ABFRL aims to demerge Madura Fashion business into separate listed entity

Move aimed to create two growth engines with distinct value creation trajectories and a well articulated capital allocation strategy

The board of directors of Aditya Birla Fashion and Retail Ltd (ABFRL), at its meeting on Monday, has authorised the management of the company to evaluate the vertical demerger of Madura Fashion & Lifestyle business from ABFRL into a separate listed company.

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, the company said in BSE filing.

“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. The evolution of this portfolio has seamlessly mirrored the shift in consumption trends, with a play encompassing all large value creation opportunities,” said Kumar Mangalam Birla, Chairman of Aditya Birla Group.

He further said, “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. This strategic realignment is poised to significantly enhance long-term stakeholder value.”

Ashish Dikshit, MD, Aditya Birla Fashion and Retail believes the restructuring will help bring in sharper focus by implementing a distinctive strategy aligned with the individual business segment. “Each of these businesses has always been operated autonomously under respective CEOs,” he said. He added, “Indian fashion and apparel sector is valued at more than $100 bn and is poised for a double-digit long-term growth. The simplified structure positions the businesses well for sustained growth and value creation.”

The Madura Fashion & Lifestyle (MFL) business segment consists of four lifestyle brands, Louis Phillippe, Van Heusen, Allen Solly and Peter England along with casual wear brands.

American Eagle and Forever 21, sportwear brand Reebok and the innerwear business under Van Heusen will be demerged into a separate listed entity. This portfolio has built a leadership position over a long 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. Post 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.

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.