ABFRL Demerger: as Madura Fashion Business Spins Off is it a CRASH?

Aditya Birla Fashion and Retail Ltd (ABFRL) witnessed a dramatic 66% plunge in share price on May 22 as its much-anticipated demerger with Madura Fashion & Lifestyle (MFL) took effect.

ABFRL Shares Post-Demerger

• Opening Price (May 22): ₹97 per share
• Intraday Low: ₹88.80 per share
• Previous Close (May 21): ₹269.15 per share

The record date for the demerger was May 22, leading to a massive price change in ABFRL's share price as per the new valuation structure post-spin-off.

Demerger Details: Key Highlights

The demerger board initially approved the ABFRL move last year and was carried out through a vertical split of its MFL division.

Here's how the restructuring was planned:

• 1:1 Share Allotment:
  • For every equity share of ABFRL (face value ₹10), shareholders receive one equity share of ABLBL.
  • Allotment applicable to shareholders as of the record date (May 22).
• Listing of New Entity:
  • ABLBL is to be listed on BSE and NSE.
• Purpose of Demerger:
  • To establish two independent listed companies with separate capital and growth strategies.

Company Portfolio: Brands Under ABLBL

The newly formed Aditya Birla Lifestyle Brands Ltd will house a strong portfolio of premium and casual wear brands, including:

• Premium Brands: Louis Philippe, Van Heusen, Allen Solly, Peter England, Reebok
• Casual Wear: American Eagle, Forever 21
• Innerwear: Van Heusen Innerwear line

Financial Restructuring: Debt & Capital Plans

As part of the demerger, the company's financial structure has been realigned:

Debt Allocation

• Total ABFRL Debt (as of March 31, 2024): ₹3,000 crore
• Transferred to ABLBL: ₹1,000 crore
• Remaining with ABFRL: ₹2,000 crore

Capital Raising Plans

• ABFRL aims to raise ₹2,500 crore within a year of the demerger
• Promoters will back the capital infusion

Summary

The ABFRL demerger marks a significant milestone in Aditya Birla Group's retail strategy. With ABLBL emerging as a new player in the Indian fashion retail sector, the company aims to unlock independent value for both entities.

While the share price dropped sharply, the move is part of a long term strategy to streamline operations and enhance brand focus. Investors will now have access to both hold ABFRL and ABLBL in equal stakes, each poised for focused growth.