Aditya Birla Fashion - Step In The Right Direction; Upgrading To A Buy: Anand Rathi

Anand Rathi Report

We believe hiving off its cash generating business, Madura, is a step in the right direction for Aditya Birla Fashion and Retail Ltd. It simplifies its business structure and betters capital allocation. The Madura entity has four industry-leading power brands with high profitability, return on capitla employed and strong cash generation.

Further re-rating is on the cards once we have a clearer capital allocation strategy. We upgrade our rating to a Buy with a higher target price of Rs 294, ~14 times FY26E enterprise /Ebitda (earlier ~12 times FY26E enterprise /Ebitda).

The demerged Aditya Birla Fashion entity (housing Pantaloons, ethnic, D2C and luxury brands) comprises the mostly loss-making businesses and a large part of the debt.

Risks: Keen competition denting revenue growth, slower turnaround for the newer initiatives, mounting debt.

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