Aditya Birla Fashion and Retail Limited (ABFRL) experienced a sharp decline in its share price, dropping by 67% to ₹88.80 during Thursday’s trading session. This significant fall coincides with the record date for the demerger of its Madura Fashion & Lifestyle division, which is being spun off into a newly formed entity, Aditya Birla Lifestyle Brands Ltd (ABLBL). The demerger, approved by ABFRL’s board last year, is part of a broader strategy to establish two independent companies with distinct operational approaches and financial structures.
Impact of the Demerger on Share Performance
The steep drop in ABFRL’s share price is directly linked to the mechanics of the demerger. Under the scheme, ABFRL shareholders will receive one equity share in ABLBL for every share held in ABFRL. Following this announcement, the stock, which closed at ₹269.15 on Wednesday, opened at ₹97 on Thursday and fell further to ₹88.80 — marking a dramatic 67% decrease from the previous day’s closing price. Even excluding the demerger adjustment, the stock declined by 9.4% during the session based on its opening value.
Restructuring Plan: Key Details
As part of the restructuring, the Madura Fashion & Lifestyle (MFL) division — which includes well-known brands such as Louis Philippe, Van Heusen, Allen Solly, Peter England, Reebok, American Eagle, and Forever 21 — will be transferred to ABLBL. The innerwear division under Van Heusen will also be included. This separation is being executed through a scheme of arrangement sanctioned by the National Company Law Tribunal (NCLT), ensuring that existing ABFRL shareholders will maintain the same ownership proportions in both ABFRL and ABLBL after the demerger.
Financial Restructuring and Strategy
As part of the financial reorganization, ABFRL will transfer ₹1,000 crore of its total ₹3,000 crore debt (as of March 31, 2024) to ABLBL, retaining ₹2,000 crore on its books. The company also plans to raise ₹2,500 crore in fresh capital within one year post-demerger, with a portion expected from promoter contributions. This capital strategy aims to strengthen the balance sheets of both ABFRL and ABLBL and enable targeted growth in their respective business segments.
Future Outlook for ABFRL and ABLBL
The demerger is designed to enable ABFRL and ABLBL to focus more sharply on their core strengths and strategic goals. With distinct operational and capital frameworks, both companies are expected to improve efficiency and unlock greater value for shareholders. As the market continues to absorb the implications of the restructuring, investors and analysts will be watching closely to assess the long-term performance and strategic direction of both entities.