One of the biggest fallout of the Flipkart-Myntra deal will be on the valuations of other ecommerce players. More billion-dollar companies may emerge out of this still fledgling industry, currently valued at $3.2 billion, and is set to grow 60 times by 2018. According to industry experts, Flipkart is already valued at $2-2.5 billion after the deal. Last year, online ticketing company RedBus made headlines when South Africa’s Naspers bought it for ₹780 crore.
“The last 12-18 months have been the most exciting time in the Indian e-commerce sector that saw an increased investor interest and a few big-ticket acquisitions. With the Flipkart deal, the game has just begun,” said Arvind Singhal, Chairman, Technopak Advisory.
Both Flipkart and Myntra together are set to dominate the fashion category, which is also the largest category in this space, he added.
Flipkart had been focusing on the fashion segment since last year, but was finding it difficult to compete with niche players such as Myntra and Jabong. However, this acquisition has made it three times bigger than its next competitor in the fashion category, Jabong.com.
Sandeep Ladda, India Technology Leader, PwC India, said only niche players with good financial muscle would be able to survive and the rest would look for acquisitions or be taken over, thereby, building a good case for consolidation in this segment.
According to Vijay Shekhar, founder of Paytm, a payment services company, the industry will witness more such acquisitions. “It would be interesting to see now what Amazon or Snapdeal does,” he said.
While the Flipkart-Myntra deal may be the start of an inevitable consolidation, players in the e-commerce industry are moving to the next phase of growth by becoming mobile-commerce players.
Mukund Mohan, Head of Microsoft Ventures, an arm of Microsoft that guides tech start-ups, said: “Consolidation happens after a period of growth and this is normal. Now, there’s a real chance that they can become the next big Internet business.”
He added Flipkart and Myntra are taking on offline retailing (unorganised), which is the biggest market. “Organised retail in India is about 6-8 per cent of the total retail, and it has not grown profitably because of high costs of rent and labour (among other things). This will change the game dramatically.” This deal also sets the course to make Flipkart the largest retailer by a wide margin, Mohan said.
Right moveMeanwhile, Rehan Yar Khan, founder of Orios Venture Partners, an early stage venture fund, said: “The deal appears to the right move to address the very large emerging online shopping base that is projected to swell to 100 million online shoppers by 2019 from 25 million today.”
Khan added it will create a unified entity that will be in a strong position to raise both private equity and public money.
Flipkart CEO Sachin Bansal has been for some time talking about raising funds through an initial public offering in 12-18 months.