Aditya Birla Fashion and Retail (ABFRL), a part of Aditya Birla Group shares fell sharply in the first hour of today’s trade, dropping 67%. The stock slipped from its 52-week high of Rs 364.40 to a new low of Rs 88.80.
This sudden and dramatic fall in the stock price of the company might have left many investors puzzled. Here is what you need to know before you assume the worst-
Aditya Birla Fashion Demerger: Record date
This sudden decline in the share price of ABFRL is not because of any bad news or poor performance by the company. This happened due to a technical adjustment related to the company’s ongoing demerger process.
In simple words, because ABFRL is undergoing a demerger, separating its lifestyle business into a new company called Aditya Birla Lifestyle Brands Limited (ABLBL).
Aditya Birla Fashion Demerger: Why did the stock fall?
Today is the record date for the demerger. This is the cut-off day to decide which shareholders are eligible to receive shares in the new company.
As a result, ABFRL shares are now trading “ex-demerger”, meaning their value has been adjusted to reflect the portion of the business that is being carved out.
This is the reason for the sudden drop. Investors are still holding on to their full value, just split across two different companies now.
Aditya Birla Fashion Demerger: What does the demerger involve?
The demerger splits ABFRL into two focused entities:
- ABFRL will continue as the main company.
- ABLBL will become a separately listed entity housing well-known labels like Louis Philippe, Van Heusen, Allen Solly, and Peter England – all currently part of Madura Fashion.
Aditya Birla Fashion Demerger: What’s the share allotment ratio?
Existing ABFRL shareholders will get shares of the new company at a 1:1 ratio. That means for every one share held in ABFRL, you will receive one share of Aditya Birla Lifestyle Brands.
As per the company’s official filing: “One fully paid-up equity share of ABLBL having face value of Rs 10 each for every one fully paid-up equity share of Rs 10 each of ABFRL shall be issued and allotted to eligible shareholders on the record date.”
Aditya Birla Fashion Demerger: When will the new shares list?
The shares of Aditya Birla Lifestyle Brands will soon be listed on both BSE and NSE. The exact listing date will be announced separately after the allotment process is completed and regulatory approvals are secured.