Skip to content

    Aditya Bir. Fas.

    ABFRL
    Consumer Services·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

    5
    • 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

    4
    • 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.

    What Changed1

    vs Q1 FY26

    Risks discussed3 → 4 (+1)

    Key financials

    Single quarter

    06 metrics
    1. 01Demerged ABFRL Revenue₹1,719 Cr+9%YoY
    2. 02Demerged ABFRL Reported EBITDA₹295 Cr
    3. 03Demerged ABFRL Reported EBITDA Margin17.2%
    4. 04ABLBL Normalized Revenue₹1,942 Cr+3%YoY
    5. 05ABLBL EBITDA₹330 Cr+18%YoY

    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
    List

    Capital allocation

    3
    high confidence
    CategoryHeadline
    Capex

    ₹400 crores

    Debt

    Net ₹781 crores

    Liquidity

    Cash ₹2,350 crores

    Demerged ABFRL has INR2,350 crores cash at consolidated level, providing strength to the balance sheet for aggressive growth.

    Guidance & targets

    11
    CategoryTargetPriority
    Growth
    ABLBL scale and margins
    Double in scale and expand margins meaningfully
    High
    Growth
    ABFRL revenue and margin
    3x revenue scale up and 2x margin expansion
    High
    Growth
    Sabyasachi growth
    Closer to 20% growth
    Medium
    Store Expansion
    ABLBL new stores
    Over net 300 stores
    High
    Store Expansion
    Style Up network
    Over 300 stores
    High
    Store Expansion
    Style Up new stores
    About another 50 stores
    High
    Store Expansion
    Tasva network
    Over 200 stores
    High
    Profitability
    Pantaloons margin improvement
    300 basis point improvements
    Medium
    Profitability
    TCNS EBITDA
    Pre-Ind AS EBITDA-positive
    High
    Profitability
    ABFRL (ex-TMRW) EBITDA
    EBITDA positive
    High
    Profitability
    All ABFRL businesses profitability
    Profitable
    High

    TMRW external investor process

    this financial year
    CurrentLooking to raise capital separately
    TargetExternal 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."

    How to verify

    capital_allocation.liquidity.notes

    Risks & concerns

    4
    RiskSeverity

    Sustained macro headwinds and impact on consumer discretionary consumption

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

    medium

    Initial margin dilution for Style Up expansion

    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

    low

    Innerwear segment remaining loss-making

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

    medium

    TMRW profitability timeline

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

    medium

    Q&A highlights

    8

    “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

    3 min read6 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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.

    04

    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%.

    05

    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.

    06

    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.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.