ABFRL separates Madura business, creates new listed entity called Aditya Birla Lifestyle Brands: ET

ABFRL aims to raise 2500 crores by creating ABLBL, including labels like Louis Phillippe, Peter England, and Sabyasachi, to boost value.

According to a report on ET, Aditya Birla Fashion and Retail (ABFRL) announced plans to raise Rs 2500 crore within one year after dividing its retail business and creating a new listed entity, Aditya Birla Lifestyle Brands (ABLBL), comprised of the Madura Fashion division.

The separation will be carried out using an NCLT arrangement scheme, and once finished, ABFRL's shareholders will have the same holdings in both companies. ABFRL shareholders will receive one share in the new company for each share they currently own, on top of their current holdings.

ABFRL's borrowing of approximately Rs 3000 crore until March 2024 will be divided between the two companies, with Rs 1000 crore of debt expected to be shifted to ABLBL. It was stated that the two companies will divide the business assets and liabilities based on the regulatory provisions.

ABFRL aims to increase its equity capital by Rs 2,500 crore within a year post the demerger to enhance its financial position and support the expansion of its remaining ventures. Each listed entity within the company will receive full support from the promoter group for the equity raise, with unique capital structures, growth paths, and value opportunities in place.

The Madura business will include four lifestyle brands - Louis Phillippe, Van Heusen, Allen Solly and Peter England - in addition to casual wear brands American Eagle and Forever 21, sportswear brand Reebok, and the inner-wear business under Van Heusen.

Madura brands and other businesses contributed to about two-thirds of ABFRL's total revenues of Rs 12,418 crore, with annual sales totaling Rs 7,607 crore. Following the split, ABFRL will still have Pantaloons, Style Up, Sabyasachi, Shantanu and Nikhil, Tasva, The Collective, Galeries Lafayette, and TMRW in its portfolio.

Analysts explained that the decision was prompted by the requirement to increase flat valuation and turn around losses experienced in the previous fiscal year due to increased investment in newer niche companies. In the last five years, ABFRL's stock price has remained flat and its market value of Rs 20,000 crore is only a fraction of Trent, owned by Tata, which had a comparable valuation on the BSE in 2019.