Aditya Birla Fashion & Retails Right Issue (July 2020) Review

Published on Tuesday, July 21, 2020 by Dilip Davda

Aditya Birla Fashion & Retails (ABFRL) is one of India's largest pure-play fashion and lifestyle companies in terms of revenue with a strong bouquet of leading fashion brands and retail formats across various segments and categories with pan-India distribution (source: Wazir Advisors Report). Company's portfolio comprises the Madura Segment which includes lifestyle brands, fast fashion, global brands, innerwear and other businesses, and the Pantaloons Segment. While Madura Segment holds the branded apparel and accessories business, Pantaloons Segment houses the large format retail business under the Pantaloons brand.

The company has a pan India distribution network comprising of 3,031 stores covering a footprint of approximately 8.04 million square feet, over 25,000 multi-brand outlets and 6,514 SIS across departmental stores, as on March 31, 2020.

ABFRL is offering 90465693 equity shares of Rs. 10 each at a price of Rs. 110 per share as a rights offer to its existing shareholders in the ratio of 9 shares for every 77 shares held as on record date of 01.07.2020. Issue has already opened for subscription on 08.07.20 and is closing on 22.07.20. Shareholders opting for applying full entitlement can also bid for additional shares which will be allotted in proportion of availability. Applicants have to pay Rs. 55 per share on application and the balance Rs. 55 in two installments of Rs. 27.50 each as allotment and final call money when called by the company. ABFRL will be raising Rs. 995.12 cr. from this offer. Amount so raised will be used for repayment of certain borrowings (Rs. 745 cr.), General corpus needs (Rs. 244.26 cr.) and the balance money (Rs. 5.86 cr.) will be used as issue related expenses.

This issue is jointly lead managed by ICICI Securities Ltd., SBI Capital Markets Ltd., Axis Capital Ltd., BNP Paribas and CLSA India Pvt. Ltd. while Link Intime India Pvt. Ltd. is the registrar to the issue. Post allotment, shares will be listed on BSE and NSE.

Post issue, company's current paid up equity capital of Rs. 773.97 cr. will stand enhanced to Rs. 864.45 cr.

For the year last two fiscals, on a consolidated basis the company has posted turnover/net profit (loss) of Rs. 8182.50 cr. / Rs. 321.22 cr. (FY19) and Rs. 8853.16 cr. / Rs. -(165.02) cr. for (FY20). For FY20 it has done higher provisioning for finance cost Rs. 424.71 cr. (against Rs. 187.42 cr. for FY19) and Rs. 885.31 cr. for depreciation and amortization (against Rs. 282.33 cr. for FY19).

Thus its issue price is at a negative P/E. However, considering group's fancy, issue is expected to be well responded. Its NAV stood at Rs. 13.80 as on 31.03.20.

On share price movements, it was quoted at Rs. 127.65 on the last cum-right trading day (29.06.20), Rs. 125.35 on first ex-right trading day (30.06.20). Its last traded price is Rs. 113.45 (20.07.20).

With this offer price, the company is aiming at a market cap of Rs. 9508.95 cr.

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. Above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in these offers.

(SEBI registered Research Analyst-Mumbai).