Aditya Birla Fashion and Retail Ltd approved the raising of Rs1,500 crore by way of preferential issue to Flipkart Group and the equity capital will be raised at ₹205 per share
NEW DELHI: Aditya Birla Fashion and Retail Ltd (ABFRL) on Friday said it is raising ₹1,500 crore from Flipkart Group, the proceeds of which the company will use to strengthen its balance sheet and accelerate growth. Flipkart Group will own 7.8% equity stake in ABFRL on a fully diluted basis with this infusion.
ABFRL approved the raising of ₹1,500 crore by way of preferential issue to Flipkart Group. The equity capital will be raised at ₹205 per share, the company said in a filing to the exchanges.
The promoter and promoter group companies of ABFRL will hold about 55.13% upon completion of the issuance.
Shares of ABFRL jumped 3.5% on Friday following the news.
ABFRL has a network of 3,004 stores, with presence across 23,700 multi-brand outlets. It operates apparel brands such as Van Huesen, Louis Philippe, Allen Solly, and Peter England, apart from the Pantaloons retail format.
“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 bn in the next 5 years," said Kumar Mangalam Birla, chairman, Aditya Birla Group.
"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 added.
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, Birla said, adding rapid growth of technology infrastructure will further accelerate this process.
As part of the transaction, Walmart-backed Flipkart Group will strengthen the range of brands offered on its e-commerce platforms Flipkart and Myntra, deepening its partnership with ABFRL, and enhancing the range of premium international and Indian brands on offer.
ABFRL will chart a “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…" the company said.
Covid has forced several large offline retailers to relook at their businesses that largely rely on asset-heavy retail stores at a time when shoppers are swiftly moving online. This has prompted several traditional retailers to stitch partnerships with online retailers as they fight the growing prominence of online retail.
Earlier this year, Flipkart Group bought a minority stake in Arvind Fashions Ltd’s subsidiary Arvind Youth Brands for Rs260 crore. The move will allow Arvind to expand its denim brand, Flying Machine, online and in India's smaller markets.
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