With ecommerce players looking to tap offline channels and adopt an omnichannel strategy, Flipkart is reportedly in exploratory talks with Kishore Biyani-led Future Group’s listed fashion arm Future Lifestyle Fashions to pick up 8-10% stake, reports Economic Times.
As per the report, the top management of both companies met in Mumbai last week to discuss the possible deal. This is being seen as Flipkart’s move into an omnichannel strategy.
This move also comes weeks after Flipkart’s biggest rival Amazon picked up a 5% stake in offline retailer Shoppers Stop last month to expand its base into smaller towns.
The vehicle for the partnership is likely to be Myntra, Flipkart’s specialist fashion-focused arm, which it acquired in 2014 for $350 million.
Future Lifestyle runs department store formats Central and Brand Factory for branded apparel. It has a total retail space of 5.4 million sq ft across 400 stores in 90 cities.
It has a portfolio of 30 brands across segments and price points and also owns and markets 41 local and global fashion brands such as Lee Cooper, Scullers, Indigo Nation, John Miller and Jealous 21.
ET reports that at current market capitalisation of Rs 6,536.81 crore, a 10% stake would translate into an investment of Rs 650 crore ($100 million). But Biyani is may ask for a significant premium to the current market price.
An investment banker told ET that the deal will be a primary issuance and that Biyani will seek 20-25% premium and will want to use the proceeds of the deal to fund his expansion plans
If the deal goes through, Central and Brand Factory could be used by Myntra to set up experience centres and even shop-in-shop formats.
ET reports that the FLF stores could also be used for product returns to reduce cash burn.
This is not the first time Biyani will have worked with an ecommerce player. In October 2014, he tied up with Amazon to sell Future Group’s brands on Amazon.