Aditya Birla Fashion and Retail Limited (ABFRL) has approved a preferential issue of shares worth approximately Rs 2,379 crore. This fund-raising move will involve the issuance of shares to the promoter group and qualified institutional buyers (QIBs). The capital raised will result in an increase in Pilani Investment and Industries’ shareholding in ABFRL from its current 0.37% to 3.9%.
The board of ABFRL approved the issuance of up to 4,08,72,580 equity shares at an issue price of Rs 317.45 per share, which amounts to a total of Rs 1,297.5 crore for the promoter group. The rest of the funds, amounting to Rs 1,081.25 crore, will be raised by issuing shares to QIBs at an issue price of Rs 272.37 per share.
Prominent institutional investors, including Fidelity Blue Chip Growth Fund, Fidelity Blue Chip Growth Commingled Pool, and others, are expected to participate in the QIB portion of the issue.
The announcement of the preferential issue resulted in ABFRL shares trading 0.43% lower at Rs 269.20. Over the past year, the stock has underperformed the benchmark indices, giving a return of less than 5%.
What This Means for ABFRL Future
Following the successful completion of this fund-raising initiative, Pilani Investment and Industries, a key investor in ABFRL, will see a substantial increase in its shareholding from 0.37% to 3.9%, reflecting a significant strengthening of its position in the company. The new shares will bring in the necessary funds to support ABFRL’s continued business expansion, including its retail business and ethnic brands.
The Demerger and New Entity: ABLBL
In a significant restructuring move, Aditya Birla Fashion and Retail Limited had earlier announced the demerger of its Madura business, which will be spun off into a separate, newly listed entity named ABLBL. The Madura business will continue to house ABFRL’s premium lifestyle brands such as Louis Philippe, Van Heusen, Allen Solly, Peter England, Simon Carter, and youth fashion brands like American Eagle and Forever 21. ABLBL will also oversee the sportswear brand Reebok, for which ABFRL holds a long-term licensing agreement in India.
Meanwhile, ABFRL will retain control over its retail operations under the brands Pantaloons and Style Up. It will also continue to manage a growing portfolio of ethnic brands, including Sabyasachi, Shantanu & Nikhil, House of Masaba, and Tarun Tahiliani. Other premium ethnic brands such as Jaypore, Tasva, and the TCNS portfolio will also remain under ABFRL’s umbrella.
Impact of the Fund-Raising on the Business
The preferential issue will provide ABFRL with significant capital that will be used to fuel the company’s growth plans, including investments in expanding its retail operations, improving its product offerings, and bolstering its presence in the ethnic and lifestyle sectors. This move is also expected to improve the financial stability and flexibility of the company, allowing it to navigate market challenges more effectively and pursue future growth opportunities.
The increased stake of Pilani Investment and Industries in the company signals a strong endorsement of ABFRL’s business strategy, particularly its focus on high-growth areas like ethnic wear, premium lifestyle brands, and sportswear. Pilani’s increased shareholding could also play a role in ABFRL’s future corporate governance and strategic direction.
Looking Ahead
While Aditya Birla Fashion and Retail Limited stock has faced challenges in the short term, this capital raise and demerger are set to provide the company with a stronger foundation for long-term growth. The company’s focus on expanding its retail business and ethnic brands, alongside its premium sportswear division, positions ABFRL well for success in the evolving fashion and retail markets.
In conclusion, Aditya Birla Fashion and Retail Limited Rs 2,400 crore preferential issue marks a significant milestone in the company’s strategic evolution, providing the necessary capital to strengthen its market position and further expand its presence across diverse retail segments.
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