Flipkart to acquire 7.8% stake in Aditya Birla Fashion for Rs 1,500 crore

The promoter and promoter group companies of Aditya Birla Fashion will hold about 55.13 per cent stake upon completion of the issuance

Aditya Birla Fashion and Retail (ABFRL) and e-commerce major Flipkart on Friday said they had entered into an agreement that would see the latter infuse Rs 1,500 crore into the company for a 7.8 per cent stake. The retailer would issue 73 million preference shares to Flipkart at Rs 205 per share. ABFRL shares surged 7.6 per cent to close at 165.05 on Friday.

This is the second big deal in two months in the domestic retail market, after Reliance acquired the retail assets of the Future group for nearly Rs 25,000 crore. The Flipkart-ABFRL transaction will further consolidate the market, Abneesh Roy, executive vice-president, research (institutional equities), Edelweiss, said.

Fashion and lifestyle retailers have been hit hard due to the pandemic, forcing them to either exit or forge tie-ups with stronger players. In July, Flipkart picked up a minority stake in Arvind Youth Brands for Rs 260 crore. The latter owns the Flying Machine apparel brand.

ABFRL, on the other hand, has already raised nearly Rs 1,000 crore in a rights issue in July. The current arrangement with Flipkart will involve the sale and distribution of various apparel brands, it said, and will provide for pre-emption rights and the right of first refusal to Flipkart for 1-5 years.

Some of Aditya Birla Fashion's apparel brands include Van Huesen, Louis Philippe, Allen Solly, and Peter England, apart from products under the Pantaloons retail format. It has a network of 3,004 stores, with a presence across 23,700 multi-brand outlets.

Roy said the capital raise would further bolster ABFRL's balance sheet and accelerate growth. The partnership would also enable the company to strengthen its omni-channel presence.

The promoter and promoter group companies of Aditya Birla Fashion would hold about 55.13 per cent stake upon the completion of the issue.

Kumar Mangalam Birla, chairman, Aditya Birla Group, said, "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 $100bn in the next 5 years. Over the years, we have shaped Aditya Birla Fashion into a strong platform to capture future growth opportunities in India. This partnership is a critical component of that strategy.”

Kalyan Krishnamurthy, chief executive officer, Flipkart Group, said it was focused on building new partnerships. "Through this tie-up, we will work towards making available a wide range of products for fashion-conscious consumers across different retail formats across the country," he said.