The Aditya Birla Group has proposed a four-way restructuring plan to bring its retail business under Pantaloon Fashion & Retail (PFRL) and offer a maximum of 10 per cent equity stake to an investor in the consolidated entity, according to media reports.
The $30-billion group has sought informal guidance from the Securities Exchange Board of India (Sebi) on the efficacy of the proposed merger through a letter dated December 24, 2014.
As the first step of the transaction, Madura Garments, a subsidiary of listed Aditya Birla Nuvo Ltd (ABNL), will be demerged into Pantaloons Fashion, and ABNL shareholders will get Pantaloons Fashion’s shares in return.
In step two, Madura Garments Lifestyle Retail Undertaking (MGL Retail Undertaking) will be demerged from Madura Garments and merged into Pantaloons Fashion, in consideration of which ABNL (shareholder of MGL) will get shares of Pantaloons Fashion. MGL Retail is engaged in the business of apparel retail and holding investments.
In step three, Aditya Birla Retail Ltd (ABRL), the operator of More superstores and 100 per cent owned by the promoters, will be demerged into Pantaloons Fashion and group promoters will get shares of Pantaloons in exchange and, finally, two financial investors will be offered up to 10 per cent stake each in the expanded capital of Pantaloons Fashion. Separate shareholder meetings of Pantaloons’ shareholders will be called for each investment, the proposal said.
After the merger, the Birlas will own up to 50 per cent stake. The Birlas currently own 72 per cent stake in Pantaloons Fashion.
The Birla group had been in talks to sell stake in the consolidated retail business to L Capital, Temasek and IFC and raise $500 million to fuel its expansion plans in a growing economy.
The Aditya Birla group had to undertake the restructuring following heavy losses suffered by its retail companies. Pantaloons Fashion, acquired from Kishore Biyani’s Future group in 2012, posted a net loss of Rs 187 crore on net sales of Rs 1,661 crore in 2013-14. Pantaloon Retail has made a loss of Rs 42.78 crore for the quarter ending December 2014 on revenues of Rs 450 crore.
