Adiya Birla Group weighs demerger of Madura Fashion & Lifestyle into separate listed entity

Aditya Birla Fashion and Retail Ltd (ABFRL) on Tuesday, April 2, said its board has authorised the company's management to evaluate the demerger of Madura Fashion & Lifestyle (MFL) business from ABFRL into a separate listed entity.

According to an exchange filing, the company said the proposed demerger will create two separately listed entities as "independent growth engines with distinct capital structures and parallel value creation opportunities."

The MFL business segment includes four lifestyle brands - Van Heusen, Louis Phillippe, Allen Solly and Peter England - as well as casual wear brands like American Eagle and Forever 21, sportswear brand Reebok, and the innerwear brand under Van Heusen. The regulatory filing said this entire segment will be demerged into a separate listed entity.

"This portfolio has built a leadership position over a long period of time and has a proven track record of delivering consistent revenue growth, profitability, strong free cash flows and high return on capital. The entity will have a strong balance sheet to power its future growth aspirations," the company said.

After necessary approvals, the demerger will be executed through a National Company Law Tribunal (NCLT) scheme of arrangement, and all ABFRL shareholders will have equal shareholding in the newly formed entity.

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

ABFRL will also raise growth capital within a year after demerger to infuse strength into its balance sheet, the exchange filing stated.

"Post demerger, the remaining ABFRL will be focused on high-growth segments where there are tailwinds from a shift from unbranded to branded, premiumisation, rise of super premium and luxury, and rapid growth in Gen Z-focused digital-first brands," it added.

Shares of ABRARL on Tuesday opened at ₹230.80, reflecting a gain of 9%, on the NSE.