Bangalore: Flipkart India Pvt. Ltd, India’s largest e-commerce firm, is buying rival Myntra.com in the largest-ever deal in the fast-growing Internet business, as Flipkart seeks to extend its lead over rivals and boost its valuation ahead of a potential initial public offering.

Though the companies didn’t disclose the merger amount at a media briefing held on Thursday, the long-awaited cash-and-stock deal is likely to value online fashion retailer Myntra at more than $330 million, one person familiar with the matter said, requesting anonymity.

Myntra has set a goal of generating 20,000 crore in gross sales by 2020, for which the site would need more than $200 million in cash, co-founder and chief executive Mukesh Bansal said.

Bansal will head the fashion business of both Myntra and Flipkart, and Myntra will operate as an independent entity and retain its website, while Flipkart will continue selling apparel on its site.

Flipkart’s buyout of Myntra will help the company compete better with Amazon India, Snapdeal and otheras well as provide Myntra access to a significantly larger pool of funds.

Flipkart’s and Myntra’s common investors Tiger Global Management, Accel Partners and Sofina Capital will get more shares in the merged entity.

Tiger Global and Accel Partners first proposed the deal last year, partly in response to aggressive moves by Amazon.com Inc.’s India unit to carve out a larger market share in the country. Flipkart’s founders Sachin Bansal and Binny Bansal, and Myntra co-founder and chief executive Mukesh Bansal approved the deal earlier this year, Mint reported on 6 May.

The Flipkart-Myntra deal comes amid a strong revival of interest in India’s e-commerce business, which was valued at $3.1 billion, excluding travel services and tickets, according to CLSA’s November 2013 report.

Snapdeal.com on Wednesday said it raised $100 million, mostly from new investors including Temasek Holdings Pvt. Ltd, BlackRock Inc. and Premji Invest, less than three months after it had received as much as $133.7 million of funding.

Flipkart, which has received $560 million in funding since starting out in 2007, is also in discussions to raise another round of funds, Mint reported this week. The company had raised $360 million in two tranches less than a year ago.

Flipkart’s valuation jumped to $2-$2.5 billion following the Myntra deal, one person with direct knowledge of the matter said, also declining to be named.

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