Buy Aditya Birla Fashion; target of Rs 200: Motilal Oswal

Motilal Oswal 's research report on Aditya Birla Fashion

Flipkart would invest INR15b as part of a strategic investment in ABFRL, taking 7.8% equity stake at a price of INR205/share, a ~37% premium (on 22nd Oct’20 closing price). It would be entitled to a board seat and Right of First Refusal for 1–5 years. Promoter stake in the company would fall to 55.1%, from 59.8% currently, on a post-equity basis.

Outlook

We increase TP to INR200 (v/s INR180 earlier). We raise our target multiple, ascribing 18x EV/EBITDA to Lifestyle, 16x EV/EBITDA to Pantaloons, and 1x EV/sales to other businesses – this is still at a 33% discount to Westside’s target EV/EBITDA multiple of 27x. We believe the sharp reduction in debt and earnings accretion would certainly help lower risk and improve growth. Maintain Buy.

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