Abstract

The case provides an overview of the Arvind Mills’ expansion strategy, which resulted in the company’s poor financial health in the late 1990s. In the mid 1990s, Arvind Mills’ undertook a massive expansion of its denim capacity in spite of the fact that other cotton fabrics were slowly replacing the demand for denim. The expansion plan was funded by loans from both Indian and overseas financial institutions. With the demand for denim slowing down, Arvind Mills found it difficult to repay the loans, and thus the interest burden on the loans shot up. In the late 1990s, Arvind Mills ran into deep financial problems because of its debt burden. As a result, it incurred huge losses in the late 1990s. The case also discusses in detail the Arvind Mills debt-restructuring plan for the long-term debts being taken up in February 2001.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• Expansion plans
• Debt driven expansion
• Financial restructuring.

Keywords

Arvind Mills, expansion strategy, company's, poor financial health, late 1990, massive expansion, denim capacity, cotton fabrics, slowly, denim, funded, loans, Indian, overseas, financial institutions, repay, interest burden, financial problems, debt-restructuring plan, February 2001