The above proposal is subject to statutory and other customary approvals from the Board of Directors of ABFRL, shareholders, creditors and regulatory authorities.
Representative image Sharleen Dsouza Mumbai
The Aditya Birla Fashion & Retail (ABFRL) board, in a meeting on Monday, authorised the company’s management to explore a vertical demerger under which the Madura Fashion & Lifestyle (MFL) business would be separated from ABFRL into a separate listed company.
“The proposed separation will result in two separately listed companies as independent growth engines with different capital structures and parallel value creation opportunities,” the company said in a statement.
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The MFL business comprises four lifestyle brands – Louis Philippe, Van Heusen, Allen Sollie and Peter England. These, plus casualwear brands American Eagle and Forever 21, sportswear brand Reebok and Van Heusen’s innerwear business, will be spun off into separate publicly traded companies.
The company said the portfolio has built leadership positions over the long term, delivering consistent revenue growth, profitability, strong free cash flow and strong returns on capital.
The proposal is subject to all statutory approvals by the Board, shareholders, creditors and regulatory authorities, as well as other customary approvals.
“The company will have a strong balance sheet to support its future growth ambitions. After obtaining requisite approvals, the de-merger will be effected through a scheme of arrangement with NCLT (National Company Law Tribunal) and all shareholders of ABFRL will hold equal shares in the newly formed company,” ABFRL said in a statement.
ABFRL will then focus on high-growth segments that are being driven by the shift from unbranded to branded, premiumisation, the rise of ultra-premium and luxury products, and the rapid growth of Gen Z-focused digital-first brands.
Following completion of the proposed demerger, ABFRL plans to raise growth capital within 12 months.
In FY23, ABFRL’s revenue stood at Rs 12,418 crore, up from Rs 8,136 crore in FY22. Revenue from lifestyle brands (Louis Philippe, Van Heusen, Allen Solly and Peter England) stood at Rs 6,608 crore, up 46% over FY22.
Kumar Mangalam Birla, chairman of the Aditya Birla Group, said in a release, “Over the years, our fashion and retail business has grown from five brands in two categories to a dynamic portfolio of over 20 brands across all lifestyle categories. The evolution of this portfolio seamlessly reflects changing consumption trends and encompasses a full range of significant value creation opportunities.”
“As the platform enters its next transformational phase of growth, there is room to reevaluate its capital structure to optimize different parts of the portfolio. The transition to a more simplified, streamlined architecture is designed to unlock clear opportunities for value creation. This strategic realignment is poised to significantly enhance long-term stakeholder value.”
ABFRL’s portfolio comprises multiple high-growth segments in large addressable markets with significant value creation opportunities.
“The restructuring will help us have a sharper focus on differentiated strategies aligned with individual business segments. Each of these businesses is run independently,” Ashish Dikshit, managing director, Aditya Birla Fashion & Retail, said.
“India’s fashion and apparel sector is over $100 billion and is expected to grow at double digit rates in the long term. The simplified structure will better position the company for sustained growth and value creation.”
ABFRL shares closed 2.89 per cent higher at Rs 211.50 in trading on the National Stock Exchange on Monday.
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