Flipkart All Set to Take Over Myntra

India’s largest e-commerce company Flipkart India Pvt. Ltd is all set to buy a majority stake in online fashion retailer Myntra.com. The deal is expected to be officially announced this week and is set to be worth around $300-330 million which is approximately around INR 2000 crore.

The e-commerce market in India is worth around Rs 12,000 crore and this particular move will be one of the major consolidations in this market. The size of the e-commerce market is expected to grow to 10 times its current size in the next three to four years, industry analysts suggest. Comparing the deal with that of Amazon’s acquisition of Las Vegas-based fashion portal Zappos.com, market experts said that Flipkart’s purchase reflects a serious and much-needed effort by the company to tap into the online sales of apparel and fashion accessories.

Whats the story behind this deal?

The Amazon Effect

Amazon launched its online marketplace in India last year in June and has already built one of the largest product assortments in the country. Also, they’ve been strongly lobbying for FDI in e-commerce and are investing heavily in the Indian market. In order to fight this big giant that has the financial muscle and the technology expertise, it will take a large amount of effort for all the local players. And this particular deal is a step in that direction.

According to market experts, the deal will help Sachin and Binny Bansal’s Flipkart garner a larger market share and give tough competition to Amazon, the Seattle-based e-commerce giant.

Besides Amazon, Flipkart and Myntra both have other strong local competitors as well like Snaldeal, Ebay and Jabong, all of whom are doing extremely well in the Indian market. All of them are competing for buyers, while offering one-day delivery, along with almost matching product ranges and discounts.

Common Investors

Two common investors at Flipkart and Myntra, Tiger Global Management and Accel Partners, first proposed this deal last year trying to give Amazon a hint that they are prepared to face the competition. Flipkart’s Sachin and Binny Bansal and Myntra’s Mukesh Bansal (yes, that’s a lot of Bansals) agreed to this deal earlier this year.

Investments & Revenues

Table below shows how much each investor funneled into Myntra.

Here’s a look at how sales and losses have grown at Myntra.

With the new government likely to allow foreign direct investment in e-commerce, competition is only expected to grow and this could prompt further consolidation.