Indian conglomerate Aditya Birla Fashion and Retail Ltd (ABFRL) has received approval from its board to strengthen its capital base through a $500m equity raise.  

The initiative is set to involve a mix of preferential allotment and a qualified institutional placement (QIP). 

The dual approach to capital raising will significantly reduce debt levels and boost the company's growth trajectory, leveraging established platforms for expansion. 

ABFRL will generate $275m via the issuance of preferential shares, with financial service company Fidelity and the retailer’s controlling shareholders participating.  

Fidelity will invest $125m for shares priced at Rs272.37 ($3.15132) each, reflecting a marginal premium of 1%, as reported by Reuters.  

The Birla family, which holds the largest equity in ABFRL through various entities, will inject $150m into the company by acquiring shares at 317.45 rupees each. 

This price signifies a substantial premium of 17.5% over the last closing market price. 

The remaining $225m will be sourced through a QIP, as approved by ABFRL's board.  

Post-transaction, as per the news agency’s calculations, the latest exchange data indicates that the Birla family's stake in ABFRL will rise from 49.25% to 52.78%, while Fidelity will secure a new 3.45% stake in the company.  

Both the preferential allotment and QIP are subject to customary and regulatory consents. 

The fundraising endeavour precedes ABFRL's planned structural reorganisation, which involves demerging its most profitable division, Madura Fashion and Lifestyle, into an independent publicly traded entity.  

Madura Fashion, which offers brands such as Peter England, Louis Phillippe and Van Heusen, contributes approximately 70% of ABFRL's total revenue. 

The proposed demerger process was announced in April 2024 and is expected to close by the end of the 2024/25 fiscal year.