ABFRL Demerger: Did Aditya Birla Fashion shares really tank 67 pc? Why investors are seeing a sharp drop

Shares of Aditya Birla Fashion and Retail (ABFRL) fell sharply by 67% to Rs 88.80 on the NSE in Thursday’s trade, marking the record date for the company’s previously approved demerger of its Madura Fashion & Lifestyle business into a separate listed entity.

The 67% decline in the stock’s price is primarily due to the demerger ratio, under which shareholders of ABFRL will receive one equity share of Aditya Birla Lifestyle Brands Ltd (ABLBL) for every one equity share held in ABFRL.

The stock, which closed at Rs 269.15 on Wednesday, opened at Rs 97 on Thursday post the demerger adjustment and touched an intraday low of Rs 88.80, reflecting a 67% drop from the previous close.


However, excluding the demerger impact, the stock declined 9.4% from its opening price of Rs 97 during the day.
The demerger, approved by ABFRL’s board earlier last year, involves the vertical separation of the Madura Fashion and Lifestyle (MFL) business into a new company — ABLBL.

The move is expected to create two distinct listed entities with independent capital structures and growth strategies. ABLBL will house prominent brands such as Louis Philippe, Van Heusen, Allen Solly, Peter England, Reebok, and others, including casual wear lines like American Eagle and Forever 21, as well as the innerwear segment under Van Heusen.

The demerger was informed to be implemented through an NCLT scheme of arrangement, and post-completion, ABFRL shareholders will hold identical shareholding proportions in both ABFRL and ABLBL.

As part of the restructuring, Rs 1,000 crore of ABFRL’s total borrowing of Rs 3,000 crore (as of March 31, 2024) will be transferred to ABLBL, while the remaining Rs 2,000 crore will stay with ABFRL.

The company also plans to raise Rs 2,500 crore within 12 months of the demerger, with promoter participation.

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ABFRL share price performance

ABFRL shares have declined by 4.39% over the past 1 year, 4.52% year-to-date (YTD), and 5.38% over the past 6 months. However, in the last 3 months, the stock has gained 7.49%, while the 1-month performance shows a marginal dip of 0.04%.

On Wednesday, the shares of ABFRl closed 2.7% lower at Rs 269.15 on the BSE.

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