AB Kinnevik, the largest shareholder of Global Fashion Group, is speaheading the sale process and is reaching out to other potential suitors to sell Jabong
New Delhi: Global Fashion Group (GFG), the company that owns India’s Jabong.com, is in initial talks with payment services provider Paytm to sell the online fashion retailer, according to three people familiar with the discussion.
AB Kinnevik, the largest shareholder of GFG, is speaheading the sale process and is reaching out to other potential suitors for selling Jabong, the people cited above said, requesting anonymity. Kinnevik is also negotiating on behalf of Rocket Internet, which owns more than 21% of GFG. It wants to sell its stake in the money-losing Indian fashion store ahead of GFG’s proposed stock market listing, they added. Kinnevik owns more than 25% of GFG.
The talks are at a very early stage and the valuation of Jabong is being pegged at anywhere between $500 million and $800 million, said one of the three people cited above.
Jabong, which matched larger rival Myntra in sales until early 2014, has ceded market share in the past 15 months or so as Myntra’s parent Flipkart has been pumping in hundreds of crores of rupees in advertisements and discounts to lure customers.
If the stake sale by GFG goes through, this could be one of the largest deals in the Indian online fashion industry after Flipkart’s purchase of Myntra in May 2014.
Earlier this month, Mint reported that Jabong is looking for a new chief executive as co-founders Praveen Sinha and Arun Chandra Mohan are exiting the company amid mounting pressure to improve the financial metrics of the online retailer.
The talks are being led by Akhil Chainwala, investment manager at AB Kinnevik. He is currently in India to meet potential buyers, including Paytm founder Vijay Shekhar Sharma and top executives of the Aditya Birla Group, two of the three people mentioned above said, requesting anonymity.
Chainwala looks after existing investments and new opportunities for Kinnevik in India and other parts of South Asia.
Sharma declined to comment on the news. Jabong did not respond to Mint’s email queries.
In late 2014, online marketplace Amazon India held early talks with Jabong for a potential buyout. However, the deal fell through at the beginning of 2015 after Jabong asked for a $1.2 billion valuation, according to a VCCircle report.
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, an entity that was valued at €3.1 billion in July.
GFG houses the German e-commerce company’s fashion businesses from emerging countries, including Jabong, Latin America’s Dafiti, Russia’s Lamoda, Namshi of the Middle East and Zalora of South-East Asia and Australia.
“Most companies in GFG are close to achieving profitability, but given the state of Indian e-commerce industry, Jabong is far from showing healthy metrics," said one of the three people cited above.
Jabong reported sales of ₹ 811.4 crore and a loss of ₹ 454 crore for the year ended 31 December.
The company earlier this month shut its design office in London and shifted it to India under pressure from its parent to focus on cutting losses.
Jabong currently offers more than 190,000 products from 1,800 brands, including well-known international brands and its own labels. Since the start of 2015, investors have pumped in more than ₹ 300 crore into Jabong, documents filed with the Registrar of Companies show.