Flipkart Group will invest Rs 1,500 crore ($204 million) in Aditya Birla Fashion and Retail Ltd, as the Walmart Inc.-owned online retailer attempts to strengthen its offline presence.
Aditya Birla Fashion said in a statement Friday Flipkart will own a 7.8% stake in the company on a fully diluted basis.
The promoter and promoter group companies of Aditya Birla Fashion will hold about 55.13% upon completion of the issuance. The promoters currently own a 59.79% stake in the Mumbai-listed company while public shareholders hold the remaining.
The fashion retailer will issue shares to Flipkart on a preferential basis at Rs 205 apiece. Shares of the company were 6.3% higher in morning trade on the BSE at Rs 163 apiece.
Flipkart, like rival Amazon.com Inc., is facing the prospects of increased competition from billionaire Mukesh Ambani’s Reliance Industries Ltd, whose retail and digital services units have raised billions of dollars from global investors since April.
In a statement, Aditya Birla Fashion said it will use the capital from the investment to strengthen its balance sheet and scale further growth for the company in segments such as athleisure, innerwear, and ethnic wear. It will also accelerate the execution of its digital transformation strategy.
Flipkart, meanwhile, said the move will result in strengthening the range of brands offered on group platforms including the eponymous e-commerce portal and Myntra. Interestingly, Myntra in August bought out actor Deepika Padukone from her equal partnership in the All About You brand that the two operated.
“Given the complementary strengths of Aditya Birla Fashion and Flipkart Group, this partnership has the potential to dramatically accelerate the growth of the apparel industry in India and reshape apparel commerce,” Aditya Birla Fashion managing director Ashish Dikshit said.
Aditya Birla Fashion posted consolidated net sales of Rs 8,787.86 crore for the 2019-20 financial year. It posted losses of Rs 165.02 crore for the same period. In June, the company launched a rights issue worth Rs 995 crore at Rs 110 per fully paid-up equity share.
It has also made some acquisitions to strengthen its own offerings. In July last year, it acquired a 51% stake in bespoke apparel brand Shantanu & Nikhil for around Rs 60 crore (around $8.75 million).
Before that, in June, it announced that it would acquire ethnic items marketplace Jaypore E-Commerce Pvt Ltd for an enterprise value of Rs 110 crore (around $15.8 million).