Shares of Aditya Birla Fashion & Retail Ltd (ABFRL) rose 11.93 per cent to Rs 236.95 after the company’s board gave approval to the management to explore a vertical demerger of the Madura Fashion & Lifestyle business from the company into a separate listed entity.
The Madura Fashion and Lifestyle division (MFL), which comprises four lifestyle brands including Louis Philippe, Van Heusen, Allen Solly and Peter England, casual wear brands including American Eagle and Forever 21, sportswear brand Reebok and Van Heusen’s innerwear business, will be spun off into a separate listed company.
The proposed separation would result in two separately listed companies as independent growth engines with different capital structures and parallel value creation opportunities.
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Post-division, the company will focus on high-growth segments driven by tailwinds from unbranded to branded transition, premiumization, the rise of ultra-premium and luxury products, and the rapid growth of digital-first brands focused on Gen Z. This is a compelling portfolio consisting of multiple high-growth segments in large addressable markets with significant value creation opportunities.
The company said that following the completion of the proposed separation, it plans to raise growth capital within 12 months to strengthen its balance sheet and position itself to pursue significant future growth opportunities.
Kumar Mangalam Birla, Chairman, Aditya Birla Group, said, “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.”
The platform is entering its next transformational phase of growth, with room to reevaluate its capital structure to optimize different parts of its portfolio. The transition to a more simplified and streamlined architecture is designed to unlock clear opportunities for value creation. This strategic realignment is poised to significantly enhance long-term stakeholder value.
Ashish Dikshit, MD, Aditya Birla Fashion & Retail, said, “Each of these businesses has always operated autonomously under its own CEO. The fashion and apparel sector in India is a USD 100 billion plus sector with long-term double-digit growth potential. The simplified structure positions the businesses well for sustained growth and value creation.”
The company reported a consolidated net loss of Rs 1,076 crore for Q3FY24, down compared to a net profit of Rs 112.1 crore in Q3FY23. Revenue from operations for the quarter grew 16.1% year-on-year to Rs 4,166.71 crore.
Aditya Birla Fashion & Retail Ltd. (ABFRL) is engaged in the manufacturing and retailing of branded clothing and operates a chain of apparel and accessories retail stores in India. As of December 31, 2023, the company has 9,781 points of sale in department stores across India and a network of 4,753 stores in approximately 37,106 multi-brand outlets.
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