We have been hearing murmurs of a Flipkart-Myntra merger since January. Now, news has it that Flipkart has bought a major stake in Myntra in a cash and stock deal that could value the company between $300-330 million (Rs 1,800-2,000 crore).
Last month, a report had hinted that the Flipkart board had started taking investor approval and the deal would value Myntra at $330 million, while Flipkart has a valuation of $2.5 billion. The two companies are believed to have been in talks to merge their businesses in the light of Amazon’s expansion of its marketplace services in the country. Moreover, there’s pressure on existing players as Walmart’s entry into the Indian e-commerce market is imminent. Then there’s eBay, which is backing Snapdeal and its own marketplace in India.
While reports circulating the web claim both the companies are expected to continue functioning independently after the dea, it isn’t yet clear if Flipkart will be taking over the operations of Myntra or just the brand name.
A Flipkart-Myntra merger will result in a far more bulked up rival against the likes of eBay and Amazon, and could also blow domestic rivals like Snapdeal out of the water.
While both the companies have refused comment on the deal, a spokesperson for Myntra was quoted as telling Mint that the company would hold a press conference on Thursday where it would “announce an important strategic development”.
While Flipkart is perhaps the closest competitor to Amazon in India, its acquisition of Myntra is expected to play a major role in it gaining market share in the online fashion retail sector. Myntra claims to be the biggest fashion portal in India’s e-commerce industry.
The fashion e-retail industry is reportedly estimated to be worth approximately $20 billion.
Flipkart has been undertaking a slew of steps to take on Amazon, that offers almost the same number of products. New services the company is offering include virtual branded stores, a customer loyalty programme called Flipkart First and same day delivery of products.
Amazon has been pushing for regulatory approval for FDI in e-commerce instead of the present marketplace model where third party sellers sell directly to shoppers through online platforms.
First appeared on Firstbiz.
Aug 1, 2014