23.5.14

Flipkart + Myntra


Flipkart India Pvt Ltd, the country’s largest e-commerce firm has acquired rival Myntra.com in the largest-ever deal in the country’s e-commerce market. 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.
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.
Amazon’s aggressive entry sparks off consolidation
The Flipkart-Myntra deal comes amid a strong revival of interest in the Indian e-commerce market, but the trigger clearly is the need for consolidation to fight global majors Amazon and eBay Inc.


Amazon, which entered India in June 2013, has stepped up the competition by cutting prices, increasing product categories, launching next-day delivery and kicking-off a high-voltage advertisement blitz.
Before the Flipkart-Myntra mega deal, the Indian e-commerce space this year has seen some 19 deals worth $497 million.  New Delhi-based marketplace Snapdeal said it raised $100 million, mostly from new investors including Temasek Holdings, BlackRock Inc and Premji Invest, less than three months after it had received around $133.7 million of funding.
In April this year, Snapdeal bought Doozton.com, an online product discovery technology platform, for an undisclosed amount. A month earlier, local online classifieds firm Quikr raised $90 million through a private-equity deal. According to retail consultants, with increasing competition, smaller e-commerce companies are likely to find it difficult to access fresh capital and survive a full-blown price war, forcing them to merge with bigger rivals. Only 18 of the 52 e-commerce start ups in India – which raised $700 million in venture capital funding in three years ending 2012 — were able to raise follow-on investments last year, according to investment bank Allegro Advisors.
The Indian e-commerce market was worth $13 billion in 2013, with online travel accounting for over 70 per cent of consumer e-commerce transactions. Online sales of retail goods totaled $1.6 billion in 2013, according to research firm Forrester. By comparison, China’s business and consumer e-commerce sales may surpass $180 billion this year, with industry leader Alibaba readying an initial public offering worth over $15 billion.

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