Aditya Birla Fashion to demerge Madura Fashion business into separate listed entity

Apparel retailer Aditya Birla Fashion and Retail (ABFRL) Ltd. on Monday (April 1) announced plans to demerge its Madura Fashion & Lifestyle segment into a separate listed entity. 

The decision seeks to create two distinct growth engines with well-defined capital structures and value creation trajectories, the company said.

This strategic move comes in response to the company's recent losses over the past three quarters, attributed to subdued demand and increased investments in certain brands.

The proposed demerger will see the Madura Fashion & Lifestyle business segment, comprising lifestyle brands such as Louis Phillippe, Van Heusen, Allen Solly, Peter England, American Eagle, Forever 21, Reebok, and Van Heusen innerwear, forming a separate listed entity.

Currently, Madura Fashion contributes to over 70% of ABFRL's total revenue. Following the demerger, ABFRL will shift its focus towards luxury and premium brands like Ralph Lauren and Fred Perry. 

Additionally, the company aims to raise growth capital within 12 months to bolster its balance sheet.

The demerger will enable ABFRL to intensify its attention on Pantaloons, which will operate independently from Madura Fashion. 

Pantaloons encompasses a diverse range of lifestyle, fast fashion, athleisure, casual sports clothing, and innerwear brands.

Chairman of Aditya Birla Group, Kumar Mangalam Birla, emphasised the opportunity to optimise different segments of the portfolio by re-evaluating capital structures. 

Under the proposed demerger, all investors will maintain identical shareholding in the newly formed entity,

Aditya Birla Fashion's shares have seen a 5.4% decline year-to-date so far, following a 22% drop last year. In contrast, competitor Trent's shares have surged by 27.5% this year, building on a significant gain in the previous