Strategic demerger: ABFRL splits to create Aditya Birla Lifestyle Brands Ltd.

Aditya Birla Fashion and Retail Ltd. (ABFRL), in a significant corporate restructuring move, has announced the vertical demerger of its Madura Fashion and Lifestyle business into a new entity, Aditya Birla Lifestyle Brands Ltd. (ABLBL). This decision, approved by ABFRL’s Board of Directors, aims to enhance shareholder value by establishing two distinct companies, each with independent growth trajectories and specialized market focuses.

The demerger, which is executed through an NCLT scheme of arrangement, will see ABLBL focusing on a range of premium and lifestyle brands including Louis Philippe, Van Heusen, Allen Solly, Peter England, American Eagle, Forever 21, Reebok, and the Van Heusen innerwear business. This strategic focus is designed to capitalize on the strong market presence and consumer loyalty these brands command.

On the other hand, ABFRL will continue to manage a diverse portfolio that includes the value retail chains Pantaloons and Style Up, a comprehensive ethnic wear segment, a bridge to luxury and luxury platforms under The Collective and Galleries Lafayette, and a series of digital-first fashion brands under TMRW.

In terms of financial restructuring, the demerger will involve the division of ABFRL’s estimated Rs. 3000 Cr debt, with about Rs. 1000 Cr being transferred to ABLBL and the remainder staying with ABFRL. This financial recalibration is aimed at optimizing the operational efficiencies and market reach of both entities.

Post-demerger, ABFRL plans to raise approximately Rs. 2500 Cr in equity capital within the next 12 months to bolster its balance sheet and support the growth of its diversified business operations. This move is fully backed by the company’s promoter group, underscoring their confidence in the strategic realignment.

This demerger represents a clear strategic intent to harness focused growth potentials in distinct segments of the fashion and retail markets. By separating the lifestyle and premium segments from the broader retail and digital platforms, ABFRL and ABLBL are positioned to tailor their strategies more effectively to their respective market demands and consumer bases. This could potentially lead to enhanced operational performance and shareholder value.

The proposed demerger is subject to approvals from shareholders, creditors, and regulators, ensuring compliance with legal and financial standards. Price Waterhouse & Co Chartered Accountants LLP and AZB & Partners have been engaged as the statutory auditors and legal counsels respectively, ensuring that the demerger meets all necessary financial and legal criteria. The fairness of the transaction was evaluated by INGA Ventures Pvt. Ltd., further adding credibility to the strategic decision.