Aditya Birla Fashion and Retail Limited — Q4 FY25 earnings call

Call held 26 May 2025

Management summary

Aditya Birla Fashion and Retail Limited (ABFRL) reported a transformative Q4 FY25, marked by the successful demerger into two independent entities: ABLBL and the demerged ABFRL. The demerged ABFRL demonstrated robust revenue growth of 9% YoY and a 103% increase in comparable EBITDA, driven by strong performance in Pantaloons and Ethnic wear. ABLBL, now a separate entity, also showed resilient performance with 3% normalized revenue growth and 18% EBITDA growth, despite macro headwinds. Both entities are well-capitalized and poised for aggressive growth and margin expansion in the coming years.

Highlights

  • Demerged ABFRL revenue grew 9% YoY to INR1,719 crores in Q4 FY25, reflecting strong execution.

  • Demerged ABFRL's comparable EBITDA increased 103% YoY to INR199 crores, showcasing strong operating leverage.

  • ABLBL's normalized EBITDA margin expanded 200 bps to 17% in Q4 FY25, driven by profitable growth.

  • Pantaloons achieved 480 bps EBITDA margin expansion to 15.1% in Q4 FY25, marking its sixth consecutive quarter of improvement.

  • Ethnic wear segment's EBITDA margin expanded 700 bps to 10.1% in Q4 FY25, supported by strong brand portfolio performance.

Concerns

  • The industry continues to face strong macro headwinds and sustained impact on consumer discretionary consumption.

  • TCNS revenue declined in Q4 FY25 due to ongoing distribution rationalization, though LTL growth was positive for the full year.

  • The Innerwear segment within ABLBL remains loss-making, with management focusing on achieving profitability.

  • TMRW (digital-first brands) is projected to take longer than FY27 to achieve profitability compared to other businesses.

Key financials

  1. Demerged ABFRL Revenue ₹1,719 Cr +9%YoY
  2. Demerged ABFRL Reported EBITDA ₹295 Cr
  3. Demerged ABFRL Reported EBITDA Margin 17.2%
  4. ABLBL Normalized Revenue ₹1,942 Cr +3%YoY
  5. ABLBL EBITDA ₹330 Cr +18%YoY
  6. ABLBL Normalized EBITDA Margin 17%

What they filed

Q1 FY27: revenue up 10.6%, net profit down 6.4% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue1,761 2,201 1,719 1,831 1,982 +13%2,374 +8%1,990 +16%2,026 +11%
EBITDA77 293 199 106 62 −19%302 +3%188 −6%111 +5%
Net profit-175 -42 -24 -234 -295 −69%-137 −226%-164 −583%-249 −6%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Demerged ABFRL - Pantaloons Segment
    ₹885 Cr Revenue15.1% EBITDA Margin
  • Demerged ABFRL - Ethnic Wear Segment
    ₹564 Cr Revenue10.1% EBITDA Margin
  • Demerged ABFRL - Designer-led Ethnic Portfolio
    46% YoY Growth20% EBITDA Margin
  • Demerged ABFRL - Digital-first brands (TMRW)
    27% YoY Growth
  • ABLBL - Lifestyle Brands
    ₹1,639 Cr Revenue20% EBITDA Margin9% Like-to-like Retail Growth
  • ABLBL - Other Businesses (Reebok, American Eagle, Van Heusen Innerwear)
    3% Growth

Capital allocation

high confidence
  • Capex ₹400 Cr
    • Ongoing capex for demerged ABFRL ₹400 Cr
    • Galeries one-time deal ₹100 Cr
    • ABLBL capex ₹250 Cr
    • Style Up expansion
    Ashish Dikshit: "About -- on an ongoing basis, close to INR400 crores." (Page 10); "Galeries as such will be a onetime deal, which will be this year, about INR100 crores, INR100-plus crores." (Page 10); Vishak Kumar: "about INR250 crores of capex this year in case you wanted that." (Page 13); Ashish Dikshit: "A large part of our capital allocation in the preceding fundraise is meant to drive Style Up expansion." (Page 11)
  • Debt Net ₹781 Cr
    Jagdish Bajaj: "Net debt of ABLBL at the end of fiscal stand at INR781 crores with repayment targeted within next 2 to 3 years." (Page 4); Jagdish Bajaj: "from a debt of INR2,000 crores last year in March, I'm sitting on cash. So there will not be any finance charge for this year." (Page 18)
  • Liquidity Cash ₹2,350 Cr Demerged ABFRL has INR2,350 crores cash at consolidated level, providing strength to the balance sheet for aggressive growth.
    Jagdish Bajaj: "With that, we have infused tremendous strength into the balance sheet of demerged ABFRL with an availability of INR2,350 crores cash at consolidated level to pursue aggressive growth across its multiple high-growth platforms." (Page 3); Jagdish Bajaj: "Demerged ABFRL has INR2,350 crores cash at consolidated level." (Page 6)

