Aditya Birla Fashion and Retail Limited (ABFRL), the flagship company of the Aditya Birla Group, is a premier player in the Indian fashion and retail industry with a retail portfolio of premium brands like Louis Philippe, Van Heusen, and Pantaloons. On May 22, 2025, ABFRL executed a long-planned demerger that separated Madura Fashion & Lifestyle (MFL) into a separate listed entity called Aditya Birla Lifestyle Brands Ltd (ABLBL). Approved by the National Company Law Tribunal (NCLT) in 2024, the demerger underlines the vision of creating two focused giants in retail, each complementing the other with distinct growth strategies.
This was followed immediately, however, by a plunge in ABFRL’s share price by 65-67%—a cause of worry for investors. Let’s unpack the reasons behind this sharp decline.
Why Did ABFRL Shares Crash 65%?
The 65% drop in ABFRL share prices is, however, entirely technical, and not in any way indicative of terrible business performance. Here are the main driving reasons behind the fall:
1. Technical Price Adjustment Post-Demerger
The only reason that the shares have crashed is that they no longer carry the value of the MFL business, which was spun off into ABLBL. ABFRL shares began trading on May 22, 2025, which was the record date for the demerger. They opened at ₹97, compared to ₹268.95 previously, and hit an intraday low of ₹88.80, marking what is essentially a 65-67% drop.
There are now premium brands like Louis Philippe, Van Heusen, Allen Solly, Peter England, Reebok, American Eagle, Forever 21, and Van Heusen Innerwear included in the adjusted value pertaining to the demerged entity. According to the demerger scheme: one ABLBL share (face value ₹10) will be allotted for each ABFRL share held (face value ₹10), keeping the total value for shareholders across two entities consistent.
According to regulatory filings, the cost of acquisition is apportioned 75.68% to ABFRL and 24.32% to ABLBL.
2. New Market Sentiment Toward Valuation Reset
The demerger adjusted certain valuations as the market recalibrated ABFRL’s share price based on remaining businesses: Pantaloons, ethnic wear (TCNS Clothing, Sabyasachi, Tarun Tahiliani, Masaba), premium (Tasva, Jaypore), luxury retail (The Collective, Galeries Lafayette), and digital-first brands (Bewakoof, Wrogn).
There will be some time until the value of ABLBL is revealed with its forthcoming listing on BSE and NSE, expected around mid-to-end June 2025, which adds uncertainty and exacerbates a sharp correction—even if analysts emphasize it is mechanical and not indicative of weakened fundamentals.
3. Debt Load and Financial Restructuring
As of March 31, 2024, ABFRL’s total debt was ₹3,000 crore, of which more than ₹1,000 crore was transferred to ABLBL in the demerger, leaving ABFRL with ₹2,000 crore.
It is also going to raise ₹2,500 crore via promoters within 12 months, which will be used to strengthen its balance sheet and grow the company.
So, while this separation is for improving financial flexibility, the immediate perception of increased debt in ABFRL books is probably contributing to this volatility. JM Financial analysts consider it another initiative to unlock value and drive independent growth for both entities.
4. Broader Market Sentiment
On May 22, 2025, the Sensex and Nifty also saw a considerable decline, with Sensex losing over 1,000 points due to global concerns about the economy, FII outflows, and profit booking.
The bearish trend pushed ABFRL stocks further down as investors opted for caution. The India VIX surged with fear in the market, which further impacted mid-cap stocks such as ABFRL.
5. Investor Misapprehension
Some investors mistook the steep plunge for a sell-off or operational failure, setting off alarms. According to experts, however, the drop is a “notional” adjustment, not a reduction of shareholder value.
“The post-listing combined value of shares in ABFRL and ABLBL will be equivalent to the pre-demerger value; going forward, shareholders would hold stakes in two independent entities having their own and distinct growth potential,” said Market Watch.
Who “Allowed” the Demerger?
No one body can be said to “allow” such a crash in any firm’s share price. For any stock price crash, there are always supply and demand and structural events like demergers.
The board of ABFRL approved the plan in April 2024. Managing Director Ashish Dikshit emphasized that the scheme will create “two separately listed companies as independent growth engines.”
The scheme has been sanctioned by the NCLT, ensuring regulatory requirements are met. The Securities and Exchange Board of India (SEBI) oversees transparency but does not control price adjustments, which are determined by market dynamics and the demerger’s 1:1 share ratio.
The record date of May 22, 2025, was set by ABFRL management to determine eligible shareholders for ABLBL share allotment.
Change or Transformation
Strategically, the demerger is intended to unlock the value of two focused entities:
- ABLBL: Portfolio of premium lifestyle brands (Louis Philippe, Van Heusen, Allen Solly, Peter England), casual wear (American Eagle, Forever 21), sportswear (Reebok), and innerwear (Van Heusen). It targets high-growth segments with strong ROCE and potential for independent cash generation.
- ABFRL: Value retail (Pantaloons, Style Up), ethnic wear, luxury, and digital-first brands aimed at a wider market, unlocking broader high-growth potential.
This gives each entity the ability to pursue focused strategies, attract specialized investors, and optimize performance. The Aditya Birla Group believes this will drive operational efficiency and long-term profitability.
Financial Performance Context
As per Q3 FY25 results released on May 23, 2025:
- Consolidated revenue: ₹4,305 crore (vs ₹4,167 crore in Q3 FY24)
- Improvement from Q2 FY25: ₹3,644 crore
- Net loss narrowed: ₹42 crore (vs ₹108 crore in Q3 FY24) due to better cost management
These figures depict operational stability, reaffirming that the stock price crash was not triggered by business performance.
What Should Investors Do?
For those impacted by the 65% drop, here are suggested steps:
- Avoid Panic Selling: This is a technical adjustment, not a real loss. Shareholders now hold ABLBL shares, too.
- Monitor ABLBL Listing: Combined value of ABFRL and ABLBL is likely to mirror pre-demerger value. Listing expected by June 2025.
- Assess Long-Term Potential: Both entities are growth-oriented, serving different market segments. Analysts recommend holding for long-term gains.
- Consult Experts: Seek advice from certified financial advisors to navigate the transition.
Conclusion
The 65% crash in ABFRL shares on May 22, 2025, is a technical adjustment resulting from the demerger of Madura Fashion & Lifestyle into Aditya Birla Lifestyle Brands Ltd (ABLBL). This is not a sell-off or business failure, but a value-unlocking strategy, creating two distinct listed companies with individual growth strategies.
Investors should remain calm. Their ownership remains intact across both companies. With ABLBL’s listing around the corner and stable ABFRL fundamentals, the future outlook remains positive.
