Flipkart may buy into Future Lifestyle to counter Amazon-Shoppers Stop combine

By Binu Paul

  • 18 Oct 2017

Indian e-commerce bellwether Flipkart is in discussions with Future Lifestyle Fashions Ltd, part of Kishore Biyani-led Future Group, to purchase about 8-10% stake in the firm, a report in a financial daily stated.

The top management of both companies met for a preliminary meeting last week in Mumbai and they are scheduled to resume the discussions after Diwali, The Economic Times reported, citing people aware of the development.

A 10% stake would give an investment of about Rs 650 crore ($100 million) at a market capitalisation of about Rs 67 crore ($1 billion), the ET report stated.

FLF's share prices jumped by 5% after the report on the investment talks was released.

Flipkart and Future Group did not respond to e-mail queries from VCCircle, seeking comment at the time of publishing this report.

With the proposed deal, both companies are expected to form omni-channel strategies where the online retailer could use Future Group’s offline outlets for product returns and in-shop purchases while turning them to consumer experience centres, a strategy the retailer has been mulling over for some time now.

Future Group will use Flipkart’s e-commerce platform and fashion subsidiaries, Myntra and Jabong to promote its brands online, the ET report said.

Myntra, which has been Flipkart’s biggest differentiator in its fight against Amazon, will likely form the mainstay of the partnership, the report added.

Myntra’s private label vertical turned profitable in past two consecutive months, registering a positive EBITDA of 5% in June this year, the company had claimed in August.

In March this year, Future Lifestyle Fashions had announced that it plans to raise Rs 450 crore (about $70 million) by selling 51% stake in its fashion brand portfolio to reduce debt and develop its investee brands.

FLF said that it will transfer all its investee brands to wholly owned unit FLFL Lifestyle Brands Ltd. The brands include Cover Story, Jealous 21, Mother Earth, Scullers, Indigo Nation, Desi Belle, Mineral, Giovani and Famozi.

Flipkart’s deal with Future Group comes weeks after a subsidiary of its major rival Amazon.com, NV Investment Holdings LLC, agreed to buy 5% stake in Indian brick and mortar retail chain Shoppers Stop Ltd in its effort to expand physical shopping points to boost sales.

Over the past few months, Flipkart received total funds infusion of close to $4 billion from heavyweight investors, including SoftBank, Tencent, eBay and Microsoft. Since the investments, the homegrown e-commerce firm has been working to create an integrated platform offering e-commerce, payments, logistics, and ticketing solutions.

On Monday, a media report stated that Flipkart is in talks to acquire a large minority stake in Mumbai-based online ticketing platform BookMyShow.

Fending off Amazon would be top priority for the company, especially from the two segments it predominantly dominates—fashion and smartphones.