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Aditya Birla Group explores demerger of Madura Fashion & Lifestyle into separate listed entity

Aditya Birla Fashion and Retail Ltd. (ABFRL) is considering a significant restructuring move that could see the demerger of its Madura Fashion & Lifestyle business into a separate listed company. The decision came following a recent meeting of ABFRL’s Board of Directors.

If approved, this strategic move would result in the creation of two distinct entities, each listed separately, thereby providing independent growth platforms with unique capital structures and opportunities for value creation.

The Madura Fashion & Lifestyle business segment (MFL), encompassing renowned brands such as Louis Phillippe, Van Heusen, Allen Solly, Peter England, American Eagle, Forever 21, Reebok, and Van Heusen’s innerwear division, would form the core of the newly separated entity. With a history of strong performance, consistent revenue growth, profitability, and robust free cash flows, this portfolio has established itself as a leader in the industry.

Meanwhile, the remaining ABFRL entity post-demerger would focus on high-growth segments such as value retail, ethnic wear, luxury fashion, and digital-first brands. This streamlined structure aims to capitalize on emerging trends in the fashion industry, including the rise of branded apparel, premiumization, and digital commerce.

“Over the years, our fashion and retail business, has grown from 5 brands in 2 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. 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,” Kumar Mangalam Birla, Chairman of Aditya Birla Group said.

“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,” Birla added.

“The restructuring will help bring in sharper focus anchored on a differentiated strategy aligned with the individual business segment. Each of these businesses has always been operated autonomously under respective CEOs,” Ashish Dikshit, MD of Aditya Birla Fashion and Retail Ltd said.

He added, “Indian fashion and apparel sector is USD 100bn+ sector and is poised for a double-digit long-term growth. The simplified structure positions the businesses well for sustained growth and value creation.”

However, the proposed demerger is subject to various approvals, including those from ABFRL’s Board of Directors, shareholders, creditors, regulators, and other relevant authorities. If approved, the restructuring is expected to be implemented through an NCLT scheme of arrangement, ensuring that all shareholders of ABFRL maintain identical shareholding in the newly formed entity.

Additionally, post-demerger, ABFRL plans to raise growth capital within 12 months to strengthen its balance sheet and pursue further growth opportunities in the dynamic fashion market.

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