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Flipkart-Myntra proposed merger uncertain, says common investor Accel Partners

02 May, 2014

The proposed merger of online fashion apparel and accessories retailer Myntra with the country’s top e-commerce firm Flipkart seems uncertain as Mukesh Bansal, co-founder and CEO of Myntra, wants to operate independent of Flipkart post merger, according to a Wall Street Journal report citing a common investor of the two firms.

To further complicate things, Myntra also reportedly wants a cash infusion of $150 million into the company in order to expand its operations as well as achieve its growth plans.

“We are not sure the deal is going to happen,” Subrata Mitra, partner, Accel Partners, told WSJ. Accel Partners is one of the three common investors in both the ventures (the other two being Tiger Global and Sofina). Mitra also represents the VC firm on the board of both the Bangalore-based companies.

It may be noted that while rumours about the possible merger have been doing the rounds for some time now, this is the first time an investor has openly acknowledged the same.

As reported first by VCCircle, a negotiation for the proposed merger was on track even after Myntra raised $50 million more early this year. Earlier, the proposed deal was said to be an alternative to the funding round.

The deal is being championed by Accel Partners and Tiger Global, to drive synergies. Currently Flipkart and Myntra compete in the apparel retail side of the business.

What do the companies stand to gain?

“The DNA of the two companies is very different as one is defensive and other is offensive. Flipkart is like Lionel Messi (a Barcelona striker) trying to score a goal while the other is like a line backer,” Mitra had mentioned in an earlier interview with Techcircle.in. “So if you were to draw global parallels, Flipkart is more like Amazon, while Myntra is like ASOS,” Mitra had said.

In February this year, Myntra had raised $50 million (about Rs 300 crore) in a financing round led by Premji Invest, along with new and existing investors. Since its launch in 2007, the company has raised close to $75 million from investors, including Accel Partners and Tiger Global.

In comparison, last October, Flipkart had raised an additional $160 million (Rs 990 crore) in the fifth round of funding. This fresh funding took the total funding for Flipkart so far to over $540 million.

For Flipkart, the deal could mean potential synergies in driving its own lifestyle vertical. Even if Myntra stays a separate site, its team could collaborate to drive the apparel unit of Flipkart through backend synergies.

While Flipkart is already the country’s top e-commerce firm, it is believed to be a bit player in the fashion e-tailing business.

Fashion e-tailing is dominated by Myntra and Rocket internet-backed Jabong. Merchandisers who have been stocking fashion apparel with both Myntra and Flipkart say the latter is doing well for sports apparel as a sub-category.

Boosting that vertical could be important to seek better valuation in the future as and when it seeks a public listing.

For Myntra, the proposed deal could take out the pain point for going to the market again for fresh funding in the future. This could especially come handy in its fight against Rocket Internet-backed Jabong, which also raised fresh money recently.

As such both firms can gain from the deal, which explains why the investors are keen on seeing it through. But a scenario where Myntra agrees to the deal but remains totally separate may not be of much help to Flipkart and that could be a deal breaker.

The risk of not marrying

There is always the potential of a rival running away with the cake. Amazon has just added apparel to its Indian marketplace and Snapdeal is also boosting its presence. If Amazon acquires Jabong, it could create a big challenger for both Myntra and Flipkart.

(Edited by Joby Puthuparampil Johnson)


View Comments
Myntra raised more funds from existing investors last year valuing it at around $200M; rumours point at possible merger with Flipkart

Myntra raised more funds from existing investors last year valuing it at around $200M; rumours point at possible merger with Flipkart

Sainul K Abudheen 4 years ago
Bangalore-based Myntra Designs Pvt Ltd, which runs fashion apparel and...
Flipkart-Myntra merger still on track despite the fashion e-tailer raising fresh funding

Flipkart-Myntra merger still on track despite the fashion e-tailer raising fresh funding

Pooja Sarkar 4 years ago
Online fashion apparel and accessories retailer Myntra, which recently raised ...
Flipkart is like Lionel Messi while Myntra is a defensive player, says Subrata Mitra of common investor Accel Partners

Flipkart is like Lionel Messi while Myntra is a defensive player, says Subrata Mitra of common investor Accel Partners

Madhav A Chanchani 4 years ago
The difference between India’s largest horizontal e-commerce player...
4 Comments
Rahul Malhotra . 4 years ago

Jabong is a retailer (inventory model). At least in the near term, till FDI regulations are addressed, there is no way that an Amazon could buy them.

vivek.sinha . 4 years ago

@Rahul, seemingly fair but naive point. It just takes some deft financial engineering to get through such norms.

Rahul Malhotra . 4 years ago

@Vivek… someone like an Amazon won’t tread the grey area in regulation. They have demonstrated this thus far.. bigger threat in my mind is the e-comm plans of RIL

vivek.sinha . 4 years ago

It’s all legal. Jabong may be inventory based model and may count Indians as so called ‘co-founders’, but fact is they are as good as entirely Rocket Internet (and now other foreign investors like CDC — funded). The art lies in separating the firm running the site and the actual operations.

My 2 cents.. they are all waiting for how do authorities treat Flipkart’s alleged FEMA violation case and if they get away easily, then there is no stopping Amazon. My guess is that Samwer brothers have exactly this in mind (leave alone the distant possibility of an Alibaba trying to navigate in India or say Rakutens of the world).

Flipkart-Myntra proposed merger uncertain, says common investor Accel Partners

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