ABFRL announced the acquisition of TCNS clothing in a two-step deal for a total value of INR29b, i.e., 10% below its current market cap of INR32.2b with INR16.5b of cash payout for 51% stake and 5.4% dilution for the remaining 49% stake. With a relatively low net debt of INR25m, the company's valuation in terms of EV/Sales and EV/EBITDA for FY23E at 2.3x/66.5x. Assuming a recovery to 8% EBITDA margin (Pre IND-AS 116) in FY25E, a middle ground from the current 3.5% and 16% in FY20, TCNS would be valued at 22.6x EV/EBITDA similar to ABFRL’s FY25E EV/EBITDA (pre IND-AS 116) of 22x at the current price.
OutlookHowever, the acquisition could potentially have an 18% impact on EPS (i.e., INR0.7 impact on EPS). Subsequently, we revise our rating to Neutral with a TP of INR245.
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Aditya Birla Fashion - 08 -05 - 2023 - motiDiscover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
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