Why Future Lifestyle Fashions is buying 30% stake in Koovs

Kishore Biyani appears to be in love with Internet-enabled retail formats. After evangelising online retail with FutureBazaar.com for several years, Biyani had to shut it down in 2013.

Nevertheless, his confidence in the online channel has returned and with a greater momentum.

Future Group's unit Future Lifestyle Fashions has announced that it will buy 29.9 per cent stake in one of the oldest pure-play online fashion and lifestyle brand Koovs for about Rs 140 crore. Following the deal, the group will have two board seats in the Gurugram-headquartered company.

Since both companies are public entities, the deal is subject to regulatory and internal approvals.

Over the past 10 months, Biyani has been emphasising on digital channels and announcing new tech-driven strategy – Retail 3.0 which is said to be a fusion of retail and technology. Now, he’s buying a sizeable stake in Koovs.

Why?

Because fashion is the only growing vertical that can deliver a decent margin. At least, Myntra has proved that fashion could be a profitable play (through a combination of in-house brands and a few popular ones) if executed well.

Meanwhile, Koovs is an online store that sells its own labels and inventories of a few popular brands. A major chunk of its revenue comes from the in-house brand. Future Group sees a sizeable potential to sell Koovs’ product line through the network of its brick & mortar stores.

Unlike the acquisition of Fabfurnish (Rocket Internet’s home furnishing unit) which later proved to be a failure, investment in Koovs fits well for the Future Group.

Following the announcement of the prospective deal, Koovs' shares jumped as high as 32 per cent (at the time of writing this post) at the London Stock Exchange - AIM.

Also read: E-commerce companies will never turn profitable: Kishore Biyani

Previously, Koovs had raised funds from Indian media groups Times of India and Hindustan Times. According to CrunchBase, the company has so far scooped up $35.4 million in risk capital.

Since the Future Group has once again turned bullish on digital channels with a gamut of initiatives including Retail 3.0 and Koovs’ investment, it would be interesting to see how the second attempt of Biyani fares up in the future.