On Friday, Aditya Birla Fashion and Retail Limited, in a BSE filing, said that its board has approved the issuance of equity shares on a preferential basis to Flipkart Investments Private Limited, a foreign portfolio investor, aggregating to Rs 1,500 Crore.
"The Company has also, in furtherance of the existing B2B arrangements with Flipkart India Private Limited, entered into a commercial agreement in relation to the sale and distribution of various brands of the Company," it added.
As per details on the preferential share issue announced by the company, Flipkart Investments will be issued 7,31,70,732 fully paid-up equity shares at Rs 205 per share (face value of Rs 10 each), aggregating Rs 1,500 crore.
Post allotment, its percentage of shareholding will be 7.8 percent. The promoter and promoter group companies of ABFRL will hold about 55.13 percent upon completion of the issuance.
"The Investment Agreement inter-alia provides for some rights such as preemption 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 said in its filing.
"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 company said in a statement.
Shares of Aditya Birla Fashion and Retail Limited rose 6 percent to Rs 163.45 after the announcement.
"This partnership is an emphatic endorsement of the growth potential of India. It also reflects our strong conviction in the future of the apparel industry in India, which is poised to touch $100bn in the next 5 years," said Kumar Mangalam Birla, Chairman Aditya Birla Group, commenting on the deal.