improvement in profitability during FY26 was driven by multiple levers working together.

Margin Driver

Better product freshness

Impact on Business:

Improved sell-through and reduced markdown pressure

Lower discounting

Impact on Business:

Protected gross margins and brand equity

Richer channel mix

Impact on Business:

Higher contribution from retail and online B2C supported profitability

Operating leverage

Impact on Business:

Scale benefits across store productivity, sourcing and central costs

Sourcing efficiencies

Impact on Business:

Supported cost optimisation and margin improvement

Premiumisation

Impact on Business:

Improved product mix and value realisation

Marketing investments

Impact on Business:

Reinvested part of operating leverage into future growth

Data and analytics

Impact on Business:

Strengthened pricing, assortment and demand planning potential

Risk Management

The Company operates in a dynamic industry and is exposed to various internal and external risks. These include consumer demand volatility, macroeconomic uncertainty, raw material price movements, foreign exchange fluctuations, regulatory changes, supply chain disruptions, inventory risk, competition, technology and cybersecurity risks, talent risk and execution risk.

The Companys risk management approach is focused on early identification, active monitoring and mitigation through business planning, operational controls, governance processes and management oversight.

Risk-Response Matrix

Internal Control Systems and Adequacy

The Company has internal control systems commensurate with the size, scale and complexity of its operations. These systems are designed to ensure operational efficiency, accurate financial reporting, compliance with applicable laws and regulations, safeguarding of assets, prevention and detection of fraud, and adherence to policies and processes.

The internal audit function evaluates the adequacy and effectiveness of controls across key business processes. Audit observations, improvement areas and corrective actions are reviewed by management and placed before the Audit Committee. The Company continues to strengthen its control environment through process improvements, system interventions, technology enablement and compliance monitoring.

As the business becomes more digital and omnichannel, internal controls are also evolving to address technology, cybersecurity, data governance, platform controls and digital transaction risks. The Company remains committed to maintaining strong governance and control standards as it scales.

FY27 Strategic Roadmap

Arvind Fashions enters FY27 with strong momentum and a clear strategic agenda. The Companys priorities are centred on building brands of scale and desire, deepening the D2C engine, expanding relevant adjacencies, improving operating leverage and using technology, analytics and AI to strengthen both efficiency and growth.

FY27 Strategic Priorities

Outlook

The long-term outlook for Indias branded apparel and lifestyle market remains positive. Rising aspirations, premiumisation, digital adoption, organised retail expansion, urbanisation, higher brand consciousness and the influence of younger consumers provide a strong structural foundation for growth.

At the same time, the near-term operating environment may remain uncertain. Demand could continue to be uneven across markets and consumer cohorts. Commodity costs, currency movements, geopolitical developments and inflationary pressures may require continued agility. The Company will remain focused on cost discipline, sourcing agility, selective pricing, inventory control and working capital efficiency.

Arvind Fashions expects to continue its growth journey with focus on mid-double-digit revenue growth, further EBITDA margin expansion, stronger cash flows and continued improvement in ROCE. Growth will be pursued with discipline, ensuring that scale is accompanied by profitability, brand strength, inventory freshness and capital efficiency.

The Companys strategy is anchored in five broad priorities: building differentiated brands of scale and desire; strengthening the direct-to-consumer organisation across retail and digital; deepening leadership in core apparel categories; expanding relevant adjacencies; and investing in technology, analytics and AI to improve speed, precision and productivity.

The future of fashion in India will be built by companies that understand consumers deeply, respond to change quickly, create brands with meaning and operate with financial discipline. Arvind Fashions is building itself around these principles. With a strong portfolio, expanding direct channels, improving profitability, growing adjacencies and future-ready capabilities, the Company is well positioned to participate in Indias next phase of branded fashion growth.