Flipkart, India’s largest multibrand online retailer, agreed to buy competitor Myntra.com as it seeks to widen its lead over Amazon.com Inc. (AMZN:US) in the country.
Flipkart will buy 100 percent of Myntra, Chief Executive Officer Sachin Bansal said at a press conference in Bengaluru today. The deal values Myntra at about $330 million and its shareholders will get a combination of cash payouts and stakes in Flipkart, a person with knowledge of the talks, said this week. Bansal today declined to comment on details of the deal.
The purchase gives seven-year-old Flipkart access to Myntra’s customers and suppliers strengthening its position as the retailer fends off competition from EBay Inc. (EBAY:US) and Amazon. India’s Internet retail market is estimated to expand sevenfold to $22 billion by 2018, according to CLSA Asia-Pacific Markets.
“What it does for Flipkart is that it kind of breaks into a segment which is not a historic stronghold,” Niren Shah, managing director at Norwest Venture Partners’ Indian unit, said before today’s announcement. “And this by the way is a very critical segment, because it has huge margins.”
Flipkart had a 4.9 percent share of the 170 billion rupees ($2.9 billion) worth of Internet retailing transactions in 2013 according to Euromonitor International estimates in a March report. Myntra controlled a 4.1 percent share, while Amazon and EBay had 1.6 percent and 1.2 percent respectively.
Flipkart will invest $100 million in the fashion business in the “near future,” said Bansal.
“There are multiple ways of building a fashion business,” said Binny Bansal, co-founder and chief operating officer of Flipkart. “It became very clear to us that it will be very valuable for Flipkart shareholders and Flipkart as a company to own multiple assets from a fashion point of view.”
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