Aditya Birla Fashion & Retail jumped 5.93% to Rs 162.50 after the company said its board approved raising Rs 1500 crore through preferential issue of equity shares to Flipkart Group at Rs 205 per share.
With this infusion, Flipkart Group will own 7.8% equity stake in Aditya Birla Fashion and Retail (ABFRL) on a fully diluted basis. The promoter and promoter group companies of ABFRL will hold about 55.13% upon completion of the issuance.ABFRL plans to use this capital to strengthen its balance sheet and accelerate its growth trajectory. The company plans to aggressively scale-up its existing businesses where it holds strong, market leading positions while increasing presence in emerging high-growth categories such as innerwear, athleisure, casualwear and ethnic wear, establishing these as the new engines of growth for the company.
The investment agreement provides for some rights such as pre-emption rights and right of first refusal, which are for a limited period of between 1-5 years from the date of allotment of equity shares or if the equity shareholding of the investor falls below a certain threshold. ABFRL has also, in furtherance of the existing B2B arrangements with Flipkart India, entered into a commercial agreement in relation to the sale and distribution of various brands of the company.
Shares of ABFRL have risen 27.6% in nine trading days from its previous closing low of Rs 127.35 posted on 12 October 2020.
Aditya Birla Fashion and Retail is a premium clothing retail chain. The company posted a consolidated net loss of Rs 410.36 crore in Q1 June 2020 as against a consolidated net profit of Rs 21.56 crore posted in Q1 June 2019. Net sales fell 84.4% YoY to Rs 323 crore in Q1 June 2020.
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