There We Go Again… Myntra Investors Pushing For Merger With Flipkart
I am not sure what to make of this, but the talks of merger / acquisition between 2 leading Indian ecommerce companies, Flipkart & Myntra, just do not seem to go away.
Just couple of months back, same talks were doing rounds. First, there were rumours that Flipkart is in acquisition talks with Myntra. However, PremjiInvest’s funding of Myntra put the whole rumour to rest. Myntra’s founders had categorically stated that they do not want to get acquired or merge with Flipkart.
Now, according to ET report, Flipkart and Myntra are close to having a deal that could either be a outright acquisition by the former, or a commercial partnership of sorts.
While this is just hearsay at present, it does carry some weight as both Flipkart and Myntra have 3 common investors (Accel Partners, Tiger Global & Sofina), who have been pushing for the merger/acquisition for a long time.
One thing is clear that Myntra Founders do not want a outright merger or acquisition – They want to remain a separate entity and grow the company, but given pressure from their investors, they will need to concede, even unwillingly.
One of the main reasons why investors are pushing for a deal between 2 companies is stupendous growth that Amazon has since it launched in June last year. They now sell millions of products across close to 30 categories. What’s more, Amazon is expected to launch their Apparel / lifestyle section before the end of this month.
Amazon’s entry into Apparel space is sure to adversely effect Myntra’s business and they will need to approach Indian market even more aggressively, which obviously will need loads of cash.
Myntra has till date raised $125 million and have GMV of Rs. 1000 Crore in this financial. However, even with that kind of turnover, they are yet to turn profitable, which they expect by end of this year.
On the other hand, Flipkart is flush with cash – They have raised a whopping $541 million till date and have sales of over Rs. 6000 crore this year. However, even Flipkart is not yet profitable.
In our view, to compete with Amazon, both Flipkart and Myntra need to come together. It may not be an outright merger or acquisition, but they need to join hands. If that happens, their operating costs are going to come down, which will not only help them in sprucing up their profits, but also allow them to compete with Amazon aggressively.
Only time will tell what will happen, but we are sure headed for interesting times ahead in Indian Ecommerce space.
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