Aditya Birla Fashion and Retail Ltd. (ABFRL) announced its plan to demerge its fast fashion segment, Madura Fashion & Lifestyle, into a separate listed entity, aiming to unlock value creation opportunities. The board gave the green light for management to assess this vertical demerger, as per the company statement released on Monday.
"The proposed demerger will enable the creation of two separately listed companies as independent growth engines with distinct capital structures and parallel value creation opportunities," it said. Moreover, after the completion of the proposed demerger, ABFRL "will raise growth capital within 12 months" to strengthen its balance sheet, and pursue the large growth opportunity, it added.
At 10:15 am, the shares of the company were trading at Rs. 245 price level, up by more than 16 per cent or 34 points on NSE.
The Madura Fashion & Lifestyle (MFL) business majorly includes four leading fast fashion labels; Louis Phillippe, Van Heusen, Allen Solly, and Peter England, alongside casual wear brands such as American Eagle and Forever 21. It also holds licenses for the Reebok sportswear brand and oversees the innerwear segment under Van Heusen. These entities will be spun off into a separate listed entity, as per the announcement.
In FY23, MFL contributed Rs 8,306.97 crore to ABFRL's consolidated revenue of Rs 12,417.90 crore.
"This portfolio has built a leadership position over a long period of time and has a proven track record of delivering consistent revenue growth, profitability, strong free cash flows and high return on capital," it said, adding that "the entity will have a strong balance sheet to power its future growth aspirations".
After the demerger of MFL, ABFRL will have Pantaloons and Style Up business, focusing on value retail. It will also have a luxury business portfolio, where it has - The Collective, Galleries Lafayette and other selected luxury brands.
After necessary approvals, MFL's demerger will be implemented through an NCLT scheme of arrangement, and all shareholders of ABFRL will have identical shareholding in the newly formed entity, it added.
"The proposal will be subject to all statutory approvals from ABFRL Board of Directors, shareholders, creditors, regulators, along with other customary approvals," it said.
Aditya Birla Group Chairman Kumar Mangalam Birla said the move is designed towards a more simplified and streamlined architecture to unlock distinct opportunities for value creation and is poised to significantly enhance long-term stakeholder value.
"The evolution of this portfolio has seamlessly mirrored the shift in consumption trends, with a play encompassing all large value creation opportunities. As the platform embarks on its next transformational phase of growth, there is scope to re-evaluate capital structures to optimise different parts of the portfolio," he said.
Post demerger, the remaining ABFRL business will be focused on high-growth segments where there are tailwinds from a shift from unbranded to branded, premiumisation, rise of super premium & luxury, and rapid growth in Gen Z-focused digital-first brands, it said.
(With Inputs From PTI)
