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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 value/Ebitda (earlier ~12 times FY26E enterprise value/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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