Tuesday will see further attention paid to Aditya Birla Fashion and Retail Ltd. (ABFRL) shares as the firm announced that it intends to demerge its Madura Fashion & Lifestyle division into a distinct listed company. It stated, meanwhile, that the plan is contingent to approval from the company's board, shareholders, regulatory bodies, and other stakeholders.

According to the firm's exchange filing, the ABFRL board of directors authorized the management team to assess the vertical demerger of the Madura Fashion & Lifestyle business from ABFRL into a separate listed company during their meeting.

"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," the filing stated.

Aditya Birla Fashion and Retail's shares increased 3.02 percent during the day to close at Rs 211.70 on Monday. With a total market valuation of over Rs 20,000 crore, the specialized retail business was highly valued. The Madura Fashion & Lifestyle business unit (MFL) is going to be split off into its own publicly traded company. It includes the following brands: American Eagle and Forever 21, sportswear company Reebok, innerwear under the Van Heusen brand, and four lifestyle brands: Louis Phillippe, Van Heusen, Allen Solly, and Peter England.

The demerger will be carried out through an NCLT plan of arrangement after receiving the required approvals, and each ABFRL shareholder will have an identical number of shares in the newly created company. Over an extended duration, the previously stated united organization has established itself as a leader.

"Subsequent to the completion of the proposed demerger, ABFRL will raise growth capital within 12 months to infuse strength into its balance sheet, positioning itself well to pursue the large growth opportunity that lies ahead of it," stated the filing.

Following the demerger, ABFRL will concentrate on high-growth markets where there are benefits to premiumization, the move from unbranded to branded products, the emergence of ultra premium and luxury goods, and the quick expansion of Gen Z-focused digital first businesses. Several high growth areas in sizable addressable markets with potential for value generation make up its portfolio.

A distinct strategy that is in line with each business sector will be the focal point of the reorganized organization. "All of these companies have always run independently under their own CEOs," stated Aditya Birla Fashion and Retail MD Ashish Dikshit. "With a market value of over $100 billion, the fashion and clothing industry in India is expected to grow by double digits over the long run. The firms are well-positioned for long-term development and wealth generation owing to the streamlined structure," he stated.