Aditya Birla Fashion and Retail Ltd (ABFRL) said it will raise Rs 2500 crore within a year of splitting its retail business and carving out Madura Fashion division into a new separate listed entity, Aditya Birla Lifestyle Brands Ltd (ABLBL).
The demerger will be implemented through an NCLT scheme of arrangement and upon its completion, all shareholders of ABFRL will have identical shareholdings in both the companies. ABFRL shareholders will get one share in the new company for every share they hold, in addition to their existing shareholding. ABFRL borrowing, at about Rs 3000 crore until March 2024, will also be split between the two companies with the estimated debt of Rs1000 crore transferred to ABLBL. The business assets and liabilities will be split between the two companies in accordance with the prescribed regulatory provisions, it said.
“The demerger is expected to unlock significant value for the shareholders of ABFRL as each of the listed entities will have their own distinct capital structures, independent growth trajectories and value creation opportunities,” the company said in a stock exchange filing. “Within 12 months after the completion of the demerger, ABFRL plans to raise about Rs 2,500 crore equity capital to strengthen its balance sheet and fund the growth of the remaining businesses. The company’s promoter group will fully support the proposed equity raise.”
The Madura business will house four lifestyle brands—Louis Phillippe, Van Heusen, Allen Solly and Peter England—along with casual wear brands American Eagle and Forever 21, sportswear brand Reebok and the inner-wear business under Van Heusen. With annual sales of Rs 7,607 crore, Madura brands and other businesses accounted for nearly two-thirds of ABFRL’s total revenues of Rs 12,418 crore. Post demerger, the remaining ABFRL portfolio will include value brands Pantaloons and Style Up, ethnic and designer portfolio such as Sabyasachi, Shantanu and Nikhil and Tasva, luxury platform The Collective and Galeries Lafayette and digital-first fashion brands under TMRW.
Analysts said the move was triggered by the need to boost stagnant valuation and reverse losses seen during the last fiscal year amid higher investment into newer niche businesses.
Over the past five years, ABFRL’s share price has been stagnant and its market capitalisation of Rs 20,000 crore is just one-seventh of Tata-owned Trent, compared to 2019 when both companies had similar valuation on the BSE.
