Arvind has met with merchant banks ahead of its plans to raise Rs.900 crore by divesting about a 15 per cent stake in the fully owned subsidiary Arvind Lifestyle Brands, people directly familiar with the matter said.

Arvind management is in the midst of finalizing banks to run a formal fund-raise process, which could value its brands and retailing subsidiary, also the country’s second largest fashion and retail enterprise, at around 1 billion US Dollar. The industry leader, Aditya Birla Fashion and Retail, has a market value of 1.7 billion US Dollar at the prevailing share price.

Arvind Lifestyle Brands has rights to operate a slew of international brands such as GAP, Calvin Klein, Arrow, Gant, US Polo, apart from its own portfolio including Flying Machine, Newport and others. The company also runs a value fashion retailer Megamart and reported around Rs.2,400 crore revenue last fiscal.

The company has a more diversified portfolio compared to Aditya Birla Fashion and Retail, which has a dominant share of formal fashion. However, the “capital intensive” nature of its operations and “subdued profitability of its brands and retail” are constraining factors, a note from an agency published in this year said. “The ability of Arvind to improve the profitability, sustainable improvement in capital structure and in working capital efficiency would be the key rating sensitivities,” the company’s report added.