In what is considered the largest deal in the fledgling Indian e-commerce landscape to date, e-retailer Flipkart on Thursday said it had acquired Myntra, a leading fashion and lifestyle online retailer, putting months of speculation to rest.
The deal is estimated at $250-350 million. The timing of the acquisition suggests that it is a strategic move by Flipkart, the country’s biggest e-retailer, to take on the might of global e-commerce giant Amazon, which started operations a year ago and offers a similar proposition to customers.
Myntra’s growing dominance, with close to 30 per cent market share in online fashion sales, made it the obvious choice for acquisition by Flipkart.
“We knew that we had to acquire multiple fashion assets in order to grow the category, which is set to dominate the e-commerce landscape very soon,” said Sachin Bansal, the 32-year-old co-founder of Flipkart. “This 100 per cent takeover is not for reasons of cost but for us to scale rapidly. Together, we can do it much faster.”
He also pointed out that while the company wants to go public at some point, it was not a priority right now.
$100 million investment To begin with, Flipkart will invest $100 million in the fashion business over the next few years and both companies will function as independent entities, each managing its own website and leveraging individual strengths.
As part of the deal, Myntra founder Mukesh Bansal will be on the board of Flipkart, heading the entire fashion category of both companies, and be responsible for turning it into the largest category for Flipkart over the next few years. Myntra employees who hold stock options will now own those of Flipkart.
The combined entity, which already holds over 50 per cent market share in online fashion sales, is expected to garner 70 per cent market share over the next 12-18 months.
Mukesh Bansal bought into the idea of being acquired a couple of months ago.
“I was convinced that if Flipkart and Myntra came together, we could not only drive fashion as a dominant category but also drive innovation in retail and e-commerce in general by leveraging Flipkart’s technology platform, customer base and supply chain,” he said.
However, he did not say whether investors in Myntra will now exit the company.