Aditya Birla Fashion and Retail Ltd. (ABFRL) has announced its intention to assess the vertical demerger of its Madura Fashion & Lifestyle business into a separate listed company. This decision was reached during the recent Board of Directors meeting, which granted authorization to evaluate this strategic move.
Aditya Birla Fashion and Retail Ltd (ABFRL) announced on Monday its consideration of the vertical demerger of Madura Fashion & Lifestyle business into a separate listed company.
“The Board of Directors of Aditya Birla Fashion and Retail Ltd. (ABFRL), at its meeting today, has authorized the management of the Company to evaluate vertical demerger of Madura Fashion & Lifestyle business from ABFRL into a separate listed company,” stated the company in a release.
The Madura Fashion & Lifestyle business segment (MFL), comprising four lifestyle brands—Louis Philippe, Van Heusen, Allen Solly, and Peter England—along with casual wear brands like American Eagle and Forever 21, sportswear brand Reebok, and the innerwear business under Van Heusen, will be demerged into a separate listed entity.
This proposed demerger aims to facilitate the creation of two independently listed companies, serving as distinct growth engines with separate capital structures and concurrent value creation opportunities, as per the release.
Upon obtaining necessary approvals, the demerger will be executed through an NCLT scheme of arrangement, with all ABFRL shareholders possessing identical shareholding in the newly formed entity.
“This portfolio has achieved a leadership position over the years, demonstrating consistent revenue growth, profitability, strong free cash flows, and high return on capital. The innerwear business under Van Heusen will be demerged into a separate listed entity.
“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,” reiterated the release.
Following the completion of the demerger, the entity will possess a robust balance sheet to fuel its future growth endeavors,” ABFRL affirmed.
“Subsequent to the completion of the proposed demerger, ABFRL will raise growth capital within 12 months to fortify its balance sheet, positioning itself favorably to seize the significant growth opportunity that lies ahead,” the company declared.
Kumar Mangalam Birla, Chairman, Aditya Birla Group, remarked, “Over the years, our fashion and retail business has expanded from 5 brands in 2 categories to a dynamic portfolio of 20+ brands across all lifestyle categories.”
He highlighted the seamless evolution of the portfolio, mirroring the shift in consumption trends and encompassing all significant value creation opportunities.
“As the platform embarks on its next transformational phase of growth, there is room to reassess capital structures to optimize various segments of the portfolio. The move towards a simplified and streamlined architecture aims to unlock distinct opportunities for value creation. This strategic realignment is poised to significantly enhance long-term stakeholder value,” he added.
Ashish Dikshit, MD, Aditya Birla Fashion & Retail Ltd, commented, “The restructuring will bring sharper focus anchored on a differentiated strategy aligned with each individual business segment. Each of these businesses has always operated autonomously under respective CEOs.”
He further stated, “The Indian fashion and apparel sector is a USD 100bn+ sector and is poised for double-digit long-term growth. The simplified structure positions the businesses well for sustained growth and value creation.”
