Shares of fashion company Aditya Birla Fashion and Retail (ABFRL) on Tuesday hit the 10% upper circuit of Rs 232.85 on BSE after announcing plans to evaluate the vertical demerger of Madura Fashion & Lifestyle business from ABFRL into a separately-listed company.

The proposed demerger will enable the creation of two separately listed companies as independent growth engines with distinct capital structures and parallel value-creation opportunities.

Following the demerger, ABFRL will be focused on high-growth segments where there are tailwinds in a shift from unbranded to branded, premiumization, rise of super premium & luxury, and rapid growth in Gen Z-focused digital-first brands.

The post-demerger portfolio of ABFRL would consist of value retail, ethnic portfolio, luxury and digital brands.

The Madura Fashion & Lifestyle business segment (MFL), consisting of four lifestyle brands viz Louis Phillippe, Van Heusen, Allen Solly & Peter England along with casual wear brands viz. American Eagle & Forever 21, sportwear brand Reebok and the innerwear business under Van Heusen will be demerged into a separate listed entity.

“The entity will have a strong balance sheet to power its future growth aspirations. Post necessary approvals, the demerger will be implemented through an NCLT scheme of the arrangement, and all shareholders of ABFRL will have an identical shareholding in the newly formed entity,” ABFRL announced last night. “The move towards a more simplified and streamlined architecture is designed to unlock distinct opportunities for value creation. This strategic realignment is poised to significantly enhance long-term stakeholder value,” said Aditya Birla Group Chairman Kumar Mangalam Birla. ABFRL shares have been underperforming with a one-year return at 9% as against the 25% jump in Sensex seen in the last one year.