Aditya Birla Fashion and Retail Ltd (ABFRL), is planning to vertically demerge the Madura Fashion & Lifestyle (MFL) business into a separate listed company.

The board of ABFRL has authorised the management of the company to evaluate
the vertical demerger, the company said in a regulatory filing.

The proposed demerger will lead to the creation of two separately listed companies as independent growth engines with distinct capital structures and parallel value creation opportunities.

The MFL business segment consists of four lifestyle brands — Louis Phillippe, Van Heusen, Allen Solly and Peter England.

The casual wear brands include American Eagle and Forever 21, sportswear brand Reebok and the innerwear business under Van Heusen. All of these will be demerged into a separate listed entity.

According to ABFRL, 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.

Further, the entity is expected to have a strong balance sheet to chart its future growth aspirations.

After necessary approvals, the demerger will be implemented through a National Company Law Tribunal (NCLT) scheme of arrangement, and all shareholders of ABFRL will have identical shareholding in the newly formed entity.

Post demerger, the residual ABFRL will be focused on high-growth segments.