The Board of Directors at Aditya Birla Fashion and Retail Ltd. (ABFRL) recently gave the green light to a vertical demerger plan involving the Madura Fashion & Lifestyle business (MFL Business) into a newly established company named Aditya Birla Lifestyle Brands Ltd. (ABLBL). The strategic move is set to result in the separate listing of ABLBL upon the completion of the demerger process, providing shareholders with increased value through unique capital structures, independent growth journeys, and value-generation prospects for each entity.
Following an NCLT scheme of arrangement, all ABFRL shareholders will witness an identical shareholding in the restructured companies post-demerger. The planned division will see ABFRL retaining brands like Pantaloons, Style Up, Sabyasachi, luxury platform The Collective, and digital-first fashion lines, while ABLBL will inherit the Madura brands and other assets. The company expects to distribute debt between the two entities, with an estimated Rs 1,000 crore debt transferred to ABLBL out of the total approximate borrowing of Rs 3,000 crore as of March 31, 2024. Additionally, within a year after the demerger, ABFRL intends to raise around Rs 2,500 crore in equity capital to enhance financial robustness and support the growth of its retained businesses, with full backing from its promoter group for the proposed equity infusion.
The demerger proposal, subject to various approvals from stakeholders, regulators, and customary clearances, is a pivotal step that underscores ABFRL's strategic restructuring efforts to optimize operational efficiencies and unlock shareholder value. Notable firms such as PWC LLP as statutory auditors, AZB as legal counsels, Bansi S Mehta Valuers LLP as independent valuers, and INGA Ventures Pvt. Ltd. offering a fairness opinion, play integral roles in facilitating this transaction. ABFRL's revenue in FY23 surged to Rs 12,418 crore from Rs 8,136 crore in FY22, with lifestyle brands like Louis Philippe, Van Huesen, Allen Solly, and Peter England contributing significantly to this growth. The Madura brands and associated businesses accounted for a substantial portion of the total revenue, underscoring their importance within ABFRL's revenue mix. At market close, shares of Aditya Birla Fashion and Retail were up by 0.81%.