Flipkart to acquire 8% stake in Aditya Birla’s fashion unit.
Flipkart to acquire 7.8per cent stake in Aditya Birla Fashion and Retail Ltd. for 15 billion rupees, giving the ecommerce company a bigger foothold in the highmargin fashion business because it battles it out with rival Amazon within the country.
Stock of Aditya Birla Group’s fashion unit rose as much as 6.5per cent on Friday following the news, hitting their highest since March 30.
The investment comes at a time when Amazon Inc, billionaire Mukesh Ambani-led Reliance Industries and Flipkart are during a race to realize market share in India’s fastgrowing online marketplace for everything from food and groceries to electronics and garments .
With the COVID19 pandemic keeping most of the people in indoors, more peoples are shopping online, especially before the key festive season.
“Fashion retail in India is about for robust future growth because of strong fundamentals of a large and growing middle class,” Aditya Birla Group Chairman: Mangalam Birla said.
“Rapid growth of technology infrastructure will further accelerate this process,” he said, adding that the country’s garment industry was set to be worth $100 billion within the next five years.
For Flipkart, which already owns the favored Myntra fashion website, the deal may be a way to add more merchandise from international brands to its roster.
Aditya Birla owns rights to sell Forever 21, American eagle Outfitters and Ralph Lauren branded clothes, among others, within the country.
The deal also will help Aditya Birla hamper debt, analysts said. As of March 31, 2020, the company’s debt stood here at 27.76 billion rupees.
“They can proportion the business, and there’ll be a long-term benefit through this partnership,” said Vaishnavi Mandhaniya, analyst at Anand Rathi Financial Services.
Media reports here had said both Amazon and Flipkart were within the race to accumulate a stake in Aditya Birla Fashion and Retail Ltd.
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