Online Retailer Flipkart Acquires Myntra; Deal Will Give Flipkart Control of Roughly Half of India’s E-Commerce Market
May 23, 2014 Leave a comment
Online Retailer Flipkart Acquires Myntra
Deal Will Give Flipkart Control of Roughly Half of India’s E-Commerce Market
DHANYA ANN THOPPIL
May 22, 2014 5:24 a.m. ET
BANGALORE—Flipkart Internet Pvt., India’s largest online retailer, agreed to acquire its rival Myntra Designs Pvt. in a $400 million transaction that will give Flipkart control of roughly half of the country’s e-commerce market.
The deal would expand Flipkart’s share of the rapidly growing online market for clothing, which is dominated by Myntra in India, and help it keep at bay new challengers in the highly competitive industry.
Flipkart said it expects clothing sales to overtake electronics as its largest business.
“We believe fashion will be more than half of our transactions in the long term,” said Flipkart co-founder and Chief Operating Officer Binny Bansal.
The companies wouldn’t say if the merger was an all-stock transaction or whether a cash payment was part of the deal.
Myntra Chief Executive Mukesh Bansal will stay with the company as head of the fashion division. He will also have a seat on the company’s board.
India’s online retailing industry is just taking off. Some analysts estimate online sales will quadruple in the next three years to $8 billion.
Still, few of India’s online retailers are profitable yet, as they invest in expanding capacity to grab market share even as they face increasing competition from global leaders in the industry, including Amazon.com Inc. AMZN -0.03%
The deal is about “getting the top line right to compete with the bigger fish out there,” said Sandeep Ladda, a technology consultant at PricewaterhouseCoopers.
Flipkart will try to stay ahead of the competition by investing more than $100 million to boost the company’s fashion business, Flipkart CEO Sachin Bansal said.
The acquisition of Myntra gives it some breathing room and will help improve its margins, said Arvind Singhal, chairman of retail industry consultants Technopak Advisors.
Flipkart began selling women’s clothing last year, sparking a price war with Myntra. The profit-crushing competition created concerns among some investors who hold stakes in both companies—such as Accel Partners and Tiger Global Management—helped encourage the merger.
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