Bengaluru: Global Fashion Group (GFG), an international group of six online fashion stores including India’s Jabong, has raised $339 million from its controlling shareholders, Rocket Internet and AB Kinnevik, at a valuation that marks a steep drop from the company’s last funding round.
Germany’s Rocket Internet will put up to $100 million while Swedish investment bank AB Kinnevik will contribute the rest in the latest funding round at GFG, which is now valued at $1.13 billion. GFG’s value has dropped as much as 68% from July 2015, when it raised $169 million from Rocket and Kinnevik at a valuation of $3.5 billion.
The drop comes against the backdrop of a tighter funding environment for start-ups that has prompted investors to write down valuations of portfolio companies.
In late February, Morgan Stanley, an investor in Flipkart, disclosed in a regulatory filing that it slashed the value of its holding in the online retailer by as much as 27%.
Morgan Stanley’s estimate implied that the mutual fund valued Flipkart at $11 billion, down from Flipkart’s peak valuation of $15 billion.
Rocket Internet said it continued to be “very excited" by the prospects of GFG given its market-leading presence in emerging markets.
“We are looking forward to continuing to work with the GFG team as well as Kinnevik and the other GFG shareholders to support GFG," Oliver Samwer, chief executive officer at Rocket Internet, said in a statement on Wednesday.
The financing will provide GFG with capital to continue investing in its portfolio companies in emerging markets at a time when valuations of start-ups have been under pressure globally as the company pushes for profitability.
“As part of the transaction, Rocket Internet has agreed to underwrite up to €100 million of the Financing. Rocket Internet expects to invest up to €85 million including the conversion of an existing investment at the terms of the Financing," the statement said.
Samwer’s optimism isn’t in sync with the troubles with GFG or Rocket’s other investments.
GFG has been looking to sell Jabong and has held initial talks with payments service provider Paytm and the Aditya Birla Group, Mint reported in September.
The pressure to improve Jabong’s sluggish finances has seen its co-founders Praveen Sinha and Arun Chandra exiting the company.
Jabong, which has raised more than ₹ 300 crore since the beginning of 2015, reported sales of ₹ 811.4 crore and a loss of ₹ 454 crore for the year ended 31 December 2015.
In a bid to revive its sagging fortunes, the company has hired a new senior management team including Sanjeev Mohanty as managing director and CEO, Kalyan Kumar as chief merchandising officer, Saurabh Goel as chief product officer, Sumit Jain as the chief technology officer and Saurabh Srivastava as chief marketing officer.
Rocket’s other investments have also been under pressure in recent times. Its portfolio firm Zalora, which operates one of the biggest online fashion platforms in South-East Asia, announced that it would be selling its operations in Thailand and Vietnam, Forbes reported on Wednesday.
Rocket and Kinnevik sold their stake in Lazada Group SA earlier this month.
Chinese e-commerce firm Alibaba Group Holding Ltd made its largest investment with $1 billion for control of Lazada Group SA, a deal in which Rocket Internet, Kinnevik and Tesco Plc. sold stakes, Reuters reported on 12 April.
In September 2014, Rocket Internet merged Jabong with four other online fashion retailers to create GFG, which houses the German e-commerce company’s fashion businesses from emerging countries—Dafiti in Latin America, Lamoda in Russia, Namishi in the Middle East, Zalora in South-East Asia and The Iconic in Australia.
“At this stage, the stakeholder expectation for companies that have been around for a few years is to show strong operational discipline and a clear path to profitability. All key metrics will continued to be monitored closely and will be an input into the valuation of a company," Ashvin Vellody, partner, e-commerce and start-ups, at audit and consulting firm KPMG, said.