E-commerce major Flipkart notified the Competition Commission of India (CCI) of its proposed acquisition of 7.8% stake in Aditya Birla Fashion and Retail Ltd (ABFRL), through its wholly-owned subsidiary Flipkart Investments Private Ltd (FIPL), on Wednesday.
Earlier in October, ABFRL and Flipkart had announced that they had entered into an agreement for the stake sale on a fully-diluted basis by way of subscription to equity shares, valued at Rs 1,500 crore.
“At the outset, it is submitted that the relevant product and geographic markets can be left open, given that the Proposed Transaction relates to only a non-controlling minority investment by FIPL in ABFRL,” the filing said.
Since both the parties would operate independently post the transaction and compete with each other, the deal “will have no impact on the competitive landscape in any potential relevant market in India, in any manner,” it said.
Further, both ABFRL and Flipkart’s parent firm, Walmart Group, have insignificant market shares in the relevant market for B2B sales in India, it said, adding that there would be no ability or incentive to create input or customer foreclosure in any of the vertically related or complementary relevant markets.
As per the filing, FIPL is a newly incorporated company and does not undertake any business activities, either in India or elsewhere as on date, while ABFRL was engaged in manufacturing and retail of branded apparel through online and offline channels.
ABFRL plans to use the fund infusion to strengthen its balance sheet and accelerate its growth trajectory, according to the notice.“Further, ABFRL will accelerate execution of its digital transformation strategy that will deepen the consumer connect of its brands, expand reach of its diverse brand portfolio, build omni-channel functionalities and augment its backend capabilities” it said.
The deal was the second big-ticket transaction in the Indian retail space after Reliance announced its plans to acquire multiple businesses of the Future Group. In July, Flipkart had picked up a minority stake in Arvind Youth Brands, which owns the Flying Machine brand, for Rs 260 crore.
With retailers being hit hard by the pandemic and lockdown, ABFRL had raised about Rs 1,000 crore through rights issue in July.
ABFRL owns multiple mainstream brands like Pantaloons, Allen Solly and Peter England, along with a network of about 3,004 stores and presence in 23,700 multi-brand outlets across the country.
In the previous fiscal, ABFRL had posted a revenue of Rs 8,788 crore and a market cap of nearly Rs 13,000 crore.
Trader’s body, Confederation of All India Traders (CAIT), had objected to the deal in a letter to Piyush Goyal, commerce and industry minister, claiming that the deal violates India’s foreign direct investment policy.
CAIT alleged that as per the stock exchange intimation, the intention of the deal was to make ABFRL a preferred seller on Flipkart’s marketplace, which was against government policy relating to multi-brand retail trading.
“Through this tie-up, we will work towards making available a wide range of products for fashion-conscious consumers across different retail formats across the country,” Kalyan Krishnamurthy, CEO of the Flipkart Group had said.
