ABFRL Demerger Shocks Investors: Why The Fashion Stock Crashed Over 65% In A Day

The shares of Aditya Birla Fashion and Retail (ABFRL) settled at Rs 99 on the NSE on Thursday as the company demerged Aditya Birla Lifestyle Brands Ltd (ABLBL) from itself.

The restructuring will lead to the listing of two separate entities on the exchange as the demerged companies will be listed on the BSE and the NSE by next month.

The shares of Aditya Birla Fashion & Retail fell 65% against the previous close at Rs 268.95 on the NSE.

This decline has taken place because the value of the new businesses has been subtracted from the stock prices. It is the fair value that has been determined by the market for Aditya Birla Fashion & Retail and the value of the restaurant entity – Aditya Birla Lifestyle Brands – shall be determined on their respective listing.

Previously, ABFRL had announced the record date for the spin-off of the company on May 22, in the ratio 1:1, which implies that one share of ABLBL is held for each share of ABFRL.

Only the shareholders who own the stock as of the record date will be eligible to receive shares of the demerged entities and those investors who buy the stock on or after the ex-demerger date will not be considered eligible.

The listing of the equity shares proposed by the resulting company, which is Aditya Birla Lifestyle Brands, is subject to the applicable regulations and the necessary approvals.

The currently listed entity, Aditya Birla Fashion& Retail will house brands such as Pantaloons, the Ethnic Segment, which is housed under TCNS Clothing, designer brands like Sabyasachi, Tarun Tahiliani, Masaba, Shantanu-Nikhil, Premium brands like Tasva, Jaypore, and Luxury retail brands like The Collective and Galaries Lafayette, which has still not been launched.

On the othe hand all the western wear legacy brands, growth brands like Reebok, American Eagle and Van Heusen innerwear, along with the Madura Fashion, Louis Philippe, Allen Solly, Peter England, will be housed by the demerged entity.