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Kumar Mangalam Birla, chairman of Aditya Birla Group, during an interview with Mint in Mumbai on Sunday. Photo: Abhijit Bhatlekar/Mint
Kumar Mangalam Birla, chairman of Aditya Birla Group, during an interview with Mint in Mumbai on Sunday. Photo: Abhijit Bhatlekar/Mint

Aditya Birla Group to merge apparel business units

Group will merge Madura Garments with Pantaloons Retail

Mumbai: The Aditya Birla Group will consolidate its garments business into a single entity by carving out premium apparel maker Madura Garments Lifestyle Retail Co. Ltd from Aditya Birla Nuvo Ltd and merging it with Pantaloons Fashion and Retail India Ltd to create India’s largest branded clothing company with annual sales of 5,290 crore.

The consolidation will unlock shareholder value and give investors an opportunity to invest in the fast-growing fashion space through Aditya Birla Fashion and Retail Ltd, the name of the new entity that will house the group’s apparel business, said Kumar Mangalam Birla, chairman of the Aditya Birla Group.

The boards of Aditya Birla Nuvo, Pantaloons Fashion and Madura Garments at their respective meetings held on Sunday approved the consolidation of the branded apparel businesses. The boards have also approved the swap ratio recommended by independent valuers.

Other businesses that will be separated from the respective companies and merged with Pantaloons Fashion are Madura Fashion, a branded apparel retailing division of Aditya Birla Nuvo, and Madura Lifestyle, an apparel retailing division of Madura Garments Lifestyle.

Shareholders of Aditya Birla Nuvo will get 26 new shares of Pantaloons Fashion for every five held in Aditya Birla Nuvo, pursuant to the demerger of Madura Fashion. Shareholders of Madura Garments Lifestyle will get seven new shares of Pantaloons Fashion for every 500 held in Madura Garments pursuant to the demerger of Madura Lifestyle. Preference shareholders of Madura Garments will get one share of Pantaloons Fashion.

On completion of the transaction and issuance of new stock, the existing base of 92.8 million shares of Pantaloons Fashion will expand to 772.8 million. An existing shareholder holding 100 equity shares in Aditya Birla Nuvo will continue to hold 100 shares of Aditya Birla Nuvo and, in addition, will get 520 shares of Pantaloons Fashion.

“This move to bring all the branded apparels businesses under one roof will accelerate the growth of these businesses and help exploit emerging opportunities presented by the rapidly growing Indian apparel market," said Pranab Barua, business director, apparel and retail business, Aditya Birla Group.

The Aditya Birla Group had bought Pantaloons from rival Kishore Biyani’s Future Group in 2012.

The apparel category is the largest contributor to the organized retail market in India and is expected to grow at an annual average pace of 18% over the next few years.

Aditya Birla Fashion will have a retail network of 1,869 stores across India. It had a combined sales and earnings before interest, tax, depreciation and amortization (Ebitda) of 5,290 crore and 493 crore, respectively, for the 12 months ended 31 December.

The consolidation will also help synergize operations on various fronts including sourcing, real estate and technology, said Ashish Dikshit, chief executive officer, Madura Fashion. The transaction is expected to be completed in the next six-nine months.

Aditya Birla Fashion has become the largest fashion company in India, said Pankaj Jaju, group head, strategic corporate group, Axis Bank Ltd.

The combined entity will have a debt of about 1,800 crore, which includes about 1,300 crore of debt that it had assumed from the acquisition of Pantaloons Fashion.

The merged company will open about 200 stores a year on an average for the brands and 30 Pantaloons department stores.

Private labels, including Van Heusen and Louis Philippe, will contribute to about 60% of the combined company’s revenue, which will help the company’s operating margin to strengthen further, said Jaju of Axis Bank.

Amritha Pillay contributed to this story.

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