Walmart-owned Flipkart has invested Rs 260 crore to acquire a significant minority stake in Arvind Fashions' recently formed subsidiary Arvind Youth Brands, which will own Flying Machine brand. This investment will focus on addressing the demands and needs of the fashion-conscious youth in India.
"The Flipkart Group and Arvind Fashions (AFL) today strengthened their partnership, through an investment of INR 260 crore by Flipkart Group to purchase a significant minority stake in AFL's recently formed subsidiary Arvind Youth Brands which will own the Flying Machine brand," Arvind Fashions said in a regulatory filing.
"This investment builds on long-standing engagement between the two organisations that have been working together for several years to address the demands and needs of the fashion-conscious youth in India," it said.
Arvind Fashions' arm will own the Flying Machine brand, which has been retailing on the Flipkart Group platforms of Flipkart and Myntra for more than 6 years. Flying Machine is amongst the leading denim brands in India.
Through this investment, the Flipkart Group and Arvind Fashions will work collaboratively to identify opportunities and synergies to innovate and develop products with strong value propositions at attractive price points, the company said.
The transaction is subject to customary conditions precedent. Metta Capital Advisors acted as the financial advisors to AFL for this transaction.
Speaking on the investment, Kalyan Krishnamurthy, Chief Executive Officer, Flipkart Group, said, "Flying Machine is a brand that is known in households across India, popular with the youth and synonymous with value and style. Through this investment, we look forward to partnering with the team at Arvind Youth Brands to continue to grow the market for its portfolio of products and enhance the strong brand equity that has been built over the last few decades."
J Suresh, Managing Director and Chief Executive Officer of Arvind Fashions, said, "The partnership with the Flipkart Group will help us accelerate our online growth strategy as we focus our efforts on developing an omni-channel retail approach for Arvind Youth Brands and Flying Machine."
"Given the strong existing relationship with the Flipkart Group, and their presence in online fashion, it was an obvious choice for us to enter into this engagement through which Flipkart and Myntra will be our preferred online partner for the Flying Machine brand, while we continue to grow our offline sales through channels like exclusive brand stores, department stores and multi-brand stores," Suresh added.
Arvind Fashions Limited and Arvind Lifestyle Brands, a wholly owned subsidiary of the company, have each signed definitive agreements to transfer by way of sale, of the wholesale trading business and the retail trading business in "Flying Machine" brand respectively to a wholly owned subsidiary, Arvind Youth Brands.
In February this year, the board of directors of the respective companies had approved the sale as a "going concern" on a slump sale basis for a lump sum consideration to be mutually agreed of not less than the book value of the division as appearing on the date of actual transaction. The shareholders of the company had also approved the transaction on March, 26, 2020 through postal ballot.
In a separate development, Arvind Fashions Ltd (AFL) reported a consolidated net loss of Rs 208.12 crore for the quarter ended March 2020, impacted by COVID-19 pandemic and subsequent disruptions in the market. Revenue from operations declined 39.22 per cent to Rs 710.46 crore during Q4 FY20 as against Rs 1,168.96 crore in the corresponding quarter a year ago.
For fiscal year 2019-20, the company reported a net loss of Rs 399.36 crore against net profit of Rs 21.48 crore in the previous fiscal. Its revenue from operations in FY20 declined 16.74 per cent to Rs 3,866.30 crore as compared with Rs 4,643.86 crore in 2018-19.