Walmart-owned Flipkart is investing Rs 1,500 crore to pick up a 7.8 per cent stake in Aditya Birla Fashion and Retail Ltd (ABFRL). The transaction will enable ABFRL to sell its various brands on the latter’s platform.
The investment by Flipkart will be through a preferential issue. ABFRL will issue 7,31,70,732 shares at Rs 205 apiece.
In a regulatory filing with the bourses, the Birla group firm said this investment agreement “provides for pre-emption rights and the right of first refusal, which are for a limited period of between 1-5 years from the date of allotment of equity shares or if the equity shareholding of the investor falls below a certain threshold’’.
ABFRL has the Pantaloons fashion chain in its portfolio along with other brands such as Louis Philippe, Van Heusen, Allen Solly and Peter England. However, both the companies were silent on the brands that will be marketed as part of the agreement.
Shares jump
Shares of ABFRL zoomed by almost 8 per cent on the announcement. On the BSE, it closed at Rs 165.05 — a gain of Rs 11.65 over the last finish.
In a press statement, the Aditya Birla group firm said that following the issuance, the promoter and promoter group companies of ABFRL will hold about 55.13 per cent.
ABFRL said it plans to use this capital to strengthen the balance sheet and accelerate its growth trajectory.
The company is also looking to aggressively scale-up its existing businesses where it holds strong, market leading positions while increasing its presence in emerging high-growth categories such as innerwear, athleisure, casualwear and ethnic wear.
The company added that it will aggressively drive its large-scale digital transformation strategy that will deepen the consumer connect of its brands, expand the reach of its diverse brand portfolio, build strong omni-channel functionalities and augment its backend capabilities; positioning it amongst the most comprehensive omni-channel fashion players in the country.
The Flipkart group said that through this partnership, it will strengthen the range of brands offered on its e-commerce platforms — Flipkart and Myntra— even as it would also deepen the relationship with ABFRL.
“Flipkart’s technology prowess will enhance ABFRL’s omni-channel capabilities, enriching customer experiences while continuing to provide access to premium loyalty programmes and affordability constructs,’’ the statement said.
The transaction comes at a time when Reliance Retail is also set to aggressively venture into online fashion retail through JioMart. Though JioMart largely sells groceries now, the plan is to enlarge its portfolio to include electronics, fashion and even pharmaceuticals.
Flipkart, however, has a major presence in the online fashion segment, because of Myntra.
“This partnership is an emphatic endorsement of the growth potential of India. It also reflects our strong conviction in the future of the apparel industry in India, which is poised to touch $100 billion in the next five years.
“Fashion retail in India is set for robust long-term growth due to strong fundamentals of a large and growing middle class, favourable demographics, rising disposable incomes and aspiration for brands. Rapid growth of technology infrastructure will further accelerate this process.
“Over the years, we have shaped ABFRL into a strong platform to capture future growth opportunities in India. This partnership is a critical component of that strategy,’’ Kumar Mangalam Birla, chairman of Aditya Birla Group, said.
“Through this transaction with ABFRL, we will work towards making available a wide range of products for fashion-conscious consumers across different retail formats across the country.
“We look forward to working with ABFRL and its well established and comprehensive fashion and retail infrastructure as we address the promising opportunity of the apparel industry in India,’’ Kalyan Krishnamurthy, CEO of Flipkart Group, said.
