MUMBAI -- Walmart-owned Flipkart will acquire a 7.8% stake in Aditya Birla Fashion and Retail, run by billionaire Kumar Mangalam Birla, for 15 billion rupees ($204 million) as it moves to tap the offline retail player's large bank of apparel outlets.
Flipkart needs to fend off billionaire Mukesh Ambani-run Reliance Industries, which is rapidly expanding its retail business via major acquisitions and funding from overseas investors, including Silver Lake and KKR.
Flipkart will buy preferential shares that Aditya Birla Fashion will issue at a price of 205 rupees each, according to a joint statement issued on Friday. The price is 33.6% higher than Aditya Birla Fashion's closing price of 153.4 rupees on Thursday. Aditya Birla Fashion's current owners will hold a 55.1% stake after the allotment.
Aditya Birla Fashion has a network of about 3,000 stores, including the Pantaloons fast-fashion chain. It also has a presence across approximately 23,700 multibrand outlets with over 6,700 points of sale in department stores.
"[W]e will work towards making available a wide range of products for fashion-conscious consumers across different retail formats across the country," Kalyan Krishnamurthy, CEO of Flipkart said. "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."
Flipkart will gain from Aditya Birla Fashion's range of international and Indian brands. In addition, it expects its technological expertise to enhance Aditya Birla Fashion's omnichannel capabilities.
For its part, Aditya Birla Fashion plans to use the capital infusion to strengthen its balance sheet and accelerate its growth trajectory. The company plans to increase its presence in categories such as underwear, athleisure, casualwear and ethnic wear.
Kumar Mangalam Birla, chairman of the Aditya Birla Group, pointed out that the evolution of technology infrastructure will accelerate the long-term growth of India's fashion retail industry. "Over the years, we have shaped ABFRL into a strong platform to capture future growth opportunities in India," he said. "This partnership [with Flipkart] is a critical component of that strategy."
Aditya Birla Fashion has successfully raised around 25 billion rupees since April, even as the COVID-19 pandemic and accompanying lockdowns across India have severely impacted footfalls in offline stores.
In August, Reliance Retail Ventures, an arm of Reliance Industries, announced a plan to buy Indian retail pioneer Future Group's units for 247.13 billion rupees. Reliance Industries is heading for an aggressive fight not only in the online space but in e-commerce as well, where it will square off against Flipkart and Amazon India.