Flipkart buys Myntra for around Rs2,000 crore

21 May 2014

Online e-commerce firm Flipkart.com has acquired fashion e-tailer Myntra.com in a cash-and-stock deal worth an estimated Rs1,800-2,000 crore, in what could be the largest in the Indian e-commerce space.

While the exact size of the deal is not known, reports based on analysts' estimates have projected it to be worth nearly Rs1,800 crore to Rs2,000 crore, which makes it larger than last year's Rs780-crore acquisition of RedBus by South Africa's Naspers.

It is also not clear if Flipkart will acquire both the Myntra brand and its overall operations.

Naspers also owns a stake in Flipkart and the latest deal could be seen as an early phase of consolidation in the Rs62,000-crore Indian e-commerce market.

Flipkart's purchase reflects the expanding online sales of apparel and fashion accessories as companies try to tap the on-line retail market. Companies now have to cater to increased product needs of the consumer to grow and flourish in a competitive market.

The Flipkart-Myntra deal could also be seen as a response to Amazon's entry in the Indian market.

Reports say the deal has been proposed by common investors, Tiger Global Management and Accel Partners, which together own majority stakes in both the companies.

The Bansals who pioneered both Flipcart and Myntra now own only smaller stakes in both the companies. Sachin and Binny Bansal now own less than 10 per cent of Flipkart,

Mukesh Bansal owns around 6-7 per cent in Myntra and the deal is also reported to be an effect of the exit by a few investors in the company.

Flipkart has had limited success with apparel and fashion accessories, the largest shopping categories in the online retail space and the move could help Flipkart garner a larger market share and give tough competition to Seattle-based rival Amazon.

The electronics and fashion segment is expected to account for 30 per cent of online sales in the e-commerce space by 2019, according to a Technopak Advisory report.

Official sources at both the companies said the companies are expected ''to announce an important strategic development'' at a scheduled press conference on Thursday.

Meanwhile, Flipkart, which has received $560 million in funding since starting out in 2007, is reported to be in discussions to raise another round of funds.

The Indian e-conmmerce space is going through a phase of consolidation, which saw several e-commerce sites shutting shop, leaving only the top four - Flipkart, Snapdeal.com, Myntra and Jabong.com - in the fight for market share, along with Amazon.

Seattle-based Amazon, which has lobbied heavily to allow foreign direct investment in India's e-commerce space, launched its India venture in June last year and has already built one of the largest online product marketplace in the country.

Given Amazon's financial muscle and technology expertise, local firms would find it tough to compete with the online retailer.

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