ADITYA BIRLA FASHION AND RETAIL LTD.

Introduction:

Aditya Birla Fashion and Retail Limited (ABFRL) is a Mumbai-based Indian fashion retail
firm. Men's wear, Women's wear, and Kids Wear are the three segments of the garment
brand. ABFRL operates a network of 3031 outlets in India, including 6,500 points of sale in
department stores. About 400 brands are sold by the company, including private labels,
licenced brands, and other trademarks. Akkriti, Rangmanch, Ajile, Annabelle, Trisha, Honey,
and Chalk are some of the company's brands. Prior to being acquired by the Aditya Birla
Group, ABFRL was known as Pantaloons Fashion & Retail Limited.
Pantaloons caters to the discerning and stylish Indian client while weaving its spell across
lifestyle areas. Pantaloons stores offer a wide selection of options for men, women, and
children, including western, Indian, formal, and party dress, as well as athletic wear.
Pantaloons has expanded its horizons to include trendy accessories such as fragrances,
footwear, handbags, watches, sunglasses, and much more, to further enhance the
customer's infinite choices that express style, attitude, and comfort. Pantaloons is continually
expanding its footprint into the rest of modern India, with 71 fashion stores in 35 cities and
towns.
Sweet Dreams named Pantaloons the Best Fashion Retail Partner, and Triumph praised
them for offering the best business support in the big format retail sector in 2017. The
following awards were given to ABFRL for its Corporate Social Responsibility and
Sustainability initiatives:

 "Sustainable Business of the Year," "Sustainable Leadership," and "Sustainable

Professional of the Year" by World Sustainability, a global non-profit organisation;
 "Special Commendation" for Corporate Social Responsibility at the Institute of
Directors' "Golden Peacock Awards 2017";
 "Arogya World Platinum Award for Global Healthy Workplaces, 2017" by Arogya
World

Market summary of ABFRL:

Aditya Birla Retail share price was Rs 264.35 as on 04 Mar, 2022.
Aditya Birla Retail share price was down by 1.10% based on previous share price of Rs
265.2.
Aditya Birla Retail share price trend:
Last 1 Month: Aditya Birla Retail share price moved down by 10.54%
Last 3 Months: Aditya Birla Retail share price moved down by 0.06%
Last 12 Months: Aditya Birla Retail share price moved up 21.35%
Last 3 Years: Aditya Birla Retail Share price moved up by 18.30%
Aditya Birla Retail share price saw a 52-week high of Rs 318.70 and 52-week low of Rs
163.10.
Stock gave a 3-year return of 20.12%.
ABFRL current valuations:

The shares are currently when compared to its past seem to suggest it is in the overvalued
zone.
The company has very poor ROCE of -6.57%.
It has not provided any dividends in the past few years. It is currently unprofitable to invest.

Ownership of the company:

In the Dec2021 quarter we have the number of FII/FPI investors is 249 and the number of
MF schemes is 40. Shareholders have not been meaningfully diluted in the past year.
The company has a high promotor holding of 56.12%. Promoter holding has decreased over
last 3 years: -3.12%

Dividend history:
Aditya Birla Fashion & Retail ltd., has not declared any dividend for the last several years as
per the Profit & Loss account.

Technical Analysis:
In the last 5 years ABFRL shareprice maximum value is Rs.314.3 and minimum
value is Rs.100.05. The average price is Rs.266.013.
ABFRL exceeded the Indian market which returned 13.8% over the past year.
The share price is significantly more volatile than the rest of the Indian stocks over
the past 3 months, typically moving by +/-6% a week. But the weekly volatility has
been stable over the past year.
Board of directors:
Name Designation
Mr. Kumar Mangalam Birla Chairman & Non-Exe.Director
Mr. Nish Bhutani Independent Director
Ms. Sukanya Kripalu Independent Director
Mr. Sunirmal Talukdar Independent Director
Mr. Arun Adhikari Independent Director
Ms. Preeti Vyas Independent Director
Mr. Yogesh Chaudhary Independent Director
Mr. Ashish Dikshit Managing Director
Mr. Vikram Rao Non Executive Director
Mr. Himanshu Kapania Vice Chairman & Non Exe.Director
Mr. Vishak Kumar Whole Time Director
Ms. Sangeeta Pendurkar Whole Time Director

The ratio of independent directors to the total number of directors is 0.5

ABFRL Income statement analysis (figures in crores):

