ABFRL - Aditya Birla Fashion and Retail Limited Share Price

Management Outlook and Key Points:
Outlook:

• Macro Environment: Subdued consumption persists, with strong demand during festive/wedding seasons offsetting weaker periods. Management remains focused on operational efficiency, cost control, and premiumization to drive growth.
• Strategic Initiatives:
  • Demerger (ABLBL): On track for completion in 2-3 months, enabling two independent entities (ABLBL for western wear, ABFRL for ethnic/lifestyle) to unlock value.
  • Fundraise: Raised $490M (Rs.3,800+ cr) to strengthen balance sheets; ABFRL (post-demerger) will be debt-free with ~Rs.1,300 cr cash, supporting growth in ethnic/value segments.
• Growth Drivers:
  • Lifestyle Brands (ABLBL): Targeting 300+ new stores in 12 months; improved margins (16.5% EBITDA) via channel optimization.
  • Pantaloons: Focus on premiumization (metro/Tier 1 expansion) and Style Up (value segment; 39 stores now, doubling next year).
  • Ethnic Wear: 7% revenue growth (39% ex-TCNS); designer brands (Sabyasachi, Tarun Tahiliani) up 41%. Tasva (men's ethnic) turned EBITDA-positive.
  • Digital (TMRW): 26% growth; plans for fundraise to scale Gen-Z-focused brands.

Key Performance Highlights (Q3 FY25):

• Consolidated Revenue: Rs.4,305 cr (+3% YoY); EBITDA Rs.683 cr (+13% YoY, margin 15.9% vs 14.5%).
• Lifestyle Brands (ABLBL): Rs.2,151 cr revenue, 12% LTL; wholesale/e-commerce rationalization ongoing.
• Pantaloons: Rs.1,305 cr revenue; LTL -2.5% (ex-East: +2.5%); EBITDA margin improved 170 bps to 19.3%.
• Ethnic Portfolio: Rs.588 cr revenue (+7% YoY); EBITDA margin surged 1,160 bps to 19.2%.
• Debt: Consolidated net debt at Rs.1,800 cr (post-QIP), to reduce further post-demerger.

Margin Focus: Cost optimization, inventory discipline, and channel mix improvements driving profitability. Ethnic and digital segments expected to scale further with balanced capex.

Question 1 (Tejash Shah, Avendus Spark):
What drove Lifestyle Brands' strong LTL performance in a tight demand environment, and how should investors think about future margins?
Answer: Strong festive/wedding demand, optimized product assortments, and reduced discounting drove LTL growth. Future margins hinge on sustaining disciplined discount controls, channel mix optimization, and store network rationalization.

Question 2 (Tejash Shah):
Is Pantaloons' store consolidation phase over, and will Tier 2/3 demand be addressed via Style Up?
Answer: Pantaloons continues premiumization, closing unviable Tier 2 stores. Style Up targets value-conscious customers in Tier 2/3 via distinct pricing (avg. INR 1,200"“1,300) and smaller stores (6,000"“8,000 sq. ft.), while Pantaloons focuses on metros/Tier 1 with larger formats.

Question 3 (Devanshu Bansal, Emkay Global):
Will store closures lead to inventory liquidation losses or asset write-offs?
Answer: Inventory-related provisions are already accounted for in reported results. Store closures were strategic (underperforming markets, format shifts, TCNS optimization), with no future surprises.

Question 4 (Devanshu Bansal):
How will the post-fundraise debt/cash balance support growth?
Answer: Post-demerger, ABLBL starts with INR 700 crore debt, while ABFRL retains INR 1,300"“1,500 crore cash. Capital will fuel Ethnic, Style Up, and TMRW growth, with demerged ABFRL targeting FCF-positive status in 3 years.

Question 5 (Sheela Rathi, Morgan Stanley):
What is Pantaloons' timeline to achieve premium positioning?
Answer: Pantaloons has shifted to mid-market, with consistency in brand experience expected in 12"“18 months. Private labels dominate, complemented by curated external brands for city-specific relevance.

Question 6 (Sheela Rathi):
What is TMRW's growth and profitability outlook?
Answer: TMRW targets 25"“30% organic growth. Most brands near profitability; corporate overheads dilute margins. Future fundraise (9"“12 months) could accelerate category expansion.

Question 7 (Sameer Gupta, India Infoline):
How is Lifestyle Brands' smaller-town expansion strategy evolving?
Answer: Tier 4 towns retain 700+ stores, but near-term expansion prioritizes metros/Tier 1 for larger formats and profitability. Growth is calibrated to mid-single digits amid macroeconomic pressures.

Question 8 (Sameer Gupta):
What is Tasva's store expansion plan?
Answer: Tasva added ~70 stores in FY25 and plans 40"“50 stores in FY26, leveraging proven economics and wedding-season demand.

Question 9 (Jignanshu Gor, Bernstein):
Are Lifestyle, Pantaloons, and Ethnic margins sustainable?
Answer: Lifestyle Brands (18"“20% margins) and Pantaloons (improving to ~17.5% YTD) are stable. Ethnic margins (19.2% in Q3) are seasonally inflated; long-term sustainability depends on scaling TCNS/Tasva.

Question 10 (Ashish Kanodia, Citigroup):
Why does ABLBL start with INR 700 crore debt post-demerger?
Answer: Fundraise timing aligned with delayed demerger. ABLBL's debt will reduce via cash flows, targeting debt-free status in 2"“2.5 years.

Question 11 (Videesha Sheth, AMBIT Capital):
How do Pantaloons and Style Up differentiate offerings?
Answer: Pantaloons (avg. store: 15,000"“20,000 sq. ft.) focuses on mid-market with external brands (avg. price ~INR 2,500). Style Up (6,000"“8,000 sq. ft.) targets value segments via private labels (avg. price ~INR 1,200).

Question 12 (Sameer Gupta):
Why did the "Other" segment (Luxury/Collective) report 13% margins?
Answer: Margins were diluted by pre-operational costs for Galeries Lafayette's first store. Core luxury retail (Collective/international brands) remains profitable.

Question 13 (Sameer Gupta):
What is Forever 21's exit impact?
Answer: Exiting unprofitable offline operations improves EBITDA marginally. Online presence remains minimal.