ABFRL proposes demerger of Madura Fashion into separate listed entity

Aditya Birla Fashion and Retail Ltd (ABFRL) is evaluating a vertical demerger of the Madura Fashion & Lifestyle business from itself into a separate listed entity, the company said in an exchange filing on Monday.

The proposed demerger will help create two separately-listed companies as independent growth engines with distinct capital structures and parallel value-creation opportunities, ABFRL added.

The demerger is aimed at charting out the retailer’s next transformational phase of growth, and to re-evaluate structures to optimize different parts of the portfolio,

As part of the proposed demerger, the Madura Fashion & Lifestyle business segment (MFL), consisting of four lifestyle brands including Louis Philippe, Van Heusen, Allen Solly, and Peter England, besides casual-wear brands such as American Eagle and Forever 21, sportswear brand Reebok and the innerwear business under Van Heusen, will be demerged into a separate listed entity.

The post-demerger portfolio of ABFRL would consist of value retail portfolio under Pantaloons & Style Up, ethnic wear portfolio with brands such as Tasva and Masaba, luxury formats including The Collective, Galeries Lafayette, apart from the company’s more recent foray into direct-to-consumer brands under the TMRW portfolio.

Subsequent to the completion of the proposed demerger, ABFRL will raise growth capital within 12 months to strengthen its balance sheet, the company said.

The MFL portfolio has built a leadership position over a long period of time and has a proven track record of delivering consistent revenue growth, profitability, strong free cash flows and high return on capital, the company said.

Meanwhile, post demerger, the remaining ABFRL will be focused on "high-growth" segments where there are tailwinds from a shift from unbranded to branded, premiumization, rise of super premium and luxury, and rapid growth in Gen Z-focused digital-first brands.