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Motilal Oswal Report
Aditya Birla Fashion and Retail Ltd. announced the acquisition of TCNS Clothing Ltd. in a two-step deal for a total value of Rs 29 billion, i.e., 10% below its current market cap of Rs 32.2 billion with Rs 16.5 billion of cash payout for 51% stake and 5.4% dilution for the remaining 49% stake.
With a relatively low net debt of Rs 25 million, Aditya Birla Fashion's valuation in terms of enterprise value/sales and EV/Ebitda for FY23E at 2.3 times/66.5 times.
Assuming a recovery to 8% Ebitda margin (pre Indian Accounting Standard 116) in FY25E, a middle ground from the current 3.5% and 16% in FY20, TCNS Clothing would be valued at 22.6 times EV/Ebitda similar to Aditya Birla Fashion's FY25E EV/Ebitda (pre IND-AS 116) of 22 times at the current price.
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