Flipkart, the parent company of popular lifestyle e-commerce portal Myntra, is gearing up to acquire its one-time rival Jabong. According to sources close to the industry, Flipkart is emerging as a front-runner to acquire Jabong since the company is in a better position to tackle the situation than other competing companies.
According to a revelation in a popular tech portal by an undisclosed person close to both companies, Flipkart would like to buy Jabong because they have all the required systems and logistics mechanisms to pave the way for a smooth transition. Moreover, the management of Jabong also prefers to align with Flipkart and Myntra. After having acquired Myntra a few years back, Flipkart really knows about the whole market scenario, adds the source.
While Jabong still commands a market share of 25 percent in online fashion retailing, Myntra holds nearly 35% market share. However, Flipkart has a negligible market presence with 10% share, which the company definitely wants to improve. If Flipkart manages to bring Jabong into its bastion then the company along with both Myntra and Jabong will have a 70% market share of apparel sales in the online segment.
If the reports of acquisition turn out to be true, then it will help Flipkart not only to increase the valuation but also to fight against Amazon.
There were conflicting reports on the media about the acquisition of Jabong. While The Economic Times reported that Alibaba, Future Group, and Myntra are top bidders for the beleaguered company, Mint revealed that Snapdeal and Aditya Birla will emerge as top front-runners in a bid to grab the online apparel space.
The deal will mark an exit of Rocket Internet from India
Recently, Morgan Stanley undervalued Flipkart to $9.4 billion from the previous year’s figure of $15 billion. Flipkart went ahead to seal the Jabong deal by keeping the valuation aspect in mind. If the valuation goes down further then it will cause serious setbacks for the company.
Even though Jabong is looking for a $250 million valuation, the New Delhi-based company will likely settle between $180-200 million. The sale of Jabong would mean an exit for Rocket Internet from India. Earlier, FabFurnish.com was sold to Future Group and the company is finding it hard to find a suitable buyer for Foodpanda.
With Jabong is on a look out for a suitable buyer, the company posted Rs. 1,085 crore revenues in 2014-2015 when compared with its rival Myntra’s revenue of Rs. 773 crore during the same period. However, the reason for the fallout is attributed to heavy discounting and the recent decision of Rocket Internet to stop pumping money into Jabong.