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Shares of Aditya Birla fashion and retail fell more than 6 percent in intraday trade on BSE on May 8, extending losses to a third straight session, ahead of the company’s conference call with analysts and institutional investors.
Shares of Aditya Birla fashion and retail fell more than 6 percent in intraday trade on BSE on May 8, extending losses to a third straight session, ahead of the company’s conference call with analysts and institutional investors.
The conference call is based on acquisition of 51% of the enlarged share capital of TCNS Apparel Company.
The conference call is based on acquisition of 51% of the enlarged share capital of TCNS Apparel Company.
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In a BSE filing on May 5, Aditya Birla Fashion & Retail said it has acquired 1,41,92,448 to 1,98,76,757 equity shares of TCNS Apparel, representing nearly 22 percent and 30.81 percent of the enlarged share capital. of TCNS, considering ₹503 per share.
According to a BSE filing, Aditya Billa Fashion will hold up to 29 percent of TCNS capital based on the minimum acceptance rate and thereafter Aditya Billa Fashion will acquire shares on merger with the equity shares already acquired. , holds a 51 percent stake in TCNS.
The acquisition is expected to be completed within 9-12 months. For TCNS it is the price of the promoter’s share and the open price. ₹1,650 crore for a 51 percent stake, this is one of the biggest deals in the Indian fashion space.
TCNS Apparel is India’s leading women’s apparel company, with great value ₹In the year 635.68 crores on September 30, 2022. The company’s gross profit was according to the Aditya Billa fashion BSE filing ₹933.03 crores on 31 December 2022.
Aditya Birla’s fashion ad has received mixed reviews from brokerage firms. Broker company Motilal Oswal Financial Services He downgraded the stock to ‘Neutral’ with a target price of ‘Neutral’ ₹245.
Motilal emphasized that Aditya Birla Fashion has announced the acquisition of TCNS Apparel in two phases at total cost. ₹2900 crore which is 10 percent below the current market price. ₹3,220 crores with ₹1,650 crore cash payment for 51 percent stake and 5.4 percent for the remaining 49 percent stake.
“Aditya Beer Fashion’s strong execution capability is reflected in its ability to leverage a series of strong brands over the decade. While the lifestyle segment continues to deliver a healthy performance, slow recovery in the Pantaloons segment and further investments in new businesses may drag down profitability in the near term; Motilal said.
“Expanding the racewear division and the Reebok brand, as well as spinning off the newly formed D2C division, could be a challenging journey for the company. The inclusion of TCNS in this portfolio could further highlight the risks to profitability in the near term.” said Motilal Oswal
Motilal has indicated that the company will be on par with Aditya Billa Fashion, assuming an 8 percent EBITDA margin (Pre IND-AS 116) in FY25E at T.CNS. However, the acquisition may have an 18 percent impact on earnings per share, ie: ₹0.7 impact on EPS.
“We revise our rating to neutral with a target price of Rs. ₹245. We project revenue/EBITDA CAGR of 19 percent/27 percent in FY23-25E. According to Motilal Oswal, we value Aditya Beer Fashion on SOTP basis by allocating EV/EBITDA 10 times to lifestyle brands, 10 times to trousers and EV/one-time sales to other businesses in FY25.
on the other hand, Nuvama wealth management He maintained a buy call on Aditya Birla fashion stock ₹341.
According to Nuvama, unlike other mergers and acquisitions, this transaction does not need to be viewed from an EPS accretion/dilution perspective or mergers.
“The main aspect is the brand fit and more importantly, the turnaround, because TCNS was in recovery and underperforming for more than two years. Only a successful turnaround of the same can create shareholder value,” Nuvama said.
Nuvama emphasized that in terms of valuation, the transaction is taking place at 14 times and 11 times FY24 and FY25 EV EBITDA (post-IND AS) respectively, which is a reasonable entry price.
“Successful apparel retailers/brands trade at over 30 times valuation. Even from a financial point of view, Aditya Billa Fashion is a limited cost of money.” ₹1,600 crore, which can be covered from the expected revenue from GIC, which will limit any increase in debt,” Nuvama said.
Disclaimer: The opinions and recommendations given in this article are those of brokerage firms. These do not represent Mint views. We recommend that investors check with certified professionals before making any investment decision.
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