Flipkart infuses Rs 1,500 Cr in ABFRL for 7.8% stake

E-commerce major Flipkart has invested Rs 1,500 crore in Aditya Birla Fashion and Retail or ABFRL for a minority stake of 7.8% on a fully diluted basis, regulatory filings show. 

ABFRL has made an allotment of 7,31,70,732 fully-paid equity shares for Rs 205 per share to Flipkart to raise the total consideration and it will utilize the capital to strengthen its balance sheet and accelerate the growth trajectory, the company said in the filings made with the BSE. 

The move will also help both the companies to leverage their synergies in the fashion segment. 

The promoter and promoter group companies of ABFRL have diluted their shareholding from 59.78% at the end of Q2 FY21 to about 55.13% post allotment to Flipkart, the filings showed.

Having a network of around 3,004 stores with 23,700 multi-brand outlets across India, ABFRL is one of India's major fashion and lifestyle companies. The company also plans to aggressively scale-up its existing businesses where it holds strong, market leading positions while increasing presence in emerging high-growth categories such as innerwear, athleisure, casualwear and ethnic wear.

For FY20, ABFRL had reported annual revenues of Rs 8,743 crore, registering a growth of 8% over the reported revenue of  Rs 8,118 crore during FY19. However, the outbreak of the Covid-19 pandemic and related government lockdowns had a significant impact on the company’s results.

The severe hit to the company's business was evident in its Q1FY21 results as total income declined 76.2% as compared to the corresponding quarter in FY20 and the company recorded a loss of nearly Rs 400 crore during the same period.

The company was well on track to record a much higher growth rate, in line with its 9-month growth trajectory of 12%, before the outbreak of the pandemic. As per company’s latest earning call, e-commerce share business, which has historically been around 6%, grew to 21% during this quarter. Predominantly driven by partners e-commerce along with significantly higher traction on its own online platforms as well.

Through the partnership with ABFRL, Walmart-owned Flipkart would strengthen the range of brands offered on its e-commerce platforms along with Myntra.

This is not the first time when Flipkart is eyeing to ramp up its presence in the fashion apparel segment. In July this year, the Bengaluru-based company had invested Rs 260 crore in Arvind Fashion Limited for a minority stake.

Flipkart dominates the fashion space with Myntra and Flipkart Fashion. Experts estimate that the Flipkart group has over 60% share in the online fashion market.