In what could be seen as an early phase of consolidation in the ₹62,000-crore e-commerce market, India’s largest online retailer, Flipkart.com, has acquired fashion e-retailer Myntra.com.
Official sources at both the companies said the deal, which will be a combination of both cash and stock, is scheduled to be announced on Thursday.
While the exact deal size could not be ascertained, a few reports have pegged it at ₹1,800-2,000 crore, making it the largest in the space since South Africa’s Naspers, which has a stake in Flipkart, bought RedBus for ₹780 crore last year.
Comparing the deal with that of Amazon’s acquisition of Las Vegas-based fashion portal Zappos.com, market experts said that Flipkart’s purchase reflects a serious and much-needed effort by the company to tap into the online sales of apparel and fashion accessories.
Flipkart has had limited success with apparel and fashion accessories, the largest shopping categories in the online retail space.
According to a Technopak Advisory report, by 2019, the electronics and fashion segment will account for 30 per cent of the sales in the online e-commerce space.
However, it is not yet clear if Flipkart will acquire only the Myntra brand or its overall operations.
“I cannot share further details but Myntra will continue to run as a separate entity,” said a company official. Meanwhile, a statement from Flipkart maintained that it cannot comment on market speculation.
Amazon effectThe buzz about a Flipkart and Myntra deal broke out soon after Amazon’s entry in the Indian market.
According to market experts, the deal will help Sachin and Binny Bansal’s Flipkart garner a larger market share and give tough competition to Amazon, the Seattle-based e-commerce giant.
The transaction is said to have been initiated by common investors, Tiger Global Management and Accel Partners, which are understood to own majority shares in both the companies.
Sources say that while Sachin and Binny own less than 10 per cent of Flipkart, Mukesh Bansal owns around 6-7 per cent in Myntra. The deal could also see an exit by a few investors in Myntra.