Aditya Birla Group Plans To Demerge Madura Fashion And Lifestyle Business

Aditya Birla Fashion and Retail Ltd. plans to vertically demerge its Madura Fashion and Lifestyle business into a separate listed company.

The board of directors of ABFRL authorised the management of the company to evaluate the demerger, according to an exchange filing issued on Monday.

The demerger will help create two separate listed companies as independent growth engines, with distinct capital structure and parallel value creation opportunities, it said.

Madura Fashion consists of four lifestyle brands—Louis Phillippe, Van Heusen, Allen Solly and Peter England, along with casual wear brands such as American Eagle and Forever 21, sportwear brand Reebok and innerwear business under Van Heusen and these will be demerged into a separate listed entity, according to the filing.

After receiving the necessary approval, the demerger will be implemented through a National Company Law Tribunal scheme of arrangement. All the shareholders of ABFRL will receive identical shareholding in the newly formed entity.

The portfolio of ABFRL after the demerger will also include value retail, ethnic portfolio, luxury and digital brands, the filing said.

After the completion of the demerger, the company will raise growth capital within 12 months to make its balance sheet strong and capture the growth opportunity available, it said.

Kumar Mangalam Birla, chairman of Aditya Birla Group, said that the demerger will help to open distinct opportunities for value creation.

"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."

Aditya Birla Fashion and Retail is a flagship of the Aditya Birla Group. It is India’s first billion-dollar fashion powerhouse, with a collection of leading fashion brands and retail formats.

Shares of the company have seen a fall of 7.88% in one month. Over the year, its shares have declined by 6.29%.

Out of 24 analysts tracking the company, five maintain a 'buy' rating, nine recommend a 'hold', and 10 suggest 'sell', according to Bloomberg data. The average 12-month consensus price target implies a downside of 1.3%.

The scrip closed 2.97% higher at Rs 211.65 apiece, as compared with a 0.61% rise in the Nifty 50.