Aditya Birla Fashion and Retail Ltd (ABFRL) on Monday announced to demerge its Madura Fashion & Lifestyle business from the company into a separate listed entity.

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The board of ABFRL at its meeting on Monday has authorised the management of the company to evaluate the vertical demerger of Madura Fashion & Lifestyle business, according to a company statement.

"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," it said.

The Madura Fashion & Lifestyle (MFL) business consists of four fast fashion brands - Louis Phillippe, Van Heusen, Allen Solly and Peter England - along with casual wear brands viz. American Eagle and Forever 21.

It also has a brand license for sportswear brand Reebok and the innerwear business under Van Heusen, which will be demerged into a separate listed entity, it said.

"This portfolio has built a leadership position over a long period of time and has a proven track record of delivering consistent revenue growth, profitability, strong free cash flows and high return on capital," it said, adding that "the entity will have a strong balance sheet to power its future growth aspirations".

After necessary approvals, MFL's demerger will be implemented through an NCLT scheme of arrangement, and all shareholders of ABFRL will have identical shareholding in the newly formed entity, it added.

"The proposal will be subject to all statutory approvals from ABFRL Board of Directors, shareholders, creditors, regulators, along with other customary approvals," it said.

Aditya Birla Group Chairman Kumar Mangalam Birla said the move is designed towards a more simplified and streamlined architecture to unlock distinct opportunities for value creation and is poised to significantly enhance long-term stakeholder value.

"The evolution of this portfolio has seamlessly mirrored the shift in consumption trends, with a play encompassing all large value creation opportunities. As the platform embarks on its next transformational phase of growth, there is scope to re-evaluate capital structures to optimise different parts of the portfolio," he said.

Post demerger, the remaining ABFRL business will be focused on high-growth segments where there are tailwinds from a shift from unbranded to branded, premiumisation, rise of super premium & luxury, and rapid growth in Gen Z-focused digital-first brands, it said. Shares of Aditya Birla Fashion and Retail Ltd settled 3.02 per cent higher at Rs 211.70 apiece on the BSE.