The move aimed to build two growth engines with a clear value creation trajectory and a clear capital allocation strategy.
Kumar Mangalam Birla Lvi Sharma New Delhi
The Aditya Birla Fashion and Retail Ltd (ABFRL) board, in a meeting on Monday, authorised the company’s management to explore vertical demerger of its Madura Fashion and Lifestyle business from ABFRL into a separate listed entity.
The proposed demerger 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 BSE filing.
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“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 has seamlessly reflected changing consumption trends with a commitment to encompass all significant value creation opportunities,” said Kumar Mangalam Birla, Chairman, Aditya Birla Group.
He added, “As the platform enters its next transformational phase of growth, there is room to re-evaluate 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.”
Aditya Birla Fashion & Retail MD Ashish Dikshit believes the restructuring will bring sharper focus with each business segment implementing its own tailored strategy. “Each of these businesses has always operated autonomously under its own CEO,” he said. He further added, “The Indian fashion and apparel sector is worth over $100 billion and is poised for double-digit long-term growth. The simplified structure will better position the business for sustained growth and value creation.”
The Madura Fashion & Lifestyle (MFL) division comprises four lifestyle and casualwear brands: Louis Phillippe, Van Heusen, Allen Solly and Peter England.
American Eagle, Forever 21, sportswear brand Reebok and Van Heusen’s innerwear business will be separated into separate publicly traded companies. This portfolio has long-standing leadership positions and a track record of delivering consistent revenue growth, profitability, strong free cash flow and strong returns on capital.
The company will have a strong balance sheet to support its future growth ambitions. After obtaining necessary approvals, the demerger will be effected through an NCLT scheme and all shareholders of ABFRL will hold equal shares in the newly formed company.
Post-demerger, the remaining ABFRL will focus on high-growth segments driven by tailwinds from unbranded to branded shift, premiumisation, the rise of ultra-premium and luxury products and the rapid growth of Gen Z-focused digital-first brands.
