In a meeting, the Board of Directors of Aditya Birla Fashion and Retail Ltd. (ABFRL) gave the management of the firm permission to assess the possibility of vertically demerging the Madura Fashion & Lifestyle division from ABFRL into a new publicly traded company.
With different capital structures and complementary value creation prospects, the two separately listed firms that result from the proposed demerger will be able to grow independently.
The Madura Fashion & Lifestyle business segment (MFL), which includes the innerwear division of Van Heusen, the sportswear brand Reebok, American Eagle and Forever 21 as well as four lifestyle brands—Louis Phillippe, Van Heusen, Allen Solly, and Peter England—will be split into a different publicly traded company. Over an extended duration, this portfolio has established itself as a leader and has demonstrated its capacity to provide steady revenue growth, profitability, robust free cash flows, and a high return on capital. The company will be able to support its goals for future expansion with a robust balance sheet. Following the required approvals, the demerger will be carried out via an NCLT plan of arrangement, with equal shareholding rights for all ABFRL shareholders in the newly created company.
Following the demerger, the remaining ABFRL will concentrate on high-growth markets where premiumization, the transition from unbranded to branded products, the emergence of ultra premium and luxury goods, and the quick expansion of Gen Z-focused digital first brands are all positive factors.
After the proposed demerger is completed, ABFRL plans to seek growth capital within a year to strengthen its balance sheet and put itself in a strong position to take advantage of the significant growth opportunity that lies ahead.
Kumar Mangalam Birla, Chairman, Aditya Birla Group, said, “As the platform embarks on its next transformational phase of growth, there is scope to re-evaluate capital structures to optimize 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.”
Ashish Dikshit, MD, Aditya Birla Fashion and Retail Ltd, said, “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.”