We believe hiving off its cash generating business, Madura, is a step in the right direction for ABFRL: it simplifies its business structure and betters capital allocation. The Madura entity has four industry-leading power brands with high profitability, RoCE and strong cash generation. Further re-rating is on the cards once we have a clearer capital allocation strategy. We upgrade our rating to a Buy with a higher TP of Rs294, ~14x FY26e EV/EBITDA (earlier ~12x FY26e EV/EBITDA). The demerged ABFRL entity (housing Pantaloons, ethnic, D2C and luxury brands) comprises the mostly loss-making businesses and a large part of the debt.
Aditya Birla Fashion and Retail Step in the right direction; upgrading to a Buy for target price of Rs 294: Anand Rathi
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