Emkay Global Financial's report on Aditya Birla Fashion and Retail
ABFRL has approved a Rs22bn capital raise from GIC Singapore through a mix of fresh equity (Rs3bn) and convertible warrants (Rs19bn) at Rs289/share. GIC will pay Rs7.7bn for fresh equity + a premium for warrant subscription now (~25%), followed by Rs14.3bn within the next 18 months. After the investment, ABFRL will see a 7.5% equity dilution. With this raise, ABFRL has strengthened its balance sheet for the medium term and expects to beat its earlier stated target of Rs210bn top-line by FY26 (~15% FY20-26E CAGR). A majority of the funds would go toward ramping up Pantaloons/Ethnic/Innerwear. Q4 EBITDA was 35-70% ahead of estimates, led by strong traction in Lifestyle (rev/sqft up ~15% vs. pre-covid). Pantaloons recovery was slower at 90%. It expects ~400/80/70 store additions in Lifestyle/Pantaloons/Ethnic after modest additions in FY22 due to challenges.
We largely maintain FY24 estimates. The FY26E top-line target is factored in, but we remain conservative on margins by ~150bps. Retain Buy with TP of Rs360 (Rs400 earlier) on 26x Jun’24 pre-IndAS EBITDA (28x earlier). Multiple cut is led by 50bps higher WACC.
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