Flipkart India, India’s biggest e-commerce player, said on Thursday it will buy out rival Myntra.com in a move that will help the retailer consolidate its position in the online multi-brand retail sector and take on competitors like Amazon.com that are beefing up their presence in the $3-billion Indian market.
Sachin Bansal, CEO, Flipkart, said his firm would buy 100% in fashion retailer Myntra.com, though the two will operate independently. Bansal said Flipkart would bring in an additional $100 million into the business.
While Myntra.com has been valued by independent experts at anywhere between $300 million and $330 million, no value for the deal was announced on Thursday. Neither were the specifics of the transaction divulged. However, Myntra co-founder and CEO Mukesh Bansal, who will head the fashion piece and join the Flipkart board, when asked whether he was getting a stake in Flipkart, said he, the Myntra management team and employees will get “that option in Flipkart with significant future upside”.
The deal has been in the making for a long time know and is understood to have been initiated by private equity players Tiger Global management and Accel Partners, who have stakes in both retailers. Mukesh Bansal told FE the idea of working separately was meant to preserve value. “The Myntra brand offers consumers a fashion experience and occupies a certain space in the consumers’ mind. Flipkart’s consumer base is different and looks for range, price and service. By trying to combine both, we would have lost our value,” he told FE.
With Myntra in its fold, the seven-year-old Flipkart can now sell to a whole new set of customers given Myntra is focused on fashion.
Currently, the largest chunk of Flipkart’s revenues comes from selling electronic products. In the financial year ended March 2013, Flipkart's revenue jumped fivefold to R1,180 crore and its loss widened to R281.7 crore from R109.9 crore a year earlier. The retailer has received close to $600 million in funding from private equity players.
According to Crisil, the country’s internet retail market is tipped to grow to R50,000 crore industry by 2016, growing at 50-55% annually; among the top players are Flipkart.com, Snapdeal, Myntra.com, Jabong.com and Amazon.com. Bloomberg reported that Flipkart had a 4.9% share of the $2.9-billion worth of internet retailing transactions in 2013, citing Euromonitor International estimates in a March report. Myntra controlled 4.1% while Amazon and eBay had 1.6% and 1.2%, respectively. Fashion e-commerce fetches very high