Guidance & targets

Growth

  • ABLBL scale and margins Growth · next 5 years · High confidence Double in scale and expand margins meaningfully
    ABLBL, backed by a robust portfolio over 3,200 stores and healthy free cash flows, is positioned to double in scale and expand margins meaningfully over the next 5 years with 300-plus stores already in the pipeline for FY '26.

    — Management

  • ABFRL revenue and margin Growth · next 5 years · High confidence 3x revenue scale up and 2x margin expansion
    ABFRL with a sharpened brand portfolio, a comprehensive diversified play across high-growth segments and a gross cash balance of INR2,350 crores is set to unlock the next phase of growth, targeting a 3x revenue scale up and 2x margin expansion over the next 5 years.

    — Management

  • Sabyasachi growth Growth · 4 to 5 years · Medium confidence Closer to 20% growth
    Over a long period of time, we believe this would be closer to 20% growth business over 4 to 5 years with few years being higher if you add a store and few years being lower than that.

    — Ashish Dikshit

Store Expansion

  • ABLBL new stores Store Expansion · next 12 months · High confidence Over net 300 stores
    Over the next 12 months, leveraging its strong cash flows, ABLBL is set to embark on a historic expansion drive with an aggressive retail rollout across its brand portfolios, adding over net 300 stores across the country to accelerate growth and deepen market presence.

    — Management

  • Style Up network Store Expansion · next 3 years · High confidence Over 300 stores
    The recent fundraise will be partly deployed to expand the network to over 300 stores in the next 3 years.

    — Management

  • Style Up new stores Store Expansion · FY '26 · High confidence About another 50 stores
    Yes. So Style Up, we currently have about 46 stores. This year in FY '26, we plan to open about another 50 stores.

    — Sangeeta Tanwani

  • Tasva network Store Expansion · next 3 years · High confidence Over 200 stores
    The current network of around 70 stores is expected to scale to over 200 stores over the next 3 years.

    — Management

Profitability

  • Pantaloons margin improvement Profitability · next couple of years · Medium confidence 300 basis point improvements
    I still believe there is a long runway. I think a lot of good work has happened in Pantaloons, but there's a long runway currently from where we are for Pantaloons also to expand its margin. We think at least 300 basis point improvements from here is pretty much something that we will look to target in the next couple of years.

    — Ashish Dikshit

  • TCNS EBITDA Profitability · FY '27 · High confidence Pre-Ind AS EBITDA-positive
    We expect to see significant EBITDA improvement in FY '26 with the TCNS portfolio projected to turn pre-Ind AS EBITDA-positive by FY '27.

    — Management

  • ABFRL (ex-TMRW) EBITDA Profitability · next year · High confidence EBITDA positive
    Excluding TCNS, Sameer -- excluding TMRW, sorry, excluding TMRW, we will be EBITDA positive next year.

    — Jagdish Bajaj

  • All ABFRL businesses profitability Profitability · FY '27 · High confidence Profitable
    And independently, every business would achieve profitability by FY '27 with perhaps TMRW being the only business which might take a year more.

    — Ashish Dikshit

What to watch in Q1 FY26

TMRW external investor process

this financial year
Current Looking to raise capital separately
Target External investor identified/process completed

Why it matters

Securing external funding for TMRW is crucial for its independent growth trajectory and capital allocation for the demerged ABFRL.

Ashish Dikshit: "You would also know that we are looking to raise capital separately in TMRW, which would be required to fund that part of the business. ... Sometime this financial year."

Risks & concerns

  • Sustained macro headwinds and impact on consumer discretionary consumption

    medium

    The quarter continues to see strong macro headwinds with sustained impact on consumer discretionary consumption, affecting overall demand.

    Management acknowledged

  • Innerwear segment remaining loss-making

    medium

    The Innerwear segment has been stable/stagnant and loss-making for the last 3 years, requiring focus on profitability.

