Flipkart, Myntra merge in Rs 2,000 crore deal

BANGALORE: Two of India's biggest e-commerce companies, Flipkart and Myntra, have merged to create an entity with annualized sales of $1.5 billion, bringing them closer and in some cases rivalling the much older offline retailers of those like Future Group, Aditya Birla, and Reliance.

Their combined might also places them in a better position to take on the likes of Amazon, which has become increasingly aggressive in India's booming e-tailing market.

The deal was influenced by two large common shareholders, Tiger Global and Accel Partners.

Flipkart and Myntra did not disclose the details of the deal, but analysts estimate that Myntra has been valued at about Rs 2,000 crore ($330 million). The impending deal was first reported by TOI in January this year. This is the biggest M&A deal in India's e-commerce story to date, surpassing the $100 million that the Ibibo Group spent to buy RedBus, again a story which first broke on this newspaper in June last year.

"We want to be a leader in every category that we are present in. Fashion is definitely the category of the future and we want to be the biggest players in this space," said Sachin Bansal, who co-founded Flipkart with Binny Bansal. This acquisition of Myntra, involving a complicated share-swap process, also values Flipkart at over $2 billion, possibly the first venture-funded Indian startup to cross that figure.



Two other Bangalore-born peers, Mu Sigma and InMobi, have been eyeing similar valuations as they explore fresh fund raising or listing plans in the near future.

While Flipkart is into a number of categories, Myntra is focused on fashion e-tailing. With Myntra's share of 30% of online fashion sales, Flipkart now has a 50% share in a segment that's clocking nearly 100% annualized growth. With this deal, Flipkart effectively has stolen the thunder from Gurgaon-based Snapdeal, which was looking to be the first e-tailer in India to cross Rs 1,000 crore in fashion sales by the end of this year.

As part of the acquisition, Myntra co-founder Mukesh Bansal will join Flipkart's board and will also oversee Flipkart's fashion business. Flipkart and Myntra will remain as two separate entities, but people holding stock options in Myntra will now hold the same in Flipkart.

"We will retain the same management team at Myntra. Neither employee roles nor the company's road map will change. The idea is to maintain distance between the two businesses and preserve a unique culture," said Mukesh Bansal. "Both companies are running at a very fast speed and winning on the competitive landscape. So we don't want to change that at all," he added.

Flipkart's acquisition of Myntra is also a great story of two IITians, both Bansals, in their early thirties buying a cross-town rival founded and run by another IITian and another Bansal in his thirties, to create a single entity that accounts for 50% of sales of the e-tailing industry.

However, the deal making wasn't a smooth road as legal due diligence involving a plethora of foreign investors with different domiciles threatened it at various stages. In fact, Myntra went to on raise a $50 million round from PremjiInvest and others even as it had the Flipkart offer on the table. Myntra continued to engage with newer investors for additional funds until the transaction details fell in place in early April. Its CEO Mukesh Bansal first hinted at the possibility of deal with Flipkart in an interview to TOI on April 7.

Sandeep Ladda, India technology leader at consultancy firm PwC India, said the merger represented a process of consolidation in the sector. "Only the niche players or those with good financial muscle would be able to survive, while the rest would look for acquisitions or being taken over," he said.

Sachin Bansal on Mukesh: We have had a lot of respect for each other for a long time and we are excited about working with each other now. We (Flipkart) learnt our first supply chain scaling lessons from Myntra back in 2008. Myntra is a leader in fashion today and we would love to learn more from Myntra and Mukesh.

Binny Bansal: This acquisition is all about scaling up fast and we really think that the future of e-commerce is fashion and we can jointly build it faster. We saw this as an opportunity to accelerate our roadmap; things that would have taken us five years to achieve, we will now achieve in two to three years.

Mukesh Bansal: Last few months I have spent a lot of time with Sachin and Binny and grown to respect what Flipkart has done. And I got convinced that if we come together and work as one entity, it will be a game changing equation in the Indian e-commerce space.