Bengaluru: As far as large acquisitions go, Myntra’s buyout by Flipkart will count among the most lucrative ones ever.
On Wednesday, Walmart bought a majority stake in Flipkart, valuing the company at $21 billion. The acquisition coincides with the four-year anniversary of Flipkart’s buyout of Myntra, the country’s largest online fashion retailer, for $330 million.
The American retail giant will be thrilled if it can replicate the success of the Flipkart-Myntra deal.
According to three people aware of the terms of the deal, Myntra comprised $5.5-$6.5 billion of the $21 billion value at which the Flipkart group was bought. The Myntra number includes Jabong, which it acquired for $70 million in 2016.
Another Flipkart asset, mobile payments firm PhonePe, was valued at nearly $1-1.5 billion, the people cited above said. PhonePe was bought by Flipkart in April 2016 for an undisclosed amount when it hadn’t even launched. It was started by two former executives Sameer Nigam and Rahul Chari, who had also sold their first start-up, digital content provider Mallers, to Flipkart.
In May 2014, when Flipkart co-founders Sachin Bansal and Binny Bansal grandly unveiled the acquisition on stage at a five-star hotel in Bengaluru by ushering in Myntra founder Mukesh Bansal, none of them in their wildest dreams could have imagined that the online fashion retailer would end up being such an integral component of Flipkart.
For a while it looked like Myntra was struggling. After it ditched its website and became an app-only platform in May 2015, sales crashed. A few months later it hired a new chief executive officer, Ananth Narayanan, to replace Mukesh Bansal, who went on to take a bigger role at Flipkart.
Bansal had built a strong fashion brand and a thriving private label business. But after the sale to Flipkart, Myntra had lost focus and the app-only move alienated many of the e-commerce firm’s customers. Under Narayanan, a former McKinsey partner, Myntra gradually bounced back. He reopened the desktop platform one year after it was closed. Myntra expanded its private label business, cut supply chain costs and made big bets on technologies such as Rapid, which offers automated fashion design.
In July 2016, Myntra moved quickly to buy smaller rival Jabong in a cut-price deal of $70 million. The acquisition helped the company consolidate its lead in online fashion sales. Myntra-Jabong generated $1.2 billion in gross merchandise value in the last financial year.
Together, the Flipkart group controls more than 70% of online fashion sales in the country. For Walmart to get the Flipkart group to profitability, it will have to lean heavily on Myntra. Among the large e-commerce product categories, fashion sales offer the highest margins to retailers.