    Analyst acknowledged

  • TMRW profitability timeline

    medium

    TMRW might take longer than FY27 to achieve profitability compared to other businesses within the demerged ABFRL.

    Management acknowledged

  • Initial margin dilution for Style Up expansion

    low

    Aggressive expansion of Style Up will entail a 'little bit of margin dilution' on the segment itself, perhaps in the first 12 to 18 months.

    Management acknowledged

Q&A highlights

8 direct
Demerged ABFRL margin expansion and Pantaloons sustainable margins Direct
I think the largest uptick in margins will come from turning the businesses, which are currently negative EBITDA and taking away from the profitability. Notably, parts of Ethnic businesses, TCNS being the largest, Tasva being the second and TMRW being the other businesses, these are businesses which are actually suppressing the margins that other profitable businesses make.

Clarifies the primary drivers for ABFRL's targeted margin expansion post-demerger, focusing on turning around loss-making segments rather than just Pantaloons.

Asked by Ashish Kanodia

Sufficiency of ABFRL's cash balance for expansion and TMRW external investor timeline Direct
Yes. Garima coming back to your question, as Jagdish mentioned, there is sufficient capital, close to INR2000 crore-plus, which is lying as a gross cash in the ABFRL subsidiary. You would also know that we are looking to raise capital separately in TMRW, which would be required to fund that part of the business. So we feel adequately capitalized to drive this over next 3, 4 years. ... Sometime this financial year.

Confirms ABFRL's strong liquidity position post-demerger and provides a timeline for TMRW's separate capital raise, crucial for its growth funding.

Asked by Garima Mishra

Demerged ABFRL's working capital and capex plans Direct
So currently, this negative level, at least on an overall basis, at least because Pantaloons is at 0 and others are high single digit, double digit, so that should be like 5%, 6% of sales is a good estimate, right? ... About -- on an ongoing basis, close to INR400 crores. ... Galeries as such will be a onetime deal, which will be this year, about INR100 crores, INR100-plus crores.

Provides clarity on the working capital structure, noting Pantaloons' negative contribution, and quantifies the ongoing capex for the demerged ABFRL, including a one-time spend for Galeries.

Asked by Devanshu Bansal

ABLBL's capex for store expansion and factory capex status Direct
Yes. Gaurav, as you know, in the Madura side of business or ABLBL, a large part of our expansion is franchisee-driven. So we have the option of having the right blend of partnered expansion and franchise expansion. ... about INR250 crores of capex this year in case you wanted that. ... Yes, a large part of it is already complete, Gaurav. So it's a small part remaining, but a large part of the expense is already incurred last year.

Details ABLBL's capex strategy, emphasizing a mix of own and franchisee-driven expansion, and confirms that most of the factory capex is already completed.

Asked by Gaurav Jogani

Profitability trajectory of premium ethnic wear (Tasva, TCNS) Direct
For premium businesses where Tasva and TCNS are the prime contributors today, TCNS is the largest part. Over a period of time, Tasva and TCNS will be a significant part. That's where currently, we have loss-making business. We expect to get to double-digit sort of pre-Ind-AS margins in these 2 businesses over the next 3 to 4 years, and that's the goal that we have for this. Currently, both these businesses are loss-making.

Highlights that key growth drivers like Tasva and TCNS are currently loss-making but have a clear path to double-digit pre-Ind AS margins within 3-4 years, indicating future profitability potential.

Asked by Gaurav Jogani

ABLBL Innerwear segment's historical performance and future ambition Direct
The business has been more, I would say, stable or stagnant for last 3 years, which has really been the time in which we have been trying to recover from the kind of expansive plans we have made pre-COVID, and as the situation emerged, we had a lot of inventory buildup. ... So you'll see going forward, while medium term, as Vishak indicated, we obviously want to get the trajectory of profitability right, but our ambition about being very competitive in size and scale in this business has not dimmed at all.

Acknowledges the Innerwear segment's past struggles and stagnant growth, but reiterates the long-term ambition for scale and profitability, suggesting renewed focus post-demerger.

Asked by Samir Gupta

ABFRL demerged entity's EBITDA break-even timeline and TCNS profitability Direct
Excluding TCNS, Sameer -- excluding TMRW, sorry, excluding TMRW, we will be EBITDA positive next year. ... And independently, every business would achieve profitability by FY '27 with perhaps TMRW being the only business which might take a year more.

