Highlights:
- E-commerce giant Flipkart buys 7.8% stake in ABFRL
- ABFRL has approved Rs 1,500 crore raising and will issue preferential shares to Flipkart Group
- The deal was made at the cost of Rs 205 per share
On Friday, the Aditya Birla Fashion and Retail Limited (ABFRL) said that the company is going to raise Rs 1500 crore from the Flipkart Group and the proceeds will be used by the company to strengthen its balance sheet and accelerate its growth.
Aditya Birla Fashion and Retail Limited have approved the raising of Rs 1500 crore by way of the preferential issue to the Flipkart Group. The equity capital will be raised at Rs 205 per share as per the filing done by the company to the NSE (National Stock Exchange).
With this influx, Flipkart Group will now own 7.8% equity stake in ABFRL on a fully diluted basis.
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In addition to this, the promoter and promoter group companies of ABFRL will hold about 55.13% upon the issuance of equity of the Flipkart Group is completed.
As the news hit the market, shares of ABFRL jumped 3.5% on Friday.
ABFRL enjoys a dense network of 3,004 stores, with presence across 23,700 multi-brand outlets. It operates apparel brands such as Van Huesen, Louis Philippe, Allen Solly, Peter England, apart from the Pantaloons retail format.
Kumar Manglam Birla, Chairman of Aditya Birla Group had 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 $100 billion in the next 5 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.”
He added, “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,”.
In the same transaction, the Walmart-backed Flipkart Group will strengthen the range of brands offered on its e-commerce platforms Flipkart and Myntra, giving the depth in its partnership with ABFRL, and enhancing the range of premium international and Indian brands on offer.
Additionally, ABFRL will chart a “digital transformation strategy that will deepen the consumer connect of its brands, expand the reach of its diverse brand portfolio, build strong omnichannel functionalities and augment its backend capabilities,” the company said.
The novel Coronavirus has forced a lot of the large traditional brick-and-mortar retailers to relook at their businesses which have been largely relying on asset heavy retail stores at a time when shoppers are swiftly moving online. This has prompted several traditional retailers to stitch a partnership with online retailers as they fight the growing prominence of online retail.
Earlier in 2020, the Flipkart Group also bought a minority stake in Arvind Fashions Limited’s (AFL) subsidiary Arvind Youth Brands for Rs 260 crore. The move will help Arvind to expand its denim brand Flying Machine, online along with the smaller markets in the country.
