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Flipkart Buys Rs 1,500-Crore Stake In Aditya Birla Fashion & Retail

Flipkart will buy a 7.8% stake in Aditya Birla Fashion & Retail.

The logo of Flipkart Online Services is seen on the side of a package in Bengaluru, India. (Photographer: Dhiraj Singh/Bloomberg)
The logo of Flipkart Online Services is seen on the side of a package in Bengaluru, India. (Photographer: Dhiraj Singh/Bloomberg)

Walmart Inc.-backed Flipkart will buy a 7.8% stake in Aditya Birla Fashion & Retail Ltd., paving the way for the apparel retailer to sell goods online amid the pandemic-fueled e-commerce boom.

The board of Aditya Birla Fashion approved issuance of equity shares on a preferential basis to Flipkart Investments Pvt., aggregating to Rs 1,500 crore, the owner of Pantaloons clothing chain said in a statement. The promoter and promoter group companies of Aditya Birla Fashion will hold about 55.13% after completion of the issuance, it said.

As part of the deal, Flipkart has also entered into a commercial agreement for the sale and distribution of various brands of Aditya Birla Fashion.

“The investment agreement inter-alia provides for preemption rights and right of first refusal which are for a limited period of 1-5 years from the date of allotment of equity shares or if the equity shareholding of the investor falls below a certain threshold,” the statement said.

Aditya Birla Fashion had previously ventured into e-commerce on its own in 2015 and had launched Abof, but it failed to take off and shut shop in 2017. It later brought it back as a private label, and started selling on Amazon and Flipkart.

Reacting to the development, shares of Aditya Birla Fashion jumped 5.47% compared with a 0.23% gain in the Nifty 50 Index.

Strategic Tie-up

For Flipkart, a stake in the offline fashion retailer is a part of its larger strategy to expand offerings and leverage strategic partnerships, as the battle heats up in India’s online e-commerce market with the entry of Reliance Jio. Flipkart, however, leads the fashion category, thanks to Myntra that has helped the firm garner the most market share in online apparel shopping.

Online sale of apparel, according to Forrester, is pegged at $7 billion, and is the biggest category after smartphones for e-commerce firms.

Flipkart is focused on building new partnerships to meet the demands of the Indian consumers, Group Chief Executive Officer Kalyan Krishnamurthy said in the statement. “Through this partnership with Aditya Birla Fashion, we will work towards making available a wide range of products for fashion-conscious consumers across different retail formats across the country,” he said.

This will be the Flipkart’s second such deal with an offline retailer. Earlier this year, it acquired a minority stake in Arvind Youth Brands, the owner of Flying machine for Rs 260 crore.

Its rival Amazon, too, in the past had done several such partnerships in India. In 2018, Amazon, along with Samara Capital, a private equity firm, had acquired supermarket chain More from the Birla Group. The U.S.-based retailer had also picked up stakes in Shoppers Stop and Future Coupons, an entity of Future Retail, which is now facing a legal tussle after selling its logistics, retail and warehousing assets to Reliance Industries Ltd.