The Aditya Birla Group is working on a restructuring plan to bring all its retail verticals under Pantaloon Fashion & Retail in a move to unlock value and accrue synergy benefits for the business.
The company is also looking to raise additional capital in multiple tranches, first of which will be through offering a maximum of 10 per cent equity stake to one or more investors.
As per an informal guidance sought by Pantaloon Fashion & Retail (PFRL) on December 24, 2014 from capital market regulator Sebi on the proposed merger the transaction is proposed to be carried out in four steps.
The company had sought that the information be kept confidential. Sebi allowed 90 days of confidentiality and made information public only last week.
"The objectives of the proposed transaction are to consolidate the retail and apparel businesses of the Aditya Birla Group within one single company to unlock value and accrue synergy benefits for the business," the company said in the letter to the Sebi.
As the first step, Madura Fashion & Lifestyle will be demerged from Aditya Birla Nuvo (ABNL) and merged with PFRL.
In consideration for the demerger, PFRL will issue equity shares to shareholders of ABNL. Second step will involve demerger of retail business of Madura Garments Lifestyle Retail company from ABNL into PFRL.
In return, PFRL will issue shares to ABNL. Step three will be the demerger of ABRL Retail Undertaking from Aditya Birla Retail (ABRL) into PFRL.
PFRL will issue equity shares to Aditya Birla Group in consideration for this.
ABRL, which operates supermarkets under the brand More, is the unlisted retail arm of the Adtiya Birla Group. Under step four, post restructuring each investor will be alloted a maximum of 10 per cent stake of the expanded capital through a preferential allotment of equity shares.
In the proposed restructuring exercise, the company is also looking to raise additional capital from financial investors.
Pantaloons said that the "proposed transaction in the exploratory stage.
While the negotiations are ongoing with various parties, the investors are yet to be identified."
Private equity firms L Capital and Temasek are said to be in talks to buy stake in the merged entity.
Aditya Birla group declined to comment on the restructuring.
Pantaloons Fashion posted a net loss of Rs 187 crore (Rs 1.87 billion) in 2013-14, while Pantaloon Retail reported loss of Rs 42.78 crore for the quarter ending December 2014.
Also, ABRL has piled up losses of nearly Rs 4,800 crore (Rs 48 billion) after seven years of operation.