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Flipkart to purchase 7.8% stake in Aditya Birla Fashion and Retail for Rs 1,500 crore

Flipkart-Aditya Birla Fashion deal: Aditya Birla Fashion and Retail (ABFRL) will issue equity shares on a preferential basis to Flipkart Investments Private Limited at Rs 205 per share.

By: Express Web Desk | New Delhi | Updated: October 23, 2020 12:41:48 pm
A shopper pays for her purchases at a Pantaloons department store (Photographer: Graham Crouch/Bloomberg)

Aditya Birla Fashion and Retail (ABFRL) on Friday informed that it has approved raising of Rs 1,500 crore from Flipkart Investments Private Limited, a foreign portfolio investor, by issuing preferential equity shares to the Walmart-owned e-commerce giant. Following this transaction, Flipkart will own 7.8 per cent stake in ABFRL.

The issue price of equity shares has been set at Rs 205 apiece, which is at a 33.64 per cent premium from ABFRL’s Thursday’s closing price of Rs 153.40 per share on the BSE. Following the announcement, the stock has jumped 6.88 per cent to hit an intraday high of Rs 163.95 apiece so far.

“The Company has also, in furtherance of the existing B2B arrangements with Flipkart India Private Limited, entered into a commercial agreement in relation to the sale and distribution of various brands of the Company,” ABFRL said in an exchange filing.

The preferential issue is subject to the approval of shareholders (by way of postal ballot), regulatory approvals and other customary conditions, the filing said.

The promoter and promoter group companies of ABFRL will hold about 55.13 per cent upon completion of the issuance.

“The Investment Agreement inter-alia provides for some rights such as preemption rights and right of first refusal which are for a limited period of between 1-5 years from the date of allotment of equity shares or if the equity shareholding of the Investor falls below a certain threshold,” ABFRL said.

Separately, the company has also informed that Flipkart is entitled to appoint an observer as an invitee to the ABFRL board.

Reacting to the development, Kumar Mangalam Birla, Chairman Aditya Birla Group 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, favorable demographics, rising disposable incomes and aspiration for brands.”

“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,” he said in the company statement.

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 innerwear, athleisure, casual wear and ethnic wear, establishing these as the new engines of growth for the company,” the release said.

ABFRL said it has also entered into a commercial agreement in relation to the sale and distribution of its various brands.

“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,” Kalyan Krishnamurthy, CEO of Flipkart Group said.

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