Mumbai: The Ahmedabad-based Arvind Ltd will demerge its branded apparel and engineering businesses.

Both the companies will be listed on stock exchanges and the shareholders of Arvind will receive shares of these two entities.

The branded apparel business will be demerged into Arvind Fashions Ltd. This business has a range of international and owned brands, including US Polo Association, Arrow, Flying Machine, Tommy Hilfiger, Gap, Calvin Klein, Hanes, Gant and Nautica. It also owns value chain Unlimited and is the franchise partner of beauty retailer Sephora.

The shareholders of Arvind Ltd will be entitled to one equity share of Arvind Fashions for every five shares held by them. Similarly, the engineering business will be demerged into Anup Engineering. In this case, the shareholders of Arvind will get one equity share of Anup Engineering for evry 27 shares held by them in the company.

Arvind said the turnover of the branded apparel business was at Rs 40.72 crore for 2016-17, while the engineering undertaking had a turnover of Rs 5 lakh.

Arvind chairman Sanjay Lalbhai said the demerger would free up resources for the company and enable it to focus on the textile business. He said Arvind Ltd would invest Rs 1,500 crore in textiles over the next 3-4 years.

He said the company would focus on the entire chain of the garment business that would enable it to supply to the world's top brands.

It will also look at next generation products and advanced materials where the plan is to venture into segments such as human protection, industrial process, infrastructure and transportation.

"In the last few years, Arvind has nurtured a diverse set of businesses... Arvind Fashions and Anup Engineering will now pursue their independent course.

"Arvind Fashions has already demonstrated an industry-leading track-record in the branded apparel and accessory space. Anup has demonstrated an impeccable trajectory on customer delight, topline growth and profitability. Financial independence will help unlock the full potential of these businesses," he said.

However, the shares of the company tanked more than 9 per cent as investors expressed their disappointment over its second-quarter results for the period ended September 30. The company saw a 14 per cent drop in net profits after exceptional items.

Arvind has reported a consolidated net profit of Rs 64.50 crore for the quarter ended September 30. The company had posted a net profit of Rs 76.65 crore during the same period in the previous fiscal.

The company said effective April 1, it has consolidated Tommy Hilfiger Arvind Fashion and Calvin Klein Arvind Fashion as subsidiaries and therefore the second-quarter results are not comparable.