Myntra Jabong India Pvt. Ltd, the business-to-business retail arm of Flipkart-owned fashion e-tailer Myntra, has secured a working capital credit of Rs 50 crore ($7.7 million) from Kotak Mahindra Bank, a person familiar with the development told VCCircle.
Following the transaction, the lender will have exclusive charge of the company’s raw material stocks, semi-finished and finished goods, consumable stores and receivables, the person added.
E-mail queries to Myntra seeking more information did not elicit a response immediately.
The development comes less than two months after VCCircle reported that the company had secured a similar facility of Rs 199 crore ($31.1 million then) from Yes Bank.
While taking loans is not unusual in the corporate space, the extent of a company’s reliance on working capital credit is an indicator of its cash flow position and the business’ recovery cycle.
Flipkart’s other group entities have also resorted to loans for meeting their operational needs. In June last year, VCCircle had reported that Flipkart was in advanced talks to raise $300 million (Rs 2,000 crore then) in loans from Indian banks since the equity infusion it was seeking at a valuation of $15 billion looked like a long shot.
Last month, VCCircle reported that Flipkart India Pvt. Ltd, the wholesale cash-and-carry arm of Flipkart, secured a working capital credit of Rs 1,000 crore ($156.2 million) from Axis Bank, besides an existing Rs 375 crore facility it already had with the bank.
Myntra Jabong India, earlier known as Quickroutes Internet Pvt. Ltd, was established in March 2017 as the B2B retailer to e-commerce marketplaces Myntra and Jabong, besides others.
Though the move was seen as complementary to the company's private label push, and an effort to take advantage of 100% foreign direct investment in B2B e-commerce, the company is yet to reveal its strategy.
In an earlier interaction, Myntra CFO Dipanjan Basu had said that the corporate restructuring was done to have a dedicated focus on the B2B side of things.
Industry experts, however, feel the move is aimed at both leveraging the liberal FDI investment norms and complying with the regulatory norm wherein a single seller cannot account for more than 25% of the annual sales of an e-commerce marketplace.
“This is most likely an exercise to create an independent seller entity that can store Myntra's private labels as well as other brands' merchandise, and supply them to its associated marketplace entities, something similar to a WS Retail (for Flipkart) and Cloudtail (for Amazon).
Also, it also makes the process of fundraising easier and regulation-compliant,” said Satish Meena, senior forecast analyst at Forrester.
It could also be part of Flipkart's long-term strategy to consolidate the number of sellers, as well as control margins, sales and consumer experience, he added.