Provides a clear timeline for the overall profitability of the demerged ABFRL, indicating that most businesses will be EBITDA positive next year (FY26) and all by FY27, with TMRW being the only potential exception.

Asked by Samir Gupta

Interest cost reduction post-demerger for ABFRL and ABLBL Direct
See, the interest cost, which you are seeing in both the companies in published results is a factor of financial charge as well as the Ind AS impact. So financial cost in ABFRL will come down significantly, but the Ind AS impact will continue. In ABLBL business, the finance cost should come down INR50 crores to INR60 crores next year, but the Ind AS impact will continue. ... So there will not be any finance charge for this year.

Quantifies the expected reduction in finance costs for ABLBL (INR50-60 crores next year) and states that ABFRL will have no finance charge this year due to its cash position, indicating improved financial health.

Asked by Rajit Aggarwal

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Detailed narrative

Demerger and Strategic Realignment

Aditya Birla Fashion and Retail Limited (ABFRL) successfully completed its demerger, creating two independent entities: Aditya Birla Lifestyle Brands Limited (ABLBL) and the demerged ABFRL. This strategic move aims to enable both entities to pursue distinct value-creation journeys. The demerged ABFRL now holds INR2,350 crores in cash, providing a strong balance sheet to fund aggressive growth across its high-growth platforms.

ABLBL Performance and Growth Drivers

ABLBL, comprising premium Western wear and lifestyle brands, demonstrated a robust Q4 FY25 performance with normalized revenue growth of 3% to INR1,942 crores and EBITDA growth of 18% to INR330 crores. The normalized EBITDA margin expanded by 200 basis points to 17%. The Lifestyle Brands segment, including brands like Louis Philippe and Van Heusen, achieved 9% like-to-like retail growth and 5% YoY revenue growth to INR1,639 crores, with a 20% EBITDA margin. ABLBL plans an aggressive retail rollout, adding over 300 stores in FY26, with approximately 200 stores driven by own capex.

Demerged ABFRL Performance and Segment Highlights

The demerged ABFRL reported a strong 9% YoY revenue growth to INR1,719 crores in Q4 FY25. Comparable EBITDA more than doubled, growing 103% to INR199 crores, and reported EBITDA stood at INR295 crores with a 17.2% margin. The Pantaloons segment, despite 50+ store closures, achieved an EBITDA margin of 15.1%, a 480 basis point expansion. The Ethnic wear segment grew 19% YoY to INR564 crores, with its EBITDA margin expanding 700 basis points to 10.1%, notably driven by the designer-led portfolio's 46% YoY growth and over 20% EBITDA margin.

Margin Expansion Across Businesses

Both ABLBL and the demerged ABFRL demonstrated significant margin expansion. ABLBL's normalized EBITDA margin improved by 200 basis points to 17% in Q4 FY25 and 100 basis points to 16.2% for the full year. The demerged ABFRL's comparable EBITDA margin expanded by 220 basis points for the full year to 10.3%. Pantaloons achieved a 480 basis point EBITDA margin expansion, reaching 15.1%, while the Ethnic wear segment saw a 700 basis point expansion to 10.1%.

Capital Allocation and Liquidity

The demerged ABFRL has a strong cash position of INR2,350 crores, which is deemed sufficient to fund its planned expansion for the next 3-4 years. Ongoing capex for ABFRL is projected at around INR400 crores annually, with an additional INR100 crores for Galeries this year. ABLBL plans approximately INR250 crores in capex for FY26, primarily for retail expansion. ABLBL's net debt stood at INR781 crores at the end of FY25, with expected finance cost reductions of INR50-60 crores next year. ABFRL expects no finance charge this year due to its cash reserves.

Outlook and Growth Trajectories

ABLBL is positioned to double its scale and expand margins meaningfully over the next 5 years, with 300+ stores planned for FY26. The demerged ABFRL targets a 3x revenue scale-up and 2x margin expansion over the next 5 years. Pantaloons aims for 300 basis point margin improvements in the next couple of years and plans 15-20 new stores in FY26. TCNS is projected to turn pre-Ind AS EBITDA-positive by FY27, and all ABFRL businesses (excluding TMRW) are expected to be EBITDA positive by FY26, with TMRW potentially taking longer.

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