Though the two Bangalore-based companies did not disclose the merger amount at a media briefing held on Thursday, analysts estimates suggest the cash-and-stock deal is likely to value online fashion retailer Myntra at more than $330 million.
The deal also comes at a time when the department of industrial policy and promotion (DIPP) has made a strong push for foreign direct investment (FDI) in e-commerce as part of its agenda for the new government. The current policy does not allow FDI in business-to-consumer e-commerce even as 100 per cent FDI is allowed in business-to-business e-commerce.
The acquisition is likely to give Flipkart, set up by two ex-Amazon employees in 2007, not just a stronger foothold in the fast-growing online fashion market, but also the additional scale it needs to fight competitors such as Amazon, Flipkart co-founder Binny Bansal said. “This acquisition helps us grab a bigger market share and compete better,” he said.
Myntra co-founder and chief executive Mukesh Bansal will head the fashion business of both Myntra and Flipkart, and Myntra will operate as an independent entity and retain its website, while Flipkart will continue selling apparel on its site.
Flipkart’s and Myntra’s common investors Tiger Global Management, Accel Partners and Sofina Capital will get more shares in the merged entity. Tiger Global and Accel Partners first proposed the deal last year.
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