Walmart-owned Flipkart will invest Rs 1,500 crore for a 7.8% stake in Aditya Birla Fashion & Retail (ABFRL), which runs brands like Pantaloons, Allen Solly, Peter England, according to regulatory disclosures.
“Fashion retail in India is set for robust long-term growth due to strong fundamentals of a large and growing middle class, favorable demographics, rising disposable incomes and aspiration for brands,” Kumar Mangalam Birla, Chairman of Aditya Birla Group, said in a statement.
Flipkart’s interest in acquiring stakes in online fashion retailers is a part of its broader strategy to expand operations and leverage strategic partnerships to keep its cost structures lean and scale rapidly amid an increasingly competitive commerce environment. “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,” Kalyan Krishnamurthy, CEO of Flipkart Group, said.
The deal terms provide Flipkart preemption rights or the right to buy additional shares in any future issue before the shares are available to the general public, and right of rst refusal which are for a period of 1-5 years from the date of allotment of equity shares, the statement said.
ABFRL plans to use this capital to strengthen its balance sheet, scale-up its existing businesses while increasing presence in emerging high-growth categories such as innerwear, athleisure, casual and ethnic wear.
On completion of this transaction, ABFRL would have executed a capital raise of Rs 2,500 crore since April, the company said. Flipkart’s transaction is subject to regulatory approvals.
It was reported around the 23rd of October that both Flipkart & Amazon were interested in buying stake in this company.
Aditya Birla Fashion and Retail has a network of 3,004 stores, presence across 23,700 multi-brand outlets with 6,700 points of sales in department stores across India.
“This deal also provides a tremendous opportunity to build scale of existing brands and expand its brand portfolio into emerging consumer segments,” Ashish Dikshit, managing director of ABFRL, said.
Flipkart has been strategically looking at building its fashion portfolio to shore up its consumer and business-to business ecommerce presence. Earlier this month, the company internally announced a “House of Brands” initiative that brought together Flipkart Fashion Originals, Myntra Fashion Brands and Myntra Brand Accelerator under a single umbrella.
Flipkart will work closely with Aditya Birla Fashion, for sales and distribution of its brands.
“The deal provides a lot of leverage to Flipkart and Myntra in terms of offering the right brands, supply chain, etc. The key takeaway, however, is if online play is not integrated into the business model, offline retail is doomed,” said Ankur Bisen, senior vice president, retail and consumer, at management consulting firm Technopak.
In July, Flipkart Group invested Rs 260 crore to buy a signicant minority stake in Arvind Fashions’ subsidiary Arvind Youth Brands for an estimated 27% stake to ramp up its fashion play.
Source: The Economic Times & MINT