homebusiness Newscompanies NewsTCNS Clothing shares fall 19%, most since listing after Aditya Birla Fashion buys controlling stake
TCNS Clothing shares fall 19%, most since listing after Aditya Birla Fashion buys controlling stake
With the recent acquisition of TCNS Clothing, Aditya Birla Fashion said that its ethnic wear portfolio was expected to reach Rs 5,000 crore in the next three years.
Shares of TCNS Clothing fell over 19 percent on Monday after announcing a merger deal with Aditya Birla Fashion, late on Friday night. On the other hand, shares of Aditya Birla Fashion have recovered from opening lows, after declining as much as 7.5 percent.
Aditya Birla Fashion on Friday announced that it was acquiring a controlling stake in TCNS Clothing, the owner of leading ethnic brands W, Aurelia, Wishful, Folksong, and Elleven.
As part of the transaction, Aditya Birla would make a conditional open offer to acquire up to a 29 percent stake at Rs 503 per share from public shareholders and acquire the remaining stake from the founder promoters to reach an overall shareholding of 51 percent in TCNS.
The value of the promoter stake and open offer consideration for TCNS is Rs 1,650 crore for a 51 percent stake.
After the deal, TCNS will be amalgamated with Aditya Birla Fashion and, as part of the merger arrangement, public shareholders of TCNS will receive 11 shares of Aditya Birla Fashion for every 6 shares that they hold in TCNS.
The company’s foray into branded ethnic wear business includes brands such as Jaypore, Tasva and Marigold Lane. The company also has strategic partnerships with designers ‘Shantanu & Nikhil’, ‘Tarun Tahiliani’, ‘Sabyasachi’ and ‘House of Masaba’. Brokerage firm Motilal Oswal said that most of these acquisitions are loss-making and yet-to-stabilise.
With the recent acquisition of TCNS Clothing, Aditya Birla Fashion said that its ethnic wear portfolio was expected to reach Rs 5,000 crore in the next three years.
While the lifestyle business remains healthy, a sluggish recovery in Pantaloons and incremental investments in new businesses can drag profitability in the near-term, Motilal Oswal wrote in its note.
However, it expects the acquisition to impact the company's Earnings per Share (EPS) by 18 percent. Therefore, Motilal Oswal has downgraded ABFRL to neutral from the earlier rating of buy, along with a price target of Rs 245.
This is the biggest single-day drop for shares of TCNS Clothing since its IPO in 2018.
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