Walmart’s Flipkart is set to acquire a 7.8% stake in Aditya Birla Fashion and Retail Ltd. (ABFRL) for ₹1,500 crore, intensifying the battle in fashion e-commerce with Amazon.com and Reliance Industries’ retail arm.
The ABFRL board had approved a proposal to raise ₹1,500 crore through a preferential issue to the Flipkart Group, the fashion apparel company said in a filing on Friday. The equity capital will be raised at ₹205 per share.
The promoter group of ABFRL would hold about 55.13% upon completion of the issuance, the firm said.
“This partnership is an emphatic endorsement of the growth potential of India,” said Kumar Mangalam Birla, chairman, Aditya Birla Group. “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 five years.”
“Fashion retail in India is set for a robust, long-term growth due to strong fundamentals of a large and growing middle class, favourable demographics, rising disposable incomes and aspiration for brands. Rapid growth of technology infrastructure will further accelerate this process,” he added.
“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,” added Mr. Birla.
ABFRL plans to use this capital to strengthen its balance sheet and accelerate its growth trajectory.
“The company 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 inner wear, athleisure, casual wear and ethnic wear, establishing these as the new engines of growth for the company,” the company said.
“Given the complementary strengths of ABFRL and the Flipkart Group, this partnership has the potential to dramatically accelerate the growth of the apparel industry in India and reshape apparel commerce,” said Ashish Dikshit, MD, ABFRL.
“This deal also provides a tremendous opportunity to build the scale of existing brands and expand the company’s brand portfolio into emerging consumer segments,” he added.
Flipkart Group would strengthen the range of brands offered on its e-commerce platforms Flipkart and Myntra, deepening its partnership with ABFRL and enhancing the range of premium international and Indian brands on offer.
Flipkart’s technology prowess will enhance ABFRL’s omni-channel capabilities, enriching customer experiences while continuing to provide access to premium loyalty programmes and affordability.
Kalyan Krishnamurthy, CEO, Flipkart Group said, “At the Flipkart Group, we are focused on building new partnerships that will help us meet the demands of the discerning Indian consumer who seek quality and value.”
“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,” he said.
On completion of this transaction, ABFRL would have successfully executed a capital raise of ₹2,500 crore since April 1,2020.
The transaction is subject to regulatory and other customary approvals.