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Last Updated : Aug 05, 2016 06:19 PM IST | Source: CNBC-TV18

CS maintains outperform on Arvind; GST may have one time impact

Credit Suisse believes the Goods and Services Tax (GST) can be a risk going forward. "With no indirect taxation in textile segment and just 5 percent VAT on the branded apparel segment, either demand or margins could be impacted by GST," the report highlighted.

 
 
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Credit Suisse, in its note, maintains an outperform rating on Arvind on the back of robust all-round performance. The company having joint ventures with Tommy Hilfiger and Calvin Klein, is targeting a 24 percent revenue growth. The management is hopeful of some pick-up in demand in 2HFY17.

The brand performance has remained strong. In the first quarter, revenues rose 26 percent year-on-year (YoY) and EBITDA margins expanded by 50 basis points, driven by store adds, better Unlimited performance and pick up in like-to-like growth. Not just this, the management expects growth rates to sustain for FY17.

However, the firm believes the Goods and Services Tax (GST) can be a risk going forward. "With no indirect taxation in textile segment and just 5 percent VAT on the branded apparel segment, either demand or margins could be impacted by GST," the report highlighted.

Arvind's textile and brand segments are likely to have one-time impact owing to the implementation of GST. Currently, there is little indirect tax on the domestic textile business and the brands business attracts 5 percent VAT.

"However, there are input credits related to service tax paid on rent, advertising, etc which can be netted off under GST," the report said.
First Published on Aug 5, 2016 06:19 pm
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