MUMBAI: Aditya Birla Fashion & Retail (ABFRL) is splitting its retail business into two by spinning off its Madura Fashion unit into a separate listed company. This is part of a broader attempt to free up valuation, refocus each company and raise fresh capital. Analysts said the move was driven by the need to boost stagnant valuations and reverse losses seen in FY24 amid rising investments in new niche businesses. The proposed demerger, approved by the board on Monday, will help create two separately listed companies as independent growth engines with different capital structures and separate value creation opportunities. ABFRL has said it will raise growth capital within a year to strengthen its balance sheet post-demerger.
“This portfolio evolution seamlessly reflects changing consumption trends and encompasses all the significant value creation opportunities. As the platform enters its next transformational phase of growth, there is scope to re-evaluate the capital structure to optimise different parts of the portfolio,” said Kumar Mangalam Birla, chairman, Aditya Birla Group, adding that the move 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.”
The Madura business will include four lifestyle brands – Louis Philippe, Van Heusen, Allen Sollie and Peter England – as well as casual wear brands American Eagle and Forever 21, sportswear brand Reebok and Van Heusen’s innerwear business.
The Madura brand and other businesses had annual sales of Rs 7,959 crore, accounting for nearly two-thirds of ABFRL’s total revenue of Rs 12,418 crore.
Post-de-merger, ABFRL’s remaining portfolio includes value brands Pantaloons and Style Up, ethnic and designer portfolios like Sabyasachi, Shantonu, Nikhil and Tasva, luxury platforms The Collective and Galeries Lafayette, and digital-first fashion brands under TMRW. Over the past five years, ABFRL’s share price has stagnated and its market capitalisation of Rs 2 trillion is just one-seventh of Tata-owned Trent’s. This is in comparison to 2019, when both the companies were valued at similar levels on the BSE. “Investors are looking for a pure retail story and Aditya Birla Fashion shares have lagged significantly against Trent in recent years. We hope this will give us a focused investment between cash cow businesses like Madura with high return ratios and another cash-burning business,” said Abneesh Roy, executive director, Nuvama Institutional Equities.
