Aditya Birla Nuvo - Special Situation

Aditya Birla Nuvo - Demerger of Apparel business

Value unlocking - Apparel business which contributed to 9% of EBIT now accounts for 50% of the Market Cap

CMP - 1800
Market Cap ~24000 Crores

Demerging Fashion and Apparel business - Swap Ratio 26 shares of Pantaloon Fashion for 5 shares of AB Nuvo. CMP of Pantaloon ~Rs.185

This translates to ~ Rs. 900 / share

For balance Rs.900 / or 12000 Crores , we get
23% in Idea Cellular ( Market Cap ~Rs.60k Crores) worth ~9500 Crores (@20% discount)
51% in Birla Sunlife Asset Management (AUM ~133k Crores) worth ~ 3500 Crores (@5% of AUM)
74% in Birla Sunlife Insurance (AUM Rs.30000 Cr) worth ~ 1500 Crore
ABFS - Loan book of ~ 17k Crore - Worth ~ 500 Crore?
Upcoming business - Housing Finance / Health Insurance worth ~ 0
Other businesses (Indogulf/Linen/Insulators) - Revenue ~5500 Cr & 615 Crore EBITDA worth ~ 2000 Crores

Total Value ~ Rs.17000 Cr
Net Debt - Not sure what is the accurate number - but is somewhere close to Rs.5 k crore ( views invited)

Of the above the Fin. Services businesses will surely grow profitably for next decade

Moreover, one can sell the stock once it demerges and buy it back to book a notional short term loss (worth ~Rs.900 * 15% Short Term Tax - Rs.135 / share)

Risk - Pantaloon Fashion stock corrects to Rs.120, in which case, the gain can be lower. But it will still be profitable.

Disclosure - Invested at 1825


@rr1980 Looks like you get what you pay for from your exercise. 24K Cr market cap, buying 24K Cr worth of conservatively appraised assets. Except for the notional tax losses, what do you get?

Yes while being quite conservative. So it is a stock where there is very low or no downside and good upside if the financial service businesses does well.

Would like to invite views of what you and others think. Thanks.

If the company listed apparel business separately they should have got much higher valuation than what they are getting now .i.e after merging with pantaloon…they did the deal mainly to appease bankers ( to whom they owe money)…in this age of ecommerce…the pantaloon will never make money… It is extremely surprising that they are still expanding business …instead of throwing good money after bad money…if you have to buy abnuvo you have to value that not considering this deal…

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As far as my understanding, Apparel division of Nuvo merging with Pantaloon to create a new company called ABFRL, Creating India’s Largest Pure Play Branded Apparels Company"

With all the brands in their hand ABFRL can fetch a high premium.

You can see the above… Also refer annual reports of pantaloon… They don’t have good brands unlike Madura … And all capex is just maintenance capex not much growth capex… In the ecommerce age it is difficult to see why people buy from these expensive stores … Lot of people might go and try and buy from website… If they keep expanding number of stores losses keep increasing effectively throwing money made from Madura into pantaloon…

Despite e-commerce there are good crowds at these stores. The pantaloon store at Borivali in suburban Mumbai has good crowds during weekends and evenings though afternoons are quite empty.

disclosure: I have never shopped there though I am invested in A B Nuvo

They are also in ecommerce. Pls visit is an initiative of Madura Fashion & Lifestyle, India’s largest and fastest growing branded apparel companies and a premium lifestyle player in the retail sector. After consolidating its market leadership with its own brands, it introduced premier international labels, enabling Indian consumers to buy the most prestigious global fashionwear and accessories within the country.

Apart from the above, other ecommerce site also have to include the brands owned by ABFRL.
Apart from the own stores, the brands are available in any standard stores.

I believe ABFRL is a winner in the longterm.

You name, any branded clothing, these guys have it. It has so good premium feel, that as our rural India grows, more people will start buying branded clothing and apparel.

Exactly 8 years before, for the upcoming middleclass man, wearing a jockey underwear was a premium stuff. I missed that bus. I hope this turns lucky!!!

Yes that is the point. In my college days back in 1990, wearing a louie philippe shirts belongs to a small segment. Now in 2015, in any place, you can find a shop that sell Products of ABFRL. So I feel it might be a good opportunity.

