Flipkart-owned Myntra on Tuesday said it has acquired Jabong from Global Fashion Group, a move that will mark further consolidation in India’s booming e-commerce industry. Myntra, which itself was acquired by Flipkart in 2014 in an estimated Rs 2,000 crore deal, will have access to a combined base of 15 million monthly active users.
“The acquisition of Jabong further strengthens Flipkart Group’s position as the undisputed leader in Fashion and Lifestyle segment in India. Jabong is among India’s major fashion multi-brand e-store with more than 1,500 on-trend international high-street brands, sports labels, Indian ethnic and designer labels and over 1,50,000 styles from over a thousand sellers,” Myntra said in a statement.
Jabong has been in the market for a sell-off and was in discussion with companies including Future Group, Snapdeal and Aditya Birla-owned Abof among others. Jabong was founded in 2012. In September 2014, its investor, Rocket Internet merged Jabong with four other online fashion retailers in Latin America, Russia, the Middle East, South-east Asia and Australia to create Global Fashion Group (GFG).
While Jabong has managed to reduce losses by reducing discounts, both Kinnevik and Rocket Internet seem unwilling to infuse fresh capital and are believed to be keen to exit. In April this year, GFG raised fresh funding from existing investors at a lower valuation, raising 300 million euros from Rocket Internet and Kinnevik.
Here are the highlights of the Flipkart-Jabong deal
* Global Fashion Group, as part of its effort to accelerate profits, has sold Jabong to Flipkart Group for $70 million in cash
* The deal comes after the GFG Board concluded that for Jabong to be a success, it had to tie up with a local player
* As of March 31, 2016, Jabong represented 13 per cent of GFG’s net revenue and ca. 22 per cent of adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) loss.
* For the 12 months ending March 31, 2016, GFG generated €977m in Net Revenues and €(255)m in Adjusted EBITDA.
* Romain Voog, CEO of GFG said: Through the sale of Jabong, we are achieving a milestone in our strategy to refocus and invest in our core markets that show both, significant growth and revenue potential but also a clear and predictable path to profitability.
* Myntra CEO Ananth Narayanan said: “The acquisition of Jabong is a natural step in our journey to be India’s largest fashion platform. We see significant synergies between the two companies especially on brand relationships and consumer experience. We look forward to working with the talented Jabong team to shape the future of fashion and lifestyle ecommerce in India.”
* According to the Internet and Mobile Association of India, e-tailing has grown at 57 per cent year-on-year, moving from Rs 24,046 crore to Rs 37,689 crore between the December 2014 and December 2015. This is further estimated to touch Rs 72,639 crore by end of 2016.
* Research Director at Gartner Sandy Shen said the move will help Flipkart further penetrate into the fashion category and keep rival Amazon at bay. “Fashion (esp. women’s fashion) is a top category on e-commerce platforms in terms of transaction volume and growth, and also one of the most competitive due to lots of brands and manufacturers. The acquisition of fashion platforms is a move for Flipkart to not only further penetrate into the red-hot category but also maintain its leadership position in the market and keep Amazon at bay.”