Aditya Birla Fashion Q3 Review: Motilal Oswal Retains 'Neutral' On The Stock, Lowers Target Price — Here's Why

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Motilal Oswal Report

Aditya Birla Fashion and Retail Ltd.’s revenue growth remained muted at ~3% YoY (in line) in Q3 FY25. The growth was driven mainly by Ethnic and TMRW (to be part of demerged Aditya Birla Fashion), whereas growth remained muted in Lifestyle Brands (robust LTL offset by weak wholesale) and Pantaloons (shift in Pujo dates).

Ebitda was up 15% YoY (11% beat), driven by broad-based improvement in profitability, with ~150bp YoY expansion in consolidated Ebitda margin.  Recently, Aditya Birla Fashion successfully raised $490 million (Rs 42.4 billion) through QIP and preferential issuance to the promoter and Fidelity group, resulting in the complete deleveraging of the company. 

Management expects to complete the demerger in the next two-three months. After the demerger, Aditya Birla Fashion will start with a net debt of Rs 7 billion, while demerged Aditya Birla Fashion will have a net cash of Rs 13 billion.

We raise our FY25-26E Ebitda by 6-7%, primarily led by better profitability in demerged Aditya Birla Fashion, while earnings improve sharply on account of lower interest costs after the recent fundraise.

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