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Birla builds a billion-dollar apparel chain with a series of M&As

In September 2018, the Aditya Birla Group decided to sell off its struggling grocery retail chain, to focus more on apparel retailing. The sale of the grocery chain was six years after Birla acquired Pantaloon, a clothing chain, from the Future group for Rs 1,600 crore. 

Since then, the Aditya Birla group has created a sprawling apparel retail business through a series of acquisitions while shutting down its loss-making online retailing arm – ABOF in 2017.

The apparel retailing flagship, Aditya Birla Fashion & Retail, signed a series of strategic partnerships with well-known designers such as ‘Shantanu & Nikhil’, ‘Tarun Tahiliani’, ‘Sabyasachi’ and ‘House of Masaba’ to focus on apparel retailing with revenues of close to a billion dollars. 

Analysts say Birla will fund the acquisition with Rs 1,900 crore of fund inflow from GIC of Singapore which is expected in the second half of the ongoing financial year. 

“The company will have to take on incremental debt to fund the acquisition. Our rough calculations show this acquisition will be EPS (earning per share) dilutive for ABFRL,” said an analyst who added that investors have already factored in the TCNS acquisition.

“We have cut our FY2023-25 EPS estimates for ABFRL sharply by 31-58 per cent, as we bake in slower revenue growth in the core business of Madura and Pantaloons and higher A&P (advertising and promotion) expenses,” the analyst said.

Analysts are also expecting increased competition from Reliance Retail which is also ramping up its value apparel retail play. Value apparel retailing is facing intense competition with Tata’s Zudio and Shopper’s Stop brand InTune. Tata also has a significant presence in the mass brand apparel through Westside.

The Birla group company, with revenue of Rs 8,136 crore spanning retail space of 9.2 million sq. ft. (as on March 31, 2022), is also taking several steps to face the competition and TCNS acquisition is part of the strategy.

The company has a network of 3,468 stores across approximately 28,585 multi-brand outlets with 6,515 points of sale in department stores across India (as on 31st March 2022). It sells brands such as Louis Philippe, Van Heusen, Allen Solly and Peter England, established over 25 years.

Walmart-owned Flipkart, which owns a 7.8 per cent stake in ABFRL, is working closely with the Birla company to sell products via its online platform.

The company’s international brands include ‘The Collective’, India’s largest multi-brand retailer of international brands has long-term exclusive partnerships with Ralph Lauren, Hackett London, Ted Baker, Fred Perry, Forever 21, American Eagle and Reebok.

The company’s foray into branded ethnic wear business includes brands such as Jaypore, Tasva & Marigold Lane and has targeted revenues of Rs 2,000 crore from ethnic wear by FY2026.

Building an empire via M&As

  •  100% stake in Jaypore in July 2019 for Rs 110 cr 

  •  51% stake in Sabyasachi in January 2021 for Rs 398 cr 

  •  51% stake in S&N in July 2019 for Rs 60 cr

  •  Majority stake in Pantaloon for Rs 1,600 cr in 2012.

  •  Partners with Tarun Tahiliani for its Tasva brand

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