Aditya Birla Fashion to acquire 51% stake in TCNS; stock rebounds 10% from early low

Shares of Aditya Birla Fashion & Retail Ltd (ABFRL) remained in focus today after the fashion retailer entered into definitive agreements to acquire a majority stake in TCNS Clothing (TCNS), the owner of women’s leading ethnic brands W, Aurelia, Wishful, Folksong, and Elleven. The Aditya Birla group company will acquire a 51% stake in TCNS Clothing for ₹1,650 crore, which is touted to be one of the largest deals in the Indian fashion space. With this acquisition, ABFRL’s ethnic wear portfolio is expected to reach ₹5.000 crore in the next 3 years.

ABFRL shares opened 6.2% lower at ₹201 against the previous closing price of ₹214.20 on the BSE. However, the stock soon rebounded strongly and gained as much as 2.9% to ₹220.35, while the market capitsalisation climbed to ₹20,446 crore. The apparel retailer stock has risen 9.7% from an early low of ₹200.95. On the volume front, there was a surge in buying as 2.23 lakh shares changed hands over the counter compared with two-week average volume of 0.9 lakh stocks.

The share price of ABFRL traded 39% lower than its 52-week high of ₹359.40 touched on November 1, 2022, while it rose 10% against its 52-week low of ₹200.20 hit on March 31, 2023. The stock has fallen 18% in a year, while it lost 31% in a six-month period and 3% in a month. In the calendar year 2023, the counter has tumbled 25%.

As part of the deal, ABFRL will make a conditional open offer to acquire up to 29% stake at ₹503 per share from public shareholders and acquire the remaining stake from the founder promoters to reach an overall shareholding of 51% in TCNS. Following the completion of the transaction, TCNS will be amalgamated with ABFRL under the merger scheme wherein public shareholders of TCNS (as on effective date) will receive 11 shares of ABFRL for every 6 shares that they hold in TCNS.

ABFRL said that this transaction will be carried out through the acquisition of the founding promoter’s stake through a sales and purchase agreement (SPA) and a conditional public open offer followed by a merger between the two entities.

“For ABFRL, the TCNS deal is indeed a significant milestone as it complements our existing portfolio of exceptional brands across the entire spectrum of Indian fashion. By embracing TCNS's portfolio of loved women’s ethnic brands, we are reinforcing our commitment to ethnic wear, the largest category in the apparel industry. With this acquisition, the fast-growing ABFRL platform is poised for the next phase of transformational growth,” said Kumar Mangalam Birla, Chairman, Aditya Birla Group.

The transaction is subject to customary regulatory approvals including approvals from the Competition Commission of India, SEBI, Stock Exchanges, and National Company Law Tribunal.

With revenue of ₹8,136 crore, ABFRL has a retail space of 9.2 million sq. ft. with a network of 3,468 stores across approximately 28,585 multi-brand outlets with 6,515 point of sales in department stores across India (as on March 31, 2022). Over the last 5 years, ABFRL has built its ethnic portfolio through a series of strategic and calibrated actions. 

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