Aditya Birla Fashion and Retail Ltd (ABFRL) is raising Rs 1,500 crore by way of preferential issue of shares to the Flipkart Group. The move is likely to be a win-win for both; it will give the Kumar Mangalam Birla-owned leading fashion player a chance to strengthen its omni-channel strategy, while the Walmart-owned e-commerce giant gets to broaden its portfolio of brands.
Post this deal, Flipkart will hold 7.8 per cent equity stake in ABFRL, while the promoter and promoter groups of ABFRL will hold 55.13 per cent. The equity capital is being raised at Rs 205 per share. ABFRL shares were trading at Rs 157.30, up 2.5 per cent on the BSE on Friday.
The Investment Agreement inter-alia provides for some rights such as pre-emption rights and right of first refusal which are for a limited period 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.
According to Kumar Mangalam Birla, chairman of the diversified Aditya Birla Group, this partnership with Flipkart reflects their strong conviction in the future of the apparel industry in India, which is poised to touch $100 billion in the next five years.
“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,” he said.
ABFRL plans to aggressively scale-up its existing businesses where it holds strong, market-leading positions, while increasing presence in emerging high-growth categories such as innerwear, athleisure, casualwear and ethnic wear, establishing these as the new engines of growth.
Retailers like ABFRL have been hit hard by the COVID-19 pandemic and the nationwide lockdown that forced shops to down shutters for over two months. In this backdrop, companies have turned their focus to e-commerce to boost sales.
The deal with Flipkart will help ABFRL aggressively accelerate execution of its digital transformation strategy that will help it deepen consumer connect and expand the reach of its diverse brand portfolio and augment its backend capabilities. Flipkart’s technology prowess will also enhance ABFRL’s omni-channel capabilities
“Given the complementary strengths of ABFRL and Flipkart Group, this partnership has the potential to dramatically accelerate the growth of the apparel industry in India and reshape apparel commerce. This deal also provides a tremendous opportunity to build scale of existing brands and expand its brand portfolio into emerging consumer segments,” said Ashish Dikshit, managing director of ABFRL.
ABFRL brand portfolio includes some of the leading names like Alan Solly, Peter England and Van Heusen. The deal will help Flipkart group strengthen the range of brands offered on Flipkart and Myntra, deepen its partnership with ABFRL, and enhance the range of premium international and Indian brands on offer.
“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,” said Kalyan Krishnamurthy, CEO of Flipkart.
ABFRL has a network of 3,004 stores and presence across 23,700 multi-brand outlets with more than 6,700 points of sales in department stores across India.
Over the last years, e-commerce companies and brick and mortar retailers have looked to collaborate and not just compete with each other as they look to leverage each other's strengths. In 2017, Amazon had acquired a 5 per cent stake in department store operator Shoppers Stop. Then in 2018, Amazon teamed up with Samara Capital to invest in Aditya Birla Group’s supermarket chain ‘More.’ Last year, Amazon also acquired a 49 per cent stake in Future Coupons, a promoter group company of Future Retail.
Mukesh Ambani’s Reliance Retail Ventures, too, has raised over Rs 37,000 crore from a clutch of global investors in the last few months.
