Flipkart beats Amazon to buy a 7.8% stake in Aditya Birla Fashion and Retail

Flipkart beats Amazon to buy a 7.8% stake in Aditya Birla Fashion and Retail
BCCL
  • Indian e-commerce giant Flipkart has bought a 7.8% stake in Aditya Birla Fashion for ₹1,500 crore.
  • With the partnership, ABRL fashion brands will find their way onto the e-commerce platforms Flipkart and Myntra.
  • The group has raised ₹2,500 crore since April, 2020.
Indian e-commerce giant Flipkart has bought a 7.8% stake in Aditya Birla Fashion for ₹1,500 crore. After the transaction, Aditya Birla Fashion Retail Limited will have a 55.13% stake in the company. ABRL runs the Pantaloon chain of retail stores across the country.

The shares of ABRL jumped by almost 5% with the news of the fundraise. The group has raised ₹2,500 crore overall since April 2020.

Flipkart beats Amazon to buy a 7.8% stake in Aditya Birla Fashion and Retail
BI India

According to reports, Amazon was also in the race to buy a stake in ABRL.
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Announcing the partnership, 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 $100bn in the next 5 years. Fashion retail inIndia 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.”

The need to transition to e-commerce

ABRL which runs the Pantaloon chain of retail stores across the country and owns brands like Allen Solly, Peter England has borne the brunt of the coronavirus pandemic. In the first quarter of the current financial year, the company had posted a loss of ₹410.36 crore as opposed to a profit of ₹21.56 crore in the same quarter the previous year.

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With the stores shut for a majority of the first quarter and the falling footfalls at retail outlets, analysts at Spark Capital expect the company’s annual numbers to take a hit and for profit to return only in FY22.

Long road to recovery
YearRevenue in ₹ mn PAT in ₹ mn
FY2087,879-1,007
FY21 Estimate61,877-2,966
FY22 Estimate99,065353
Spark Capital report from August, 2020.

And so, ABRL has been looking at ways to expand its online offerings. “E-commerce, as a route to market, is being scaled aggressively and the company is also looking to introduce new omni-channel offerings,” the company had said in May.
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Now, with the Flipkart partnership, ABRL fashion brands will find their way onto the e-commerce platforms Flipkart and Myntra and leverage the e-commerce giant’s reach. It also plans to expand its offerings in categories such as innerwear, athleisure, casualwear and ethnic wear which have been identified as ‘high-growth’ categories by the company.

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

Earlier this year, Flipkart had also bought a minority stake in the publicly listed Arvind Fashions for ₹260 crore. Arvind Fashions has 1,290 stores across India as well as a 10,000 multi-brand outlet presence.
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