ABFRL shares: Aditya Birla Fashion jumps 15% amid demerger news

Shares of Aditya Birla Fashion and Retail Ltd (ABFRL) hit their upper circuit limit during the early trading session on Tuesday as the company announced its demerger plans. However, the stock gave up its early gains partially as the session progressed.

The stock surged 15 per cent to Rs 243.45 on Tuesday, hitting the second circuit limit, commanding a total market capitalization of more than Rs 24,700 crore. However, the stock gave up its gains to trade at Rs 230.85 at 9.40 am, up 9 per cent from its previous close at Rs 211.70.

The board of directors of Aditya Birla Fashion and Retail (ABFRL) authorized the management of the company to evaluate the vertical demerger of Madura Fashion & Lifestyle business from ABFRL into a separate listed company, said its exchange filing.  However, the proposal is subject to approval from the company board, shareholders, regulatory and other stakeholders.

"The proposed demerger will enable the creation of two separately listed companies as independent growth engines with distinct capital structures and parallel value creation opportunities," ABFRL's filing said. Subsequent to necessary approvals, the demerger will be implemented through an NCLT scheme of arrangement.

The Madura Fashion & Lifestyle business segment (MFL) will be demerged into a separate listed entity. It consists of four lifestyle brands namely- Louis Phillippe, Van Heusen, Allen Solly & Peter England- along with casual wear brands- American Eagle and Forever 21; sportswear brand Reebok and the innerwear business under Van Heusen.
 

Subsequent to the completion of the proposed demerger, ABFRL will raise growth capital within 12 months to infuse strength into its balance sheet, positioning itself well to pursue the large growth opportunity that lies ahead of it, the filing added.