Update as of 4th August
ABRL - Moved up to 2250+
Pantaloon - 220+ - This translates to ~Rs.1150 of AB Nuvo (Swap Ratio 26:5)
For people who entered ABNuvo at Rs.1800 or below, the bet paid off.

The real long term trigger can come if and when they spin off the Financial Services business. Check out the articles below for how they are slowing creating the right business structure and unlocking value one piece at a time.

Aditya Birla Nuvo Ltd (ABNL), part of the $42-billion Aditya Birla Group, has started talks with private equity (PE) investors to sell Aditya Birla Insulators, according to two people aware of the development. ABNL may sell the subsidiary for Rs.800-1,000 crore, one of the two people indicated.

Q1 Results announced. Consolidated profits up by 50%.

Investor presentation gives a good sense of where the company is focusing. Link below :

AB Nuvo gets in-principle licence for payments banks from RBI…

AB Nuvo sells 23% in Life insurance business for ~Rs.1600 crores which translates to a value of Rs.5000 Crores for AB Nuvo’s holding of 74% in Birla Sun Life. I had initially valued that at Rs.1500 Crores in my conservative estimate.

As each of the pieces get carved out and valued, I see a good opportunity for a 20-30% upside over the next year in the stock.

Post demerger and a major market correction, Nuvo stock is trading at a market cap of 11,500 Cr and debt of ~3000 Cr which brings EV to Rs.14500 Cr which is at a 40% discount to its SOTP valuation

Now that the math is a little simpler putting it down for fellow boarders to comment.

Financial business
51% in Birla Sunlife Asset Management (AUM ~133k Crores) worth ~ 3000 Crores (@ 4% of AUM)
74% in Birla Sunlife Insurance (AUM Rs.30000 Cr) worth ~ 5000 Crore (stake sale done at this price)
ABFS - Loan book of ~ 20 k Crore - Worth ~ 2800 Crore (net worth)
Upcoming business - Housing Finance / Health Insurance worth ~ 0
Total Value of Finance business - Rs.11000 Cr


“Divisions” (Indogulf/Linen/Insulators) - Revenue ~5500 Cr & 615 Crore EBITDA
Divisions Value ~ 3000 Crores

Holding companies
23% in Idea Cellular ( Market Cap ~Rs.40k Crores) worth ~6000 Crores (@40% discount)
9% in Pantaloons Fashion post amalgamation (Mcap 15000 cr) worth ~ 900 Cr
Holding company value - 6900 Cr ( at 40% discount)

Total SOTP Value - Rs.21000 Cr

Kindly look at this and share your views. I think with further simplification of structure which seems to be clearly happening and demerger of business units, the upside could be much higher.

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Appears to be highly undervalued compared to more fancied NBFCs names.

Add a couple of points more:

  1. Their Housing Finance arm has already generated a loan book of about 1000 cr.
  2. NBFC grew almost 40% compared to last year.
  3. Has good presence in brokerage, financial product distribution (zipsip) etc
  4. Launching payment bank operations in 2016 with Idea.

Earlier valuation metrics suggested 2/3 value for existing biz and 1/3rd for fashion biz. But steeper fall in AB Nuvo can be attributed to mispricing, exclusion from indices leading to selling by some funds and general market volatility and some investors trying to book short term capital losses.

Disc: Initiated initial position based on undervaluation.

Ashish Dhawan has picked up stake of ~1.5% in the company in last quarter around Rs.850. Stock has moved up 25% from its low.
The scope for financial services business looks very bright

Results are out. Slightly difficult to compare it prima facie but consol profit is up by 28%. The company has declared 50% dividend.

Can any one help me calculate the short-term capital gains tax on this stock. I had a total holding of 210 shares in Aditya Birla Nuvo (all purchased in FY 2015-16) for which I have been allotted a total of 1092 shares in Aditya Birla Fashion. I booked a short-term loss of Rs 2,14,561/- before March 31, 2016.

Am I allowed to show the entire short-term loss of Rs 2,14,561/- in my tax return or will the shares in AB Fashion allotted to me also need to be taken into consideration while calculating short-term capital loss?

Chartered Accountants on Valuepickr may please help.

Shiv Kumar