OUTTA NOWHERE

Everyone is having a bit of a WTF moment with Myntra’s acquisition of Jabong

Quartz india
Quartz india

One of the most talked-about acquisitions in Indian e-commerce has finally happened—and the most unexpected of buyers has walked away with the deal.

Flipkart-owned online fashion retailer Myntra today (July 26) said that it has acquired competitor Jabong for an undisclosed amount.

For almost two years now, Indian media reports have named every other player in the e-commerce space as a Jabong suitor—except Myntra.

“We have always believed in the fashion and lifestyle segment and Myntra’s strong performance has reinforced this faith. This acquisition is a continuation of the group’s journey to transform commerce in India,” Flipkart co-founder and CEO Binny Bansal said in a statement.

This is Flipkart’s second significant online fashion retail acquisition. In 2014, it bought Myntra for around $300 million.

Jabong may have cost Flipkart much less as the Gurgaon-based online seller had seen its valuation fall from around $1.2 billion in 2014 to around $60 million in recent months, according to media reports.

Arvind Singhal, chairman and managing director at Tecknopak Advisors calls the deal a “good defensive move from Flipkart.” He said, “By taking Jabong out of the equation, you are preventing competition from acquiring it.”

Rumours of a likely acquisition of Jabong have been floating ever since Flipkart bought Myntra. This was mainly because Jabong, once Myntra’s close competitor, would have helped Flipkart’s rivals up their game in the high-margin fashion segment.

In November 2014, VCCircle first reported that American e-commerce giant Amazon was looking to buy Jabong for a whopping $1.2 billion in “the biggest acquisition in the history of the Indian e-commerce space.” In April 2015, the News Corp-owned website said the talks had failed.

Back then, Jabong reportedly had a gross merchandise value (GMV, or the total value of goods sold through a marketplace) of Rs509 crore, which had grown three-folds over the previous year. The company held around 25% of the online fashion retail segment in India.

In September 2015, Mint newspaper said that online payments company Paytm was in talks to buy Jabong at a valuation of between $500 million and $800 million.

While some reports earlier this month had named Flipkart as a potential buyer, it was never the “front-runner.”

A July 04 Mint report said Snapdeal and the Aditya Birla Group were leading the race. The Economic Times also named China’s Alibaba Group, the Kishore Biyani-led Future Group, and Aditya Birla’s e-commerce venture Abof as likely acquirers.

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