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    Flipkart, Amazon race to bag stake in Aditya Birla Fashion and Retail

    Synopsis

    Flipkart may have the edge; move may bring in ecomm firm as strategic partner

    ETtech
    Illustration: Rahul Awasthi
    Walmart-owned Flipkart Group as well as ecommerce major Amazon have held separate talks with Aditya Birla Fashion and Retail (ABFRL), which owns brands like Pantaloons, Allen Solly and Peter England, for a potential investment, according to three people aware of the matter.

    The two ecommerce companies are vying to acquire a minority stake in the Birla group company, sources said, at a time when offline retailers, especially in fashion and apparel segment, have been severely hurt by the coronavirus pandemic and the resulting lockdown.

    People in the know told ET that Flipkart may edge ahead of Amazon.

    “Flipkart is looking to pick up a small minority stake, about 10-15%, and onboard the retailer’s fashion portfolio as a strategic partner,” said one of the persons aware of the negotiations, adding that the investment is subject to ABFRL’s board approval.

    “Amazon was also initially in conversations with the Birla group for (an) investment in its fashion business, but those talks may have fallen through..,” said another person in the know. When contacted by ET, Flipkart and Amazon declined to comment.

    “As a matter of policy, we do not comment on rumours and market speculation,” a spokesperson for Aditya Birla Fashion said.

    The board of ABFRL will meet on Friday to consider a proposal for raising funds, as per a company filing.

    Flipkart Amazon graphicTHE ECONOMIC TIMES

    In recent years, both Flipkart and Amazon have shown interest in buying or acquiring stakes in physical retail assets with Amazon taking the lead. In 2018, Amazon along with private equity firm Samara Capital had acquired supermarket chain More from the Birla Group. The US etailer had also picked up stakes in department store chain Shoppers Stop and Future Coupons, a promoter entity of Future Retail.

    In July, Flipkart Group invested Rs 260 crore to buy an estimated 27% stake in Arvind Fashions’ subsidiary Arvind Youth Brands. The subsidiary, which owns the Flying Machine brand, is expected to help Flipkart strengthen its mid-market fashion portfolio. On a standalone basis, Flying Machine clocked Rs 365 crore in sales for fiscal 2019, accounting for 36% of Arvind Fashion’s revenue, according to regulatory filings.

    Flipkart’s interest in acquiring stakes in offline fashion retailers is a part of its broader strategy to expand operations and leverage strategic partnerships to keep its cost structures lean and scale rapidly.

    ABFRL has a network of 3,004 stores, presence across 23,700 multi-brand outlets with 6,700 points of sales in department stores across India. It clocked revenues of Rs 8,788 crore for the fiscal year ended March 2020 and has a market capitalisation of around Rs 13,000 crore. On Wednesday, the company’s stock rose 4.3% on the Bombay Stock Exchange (BSE).

    Hit by the pandemic, fashion brands across the spectrum including Bata, Max Fashion, Arvind Fashion and Aditya Birla Group have partnered with online marketplaces to expand their presence and offer value products to shoppers from small cities.

    The ABFRL Group in an earlier statement said it is looking at revamping its brand websites by introducing video call sales, WhatsApp commerce, and building deeper partnerships with leading third-party ecommerce players. The company has also piloted new routes to market such as Pantaloons-on-wheels, personalised catalogue through mailers, and hyperlocal models in this quarter.

    Flipkart has been strategically looking at building its fashion portfolio to shore up its consumer and business-to-business ecommerce presence. Earlier this month, the company internally announced a ‘House of Brands’ initiative that brought together Flipkart Fashion Originals, Myntra Fashion Brands and Myntra Brand Accelerator under a single umbrella. The business is led by Manohar Kamath who continues to report to Myntra CEO Amar Nagaram.

    “The ambition is to be the largest fashion house in the country. HOB will help build synergies between Flipkart Fashion Originals and Myntra business,” said a person aware of the matter.

    Amazon India has been trailing Flipkart in its fashion portfolio. The firm has over the last few years ramped up its presence by launching private brands, and forging partnerships with designers to cater to the premium segment. Myntra has helped Flipkart maintain its lead in the category.

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