Flipkart to acquire 10% stake in Future Lifestyle Fashions

Flipkart is in talks with Kishore Biyani to pick up an 8-10 per cent stake in Future Lifestyle Fashions (FLF), the listed fashion arm of the Future Group, according to Economic Times.

The move can be seen as an omni-channel strategy by online and offline retailers which are entering each other's territories to combat shrinking retail margins.

Myntra, the fashion arm of e-commerce platform Flipkart, is the likely vehicle for the partnership.

In offline segment, Future Lifestyle is one of the largest branded apparel retailers in India having 400 stores in 90 cities. The fashion arm of Future group also owns and markets 41 domestic and global fashion brands including Lee Cooper, Scullers, Indigo Nation, John Miller and Jealous 21.

According to Myntra, it had reached $1.5 billion in gross merchandise value (GMV) in August and now plans to raise this to $1.7 billion by the end of the year. Its private label business, Myntra Fashion Brands, has also turned profitable. This comprises 13 private brands such as Roadster and Hrithik Roshan's HRX.

The report added at current market capitalisation of Rs 6,536.81 crore ($1 billion), a 10 per cent stake would translate into an investment of Rs 650 crore ($100 million). But Biyani is expected to ask for a significant premium to the current market price.

"It will be a primary issuance and Biyani would use the proceeds to fund his expansion plans. So I won't be surprised if he seeks a 20-25 per cent premium," said an investment banker aware of the negotiations. "FLF wants to halve its debt in the coming months."

Recently, another e-commerce major Amazon has picked up a 5 per cent stake in Shoppers Stop for Rs 179.26 crore.

Amazon and Shoppers Stop has also signed a pact that will allow the offline retailer’s 400 brands to be sold on Amazon. Besides, the Seattle-based company will get space to set up experience centres at Shoppers Stop outlets to promote its fashion products on the online platform.

According to experts, both Amazon and Shoppers Stop are leveraging each other’s space to promote brands offline and online, respectively.

In August, Shoppers Stop announced that it is planning to go online with its wholly owned subsidiary products — HyperCity and Crossword. The company is going to sell food and book via omni-channels by the next financial year.

This trend of online platforms venturing into the offline space has been observed globally. In June, Amazon acquired US-based offline retail chain Whole Foods for $13.7 billion. In China, Alibaba opened three massive Hema supermarkets, where customers can order groceries for home delivery and even eat in.

Experts believe that online e-commerce platforms have realized the importance of the offline segment and they don’t rule out the conventional way of shopping outrightly any more. Besides, the price war among online players put a lot of pressure on the entire industry, and caused smaller players great damage.