Aditya Birla Group merges apparel brands into Rs5,290-cr business

Aditya Birla Nuvo Ltd (ABNL) on Sunday announced a merger of its branded apparels businesses under its listed subsidiary, Pantaloons Fashion & Retail Limited (PFRL), to create a Rs5,290 crore business, to be renamed 'Aditya Birla Fashion & Retail Limited' (ABFRL).

The company said the move would enable Aditya Birla Nuvo to unlock value for the shareholders by consolidating its branded apparels businesses.

With its large market presence in the branded fashion space in India, ABFRL will be the largest pure-play fashion lifestyle company in the country, ABNL said in a release.

Under the scheme of arrangement approved by the boards of ABNL, PFRL and Madura Garments Lifestyle Retail Company Limited (MGLRCL) – a subsidiary of ABNL, the apparel businesses of group holding company Aditya Birla Nuvo (ABNL) and of another group firm Madura Garments Lifestyle Retail Company Ltd (MGLRCL) would be demerged into listed firm Pantaloons Fashion & Retail Ltd (PFRL).

To reflect the enhanced scope of the operations post-merger, the board of PFRL has approved the renaming of the company as 'Aditya Birla Fashion & Retail Limited' (ABFRL).

"This consolidation will create India's largest pure play fashion and lifestyle company with a strong bouquet of leading fashion brands and retail formats. This move brings India's No1 branded menswear and womenswear players together," Kumar Mangalam Birla, chairman, Aditya Birla Group, said.

"The consolidation will unlock value for the shareholders by giving them an opportunity to participate in the promising fashion space directly through ABFRL", added Birla.

The businesses that will be demerged from the respective companies into PFRL include Madura Fashion, a branded apparel retailing division of ABNL and Madura Lifestyle, a luxury branded apparel retailing division of MGLRCL.

Shareholders of ABNL will get 26 new equity shares of PFRL for every 5 equity shares held in ABNL pursuant to the demerger of Madura Fashion while shareholders of MGLRCL will get seven new equity shares of PFRL for every 500 equity shares held in MGLRCL pursuant to the demerger of Madura Lifestyle.

Preference shareholders of MGLRCL will get one new equity share of PFRL.

On the completion of the transaction and issuance of new shares, the existing base of 92.8 million equity shares of PFRL will go up to 772.8 million equity shares.

The new shares will be issued directly to the respective shareholders of the transferor companies. An existing shareholder holding 100 equity shares in ABNL will continue to hold 100 equity shares of ABNL and in addition, will get 520 equity shares of PFRL.

"This move to bring all the branded apparels businesses under one roof will accelerate the growth of these businesses and help exploit emerging opportunities presented by the rapidly growing Indian apparel market," Pranab Barua, business director, apparel and retail business, said.

The apparels category is the largest contributor to the organised retailing market in India which is expected to grow at a robust CAGR of 18 per cent over next few years.

Having a combined turnover and EBITDA of Rs5,290 crore and Rs493 crore respectively for 12 months ended 31 December 2014, ABFRL will have the widest retail network in India in the fashion space with 1,869 exclusive stores pan India across 4.8 million square feet, as of 31 March 2015.

The consolidation will also enable tapping of operational synergies on various fronts such as sourcing, real estate and technology platforms, the company stated in a release.

The transaction is subject to the necessary statutory and regulatory approvals, including approvals of the respective high courts, the stock exchanges, market regulator Sebi, the respective shareholders and lenders / creditors of each of the companies. The appointed date of the scheme will be 1 April 2015. The transaction is expected to be consummated in the next 6 to 9 months.