Aditya Birla Fashion and Retail Ltd Quarterly Results Q3 FY 25 stock analysis

Home » Financial News Hotbox » Results » Aditya Birla Fashion and Retail Ltd- Q3FY25 Result Update

Sector Outlook: Positive

Profits Rise Despite Sluggish Sales Growth

In Q3FY25, Aditya Birla Fashion & Retail Ltd. (ABFRL) saw a 3.3% YoY revenue increase to ₹43,047 million, despite weak demand. The proposed Aditya Birla Lifestyle Brands Ltd. (ABLBL) grew just 1% YoY to ₹21,509 million, as lifestyle brands remained flat while other businesses grew 5%. Wholesale and e-commerce sales were weak, impacting lifestyle brand revenues. The demerged ABFRL’s revenue rose 3% YoY to ₹22,184 million, driven by an 11% YoY rise in ethnic and other businesses due to festive and wedding demand. However, the Pantaloons segment fell 2% YoY, partly due to the Pujo festival shift to Q2FY25 and the closure of 40+ stores as it refocuses on Metro and Tier 1 cities. Despite moderate revenue growth, EBITDA rose 14.8% YoY to ₹6,349 million, with margins improving by 147 bps due to better pricing, channel mix, and inventory management. The company still posted a net loss of ₹424 million for the quarter. On a positive note, it raised ₹42 billion through QIP and preferential issues to repay debt.

Key Concall Highlights

Festive Boost, Inconsistent Demand: Strong demand during the festive and wedding season, but footfalls fluctuated during other periods.
ABLBL Performance:
- Revenue grew 1% YoY to ₹21.5 billion.
- EBITDA margin improved by 90 bps to 16.5%.
- Lifestyle brands revenue remained flat at ₹18.2 billion, but EBITDA margin improved by 40 bps to 19.6% due to cost control and lower discounts.
Proposed ABFRL Performance:
- Revenue grew 3% YoY to ₹22.2 billion.
- Ethnic and TMRW businesses performed well, boosting EBITDA margin by 250 bps to 14.4%.
- Pantaloons business declined by 2% YoY due to the Pujo festival shift to Q2FY25.
Pantaloons Strategy Shift:
- Moving from value retail to a mid-premium segment.
- Focus on Metro and Tier 1 cities.
- Closed 40+ stores in the past year.
Style Up Expansion:
- Currently operates 39 stores.
- Plans to reach 45-50 stores by FY25-end and approximately 100 stores in FY26.
Debt & Fundraising:
- Net debt stood at ₹18 billion after receiving ₹18.6 billion from QIP.
- Debt will reduce further after receiving ₹23.8 billion from a preferential issue.
- Total funds raised: ₹42.4 billion.
Demerger Update:
- NCLT hearing in March 2025.
- After demerger: ABFRL will have ₹13 billion in cash, while ABLBL will have ₹7 billion in net debt.
Profitability & Inventory Focus:
- Improved inventory management for better profitability.
- Reduced liquidation of old stock.
- E-commerce business shifting to a “less discount, more profit” model.

Valuation and Outlook

Aditya Birla Fashion & Retail Ltd. (ABFRL) reported a modest 3.3% YoY revenue growth in the quarter, but its focus on higher margins through lower discounting helped improve profitability. The company is expanding in Metro and Tier 1 cities, aiming for long-term growth while keeping profitability strong. Tight inventory management and an optimized distribution strategy led to EBITDA growth. ABFRL also raised ₹42 billion through QIP and preferential issues, which will help repay debt and make the company debt-free. The demerger process is on track, with the next NCLT hearing in March 2025. After the split, Aditya Birla Lifestyle Brands Limited (ABLBL) will include Lifestyle brands, American Eagle, Van Heusen, and Reebok, while the demerged ABFRL will focus on Pantaloons, Designer Ethnic brands like Sabyasachi, MASABA, Tarun Tahiliani, and TMRW. Future performance will depend on expanding in high-growth markets and handling weak demand, but with improving margins, better inventory control, and a stronger balance sheet, the outlook remains cautiously optimistic.