Revenue growth is lower than the industry. Over the last five years, revenue has
grown at a yearly rate of -2.56% vs industry average of -1.05.
The revenue has decreased by 40.3% to 52.53B. The five-year CAGR of revenue is
-2.75%
The company is incurring loss of 345.46% to -6.49B in FY21 compared to the FY20.
The CAGR of net income is -43.70%.
The EBIT has negative CAGR of -57.75% for the past five years.
The operating profit has decreased with a negative CAGR of 63.86% for the past five years.
Over the last 5 years, market share decreased from 51.73% to 47.89%

ABFRL Balance sheet analysis (figures in crores):

The total assets have increased by 93.86% over the last five years. The CAGR for five years
is 17.29%. while the current assets decreased by 6.4% for FY21 compared to FY20. The
fixed assets increased by 15% in FY21.
The total liabilities have increased by 93.86% over the last five years. The CAGR for five
years is 15.31%. The current liabilities decreased by 26% in the FY21 compared to FY20.
Overall, the assets and liabilities for FY21 is 9762.7 crores, compared to 5035.9 crores in
FY17 with an increase of 93.862%.

ABFRL cash flow analysis (figures in crores):

The cash flow from operating activities has increased by 170.53% over the five years. the
CAGR of cash operating activities is 28.84% over the three years.
The cash flow from investing activities has decreased with a negative CAGR of -35.70% for
the past five years.
The cash flow from financing activities has decreased by 1.1% in FY21 compared to FY19. It
has a negative CAGR of -15.16% for the past five years.
The net cash flow is negative.

Ratios:
Profitability ratios:

Ratios Formulae 2017 2018 2019 2020 2021

Operatin Operating 1960.1/6 1896/71720 2731/81177 3292.9/87 -

g profit income 6028.6= .7=2.644% .2=3.364% 878.6=3.7 4290.2/52489
margin (EBIT)/revenue 2.969% 47% .2=-8.173%

Net profit Net 535/660 1177.9/717 3212.2/811 - -

margin income/revenue 28.6=0.8 20.7=1.642 77.2=3.957 1630.1/87 6725.1/52489
1% % % 878.6=- .2=-12.812%
1.855%

Higher Ratio of the particular company compared to its peers or previous years indicates that the
company's performance is good in generating profit.

The operating profit margin of ABFRL is -8.173% in FY21. Operating margin shows the
revenue made for each rupee of sales after the company pays vaiable costs but before
interest and tax. Negative Operating margin indicates that ABFRL is not efficient in its
operations and it is generating losses from its sales since the FY20. From FY17 to FY20 the
operating profit margin has slightly increased.

Net Profit Margin ratio, a higher net margin is considered good. It indicates the company is
efficiently managing its expenses and generating profits from its sales. The high net margin
of the company can be a result of the company's sales being in high demand or the total
expenses being low. A net margin of 15% or higher is considered good. The 15% means that
the company generated fifteen percent net profit compared to its revenue. For ABFRL from
the FY17 to FY19 the net profit margin is increasing year on year which is a good sign but
the net margin for the FY2021 is -12.812% which is a very low margin which shows that the
company is not generating any profits since FY20.

Liquidity ratio:

Ratios Formulae 2017 2018 2019 2020 2021

Current current 21358.0/ 26503.0/31 33691.6/407 41708.8/5710 39025.9/42
assets assets/current 25,578.50= 710.2=0.83 78.6=0.826 4.6=0.730 247.2=0.92
liabilities 0.835 6 4
Cash Cash and 496.6/ 727.9/3171 574.1/40778 2669.4/57104 2617.5/422
ratio Cash 25,578.50= 0.2=0.023 .6=0.014 .6=0.047 47.2=0.062
equivalents/c 0.019
urrent
liabilities

In case of current ratio, the range for ABFRL lies within 0.7 to 0.9 in the FY17 to FY21,
indicating insufficient assets. The low current ratio indicates a weak liquidity position for the
company. It means that the company is insufficient to pay off current liabilities.

The Cash Ratio measures the short-term liquidity position of the company. And it is
calculated as cash and cash equivalent divided by current liabilities. This metric is considered
more conservative than the current ratio and quick ratio.

For ABFRL, the range lies within 0.01 to 0.06 which is quite low for a company. A low cash
ratio indicates that the company's liabilities are more than its cash and cash equivalents and
inefficient to meet its current short-term liabilities.

