Aditya Birla group approves demerger of Madura business into a separate listed entity, to raise Rs 2500 cr in one year

The Board of Directors of Aditya Birla Fashion and Retail Ltd. (ABFRL) has approved the proposal of vertical demerger of the Madura Fashion & Lifestyle business (MFL Business) from ABFRL into a newly incorporated company. The new entity, Aditya Birla Lifestyle Brands Ltd. (ABLBL), will be listed separately on completion of the demerger.

The demerger is expected to unlock significant value for the shareholders of ABFRL as each of the listed entities will have their own distinct capital structures, independent growth trajectories & value creation opportunities.

The demerger will be implemented through an NCLT scheme of arrangement and upon its completion, all shareholders of ABFRL will have identical shareholdings in both the companies, the company in a press statement on Friday. 

Post demerger, the two listed companies will be as follows:

1. Aditya Birla Lifestyle Brands Ltd. (ABLBL) will house:

· Lifestyle brands - Louis Phillippe, Van Heusen, Allen Solly & Peter England

· Casual wear brands - viz. American Eagle & Forever 21

· Sportswear brand - Reebok

· Innerwear business under Van Heusen brand

2. Aditya Birla Fashion & Retail Ltd. (ABFRL)

The remaining ABFRL portfolio will include value brands Pantaloons and Style Up, ethnic and designer portfolio such as Sabyasachi, Shantnu and Nikhil and Tasva, luxury platform The Collective and Galleries Lafayette and digital-first fashion brands under TMRW.

As per the share entitlement ratio approved by the Board, once the demerger is completed, the shareholders of ABFRL will get one share of ABLBL for every one share in ABFRL, in addition to their existing shareholding in ABFRL.

"The business assets and liabilities will be split between the two companies in accordance with the prescribed regulatory provisions. In line with this, the overall ABFRL borrowing, which is estimated to be ~ Rs 3,000 crore as of March 31, 2024, will be split between the two companies. The estimated debt to be transferred to ABLBL will be ~Rs 1,000 crore, and the balance will continue to stay with ABFRL," the company said.

The company further said that within 12 months after the completion of the demerger, ABFRL plans to raise ~ Rs 2,500 crore equity capital to strengthen its balance sheet and fund the growth of the remaining businesses. The company’s promoter group will fully support the proposed equity raise.

The proposed demerger will be subjected to necessary approvals from shareholders, creditors, regulators, along with other customary approvals.

PWC LLP are the statutory auditors of the Company and AZB are the legal counsels for the transaction. Bansi S Mehta Valuers LLP were the independent valuers to the transaction and INGA Ventures Pvt. Ltd. provided the fairness opinion.

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.

With annual sales of Rs 7,959 crore, Madura brands and other businesses accounted for nearly two-thirds of ABFRL's total revenues of Rs 12,418 crore. 

Shares of Aditya Birla Fashion and Retail closed at Rs 231.40, up by 0.81%.