Aditya Birla Fashion and Retail witnessed a surge in its shares on Tuesday following the announcement that the company’s board has given authorization for exploring the possibility of spinning off its Madura Fashion & Lifestyle business into a separate listed entity.

What Happened: The proposed demerger aims to create two separately listed companies, each serving as independent growth engines with distinct capital structures and potential for value creation, according to a company release.

Following necessary approvals, the demerger will be executed through an NCLT scheme of arrangement, ensuring that all shareholders of ABFRL maintain identical shareholding in the newly formed entity.

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After the demerger, ABFRL will focus on high-growth segments driven by factors such as the shift from unbranded to branded products, premiumisation, the emergence of super premium and luxury segments and the rapid growth of Gen Z-focused digital-first brands.

Upon completion of the proposed demerger, ABFRL plans to raise growth capital within 12 months to strengthen its balance sheet and capitalise on growth opportunities.

Following the demerger, ABFRL’s portfolio will comprise its value retail business, including brands like Pantaloons and Style Up; its ethnic portfolio; luxury brands like the Collective, Galleries Lafayette and select luxury brands; and digital brands like TMRW.

Price Action: Aditya Birla Fashion’s stock climbed 14.39% to ₹242.10 in morning trade on Tuesday. Meanwhile, shares of TCNS, which Aditya Birla Fashion is set to acquire, were also up over 12%.

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