Aditya Birla Fashion and Retail Limited (ABFRL), on Friday (October 23), announced that it is raising INR 1,500 Cr (about $203 Mn) from Indian ecommerce giant Flipkart. With this, the Walmart-owned company will own 7.8% equity in the retailer on a fully diluted basis.
The transaction is done by the way of preferential issue. Once the issuance is complete, the promoter and promoter group companies of Aditya Birla Fashion and Retail will hold about 55.13% upon completion of the issuance. The company will use this capital to strengthen its balance sheet and accelerate its growth trajectory.
A part of the funding will also go into aggressively scaling up its existing businesses, where it already holds strong, market-leading positions while increasing presence in emerging high-growth categories such as innerwear, athleisure, casual wear, and ethnic wear, establishing these as the new engines of growth for the company.
Aditya Birla Fashion and Retail owns some mainstream Indian brands like Pantaloons, Allen Solly and Peter England. It has a network of 3,004 stores and a presence across 23,700 multi-brand outlets, with 6,700 points of sales in department stores across India. In the financial year 2020, the company reported INR 8,788 Cr in revenue and a market cap of around INR 13,000 Cr.
Commenting on the investment, Aditya Birla Group’s chairperson Kumar Mangalam Birla, said, 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.”
Further, he said that the fashion retail in India is set for robust long-term growth due to strong fundamentals of a large and growing middle class, favorable demographics, rising disposable incomes and aspiration for brands. The rapid growth of technology infrastructure will further accelerate this process, Birla added.
Kalyan Krishnamurthy, CEO of Flipkart Group said, “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. We look forward to working with ABFRL and its well established and comprehensive fashion and retail infrastructure as we address the promising opportunity of the apparel industry in India.”
According to media reports, even Amazon was in the race to invest in the fashion retailer. The US-based ecommerce company had previously bought supermarket chain More from the Birla Group, along with the private equity firm Samara Capital.
Flipkart has followed an acquisition strategy for other brands and verticals in the past as well in order to expand its operations and leverage strategic partnerships to keep its cost structures lean and scale rapidly.
Earlier in September, it invested INR 260 Cr for a minority stake in Arvind Fashions’ (AFL) subsidiary Arvind Youth Brands, which owns the Flying Machine brand. The investment is meant to strengthen the long-standing partnership between the two organisations to address the “demands and needs of the fashion-conscious youth of India,” the company had said in a press statement.