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ABFRL plans to separate its Madura Fashion business into a distinct publicly listed company

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On April 1, Aditya Birla Fashion and Retail Ltd (ABFRL) Board authorized management to assess splitting Madura Fashion & Lifestyle business from ABFRL into an independent listed company.

This move aims to create two distinct listed entities with separate capital structures and growth opportunities. ABFRL shares rose nearly 3% on BSE, closing at Rs 211.5.

The Madura Fashion & Lifestyle segment includes lifestyle brands like Louis Philippe, Van Heusen, Allen Solly, Peter England, American Eagle, Forever 21, Reebok, and Van Heusen innerwear, to be demerged into a new listed entity.

ABFRL stated in a stock exchange filing that this portfolio has established a leading position over time, showing consistent revenue growth, profitability, robust free cash flows, and high return on capital. The new entity will possess a sturdy balance sheet to support its future growth plans. Following approvals, the demerger will occur via an NCLT scheme of arrangement, ensuring all ABFRL shareholders have equal ownership in the new entity.

Following the demerger, ABFRL plans to raise growth capital within a year to bolster its balance sheet, positioning itself for future growth opportunities.

Kumar Mangalam Birla, Chairman of the Aditya Birla Group, highlighted the remarkable growth of their fashion and retail business, expanding from 5 brands in 2 categories to a diverse portfolio of over 20 brands covering all lifestyle segments. He emphasized that this evolution aligns with changing consumption patterns, capturing various growth opportunities. Birla noted the importance of re-evaluating capital structures to optimize the portfolio and unlock value, aiming for a simplified and streamlined architecture to enhance long-term stakeholder value.

Ashish Dikshit, Managing Director of Aditya Birla Fashion and Retail Ltd, emphasized that the restructuring aims to enhance focus on each business segment’s unique strategy, with autonomous operation under respective CEOs. He highlighted the significant potential of the Indian fashion and apparel sector, valued at over USD 100 billion, poised for sustained double-digit growth. The simplified structure positions the businesses well for long-term growth and value creation.

Following the demerger, the remaining ABFRL will concentrate on high-growth segments benefiting from shifts to branded products, premiumization, emergence of super-premium and luxury categories, and the rapid growth of Gen Z-focused digital-first brands, stated the Aditya Birla Group firm.

  • Value Retail: Offering affordable fashion through Pantaloons and Style Up brands.
  • Ethnic Portfolio: Diverse range of ethnic wear, catering to various occasions, price ranges, and consumer preferences, including designer collections.
  • Luxury: Growing presence in the bridge-to-luxury segment with The Collective, Galleries Lafayette, and other luxury brands.
  • Digital Brands: TMRW – Leading collection of digital-native fashion brands.

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