, Edited by Explained Desk | New Delhi |
October 23, 2020 7:06:42 pm
Flipkart has picked up the 7.8% stake for an aggregate of Rs 1,500 crore, which adds to the Rs 1,000 crore that Aditya Birla Fashion raised through a rights issue earlier this year. (REUTERS/Abhishek N. Chinnappa/File photo)
Walmart-owned online retailer Flipkart has picked a 7.8% stake in Aditya Birla Fashion and Retail Ltd, which houses lifestyle brands such as Allen Solly, Peter England, Van Heusen, Louis Philippe, in addition to the Pantaloons chain of multi-brand stores. The deal comes at a time when India’s retail market has witnessed an uptick in activity with Reliance Retail on the one hand acquiring Future Group’s assets and on the other raising funds from foreign investors.
What does the deal mean for Aditya Birla Group?
Flipkart has picked up the 7.8% stake for an aggregate of Rs 1,500 crore, which adds to the Rs 1,000 crore that Aditya Birla Fashion raised through a rights issue earlier this year. According to the company, the deal will result in Aditya Birla Fashion “aggressively accelerating” its omni-channel strategy through which it will expand the reach of its portfolio brands.
Flipkart’s investment will also bring its technological know-how – through its various platforms like digital money app PhonePe, and e-commerce platforms Flipkart and Myntra – which according to sector experts will be crucial for a company like Aditya Birla particularly given the transformation in the physical to online retailing equation in the aftermath of Covid-19. 📣 Follow Express Explained on Telegram
What does this deal mean for Flipkart?
The deal will strengthen the range of brands offered on the e-commerce company’s platforms Flipkart and Myntra and will enhance the range of premium international and Indian brands on offer. For Flipkart the deal also means having a strong offline partner in Aditya Birla Group to raise the stakes in its battle with Amazon, which had invested in Future Group last year. Currently, Aditya Birla Fashion has a network of 3,004 stores, presence across approximately 23,700 multi-brand outlets in addition to over 6,700 point of sales in department stores across India.
Are there any roadblocks for this deal?
The transaction is subject to regulatory and other customary approvals such as from the Competition Commission of India, etc. Another potential roadblock for the deal could be the revised foreign direct investment norms notified by the government in December 2018, which barred any entity in which an e-commerce firm or its group companies have a stake from selling on their online platform. Both Aditya Birla Fashion and Flipkart will have to enter into an arrangement with a third-party seller to expand presence of the former’s portfolio on the e-commerce platform.
© The Indian Express (P) Ltd
