Aditya Birla Fashion Shares Dips 66%, but Don’t Panic—It’s Just the Demerger Math

Checked your portfolio today and saw shares of Aditya Birla Fashion Retail? Yeah, that nosedive wasn’t a glitch—it was the financial equivalent of a soap opera plot twist, leaving one wondering what just happened. Shares of the company took a sharp 66% tumble from its previous close as the stock officially kicked off its demerger today—stripping out the value of the Madura Fashion and Lifestyle business into a separate entity, Aditya Birla Lifestyle Brands.

Shares of Aditya Birla Fashion closed at Rs 268.95 on Wednesday, but opened at Rs 98 on the National Stock Exchange today. This was almost 64% lower than yesterday’s close, and this fall coincided with the record date of the demerger of the Madura Fashion business.

At first glance it may seem that the shares of Aditya Birla Fashion are in a sell-off spiral, but this steep decline is a result of technical adjustment. The opening price of the stock was sharply below its previous closing price and this was not due to any negative triggers, instead the share price adjusted due to the demerger.

Today is the record date, when the eligible shareholders of Aditya Birla Fashion will be determined, to whom the equity shares of Aditya Birla Lifestyle would be allotted in terms of the scheme. From today, the shares have stopped factoring in the value of the demerged business to reflect the split and hence the stock price adjusted accordingly. Hence, this 66% fall is not a result of any financial downturn.

Although the shares of the company have fallen today, the extent of this fall is not what it appears. At 1:18 PM Aditya Birla Fashion shares were trading 8% below its today’s open on the National Stock Exchange.

Aditya Birla Fashion Demerger

The plan to demerge Madura Fashion and Lifestyle into a separate listed entity, Aditya Birla Lifestyle Brands, received the board’s approval in 2024. Under the scheme, shareholders of Aditya Birla Fashion will receive one share in Aditya Birla Lifestyle for every share held in the former entity, and hence the demerger ratio was 1:1. According to JM Financial, the new entity will join the bourses mid-to-end June 2025.

Aditya Birla Lifestyle will include well-known brands such as Louis Philippe, Van Heusen, Allen Solly, Peter England, and Reebok, along with casual wear labels like American Eagle and Forever 21, and the innerwear line under Van Heusen. While the erstwhile Aditya Birla Fashion will now house brands such as Pantaloons and Styleup, along with ethnic brands, luxury retail and digital first brands.

"Lifestyle brands are expected to witness stable growth rate led by network expansion and mid-single digit SSSG growth, while the other brands like Reebok and Van Huesen Innerwear will do the heavy lifting for driving future growth (for Aditya Birla Lifestyle)," JM Financial said.

Reports said that Rs 1,000 crore out of erstwhile Aditya Birla Fashion’s total debt of Rs 3,000 crore (as of March 31, 2024) will be transferred to the new entity as part of the restructuring. On Wednesday, NSE said trading in new contracts will begin from today, with a revised lot size of 2,600 shares.