Flipkart is going to acquire a 7.8% stake in Aditya Birla Fashion and Retail (ABFRL) for Rs 1,500 crore on a fully diluted basis, the latter said in a regulatory filing adding that the proceeds will be used to "strengthen the company's balance sheet and accelerate its growth".
ABFRL approved the raising of Rs 1,500 crore through preferential allotment of shares at Rs 205 (per share), 33.63% higher than Thursday's closing price of Rs 153.40.
The Flipkart-ABFRL pact would be 2020's second big deal in the offline consumer space so far. In August this year, Reliance Industries Ltd.'s (RIL) unit Retail Ventures acquired the retail and wholesale business as well as the logistics and warehousing business from Kishore Biyani-led Future Group as going concerns for a gross amount of Rs 24,713 crore.
After the dilution of the 7.8% stake, the promoter and promoter group companies of ABFRL will hold around 55.13%. Following the news, shares of ABFRL jumped 3.5% on Friday.
"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," said Kumar Mangalam Birla, Chairman Aditya Birla Group.
Furthermore, Aditya Birla Fashion said it will use the money to "strengthen its balance sheet and accelerate its growth trajectory" as it 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."
ABFRL has a network of around 3,000 stores, with presence across 23,700 multi-brand outlets. The Indian clothing retail chain operates apparel brands such as Peter England, Allen Solly, Van Huesen, Louis Philippe, besides the Pantaloons retail format.
With this acquisition, Walmart-owned Flipkart Group will strengthen the wide array of brands offered on its e-commerce platforms Myntra and Flipkart, deepening its association with ABFRL, and enhancing the range of premium international and Indian brands on offer.
Furthermore, ABFRL will aggressively accelerate execution of its large-scale digital transformation strategy that will deepen the consumer connect of its brands, expand reach of its diverse brand portfolio, build strong omni-channel functionalities and augment its backend capabilities; positioning it amongst the most comprehensive Omni-channel fashion players in the country, the company said.