Aditya Birla Fashion and Retail demerger may unlock Rs 32k crore value for shareholders

Aditya Birla Fashion and Retail may achieve breakeven EBIDTA by FY27: Jefferies report

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26 Aug, 2025 12:21

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The proposed demerger of Aditya Birla Fashion and Retail (ABFR) will unlock Rs 32,000 crore value for the investors, say market participants.

The company has proposed to demerge its western wear brands including Louis Phillipe, Van Heusen, Peter England and Allen Solly into a separate entity named Aditya Birla Lifestyle Brands (ABLB). Post the dermerger, ABFR will house some high growth ethnic wears brands of the company including TCNS, Tasva along with Pantaloons.

As per the proposed arrangement whose record date is May 22, investors get one share of ABLB for each share of ABFR they own. US based brokerage house Jeffries has valued the shares of ABLB at Rs 215 per share while shares of ABFR have been valued at Rs 100 per share. The development assumes significance as the company also raised Rs 4,300 crore via institutional placement recently to fund the growth of multiple growth platforms within the demerged ABFR.

According to industry experts, following the demerger, ABLB will have access to internal cash flows to a tune of Rs 300 crore every year to pursue growth opportunities. On the other hand, ABFR will start with net cash flow of Rs 1,400 crore every year to achieve self-sustenance.

According to Jeffries, ABFR may break even in terms EBIDTA by FY27 following the demerger of ABLB, said Jefferies India in a research report dated May 20. According to the report, ABFR will house some high growth ethnic wears brands of the company including TCNS, Tasva along with Pantaloons.

“Mgmt. focus is on improving profitability in some areas (Pantaloons, TCNS), while aggressively expanding others (value retail, designer brands, Tasva) and raising capital in TMRW. Execution will be key to reduce PBT losses, even as opportunity is large if the mgmt. does well on executing its strategy.” Said Jefferies in a report dated May 20.

On the other hand, the demerged entity ABLB will house some of the biggest revenue generating brands of Aditya Birla Fashion including Louis Phillipe, Van Heusen, Peter England and Allen Solly. Put together, these four entities make a revenue of Rs 67 billion(Rs 6,700 crore), according to Jefferies.

“ABLB will also house three faster-growing businesses, namely innerwear & athleisure (under Van Heusen), India franchise for Reebok and American Eagle. ABLBL will be profitable, with high-ROCE and cash-generating entity, which we expect to grow at 10-11% CAGR over FY25-27e with modest margin expansion and hence 15% Ebitda CAGR.” Jeffries report dated May 20 said.

Jeffries currently has a Buy rating on ADFR with a target price of Rs 315 per share. Shares of ABFR closed at Rs 271.15 apiece, down 2% on Wednesday at 3 PM.