Shares in Aditya Birla Group’s fashion unit rose as much as 6.5% on Friday following the news, hitting their highest since March 30.
The investment comes at a time when Amazon.com Inc, billionaire Mukesh Ambani-led Reliance Industries and Flipkart are in a race to gain market share in India’s fast-growing online market for everything from food and groceries to electronics and clothes.
With the COVID-19 pandemic keeping most people indoors, more Indians are shopping online, especially ahead of the key festive season.
“Fashion retail in India is set for robust long-term growth due to strong fundamentals of a large and growing middle class,” Aditya Birla Group Chairman Kumar Mangalam Birla said.
“Rapid growth of technology infrastructure will further accelerate this process,” he said, adding that the country’s apparel industry was set to be worth $100 billion in the next five years.
For Flipkart, which already owns the popular Myntra fashion website, the deal is 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, in the country.
The deal will also help Aditya Birla cut down debt, analysts said. As of March 31, 2020, the company’s debt stood https://www.bseindia.com/xml-data/corpfiling/AttachHis/36845f03-79e2-43b9-8fa6-298c3fac055c.pdf at 27.76 billion rupees.
“They can scale up the business, and there will be a long-term benefit through this partnership,” said Vaishnavi Mandhaniya, analyst at Anand Rathi Financial Services.
Media reports https://www.livemint.com/industry/retail/flipkart-amazon-hold-talks-to-acquire-stake-in-aditya-birla-fashion-11603348168136.html had said both Amazon and Flipkart were in the race to acquire a stake in Aditya Birla Fashion and Retail.