Shares of Aditya Birla Fashion and Retail Ltd (ABFRL) will remain in the focus on Tuesday after the company said it is looking to demerge its Madura Fashion & Lifestyle business into a separate listed entity. However, the proposal is subject to approval from the company board, shareholders, regulatory and other stakeholders, it said. The board of directors of Aditya Birla Fashion and Retail (ABFRL), at its meeting, authorised the management of the company to evaluate the vertical demerger of Madura Fashion & Lifestyle business from ABFRL into a separate listed company, said the company in its exchange filing. "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," ABFRL's filing with the bourses said. Shares of Aditya Birla Fashion and Retail settled at Rs 211.70 on Monday, rising 3.02 per cent for the day. The specialty retail chain commanded a total market capitalization of more than Rs 20,000 crore. The Madura Fashion & Lifestyle business segment (MFL) will be demerged into a separate listed entity. It consists of four lifestyle brands namely- Louis Phillippe, Van Heusen, Allen Solly & Peter England- along with casual wear brands- American Eagle and Forever 21; sportswear brand Reebok and the innerwear business under Van Heusen. Subsequent to necessary approvals, the demerger will be implemented through an NCLT scheme of arrangement, and all shareholders of ABFRL will have identical shareholding in the newly formed entity. The aforementioned demerged entity has built a leadership position over a long period of time. "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 filing added. Post demerger, ABFRL will be focused on high-growth segments where there are tailwinds from a shift from unbranded to branded, premiumisation, rise of super premium & luxury, and rapid growth in Gen Z focused digital first brands. Its portfolio consists of multiple high growth segments in large addressable markets with value creation opportunities. 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, said Ashish Dikshit, MD, Aditya Birla Fashion and Retail.
"The Indian fashion and apparel sector is over a $100 billion sector and is poised for a double-digit long-term growth. The simplified structure positions the businesses well for sustained growth and value creation," he said.