Madura Fashion and Lifestyle, a prominent player in the fashion and lifestyle sector, is poised for a substantial reduction in debt levels following its impending demerger from Aditya Birla Fashion and Retail (ABFRL). Management discussions with analysts have shed light on the company's strategic move, indicating a shift towards independent growth trajectories for both entities.
In a recent analyst meeting convened after the ABFRL board's nod for the vertical demerger, Madura Fashion and Lifestyle's management outlined the rationale behind the decision, emphasising the desire for each vertical to pursue tailored opportunities and drive growth autonomously.
The board's approval last week paved the way for the vertical demerger of Madura Fashion and Lifestyle business from ABFRL, culminating in the formation of a new entity named Aditya Birla Lifestyle Brands (ABLBL). Post-demerger completion, ABLBL will be listed as a separate entity.
The demerger timeline is estimated at around 12 months, contingent upon the merger of TCNS within the business, anticipated within four months.
ABFRL, in its consolidation phase, highlighted limited avenues for meaningful acquisitions in the near term. The company intends to utilise a fundraising of Rs 2,500 crore to bolster growth initiatives across its portfolio of brands, with a focus on Value Retail, Ethnic Portfolio, Luxury, and Digital brands like TMRW. This investment will also aid in debt repayment, although the precise capital structure is yet to be finalised.
Emphasising the growth potential within the ethnic segment, ABFRL earmarked a significant portion of the investment towards this category, projecting a revenue potential of Rs 2,000 crore annually, with prospects to scale up to Rs 4,000-5,000 crore.
TMRW, a digital-centric brand, will pursue its funding path independently of the planned fundraising activities, ABFRL clarified.
While 75 per cent of the Rs 2,000 crore debt retained by ABFRL is long term, the remainder is categorised as short-term or working capital.
In contrast, Madura Fashion and Lifestyle anticipates a notable reduction in debt levels despite investment in growth initiatives. Management underscored the vast growth opportunities in the sportswear and innerwear segments, highlighting the potential for core brand strengthening through positive cash flows generated by existing brands.
As Madura Fashion and Lifestyle charts its course post-demerger, the strategic realignment promises to unlock value and foster sustained growth in the fiercely competitive fashion and lifestyle landscape.
