CCI okays Flipkart's Rs 1,500 cr stake in Aditya Birla Fashion and Retail

Amazon and Flipkart can't directly acquire assets under FDI rules, so they are doing smaller strategic stake deals with offline retailers, hoping to acquire offline assets when rules change

The Competition Commission of India (CCI) on Wednesday approved the acquisition of a 7.8 per cent minority stake in Aditya Birla Fashion and Retail Ltd by Flipkart Investments Private Ltd. The competition watchdog made the announcement in the evening on Twitter.

Last October, Flipkart Group and Aditya Birla Fashion and Retail Limited (ABFRL) formed a new strategic partnership aimed at enhancing the consumer fashion experience. Through an investment of Rs 1,500 crore, Flipkart Investments said it will acquire about 7.8 per cent stake in ABFRL. The companies have partnered to leverage synergies in the fashion segment.

Through this partnership, Flipkart Group will strengthen the range of brands offered on its e-commerce platforms Flipkart and Myntra. This would deepen its relationship with ABFRL, and enhance the range of premium international and Indian brands on offer. Flipkart’s technology prowess will enhance ABFRL’s omni-channel capabilities. This would enrich customer experience while continuing to provide access to premium loyalty programmes and affordability constructs.

Flipkart is eyeing strategic stakes in multiple small, regional as well as large retailers in India as the e-commerce giant looks to tap the offline retail opportunity in the country, according to sources.

 

Last July, Flipkart Group also invested Rs 260 crore for a significant minority stake in retailer Arvind Fashions’ (AFL)  subsidiary Arvind Youth Brands, which owns the Flying Machine brand.

The Walmart-owned firm is in a race with rivals Amazon and Reliance’s JioMart, who are also following a similar strategy and are in talks with multiple Indian offline retailers to buy strategic stakes. 

Under foreign direct investment (FDI) regulations, Amazon and Flipkart cannot directly acquire assets, according to analysts. These firms are doing smaller strategic stake deals with offline retail players in the hope of acquiring offline assets when rules change. People in the know said that Flipkart has also held talks with grocery chain Namdhari’s Fresh to purchase a significant stake.

The approval by the watchdog comes at a time when the  Karnataka High Court is hearing the petition filed by CCI for the probe against e-commerce firms Amazon and Flipkart. This is a continuation of the matter when the Supreme Court in October last year declined to entertain the petition filed by CCI seeking to remove Karnataka High Court’s stay on an investigation that the watchdog had ordered against Amazon and Flipkart related to anti-competitive business practices.