Why Does MOSL Stay Neutral On Aditya Birla Fashion Despite Growth Plans?
Aditya Birla Fashion and Retail Limited (ABFRL), part of the Aditya Birla Group, is one of India’s largest branded apparel companies with a portfolio spanning lifestyle, ethnic wear, innerwear, and luxury retail. The company operates well-known brands like Pantaloons, Van Heusen, Louis Philippe, Allen Solly, and Peter England. It has also expanded into ethnic wear through acquisitions and luxury retail partnerships with global brands. While ABFRL continues to scale up growth businesses such as TMRW and OWND! for Gen Z, its near-term profitability outlook remains weighed down by heavy investments. Motilal Oswal Financial Services (MOSL) has reiterated a Neutral rating on the stock with a target price of ₹100 (raised from ₹85 earlier).
Pantaloons Revamp & Retail Strategy
The Pantaloons brand has been undergoing a revamp to improve its margin profile. With a sharper product mix, improved sourcing, and store-level efficiency, Pantaloons is expected to gradually enhance profitability. At the same time, the company has rebranded its youth-focused Style-Up segment as OWND! to target the Gen Z demographic with curated fashion offerings.
- Pantaloons revamp aimed at driving better margins.
- Style-Up rebranded as OWND! to target Gen Z consumers.
- Ethnic wear portfolio strengthening as TCNS losses reduce.
TMRW & Luxury Retail Portfolio
ABFRL has been nurturing TMRW, its digital-first house of brands, through separate fundraises to drive growth and acquisitions in the new-age fashion ecosystem. This platform is expected to become a key revenue contributor over the medium term. In addition, ABFRL’s luxury retail portfolio, built through partnerships with leading global brands, is already profitable and remains a strong growth engine for the company.
- TMRW expected to deliver growth via acquisitions and brand scale-up.
- Luxury retail portfolio delivering strong, profitable performance.
- Ethnic wear segment turning around with improved profitability outlook.
Financial Forecasts
MOSL projects that ABFRL will deliver steady top-line and margin growth over the next two years. Revenue is estimated to grow by 5–8% in FY26–27, driven by TMRW, luxury retail, and the OWND! brand. EBITDA is expected to increase by 12% in FY26 and by 26% in FY27. However, despite these gains, overall profitability remains challenged due to the heavy capital requirements of TMRW and newer businesses.
- Revenue growth: 5–8% (FY26–27E).
- EBITDA growth: +12% (FY26E), +26% (FY27E).
- Losses likely to persist through FY25–28 due to TMRW investments.
Concerns Over Profitability
While ABFRL has multiple growth drivers in place, MOSL remains cautious as the company is expected to remain in losses during FY25–28, weighed down by continued investments in TMRW and other new initiatives. This reduces visibility of near-term returns and creates uncertainty about when the company will achieve sustainable profitability.
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Long-Term Outlook
ABFRL’s long-term growth potential rests on its ability to scale TMRW, deepen its luxury partnerships, and improve Pantaloons’ profitability. While short-term earnings may remain under pressure, the company’s diversified brand portfolio and focus on premiumisation provide a solid platform for growth. Investors with a longer-term horizon may find value once the company transitions from loss-making phases to consistent profitability.
- Performance of TMRW and timeline for profitability.
- Pantaloons’ margin expansion post revamp.
- Growth in luxury and ethnic wear segments.
- Company’s ability to manage capital requirements without sustained losses.
Investor Takeaway
ABFRL is in the midst of a transformation, with brand revamps, digital-first platforms, and luxury retail providing growth avenues. However, high investments and continued losses limit near-term upside, leading MOSL to maintain a Neutral stance despite raising the target price to ₹100. Investors should monitor progress in profitability, particularly within TMRW and Pantaloons, before expecting a strong re-rating.
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SEBI Disclaimer: The information provided in this post is for informational purposes only and should not be construed as investment advice. Readers must perform their own due diligence and consult a registered investment advisor before making any investment decisions. The views expressed are general in nature and may not suit individual investment objectives or financial situations.
