Aditya Birla Fashion and Retail (ABFRL) has stated its plans to evaluate the vertical demerger of its Madura Fashion & Lifestyle business into a separately listed company. This move aims to create two distinct entities with separate capital structures, allowing for parallel value-creation opportunities.
“The Board of Directors of Aditya Birla Fashion and Retail Ltd. (ABFRL), at its meeting today, has authorized the management of the Company to evaluate vertical demerger of Madura Fashion & Lifestyle business from ABFRL into a separate listed company,” the company said in a release.
The Madura Fashion & Lifestyle business segment, which includes well-known lifestyle brands such as Louis Phillippe, Van Heusen, Allen Solly, Peter England, American Eagle, Forever 21, Reebok, and the innerwear business under Van Heusen, will be demerged into a separate listed entity. The proposed demerger will be implemented through an NCLT scheme of arrangement, with all ABFRL shareholders having identical shareholding in the newly formed entity.
“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. The entity will have a strong balance sheet to power its future growth aspirations,” said ABFRL.
The post-demerger portfolio of ABFRL will consist of Value Retail (Pantaloons & Style Up), Ethnic Portfolio (comprehensive ethnic wear), Luxury (The Collective, Galleries Lafayette, and select luxury brands), and Digital brands (TMRW – digital first fashion brands).
“Subsequent to the completion of the proposed demerger, ABFRL will raise growth capital within 12 months to infuse strength into its balance sheet, positioning itself well to pursue the large growth opportunity that lies ahead of it,” the company said.
Kumar Mangalam Birla, Chairman of Aditya Birla Group, said, “Over the years, our fashion and retail business, has grown from 5 brands in 2 categories, to a dynamic portfolio of 20+ brands across all lifestyle categories.”
He said, 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 optimize different parts of the portfolio. The move towards a more simplified and streamlined architecture is designed to unlock distinct opportunities for value creation. This strategic realignment is poised to significantly enhance long-term stakeholder value,” he added.
Ashish Dikshit, MD of Aditya Birla Fashion & Retail said, “The restructuring will help bring in sharper focus anchored on a differentiated strategy aligned with the individual business segment. Each of these businesses have always been operated autonomously under respective CEOs.” He added, “Indian fashion and apparel sector is USD 100bn+ sector and is poised for a double-digit long-term growth. The simplified structure positions the businesses well for sustained growth and value creation.”
