ABFRL Demerges Madura Fashion, Plans Rs 2,500 Cr Fundraise

New Delhi, Apr 19 (PTI) Aditya Birla Fashion and Retail Ltd on Friday said its board has approved a proposal to demerge Madura Fashion & Lifestyle business, while it plans to raise Rs 2,500 crore equity capital within 12 months of demerger with promoter participation.

Earlier this month, the company announced plans to demerge its fast fashion and retail business Madura Fashion & Lifestyle into a separate listed entity to unlock opportunities for value creation. The board authorised the management to evaluate the vertical demerger.

The board of directors of Aditya Birla Fashion and Retail Ltd (ABFRL), at its meeting on Friday, has approved the proposal for vertical demerger of ABFRL into a newly incorporated company Aditya Birla Lifestyle Brands Ltd (ABLBL), which will be listed separately on completion of the demerger, the company said in a statement.

"The demerger will be implemented through an NCLT scheme of arrangement, and upon its completion, all shareholders of ABFRL will have identical shareholdings in both the companies," it added.

Upon completion of the demerger, as per the share entitlement ratio approved by the board and recommended by the independent valuer, the shareholders of ABFRL will get one share of ABLBL for every one share in ABFRL, in addition to their existing shareholding in ABFRL, it added.

"Within 12 months after the completion of the demerger, ABFRL plans to raise Rs 2,500 crore equity capital to strengthen its balance sheet and fund the growth of the remaining businesses. The company's promoter group will fully support the proposed equity raise," the statement said.

Further, it said the business assets and liabilities will be split between the two companies in accordance with the prescribed regulatory provisions.

"In line with this, the overall ABFRL borrowing, which is estimated to be (around) Rs 3,000 crore as of March 31, 2024, will be split between the two companies. The estimated debt to be transferred to ABLBL will be Rs 1,000 crore, and the balance will continue to stay with ABFRL," it added.

After the demerger, ABLBL will house the business consisting of lifestyle brands, Louis Phillippe, Van Heusen, Allen Solly and Peter England; casual wear brands American Eagle & Forever 21; sportswear brand Reebok; and innerwear business under Van Heusen.

On the other hand, ABFRL will be responsible for the remaining businesses comprising value and masstige fashion retail play under Pantaloons and Style Up; ethnic portfolio, including designer wear partnerships and recently acquired a portfolio of TCNS brands; luxury consisting of The Collective, Galleries Lafayette and select luxury brands, along with a portfolio of digital-first fashion brands - TMRW.

"The demerger is expected to unlock significant value for the shareholders of ABFRL as each of the listed entities will have their own distinct capital structures, independent growth trajectories and value creation opportunities," the company said.