Home/ Companies / Start-ups/  Snapdeal, Aditya Birla Group front-runners to buy Jabong

New Delhi: Online fashion retailer Jabong.com has expedited its sale process as the firm’s owners, AB Kinnevik and Rocket Internet, are reluctant to pump in more capital into the company in a gloomy e-commerce market.

Jabong, which has been scouting for a buyer for about a year, is in initial talks with online retailer Snapdeal, Aditya Birla Group’s fashion portal abof.com and Flipkart, India’s largest e-commerce firm, among others, according to four people aware of the development. The talks are led by Kinnevik chief executive Lorenzo Grabau, who was in India last week to meet executives at Snapdeal, Abof, Future Group and Flipkart, said two of the four people cited above, all of whom spoke on condition of anonymity.

Snapdeal and Aditya Birla are front-runners for Jabong, the people said.

Flipkart is believed to be interested in the deal since it owns leading online fashion retailer Myntra, which competes with Jabong.

Over the past 10 months, Jabong has held talks with online and offline retailers; however, there has been no agreement on valuation. While Kinnevik is seeking a valuation of $100-150 million for Jabong in cash and stock, the deal, if it goes through, might be closed at a much lower valuation of $50-75 million, said the people cited above.

In September, Mint reported that Jabong was in talks with online payments firm Paytm.

Jabong, owned by Global Fashion Group (GFG), has also held discussions with Amazon.com Inc. and Chinese e-commerce giant Alibaba; however the talks collapsed in the early stages itself, said one of the people cited earlier.

Kinnevik is the largest shareholder of GFG and is negotiating with buyers on behalf of Rocket Internet, which owns more than 21% of GFG. “Rocket Internet is keen to exit Jabong, while Kinnevik wanted to stay on and find a strategic investor. However, due to a financial crunch, a complete sell-out is more probable now," said one of the people cited earlier.

Jabong is the latest and most significant instance of Rocket Internet’s struggles in India. It recently carried out a distress sale of online furniture retailer FabFurnish to Future Group. That deal was valued at about 6 crore, according to company officials.

Jabong, Flipkart and Abof did not respond to email queries. Snapdeal and Future Group spokespersons declined to comment.

Jabong, which matched larger rival Myntra in sales until early 2014, has ceded market share since then, as Myntra’s parent Flipkart has been spending hundreds of crores of rupees on advertisements and discounts to lure customers.

In September 2014, Rocket Internet merged Jabong with four other online fashion retailers in Latin America, Russia, the Middle East, South-east Asia and Australia to create GFG.

GFG houses the German e-commerce company’s fashion businesses from emerging countries, including Jabong, Latin America’s Dafiti, Russia’s Lamoda, Namshi in the Middle East and Zalora in South-east Asia and Australia.

The valuation of GFG, which was €3.1 billion in July 2015, slid to $1.13 billion (€1 billion) after barely 10 months. In May, GFG said it raised $339 million (€300 million) from Kinnevik and Rocket Internet at a valuation that was a third below the previous round’s.

At the end of May, Jabong reported a 14% increase in revenue to €32.6 million for the March quarter. The Gurgaon-based firm’s adjusted Ebitda (earnings before interest, taxes, depreciation and amortization) loss narrowed to €11.9 million from €16.3 million in the same quarter a year earlier.

In the past year, the company has witnessed an exodus in its senior management, a funding slowdown and strong competition from Myntra and Amazon.

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Updated: 04 Jul 2016, 02:41 PM IST
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