ABFRL to demerge Madura Fashion & Lifestyle into separate listed entity

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The board of directors of Aditya Birla Fashion and Retail (ABFRL), at its meeting on Monday, authorised the management of the company to evaluate the vertical demerger of the Madura Fashion & Lifestyle (MFL) business from ABFRL into a separate, listed company.


“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 in its release.


The MFL business consists of four lifestyle brands: Louis Philippe, Van Heusen, Allen Solly and Peter England. These, along with casual wear brands American Eagle & Forever 21, sportwear brand Reebok, and the innerwear business under Van Heusen, will be demerged into a separate listed entity.


The company said this portfolio had built a leadership position over a long period and had delivered consistent revenue growth, profitability, strong free cash flows, and high returns on capital.


The proposal will be subject to all statutory approvals from the board, shareholders, creditors, regulators, along with other customary approvals.


“The entity will have a strong balance sheet to power its future growth aspirations. After necessary approvals, the demerger will be implemented through an NCLT (National Company Law Tribunal) scheme of arrangement, and all shareholders of ABFRL will have identical shareholding in the newly formed entity,” ABFRL said in its release. 


ABFRL will then focus on high-growth segments where there are tailwinds due to a shift from unbranded to branded, premiumisation, a rise of super premium and luxury, and rapid growth in Gen Z-focused digital first brands.


Subsequent to the completion of the proposed demerger, ABFRL will raise growth capital within 12 months.


In FY23, ABFRL’s revenue stood at Rs 12,418 crore compared to Rs 8,136 crore in FY22. Its lifestyle brands (Louis Philippe, Van Huesen, Allen Solly and Peter England) revenue stood at Rs 6.608 crore, up 46 per cent compared to FY22.


Kumar Mangalam Birla, chairman, Aditya Birla Group, said in its release: “Over the years, our fashion and retail business has grown from five brands in two categories, to a dynamic portfolio of 20 plus brands across all lifestyle categories. 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. 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.”


ABFRL’s portfolio comprises multiple high-growth segments in large addressable markets with strong value-creation opportunities.


“Restructuring will help bring in a sharper focus anchored on a differentiated strategy aligned with the individual business segment. Each of these businesses has been operated autonomously,” said Ashish Dikshit, managing director, Aditya Birla Fashion and Retail. 


“The Indian fashion and apparel sector is $100 billion plus and is poised for double-digit, long-term growth. The simplified structure positions the businesses well for sustained growth and value creation.”

ABFRL’s shares closed 2.89 per cent higher at Rs 211.50 in Monday’s trade on the National Stock Exchange.

First Published: Apr 01 2024 | 10:16 PM IST