Contrary to mass perceptions developed during the pandemic COVID-19 lockdown, online shopping is not the be-all and end-all of India’s retail. Offline stores are the major contributors.
India’s organized retail space has been seeing a couple of large-ticket purchases. Amazon wanted right of first refusal in Future Group, while the latter went ahead and sold the same to Reliance. And now, Flipkart, an online shopping platform, will buy 7.8% ownership of offline fashion retail Aditya Birla Fashion and Retail Limited.
The equity capital will be raised at Rs 205 per share. The promoter and promoter group companies of ABFRL will hold about 55.13 per cent upon completion of the issuance.
ABFRL will use this capital to strengthen its balance sheet and propel its growth ambition with renewed vigour, said a statement. The company plans to scale-up its play in emerging high-growth fashion categories including innerwear, athleisure, casual wear and ethnic wear, establishing these as the new engines of growth for the company.
Furthermore, ABFRL will accelerate the execution of its large-scale digital transformation strategy that will deepen its consumer connect and augment its backend capabilities, positioning it amongst the most comprehensive omni-channel fashion players in the country.
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Through this partnership, the Flipkart Group will strengthen the range of brands offered on its e-commerce platforms Flipkart and Myntra, deepening its relationship with ABFRL, and enhancing the range of premium international and Indian brands on offer.
Flipkart's technology prowess will enhance ABFRL's omni-channel capabilities, enriching customer experiences while continuing to provide access to premium loyalty programs and affordability constructs for which Flipkart is known.
Speaking on this development, Kalyan Krishnamurthy, CEO, Flipkart Group, said, "Through this partnership 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," he said.
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 $100 billion in the next 5 years."
He said that fashion retail in India is set for robust long-term growth due to strong fundamentals of a large and growing middle class, favourable demographics, rising disposable incomes and aspiration for brands.
This partnership is a critical component of that strategy, Birla added.
Though the transaction is subject to regulatory approvals, but the stock markets are rejoicing in the news with the stock price having risen by 13% as compared to the previous day’s closing.