Walmart-owned e-commerce company Flipkart has picked a 7.8 per cent stake in Aditya Birla Fashion and Retail Ltd (ABFRL) for Rs 1,500 crore in a deal that comes at a time when the retail sector has witnessed an uptick in M&A transactions, with sectoral analysts expecting more such deals to be announced in the near future.
Flipkart Group runs e-commerce platforms Flipkart and Myntra, and is the market leader in the online fashion category, while ABFRL houses lifestyle brands such as Allen Solly, Peter England, Van Heusen in addition to the Pantaloons chain of multi-brand stores. The deal is part of a trend where online retailers are entering into financial and strategic partnerships with offline retailers to expand their presence.
“As far as India is concerned, the penetration of online is very small. So for them to grow their business and get customers experience their products, they need physical presence and the FDI regulations come in their way,” said Arvind Singhal, CMD of retail consultancy firm Technopak.
Sources in know of the deal also pointed out that Flipkart and ABFRL will need to find a way around India’s foreign direct investment (FDI) norms, which bar any entity in which an e-commerce firm or its group companies have a stake from selling on their online platform.
“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,” said Kalyan Krishnamurthy, CEO, Flipkart Group.
In a statement, ABFRL said that it plans to use this capital to strengthen its balance sheet and “accelerate its growth trajectory”. “This deal also provides a tremendous opportunity to build scale of existing brands and expand its brand portfolio into emerging consumer segments,” said Ashish Dikshit, MD, ABFRL.
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