Turnover ratio:

Formul 2017 2018 2019 2020 2021

Ratio
ae
Acco Net 66,028.6 71720.7/551 80431.8/780 87243.9/840 52128.0/730
unt sales/A 0/ 8.4=12.997 8.1=10.301 4.6=10.380 4.7=7.136
recei verage 4,521.80
vable account =14.602
receiva
ble
Cash Total 66,028.6 71720.7/727. 81177.2/574. 87878.6/266 52489.2/261
turno revenu 0/ 9=98.531 1=141.399 9.4=32.921 7.5=20.053
ver e/cash 496.6=13
Ratio and 2.961
 cash
equival
ents
Days (Workin (- (- (- (- (-
in g 4,220.50/ 5207.2/7172 7087.0/8117 15395.8/878 4220.5/5248
worki capital/t 66,028.6 0.7)*365=- 7.2)*365=- 78.6)*365=- 9.2)*365=-
ng otal 0)*365=- 26.5 31.86 63.94 22.4
capit revenu 23.331
al e)x365
days

Turnover ratios determine the repayment of liabilities, receivables turnover, period of

receivables, assets utilization etc. It is used to calculate the efficiency of the companies.
Account receivable turnover ratio measures the number of times a company collects its
receivables. It refers to the credit it has given to its customers, and its turnover refers to how
it converts that credit into cash. The higher account receivable turnover ratio is considered
good. A low account receivable ratio indicates that the company is receiving its payment
slowly. From FY17 to FY21 the company has an average account receivable ratio of 10.2,
which shows that the company is receiving its credit payment 10 times in the financial
period.
The Cash Turnover Ratio indicates the number of times cash and cash equivalents are
turned into revenue in an accounting period. It measures the efficiency of the company's
cash management and how many times it utilizes its cash to generate revenue. A high ratio
is considered good as it indicates that the company has an efficient cash management
system and turns its cash quickly. For ABFRL the cash turnover ratio is decreasing since the
FY19 which shows that the company is not generating the cash quickly.
Days in Working Capital measures the liquidity and efficiency of the company, which
indicates how many days a company takes to convert its working capital into sales revenue.
A well-established company of a mature industry is likely to have less number of days in
working capital. ABFRL has negative days in working capital indicating that the current
liabilities are exceeding the current assets.
Solvency ratio:

Rati Formu 2017 2018 2019 2020 2021

o lae
Debt Total 20,317.30 17583.6/573 17028.6/662 52848.3/976 35997.8/1017
-to- debt/tot / 38.4=0.307 10.7=0.257 55.6=0.541 14.7=0.354
asse al 50,358.5
ts assets 0=0.403
Inter Earing 1,960.10/ 1896.0/1668. 2731.0/1846. 3292.9/4217. -
est s 1,796.70 6=1.136 1=1.479 1=0.781 4290.2/4927.
cove before =1.091 5=-0.871
rage interest
and
taxes/I
nterest
payme
nts
Liquidity is about meeting current liabilities, while solvency refers to the ability of a firm to
cover long-term liabilities and short-term debt obligations. The solvency ratios indicate
whether the company's cash flow is sufficient or not to pay off its debts. Prospective lenders
and bond investors use solvency ratios to evaluate a company's creditworthiness.
It shows the weak solvency position of the company as more assets are funded using
debts. In FY2020-21 the company had stable debts which shows the company is acquiring
more equity capital. Till the financial year 2019 the company had enough operating profits
to pay off its interest expenses. In the FY2019-20 and FY2020-21 the company had less
interest coverage and it had insufficient EBIT to pay its debt obligations i.e., unavailability of
the earnings to cover the interest. There is deficiency in the cash flow operations to cover
the debts. It is highly risky to invest in this company and investors have very less claim on
the company’s assets if it faces liquidation.
Earnings ratio:

Rati Formula 2017 2018 2019 2020 2021

o
Earni (Net income- 535/781.7=0. 1177.9/782. 3212.2/782. - -
ngs preferred 684 88=1.505 96=4.103 1630.1/7 6725.1/8
per dividends)/o 85.17=- 47.62=-
shar utstanding 2.076 7.934
e number of
(EPS common
) shares
Price share 151.65/0.684 148.69/1.50 782.96/4.10 785.17/- 847.62/-
Earni price/earning =221.579 5=98.825 3=52.942 2.076=- 7.934=-
ngs s per share 72.592 25.365
(P/E) (EPS)
ratio

The company is generating negative income or the company is losing money and incurring
losses after the financial year 2019. Hence the EPS and P/E ratio is negative for the
financial years 2020 and 2021. The company is not earning money for its shareholders. In
the FY2017-18, FY2018-19 we can see that the PE ratio is high as the company was
growing and after which the negative ratio shows the slow growth of the company and debt
burden of the company.
Resources:
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