The Board of Directors of Aditya Birla Fashion and Retail Ltd (ABFRL) on Monday authorised the management of the company to evaluate the vertical demerger of the Madura Fashion & Lifestyle business from the ABFRL into a separate listed company.

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 said.

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

The entity will have a strong balance sheet to power its future growth aspirations. Post the necessary approvals, the demerger will be implemented through an NCLT scheme of arrangement, and all the shareholders of ABFRL will have identical shareholding in the newly-formed entity, the company said.

Post the demerger, the remaining ABFRL will be focused on high-growth segments where there are tailwinds from a shift from unbranded to branded, premiumisation, rise of super premium and luxury, and rapid growth in Gen Z-focused digital-first brands.

After the completion of the proposed demerger, ABFRL will raise growth capital within 12 months to infuse strength into its balance sheet.

Kumar Mangalam Birla, Chairman, Aditya Birla Group, said, “Over the years, our fashion and retail business has grown from five brands in two categories to a dynamic portfolio of 20+ brands across all lifestyle categories.

“As the platform embarks on its next transformational phase of growth, there is scope to re-evaluate the capital structures to optimise the different parts of the portfolio. The move towards a more simplified and streamlined architecture is designed to unlock distinct opportunities for value creation. This strategic realignment is poised to significantly enhance the long-term stakeholder value.”

Shares of Aditya Birla Fashion and Retail were up 3 per cent in trade on Monday at Rs 211.70.