Financial Management & Corporate Finance Case Study

Arvind-Managing Working Capital

OR

Abstract:
Arvind Mills Limited (AML), a composite textile mill played a leading role in India’s contribution to global textile trade (51% of its revenues), as it was the largest producer of textiles, particularly Denim. It had a strong relationship with leading global brands in denim, shirting and knits. In Denim, it had 72% market share of the estimated 80 million meters of the Indian Denim market. Leveraging global capacities and strong product development, AML decided to concentrate on high end segments, which offered higher margins and realisations.

With the removal of WTO quota restrictions in textiles 49% of the global trade was freed. Asia was the biggest gainer being the biggest exporter to the developed region. China and India being the prominent winners. As a competitor, China has the cost advantage over India. AML being a Global player is looking for ways and means to reduce the cost. One of the issues is effective management of working capital.

The case gives a brief account of the steps AML has taken at various point of time to overcome constraints and focuses on the issue of working capital management.

Pedagogical Objectives:

• To understand the working capital management
• To compare and contrast the financial operation of the competitors
• To understand the operations of any company and its impact on its working capital requirement.

Keywords : Business Strategy, Working Capital Management, Finance Case Study, Strategic Management, Core Competence, WTO, Cost advantage, Inventory Management