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Great expectations from new retail firm, ABFRL

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Sunday 3rd May 2015 was a day of champions. And maybe a bit of champs that do win but have stopped throwing enough big punches of late.
Floyd “Money” Mayweather Jr took home a purse Rs.1145 crore, and won in the eyes of the judges and American television commentators. Back home in Mumbai a whole stable of Indian fashion heavy weights was being streamlined into a formidable single Rs.12,000 crore fashion behemoth. Similarly here too the judges (the investors and shareholders) and Indian media were cheering.
But the crux remains that when you are a Mayweather or a custodian of Louis Philippe, Van Huesen, Allen Solly, Peter England, Pantaloons, and People—all icons of Indian fashion and pioneers of Indian retail–what the lovers of each expect is leadership and some real stunning action from the champs. So, these were both moments of greater expectation.
On Sunday, Kumar Mangalam Birla, Chairman, Aditya Birla Group (ABG) announced that it will merge all its fashion arms to create Aditya Birla Fashion and Retail Limited (ABFRL). Madura Fashion and Madura Lifestyle of Aditya Birla Nuvo (ABNL) will be demerged into Pantaloon Fashion and Retail Limited (PFRL) which is a listed entity and this will then be renamed ABFRL. Seen with Kumar Mangalam were Ashish Dixit, CEO, Madura Fashion & Lifestyle, and fashion veteran Pranab Barua, Business Director — Apparel and Retail, ABG.
“This consolidation will create India’s largest, pure-play, fashion and lifestyle company, with a strong bucket of leading fashion brands and retail formats. This move brings India’s number one branded collection for both men and women together…The consolidation will unlock value for the shareholders by giving them an opportunity to participate in the promising fashion space directly through ABFRL,” Kumar Mangalam Birla, chairman of the Aditya Birla Group, said in a statement. The key stats on the new entity were a winning network of 1869 exclusive stores, spanning exclusive retail space of 4.8 million square feet, combined 12 month revenues of Rs.5,290 crores, EBITDA of Rs 493 crore. The entity will work forward from a debt of Rs. 1,775 crores.
Reports were valuing the new fashion colossus at Rs.12,000 crores (USD 2 billion).
The holding in the new entity will be ABG – 51.1%, ABNL – 9.6%, and the rest public. There are no plans to bring in any other strategic partner. The share conversion/swap will be thus: 26 of PFRL=5 of ABNL, 7 of PFRL=500 of MGLR, 100 of ABNL (old)=100 ABNL+520 PFRL.
“This move to bring all the branded apparels businesses under one roof will accelerate growth,” said Pranab Barua, business director of apparel and retail business at the Aditya Birla Group, in an official statement. “E-commerce is throwing up opportunities. If possible we will first partner with e-commerce players,” said Ashish Dixit, CEO, Madura Fashion & Lifestyle. Kishore Biyani’s Future Group, which will see its holding come down to 2.5 per cent, were pleased that the move will bring in efficiencies and reduce operating costs. Since the acquisition of Pantaloon Fashion Retail from Future Group in 2012, 39 new Pantaloons stores have been launched, 40 renovated, additionally seven new brands and 15 external brands have been added.
It was also shared that after the creation of the new entity, ABNL will continue to invest in NBFC, home finance, MFs insurance, and possibly soon in payments banking. More which is under a different holding structure will continue on its path and possibly reach profitability in two years.
The buzz on the restructuring was all across the business media. But we at Images Business of Fashion  had a rather emotional moment. Let’s call it a moment of new hope.
To explain our emotion, we must first confess that we aren’t very good at knowing what “largest” and “consolidation” ever does or ever achieves. And our fondest memories are still those of the great “Friday Dressing” days, the great collections and campaigns of LP, VH, and the wide open arms of PE. And that we can see what players like Amazon and Flipkart are doing and it is “great things” and giving users great convenience. It is definitely not “large” things.
In our minds, Madura was always the largest for years. In our mind — and in the minds of lots of others — it should have been Madura (now a lead part of ABFRL) that facilitated the India entry of international fashion brands. It did not. In our minds — and in the minds of lots others — it should have been Madura (a lead part of ABFRL) that lead fashion e-commerce in India. It did not. Maybe it didn’t want to, but we observers feel it should have. Nor was it wind-tailing the front pack as leaders often do. We did wonder and begin to question whether Madura still had the drive. They were successful alright, yes, but they just weren’t doing enough leader things.
Now with a new start, we expect great things from ABFRL. Perhaps for starters we want to see leadership in redefining the fashion omni-channel shopping experience  in India.

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