In a major consolidation exercise, the Aditya Birla Group on Sunday said it would bring all branded apparel retail units under a Rs 5,290-crore single entity — Aditya Birla Fashion and Retail (ABFRL).
The move will help the group strengthen business, expand its reach and address strong competition posed by e-commerce players who have been growing their customer base rapidly.
The Kumar Mangalam Birla-led Group, which also has interests in telecom, fiber, metals and financial services, will first separate Madura Fashion and Madura Lifestyle, two major branded retailing arms from their respective companies and bring them under an existing listed company Pantaloon Fashion & Retail. This will then be renamed ABFRL.
Madura Fashion is a branded apparel retailing division of Aditya Birla Nuvo, while Madura Lifestyle is a luxury retailing division of Madura Garments Lifestyle Retail Company. Madura sells popular brands such as Louis Philippe, Van Heusen and Allen Solly, while Pantaloons is a large apparel retail company.
“We are combining the businesses of Madura Garments and Pantaloon through a vertical de-merger and creating a listed apparel retail company that will be by far the largest in its space,” group chairman Kumar Mangalam Birla said.
ABFRL will have an operating profit of Rs 493 crore, and a retail network of 1,869 exclusive stores across 4.8 million square feet.
Since the companies are listed, the merger will include a swap ratio – the rate at which shareholders of one company are given shares in another after considering the respective valuations.
Under the scheme, which has to be approved by the courts, shareholders of Aditya Birla Nuvo will get 26 new equity shares of the new company for every five equity shares held. Similarly, shareholders of Madura Garments Lifestyle Retail will get seven new equity shares of the new company for every 500 equity shares held.
E-commerce firms including Flipkart, Snapdeal and others are giving tough competition to traditional retailers, by luring customers via large discounts. The competition has already prompted others including the Tata Group and the Future Group to explore e-tailing opportunities.
“E-commerce is throwing up opportunities. If possible we will first partner with e-commerce players,” said Ashish Dixit, CEO, Madura Fashion & Lifestyle.